Much more than a distribution economy

Offshoring is threatening to engulf whole swathes of UK manufacturing. The National Outsourcing Association reckons that among SMEs (small to medium-size businesses), there is a noticeable trend to moving operations overseas. And the highly regarded Benchmark UK Manufacturing Survey estimates that 30—50% of UK manufacturers are having to embrace some degree of outsourcing to sustain operations. "Every one of our customers has something to say about outsourcing," says Howard Joseph, sales director at Syspro ERP provider McGuffie Brunton. "One of our aerospace components manufacturers, for example, was saying recently that its customers don't want it to outsource manufacture of its main product, because safety and quality are so critical. But some of its sub-components are already offshored and outsourced." Massive erosion It's not all doom and gloom, but Joseph is one that believes the situation is among the most worrying of today's key business issues. "Some of the traditional UK manufacturers making basic components are going out of business," he says. "The Benchmark survey indicates that there has been a 24% reduction in the number of SME manufacturing sites since 1999. And with the number of design engineers also plummeting, that adds up to a massive erosion of UK manufacturing. What's more, it shows every sign of accelerating." For McGuffie itself, the situation has already been cathartic. "We are having to look after not only those manufacturing companies that are surviving," says Joseph, "but also those that are transforming themselves, in order to provide them with the right tools to enable them either to be more efficient as manufacturers or to exist in a different form altogether." For example? "Often, the USP that remains to organisations that outsource much of their manufacturing is their customers and routes to market. That means we have to look at software and services that support their businesses as they become more distribution-focused and leaner." So it's about ensuring that both sets of customers – those offshoring and those that are continuing to manufacture – have access to the right software. For, despite all the dire prognostications for UK manufacturing, this latter group continues to be a powerful presence. "We still see many modern companies that are working to very short lead times, manufacturing extremely complex products with a very high design cost, and they are doing well," says Joseph. And while some 25% of the companies that McGuffie Brunton might have sold to previously have now disappeared, sales of its manufacturing ERP are still buoyant. "We are going to have a very good year," says Joseph, "in terms of securing new customers from both the manufacturing and distribution sectors." All that aside, Joseph is pleased to note that customers have become far more discerning and concerned with business benefits from their software. "Once, companies would replace their systems every five to six years with the latest technology, without implementing it to any great degree. Nor were they able to quantify the benefits they were getting. Now, when we implement new solutions, we are analysing in far more depth with our customers where the greatest efficiencies are going to come from." Evidence of that includes the number of customers now looking to mobile applications and warehousing to augment their operations. "Our mobile applications are giving many of our customers a competitive edge," comments Joseph. "And there are companies we are dealing with on the distribution side that are having to respond to a situation where, for example, lorries are arriving almost hourly, with vast amounts of inventory. Our warehousing software solutions are now enabling them to manage this automatically." Not that long ago, the cost of software to perform such operations would have been prohibitive for SMEs. "Now it's different," says Joseph. "Companies have access to solutions that enable them to achieve these levels of efficiencies cost-effectively – and it's all driven by the fact that more and more businesses are moving away from being manufacturers." All the evidence suggests that distribution will gather pace, but the fact that business volumes are higher at McGuffie makes Joseph optimistic. "Those companies that do survive will see IT as crucial for their future operations. We have a key role to play in providing those solutions."