Financial decision makers on the boards of manufacturing firms lack understanding of the capital budgeting case for manufacturing technologies and are contributing to technological stagnation in British firms. So says Brian Holliday, divisional director for industry automation at Siemens Industry UK.
While Siemens, a big provider of automation technology to manufacturing firms globally, obviously has a vested interest in encouraging companies to invest in the UK, Brian Holliday’s presentation at the Answers for Industry Conference in Manchester this week raised some important points around the relative technological capabilities of UK manufacturing.
Comparing the UK to China, Mr Holliday highlighted a steep investment climb in automation and manufacturing systems in China and urged manufacturers not to believe blindly in an outdated idea of Chinese manufacturing as being low skilled and labour intensive. Asia now accounts for 40% of the global industrial automation market and government policy clearly shows a will to accelerate growth in such investments.
“Chinese factories are no longer being filled with lots of people. They are being filled with the latest in manufacturing technologies. The risk for us is that China will accelerate from here on out at an even greater rate than they have grown in manufacturing over the past decade,” said Holliday.
With no ability to leverage the same man power in manufacturing as China, it is critical that companies in Europe do all they can to increase efficiency in their processes and their use of human resources and energy. Savings made on jobs on the shop floor can then be reinvested in advancing innovation in products, processes and business models that keep the proposition of UK manufacturing one step ahead of competitors.
But investment in manufacturing systems is weak in Britain, even by comparison to European countries. Holliday revealed that the forecast figures for investment in plant in Germany for 2012 came to Eu57bn while the UK lagged behind at around Eu14bn.
Furthermore, while some engineers, plant managers and manufacturing professionals recognise the advantages to be gained through automated drives, process controls, robotics and manufacturing systems, Mr Holliday suggested that they are often poorly equipped to present the capital budgeting case and that finance colleagues fail to perceive the strategic importance of refreshing and upgrading manufacturing systems.
“The finance function has a disproportionate influence in decision making versus the engineering function in many UK firms” commented Holliday. “This represents a different approach than that we see in other nations.”
Holliday observed that “While finance will often support investment in IT and big enterprise ERP systems they approve less spend on manufacturing systems. I would suggest there is a need to review the education process for our accountants to include more knowledge of what different types of businesses are trying to achieve, particularly when it comes to engineering.”
Holliday hoped that this would lead to better approaches to asset management in manufacturing firms and move the UK sector away from a “make do and mend” mentality.
Expanding on the theme of asset management Holliday lauded the attempts of the Institute of Asset Management and the IET to up skill engineering managers. “They come together for an event every year which introduces engineering managers to the principle s of PAS55 asset management.
“The aim is not to send people away with the ability to present a full capital asset financing model to their FD which details wealth creation expectations above and beyond other investments from a certain piece of kit. But I think it does help to address this communication and understanding challenge.”
Holliday also observed that this challenge exists due to a persistent “employability gap” in graduates across the board.
“Universities still produce graduates who are ill equipped to contribute to business. With regards to engineers this is certainly true when it comes to financial literacy. I think there is room for discussion around introducing more use of financial tools into courses.”
Poling audience opinion in his conference session, Holliday asked delegates if they agreed that the relationship between finance and engineering or manufacturing functions was a challenge in pushing forward automation investment.
Over half of those present confirmed that their own experiences supported this view and in a seperate conversation Graeme Philp, CEO of automation trade body Gambica, told TM that improving understanding of manufacturing technology strategy among financial decision makers will be an important part of future events in its Automated Britain campaign.