It has been a turbulent year for the manufacturing sector.
EEF, the manufacturers’ association, recently revised down their 2015 forecast from 0.7% growth to -0.1% shrinkage by the end of the year and noted that output balance was now at its lowest level since Q3 2009.
Similarly, commenting on the global manufacturing sector, the J.P.Morgan Global Manufacturing PMI, compiled by Markit, stated that “the headline PMI remained relatively lacklustre” continuing the “subdued run of data for the global manufacturing sector through 2015.”
The recent abolition of the Business Growth Service (BGS), which houses the Manufacturing Advisory Service (MAS), has also been a blow to many who were looking to the Government for support in these troubled times.
Further research from EEF shows that there has been a decline in spending on employment and investment, falling by -7% and -3% respectively. So if businesses cannot support themselves and the government won’t either, can any of us help but wonder what the next few years will hold for the 6,000 or so British manufacturing businesses?
As we begin the New Year it is important that those working in the manufacturing sector are not disheartened, but continue to develop and innovate in order to combat uncertainty.
Let’s talk tech
It will come as no surprise that the evolution of technology is a key consideration to any industry, but for manufacturing it is more pressing than ever.
The manufacturing industry has generally been seen as slow when it comes to embracing new technology, and with spending on innovation reducing, this could suggest that the amount of money manufacturers are willing to spend on digital will decline as a result.
However, in a recent report produced by Salmon, a global digital commerce consultancy, entitled ‘British Business in a Digital Age’, this assumption was disputed.
The report claimed that 97% of manufacturers already have an individual or team responsible for their digital commerce channels, with a further 90% using technology to improve their customer service, boosting sales by up to 17%.
In terms of future uptake, 45% of manufacturers expect that their digital channels will represent between 10-20% of their revenue in the next 5 years. This kind of projection would only come about if those at the top had already forecasted for investment into their tech teams, which is promising.
Commenting on the report, Martin Girdlestone, Head of Consultancy at Salmon, stated that: “In 2016, manufacturers will gain a greater understanding of why digital is now such an important part of their business.”
Zoe Brimelow, Brand Director of Duo UK, concurs: “Embracing digital and smart connected products is central for manufacturers to become more agile and responsive.”
A report published from the Government Office for Science in 2013 stated that the Internet of Things would be key for UK Manufacturers over the next few decades “as virtually everything is expected to be connected via central networks and the Internet.” This not only applies to customer service, but it also relates to how software and automation will revolutionise production.
The robot revolution
There has been a lot of hype surrounding robotics and automation and, as we move forward, this is showing no signs of abating.
Statistics from the Annual Manufacturing Report stated that 83% of companies implemented some form of automation in their production in the past 5 years and 60% claimed that the effect on working conditions and job satisfaction is one of improvement.
Neil Gallant, Managing Director at Neutronic Technologies had this to say: “In my opinion the future of manufacturing is going to continue moving towards increased use of automation and robotics removing the requirement for human interaction in the manufacturing processes. As robotic automation becomes more commonplace the capital costs of implementation should be driven down, which will allow access for smaller companies to implement fully automated production lines.”
This is not to say that engineers and a skilled workforce will no longer be required, it is just that their skill set will need to change. This can already be seen in the UK Commission for Employment and Skills’ High Level STEM Skills Requirements in the UK Labour Market Report which states that IT professionals and IT technicians are projected to see the most significant recruitment need, above that of engineers.
Having said that, production managers and directors in manufacturing came second in terms of labour market need. This demonstrates that a top down re-evaluation of how the manufacturing industry is run is being called for and in order for this to occur a continuous stream of skilled workers must be present.
Closing the skills gap
As the skills gap in the UK widens, nurturing staff and training new recruits will be vital for future profitability.
Recent research from the Department for Business, Innovation & Skills for the Business Growth Service found that 71% of SME Manufacturers are planning on increasing investment in workforce skills between June 2015 and June 2016 believing it will increase their productivity more than investment in new capital equipment or computer software would.
