Manufacturers need leaders and a new focus to survive

UK manufacturing is going to find it ever harder to compete with low cost labour competitors, and for 2003, needs to focus on supply chain synergies and improvements and technology to enable and support engineering innovation and customisation, not just cost cutting. So warns Deloitte Consulting in its strategy report for manufacturing in 2003. LeRoux Cilliers, head of Deloitte’s manufacturing practice, says: “Manufacturers considering cutting further into their R&D programmes will find themselves cutting into the heart of their ability to survive.” He continues: “The global economic slowdown coupled with the strength of the pound has caused many problems for UK manufacturers. Many heavily export based manufacturers have dropped their prices by as much as 30% to remain competitive. “This will ease slightly in 2003 if businesses concentrate on improving relationships with suppliers, innovative products and flexible processes. But the development of cutting-edge products requires a highly skilled workforce. This urgently needs to be addressed by aspiring world-class manufacturers.” Deloitte identifies the need for more Government assistance for the sector, and also calls for the usual changes in culture and education – all of which are long term and have been supposedly on the agenda for at least the last 25 years with only gradual noticeable effect. “Everybody talks UK manufacturing down,” says Cilliers. “We are discrediting ourselves and we’re running the risk of not attracting high talent. There needs to be a big attitudinal change.” He does, however, concede, that not only are their pockets of engineering, manufacturing and business excellence, but that the younger breed of engineering talent is now considerably more IT and business aware. What we need on top of that, he opines, is leadership skills. As for the IT, Deloitte advises far greater uptake of collaborative technologies, supporting and enabling better, faster, more efficient and lower cost processes throughout engineering, design for manufacture, production itself and supply chains. “It’s unfortunate that the word ‘collaboration’ was tainted through the hype of the early Internet days,” he agrees, “but the fact is, business leaders have got to understand that collaborative IT does add real, spectacular value, especially where it links into manufacturers’ supply chains.” And he adds: “Unless they focus on that and gaining competitive advantage, they are going to be in trouble. Without electronic catalogues, electronic order promising and so on, they are going to see their businesses falling away.” Deloitte estimates that supply chain costs account for nearly 50% of the cost of sales. This, says the report, is an area where many pressured manufacturers can reap rewards, often with minimal investment. “In 2003 manufacturers must focus attention on improved development of their supply chains. Those who develop, build and manage a portfolio of capability-focused relationships will emerge as winners.” The report goes on to suggest that, for many manufacturers, the coming year will provide an opportunity to realise the actual cost of outsourcing decisions. “While the current outsourcing market is not mature enough to manage every aspect of a manufacturer’s supply chain, those who understand the strategic benefits of outsourcing through increased flexibility will be the real beneficiaries.” Cilliers and Deloitte’s message: e-business as a term may have fallen from grace through hype and ambiguity, but if you don’t do it now, and get yourself interactive with your supply chain and with your customers, then especially in the UK, your days are numbered. Part of this is inevitably instilling a culture of continuous improvement and change in processes to take advantage of the newer technologies. “Beyond the manufacturing shop floor and the ‘back office’, manufacturers need to look at their supply chains and customer engagement. Consider mobile technologies, wireless.”