Yesterday we published our sixth annual Executive Survey, looking at manufacturing expectations for 2017 – and as Hela wrote about, long-term goals are still front and centre of manufacturers’ minds. So how will manufacturers’ business plans be delivered in the year ahead?
Manufacturers have had to deal with challenging and volatile business conditions since the financial crisis but through all of this there is a constant: the UK manufacturing sector is ambitious, resilient and manufacturers set out strategies to achieve business growth.
Our Manufacturing Ambitions report showed that three-quarters of manufacturers are going for growth – ranging from the substantial to those laying the necessary foundations for future growth.
This year is no different. Our survey shows that firms in the UK are focused on areas to deliver long-term growth and sustainable business.
The building blocks of success
Innovation, investment, exporting – three foundations of a successful and productive manufacturing sector, and importantly, a thriving and balanced economy. Manufacturing is more than products, it about the knowledge that goes into making the best alongside offering services that bring added value. It is a globally connected sector as part of interdependent, intricate supply chains and through selling products and solutions worldwide.
In order to realise business plans in 2017 there is focus from UK manufacturers on productivity through process innovation, investment in technology and innovation and continued work to ensure flexible supply chains. The effort is broad based with two in five firms focusing on four or more actions – with many going hand-in-hand with each other – in order to ensure successful business outcomes.
An innovative sector
Fifty-six percent of survey respondents report they will be undertaking process innovations to increase productivity in order to deliver their business plan in 2017.
Process innovation can quickly pay for itself by increasing efficiency and reducing costs, and the returns are quickly visible on the bottom line. It improves competitiveness, for example, by reducing lead times and improving quality.
Complementary to this, half of companies expect to increase investment in technology and innovation in the next 12 months.
Manufacturing relies on its supply chains
Working with customers and suppliers to ensure supply chain flexibility will be undertaken by 44% of respondents in this year’s survey. Modern manufacturing is built on complex supply networks and the relationships across these supply chains can be an important factor of success, with customer satisfaction, product quality and on-time delivery all key aspects in maintaining competitive advantage.
It won’t all be plain sailing
It is clear that manufacturing executives have their 2017 course plotted but a smooth journey is not guaranteed. Many actions remain challenging to deliver.
What will these aims amount to? On balance, we see that firms are positive about the prospects for the industry in 2017 – although by a slim margin – and there are overall encouraging views for firm level indicators on productivity and investment.
The picture on profit margins looks less rosy however, and companies are also less sure about the UK and global economic environment overall, and firms still have a range of risks firmly on their radar.
Sales expectations are in the black, with half expecting UK sales to increase in the next 12 months, and 17% expecting a decrease – a picture reflected across all company sizes. This balance, at 33%, has ticked up from the 19% posted 12 months ago.
Increased marketing efforts and diversifying into new export markets look set to pay off with export sales also, on balance, expected to be positive, both to EU and non-EU markets.
Employment looks set to hold up with 36% of firms planning for increases in permanent employee numbers in the next 12 months – for nearly all the expectation is for moderate growth. Encouragingly, seven in ten companies expecting increases say this is due to the need to increase capacity.
With a range of ambitious actions on the cards for 2017, manufacturers believe this will translate to positive results at the firm level, but they are not disregarding the risks for the year ahead – something which Hela will be blogging about later this week.