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1 . SWMAS Ltd No part of this report may be reproduced without the express permission of SWMAS. National Report Autumn 2017 (July, August and September 2017) Surveyed in October 2017
2 Contents Productivity: where would manufacturers most like to see improvement by the year 2020? Introduction Business Aspirations Survey Demographics Measuring Trends Special Focus About the Manufacturing Barometer
3 Introduction Welcome to the latest Manufacturing Barometer report revealing the latest performance, views and opinions of manufacturing SME s across the UK. Around 280 senior decision makers in manufacturing SMEs have once again shared their views on business performance and forecasts for the future. Note too, this quarter s special focus looking at UK manufacturers plans to address productivity. We asked manufacturers about their own thoughts on where and how in their business they want to improve productivity and also how they plan to do this the results will surprise some readers. Simon Howes Managing Director Exelin Group Ltd Delivering SWMAS The Core Trends 61% of respondents reported an increase in sales in the previous 6 months reflecting a continued picture of growth being achieved in the sector. 59% believe they will grow sales in the next 6 months, reflecting the ongoing confidence in spite of uncertain market conditions. However, just 43% say they are planning to invest in new equipment and only 40% are planning to recruit to meet future needs, the lowest recruitment figures the Manufacturing Barometer has seen since 2013 Quarter 2. This raises questions around how businesses will manage growth and has clear implications on the need to increase productivity to meet the predicted increase in sales. Continued Overleaf...
4 Special Focus: Productivity This is a pivotal time for the UK to focus on what productivity actually means to manufacturers. It has very much become headline news over the past months with government and industry talking about a need to solve the Productivity Puzzle. Last quarter s Barometer, highlighting business concerns about the impact of Brexit and availability of people, also showed that the importance of efficiency and the ability to be more productive is more crucial than ever. Thus the Barometer explored two important questions: where and how these improvements in productivity should be made. When asked where in their business manufacturers would like to make improvements, they are saying reducing the cost of operations, supply chain and back office are distinct priorities. The surprise for some could be in how manufacturers believe they should improve productivity. Businesses say that they intend to prioritise making their existing people and processes more productive ahead of investing in new production facilities or through automation and robotics. This is somewhat out of step with the developing industrial strategy, which sees robotics and automation as much more central to solving the productivity puzzle. Conclusions The Autumn 2017 Manufacturing Barometer has left no doubt that manufacturers recognise the need to improve productivity within their businesses and that optimising existing processes and improving existing employee effectiveness is a priority. SMWAS support the view that the UK will need to invest in automation as part of the strategy to grow productivity and increase manufacturers ability to cope with the unavailability of labour. However, it is vitally important that we listen to what manufacturers are actually saying as to where and how they feel they need to improve in order to become more productive. The right information and support must be available to enable them to get the most out of their people and processes. This suggests that government and industry bodies need to facilitate manufacturers to get more out of their existing people and processes and businesses may need to look harder at investing in robotics so they do not fall behind in the medium and long term. Read on for more about the Manufacturing Barometer results...
5 Business Aspirations & Productivity The big question about productivity is how it is being measured. Everyone uses different terms such as turnover, profit or GVA. The government may be measuring differently to manufacturers. This is important, because the worst killers in our manufacturing figures are the indirect costs, such as HR, pensions and health & safety administration. Vital as they are, these all require people in post and therefore take money off the bottom line. So it s important to be clear if these are taken into account. We need to keep a motivated workforce, and be open to developing skills and empowering the people that work for us, so they can continually make decisions that improve efficiency. Exelin have helped us to do this by providing insight and assistance to understand and eliminate waste and through inspiring our people. Yes, automation is key for us, but the more immediate priority focus should be our people. It s a quicker win. Unless we have people who are capable of making observations and taking any subsequent decisions, we lose the capacity to be productive. Karen Friendship, Managing Director, Aldermans Engineering metalwork solutions Increase the skill level and productivity along with leadership training to take team leaders to the next level. Develop own product to be 30% of turnover in two years and move up the supply chain with use of higher value engineering. Groveley Precision Engineering Limited Design and manufacture for safety critical equipment
