UK: Manufacturing outlook 2004/05 - Sorting the survivors from the winners

Julian Thomas looks at the issues facing manufacturers today
Last Updated: 13 October 2004
Article by Julian Thomas

Most Read Contributor in UK, August 2017

This is a good time to be in manufacturing. To those who are still feeling bruised by the upheavals and severe trading conditions of the past few years, this may seem an extraordinary statement. Few are comforted by the fact that the rate of change is still accelerating; in fact, uncertainty is becoming today’s only constant. So why, then, am I confident that I am right?

Quite simply, if you are one of those prepared to set the pace rather than follow the trend, the opportunities have never been better. Both our extensive research and the case studies featured in this report prove that organisations prepared to go the extra mile not only return real shareholder value but also build satisfying businesses with sound futures. The manufacturing climate is demanding but that has its advantages. It offers real opportunities to the talented, the diligent and those prepared to take carefully judged risks.

Let’s take a more detailed look at what is happening today. Manufacturing has always been competitive but increasing diversity is making the pressures fiercer. Traditional management skills need to adapt to cope with geographically dispersed production bases. Nowhere is the rate of change more acutely felt than in the supply chains where – with the new importance of economies like India and China – we are seeing huge restructuring. Outsourcing and regular changes to the supplier base have left many managers feeling they are no longer in control of a large chunk of their production. It takes a whole new raft of skills and techniques to manage remotely and those who are wedded to traditional approaches are right to feel threatened.

On the other hand, the deluge of available information can make it very hard to ‘see the wood for the trees’. In the immediate future, successful manufacturing will depend on its ability to stay ahead of trends. We are already aware of some of them; others haven’t yet seen light of day. Traditionally, UK manufacturing has been very skilled at spotting a trend, waiting until it has proved its substance and then running fast to get on board. But, in today’s climate, companies will not score real successes by being fast followers. Take one very topical example. A lot of European manufacturers are suffering because they didn’t spot outsourcing opportunities early enough. The people who are going to be most successful in China are those who are already there, who have built up the relationships, invested both capital and resources and are now positioned to profit from them. Those who are only just trying to get into the Chinese market are coming from a long way behind.

The argument applies as strongly to innovations in technology as it does to processes. Look at radio frequency identification (RFID). The majority of industry is waiting for proof that it is relevant to any sector outside retail. A few, however, are exploring its implications for their own business. RFID has the potential to allow complete re-engineering of the supply chain. These early adopters will be capitalizing on the big opportunity when the rest are running to catch up.

Against that background, manufacturers still need to bring more productivity into their existing processes, growing their profits as well as their revenue and optimising their cash flow. Lean thinking is of paramount importance to this but it is also a much-abused term. The only way you can respond profitably to all the internal and external pressures is to be genuinely lean – not just say you are. Yet, in my experience, 80-90% of the companies who call themselves lean are no such thing. There are multiple examples of companies who have installed lean processes into their factory floor without looking at their sales order processing or their supply chain. People still haven’t understood that lean applies not just to the production process but to the entire organisation and its external relationships.

Our Manufacturing Industry Group gives practical support to clients who are responding to challenges like these. We work with organisations to improve performance, enhance shareholder value and enhance long-term growth. It is probably not generally appreciated that, on a global basis, manufacturing companies represent the largest single industry segment of Deloitte’s business. We have dedicated a significant amount of our considerable intellectual capital to a sector many consultancies treat as an also-ran. We are as committed to the future of manufacturing as our clients.

Although we are backed by our academic alliances and our major investments in research, the real life projects described in this report prove that we are far from being mere theorists. Our practitioners come from successful manufacturing companies and have themselves overcome the problems facing our clients.

We have a focused set of people with the experience to work alongside companies in tackling complex problems. All the dimensions of business now are so inter-related that it is actually damaging to imagine you can take one specific problem, isolate it and solve it. No supply chain exercise, for example, can be successful without an all-round consideration of its tax efficiency and cross-border legal implications as well as its impact on production processes and customer satisfaction. Our practitioners bring fresh approaches and practical solutions rather than off-the-shelf answers based on the same tired methodologies. And they are firmly focused on developing and executing manufacturing strategies that integrate people, processes and technologies to bring tangible results.

I end where I began: manufacturing today is very different to the common public perception. It’s a dynamic sector, full of challenges and interest and with a hugely profitable future. But it is not a place for those who would prefer to keep their heads in the sand. We are all capable of responding to its demands but we need to be bold, planning with confidence, and setting the pace, not following the trends.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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