While this suggests we should remain positive about the future of the manufacturing workforce, it is key that STEM skills continue to be taught and championed in order to ensure there is a ready stock of new recruits coming into the industry.
The aforementioned UK Commission for Employment and Skills found that 43% of vacancies for professionals working in science, research, engineering and technology are hard to fill due to skills shortages. This is almost twice the average for other occupations, and for manufacturing specifically, the biggest challenge will be the need to upgrade innovation capacity in order to compete globally.
So what can manufacturers do to help remedy this?
Employing apprentices is the obvious place to start. By investing in young talent, manufacturers are paving the way for future success. Despite much debate regarding proposed Government levies and costs surrounding training, policy makers are working towards making apprenticeships pay for those businesses willing to take part.
2016 will see the Apprenticeship Levy proposals finalised and early adopters may well be rewarded as parliament try to do all they can to encourage employer investment, keeping ‘undiscovered’ talent in the UK.
Should we stay or should we go?
There has been a concerted effort from the Government to keep manufacturing in the UK more generally, not just the workers.
In 2013 a report was released by the Government Office for Science which stated rather proudly that ‘UK Manufacturing in 2050 will look very different from today, and will be virtually unrecognisable from that of 30 years ago’.
This may be the case, but not necessarily in the way that was expected.
Martin Davidian, Managing Director Sales UK North and Ireland at FedEx Express, has commented on the rise of Micro-Nationals noting that small self-starting companies in the UK are leading the way when it comes to expanding internationally; “Small businesses are spreading out production to create products at a lower cost. Manufacturing products across different borders or having different components of the business based overseas, [means that] these companies are small yet wield international influence.”
He continued: “While micro-multinationals have all the traditional benefits of being small and nimble, they have additional benefits of operating and marketing their products and services in multiple global markets.”
Does the future of UK Manufacturing therefore lie in the creation of global hubs?
A report by Pinsent Masons entitled ‘The UK in 2030: Key Trends for Manufacturing’ confirmed that most British manufacturers have part of their supply chain overseas and 20% have half of their suppliers outside of the UK. However, this does not suggest curtains for the UK by any means.
Despite revising down estimates in Q4 2015, EEF reported that 2016 will see 0.8% growth in the Manufacturing and Construction sectors, suggesting a bounce-back in fortunes. The motor sector and food industry in particular will represent the UK well moving forward, as the ‘Made in Britain’ tag regains its reputation of quality, heritage and professionalism.
The Annual Manufacturing Report 2016 produced by The Manufacturer, in collaboration with Hennik Research, suggested that the industry was broadly optimistic with 70% of survey respondents believing that the UK economy has been managed reasonably well.
Furthermore, the UK’s economy remains the strongest of the G7 nations, with 60% of respondents expecting international trade to be very important to their future growth. Such confidence in international growth surely suggests that the future is looking brighter than many forecasts have hinted, and this does not mean production is expected to be outsourced.
The rise of servitization
One of the key future trends that will be helping to keep manufacturing on UK shores is the rise of servitization. This newest buzz word in the industry is the idea of offering services around the product, therefore adding real long-term value alongside the goods themselves.
Offering support services, such as the maintenance and repair service Neutronic Technologies provide, can result in insight that will make companies far more competitive and aware of their customers’ wants and needs. For example, being able to predict repair times and being aware of when items will need replacing is golden information for any sales team and if your business provides repairs and replacements then it is a win-win for both the customer and the business.
Dave Hart, Vice President of Customer Transformation for field service management specialist ServiceMax, explains: “The reality today is that everyone is now chasing the same part of the value chain. This is because they [manufacturers] recognise that the real value lies in offering services around a product just as much as the product itself.”
The next five years then are set to be one of great change for the manufacturing sector and one cannot help but be excited despite the recent gloomy forecasts.
Longer term, the next few years are predicted to be brighter ones, but it is down to the businesses themselves to prioritise and promote developments, remain optimistic and march confidently forward into the future.