6 Business Aspirations & Productivity We are continually looking at improvement and efficiencies within our business. We pride ourselves on lean thinking! We operate from four separate sites and our long term plan is to re-locate, but with the current lack of employment space and high build costs this is a real challenge for us and many other companies. I believe lack of affordable employment space is a national problem because land is too valuable in light of house building requirements. People need homes, but they also need jobs and jobs are created in places to work! Taunton Fabrications Steel fabrication and architectural metalwork To increase productivity and achieve 25% more sales. Crocodile Packaging Ltd Timber engineering and manufacturing We are investing in learning by setting up an academy. Delta Balustrades Design and production of bespoke glass balustrades We seek to export more; immediately we are developing business in Brazil and China. Micromix Plant Health Chemical formulation and production To still be here and profitable this time next year. Hope the government has decided what they are going to do about the EU and get on with it. Senior and Dickson Plastic injection moulding
7 Survey Demographics 17% 4% 5% 7% Chair of the Board Finance Director Managing Director Operation Director Other 67% Over 67% of respondents were Managing Directors Individuals who are in the business, hands-on, running it day-to-day 279 Respondents
8 National Past Sales 90% 80% How has your sales turnover changed within the past 6 months? Much Reduced/Reduced Much Increased/Increased 70% 60% 57% 61% 57% 61% 50% 48% 43% 48% 40% 30% 20% 10% 0% -10% -20% -30% -40% -28% -30% -24% -22% -15% -22% -18% -50% Q4_2015 Q1_2016 Q2_2016 Q3_2016 Q4_2016 Q1_2017 Q2_ Respondents
9 National Future Sales 90% How do you expect your sales turnover to change over the next 6 months? Much Reduced/Reduced Much Increased/Increased 80% 70% 60% 69% 59% 59% 66% 69% 58% 59% 50% 40% 30% 20% 10% 0% -10% -20% -10% -18% -19% -13% -10% -17% -15% -30% -40% -50% Q4_2015 Q1_2016 Q2_2016 Q3_2016 Q4_2016 Q1_2017 Q2_ Respondents
10 National Past Profits 5% 34% 9% 22% How has your profit changed within the past 6 months? 4% 4% 30% Last quarter s results 25% Much Reduced Reduced 41% No Change Increased Much Increased 26% 273 Respondents
11 National Future Profits How do you expect your profit to change over the next 6 months? 3% 1% 16% Much Reduced Reduced 47% No Change Increased 33% Much Increased 273 Respondents
12 National Past Capital Investment How has your investment in new machinery/premises changed in the past 6 months? Much Reduced/Reduced Much Increased/Increased 90% 70% 50% 44% 37% 44% 42% 43% 41% 45% 30% 10% -10% -3% -11% -10% -9% -6% -14% -8% -30% -50% Q4_2015 Q1_2016 Q2_2016 Q3_2016 Q4_2016 Q1_2017 Q2_ Respondents
13 National Future Capital Investment How do you expect your investment in new machinery/premises to change in the next 6 months? Much Reduced/Reduced Much Increased/Increased 90% 80% 70% 60% 50% 40% 47% 41% 45% 50% 50% 44% 43% 30% 20% 10% 0% -10% -20% -3% -14% -12% -9% -3% -15% -8% -30% -40% -50% Q4_2015 Q1_2016 Q2_2016 Q3_2016 Q4_2016 Q1_2017 Q2_ Respondents
14 National Past Employment 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% -30% -40% -50% 35% -25% 31% How have staff numbers in your company changed in the past 6 months? 41% -22% -23% 37% -19% 44% -13% 38% Much Reduced/Reduced 47% -17% -15% Q4_2015 Q1_2016 Q2_2016 Q3_2016 Q4_2016 Q1_2017 Q2_ Respondents
15 National Future Employment How do you expect staff numbers in your company to change in the next 6 months? Much Reduced/Reduced 90% 80% 70% 60% 50% 51% 44% 49% 46% 48% 42% 40% 40% 30% 20% 10% 0% -10% -20% -9% -9% -10% -7% -7% -11% -9% -30% -40% -50% Q4_2015 Q1_2016 Q2_2016 Q3_2016 Q4_2016 Q1_2017 Q2_ Respondents
16 Special Focus: Productivity Are you a primarily a Project based or Volume based manufacturing business? 47% Project based - most of our work is in small batches of one-off in nature 53% Volume based - most of our work is repeatable in nature (including small variations to suit different customers) 260 Respondents
17 Special Focus: Productivity We asked respondents to rank where in their business would they most like improve cost? 140 COST Operations Supply Chain Back Office Sales New Product Development & Design
18 Special Focus: Productivity We asked respondents to rank where in their business would they most like improve quality? 90 QUALITY New Product Development & Design Sales Operations Back Office Supply Chain
19 Special Focus: Productivity We asked respondents to rank where in their business would they most like improve delivery/lead time? 100 DELIVERY/LEAD TIME New Product Development & Design Operations Supply Chain Sales Back Office
20 Special Focus: Productivity We asked respondents to rank how they would most like to improve productivity Smarter working practices (more productive people) Better utilisation from existing equipment Higher value products - increasing value to customers Newer/Larger/Faster production equipment - more output per hour Automation - more output with fewer people Weighted rankings
21 About the Manufacturing Barometer The Manufacturing Barometer is a quarterly survey that charts the experiences of UK SME manufacturers. It is the largest survey of its kind and has informed both government industrial strategy and the national debate on manufacturing. Run by SWMAS, part of the Exelin Group, since 2009 in the South West of England and recently partnering with Economic Growth Solutions, the Manufacturing Barometer records trends in employment, turnover and investment. Each quarter, a special focus explores an issue in greater depth. In the past this has included issues such as productivity, overseas production and energy efficiency. Companies are able to use this quarterly Manufacturing Barometer to compare themselves against other firms within their sector or region. The Exelin Group are experts in productivity and growth. If you would you like one of our team to undertake a diagnostic review, helping identify opportunities in your business, or for more information on this report, please contact: info@swmas.co.uk
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