Since Tuesday, we’ve been drumming out a series of blogs on the findings of EEF’s and Infor’s recently published Productivity Report. Today’s blog aims to wrap up a week full of manufacturing productivity, also a major topic on EEF’s Annual Conference on Wednesday.
What have we learned so far?
Our research shows that productivity in manufacturing is not just a vague concept that has become the media buzzword of the moment. It’s the cornerstone of manufacturers’ business strategy and a key metric of business performance. Manufacturers measure and monitor productivity in their daily operations and take a range of steps to boost productivity as part of the ‘continuous improvement’ process, as well as through larger step-change investments. However, productivity in UK manufacturing is not yet a job done.
Manufacturers can do more
In a globally competitive marketplace manufacturers cannot afford to get complacent in trying to maximise the productivity potential of their business. While some manufacturers are already dipping into the full range of measures to improve productivity, this is not necessarily the norm across the sector.
1. Productivity beyond the shop-floor
Some manufacturers have a holistic view of productivity; they look to improve productivity across different units of their business, as well as that of their supply chain. Their focus goes beyond the shop floor to the training of senior decision-makers and the implementation of lean initiatives in the back office.
However, most manufacturers interviewed tend to concentrate on improving productivity inside the four walls of the factory. Broadening the productivity focus beyond the shop floor and extending continuous improvement initiatives across the business can yield important productivity gains.
2. Productivity beyond increment changes
Another area where UK manufacturing seems to be punching below its weight is that of early adoption of major technological breakthroughs. While for the majority of manufacturers getting those incremental improvements is well ingrained in the way they think about productivity, investing in new technologies has been less commonplace in the past few years.
Adopting new technologies – such as 3D printing, big data, robotics and internet of things – can have an impact on productivity substantially above and beyond that of incremental changes. They lead to transformational change that can significantly raise the plateau of a company’s productivity potential. However, our interviews indicate that these types of investments are currently hard to find in the sector.
3. Productivity beyond manufacturers
Not everything depends on what actions manufacturers can take to improve their productivity; government policy has a role to play too. It’s the policy environment that shapes the ‘ecosystem’ within which manufacturers pursue their business objectives. In a way, government policy sets the boundaries for businesses ability to reach their productivity potential – its can be both an enabler and limiting factor.
Manufacturers noted a range of policy areas where improvements could generate a more enabling environment for manufacturers to boost their productivity:
I. Tax environment
Investment in capital equipment is at the forefront of manufacturers’ productivity toolkit. In this respect, tax incentives for capital investment are key, especially around capital allowances and the business rates system.
II. Innovation and export support
Successful innovation has a large positive impact on long-term productivity. However, innovation is high-risk and the pay-pack period is long, and government support in this area needs to be maintained. On the other hand, more work could be done to assist UK exporters through an expansion of the UKTI’s expertise that could go a long way towards easing access into new export markets.
III. A long-term view
The principle overarching concern that UK manufacturers share is that respective governments are too short-sighted when thinking about policy. Manufacturers invest in long cycles and certainty and predictability in policy are two of the most important parameters that they look for when choosing a location to manufacture. The sector would therefore have a lot to gain from the Government adopting a more long-term view about the place of manufacturing in its economic plan.
Where does this leave us?
Our research into manufacturing productivity is not a job done either. The Productivity Report has yielded some important insights into how manufacturers understand and measure productivity, the steps they take to improve it and what more can be done to up their performance. It’s the last point which we’ll look to delve into more detail for phase 2 of our productivity project. Also, keep an eye out for our blog on Monday, where we'll be outlining our key asks ahead of the Budget on how the Government can support manufacturers in their efforts to boost productivity.