An upbeat report from the manufacturing and engineering support organisation, EEF and business advisor, BDO Stoy Hayward, suggests that UK manufacturers may have entered this current recession in better shape than in the past. The report – Manufacturing advantage: changing the ground rules of global competition – says the necessary innovations that UK manufacturing has made to rebuff the threat of global competition, such as services innovation and niche market positioning, have equipped it well for the economic downturn.
The report finds that more than two thirds (68%) of UK manufacturers now offer services on the back of production activities, compared with just 50% in 2007. The report’s authors believe this indicates a blurring of the lines between traditional manufacturing and service sectors, and shows how manufacturers are using service offerings to increase revenue and add value for customers. Indeed, services now seem to be boosting the bottom line of manufacturing businesses and contributing an average of 14% to their annual turnover.
Moreover, service offerings are broadening in response to customer demand, stretching beyond mere maintenance contracts, to embrace functionality upgrades and design services. For example, many companies operating in the engineering and technology sectors now offer functional upgrades to give new leases of life to legacy installations. But despite these encouraging findings, the report suggests that one in six companies have yet to establish a service offering and are currently missing out on the opportunities – not to say lifelines – that these activities bestow.
EEF chief economist, Stephen Radley pays tribute to companies that make the effort to add customer value while ensuring production remains at the core of their activities. He says that the up-front investments that firms have made in order to adapt to the changing competitive landscape suggest that they are in it for the long haul. What may have started as a “survival tactic” in the face of emerging economies, is now helping manufacturers fight the next challenge: namely, those alarming developments on the economic front.
An interesting phenomenon identified by the report is the move into niche markets. Some 61% of manufacturers now supply niche markets compared with just 45% in 2004. The definition of niche is no longer confined to ‘small’ or ‘unique’; niche manufacturing now includes a variety of activities, described by the report’s authors as “incorporating the development of more sophisticated goods and technology, unique product design, flexible production and customisation.”
Head of manufacturing at BDO Stoy Lawton, Tom Lawton says that to take the lead in niche markets, manufacturers should develop or reposition products and services in a way that adds value to a distinct customer base. Manufacturers may be able to create these positions more often than they realise, he claims, adding that they should not be ‘blind-sighted’ to the long and short term benefits of adding services or taking a niche position when the prime concern may simply be to weather the economic storm.
Rather less optimistic is a report on the engineering industry from the Chartered Management Institute, which compounds the fears of businesses across the sector on a variety of fronts, including rising business costs, low levels of credit, employee unrest and a paucity of relevant skills. Almost two thirds (63%) of senior engineering sector managers confessed to being “nervous” about the coming year; some 29% were “pessimistic” about 2009 and 18% expressed uncertainty about what the New Year will bring. Rather gloomily, there is also a lot of disquiet about the cost of redundancies, with 34% of respondents worried over employment disputes.
The CMI says that despite the sector’s pessimism, there is evidence that individuals are out to make the most of things, with 42% resolved to take up a qualification or course in the New Year and 23% intent on building ‘transferable skills’. Perhaps not surprisingly, employers remain downbeat, believing that the continuing shortage of high-end skills will have a negative impact on their performance in 2009. And contrary to the positive attitude shown by individuals within the sector to personal advancement, well over half (61%) of employers predict a downturn in training and development.
All rather depressing stuff as the festive season rapidly approaches. More so, as the CMI survey reveals that while a good proportion (67%) of employers intend to host Christmas parties for their employees this year, many will not be dipping into their pockets to fund them.
So, in the short term at least, turn a blind eye to all adversity, eat, drink and be merry, for tomorrow… who knows?
The DPA team would like to wish all newsletter readers a very happy Christmas and a healthy and (with fingers crossed) prosperous New Year.
Les Hunt
Editor