It has been a mixed bag for UK manufacturing so far this year. The British Chambers of Commerce kicked off the year with a report that 8,000 manufacturing jobs disappeared in January and said that the outlook for the rest of the year was ominous.

Earlier this year, the Chartered Institute of Purchasing and Supply (CIPS) said that exporters helped UK manufacturing reach its fastest growth rate for over two years and that factory gate prices were on the up. CIPS put its closely watched index of manufacturing activity at 55.4, a rise for the nineteenth consecutive month.

Positive domestic demand

In March the CBI’s monthly Industrial Trends Survey reported that manufacturing demand and pricing intentions had hit the best level for over a decade. It said: “The level of manufacturers’ total order books has reached a new 12-year high this month, pushed up by strong domestic demand. Pricing intentions were also their strongest since 1995.” Eight per cent of firms said their current total order books were “above normal”, the strongest balance since May 1995. The previous two months saw total order book levels markedly above normal for the first time in 12 years.

The figure of +21 per cent is the highest balance of manufacturers since March 1995 and they now expect to raise prices. The balance for the consumer goods sector is the highest for 17 years, with a balance of +38 per cent planning to raise prices to the highest since April 1990 (+39 per cent). All sectors saw rising demand, with capital goods making the biggest contribution.

In all sectors expectations for output dropped a little, with intermediate goods such as timber, chemicals and manmade fibres now showing a stronger balance than either capital or consumer products.
On the IT side, supply chains and supply chain solutions are again becoming increasingly important.
“Manufacturers are finding that their supply chains are becoming increasingly complex and are having a greater impact on their overall business,” says Adam Jura, manufacturing technology analyst at Datamonitor. “Gone are the days of comparing two manufacturing companies. Now, it’s a case of two supply chains, and as such, the capabilities of modern supply chain management (SCM) suites to streamline processes associated with both partners and customers are driving significant investment.” The research company said that by 2010 the worldwide market for SCM applications in the manufacturing industry will grow to $2.5 billion, up from $1.6bn in 2005.

RFID price still too high

This year is also reckoned to bring the inflection point for Radio Frequency Identification (RFID).
Currently used at the high value end of the manufacturing market in sectors such as aerospace, defence and some pharmaceuticals, RFID deployments are reportedly growing in popularity but they have yet to reach critical mass, being held back by high tag costs. Forrester Research says only after 2007 will RFID tags fall below the one cent level, at which point large scale item tagging will be viably economical in general manufacturing.

Among the manufacturers’ suppliers, SAP shipped the latest version of its mySAP ERP-based All-in-One product with reduced CRM functionality. The move was seen as SAP hardening its commitment to the SME market.

Promising a strong defence

In an unrelated move, arch rival Oracle sued SAP for “corporate theft on a grand scale”. Its 44-page complaint surrounds allegations that a SAP-owned consultancy, TomorrowNow, stole “thousands of proprietary copyrighted software products and other confidential materials that Oracle developed to service its own support customers”.

SAP responded tersely: “SAP will not comment other than to make it clear to our customers, prospects, investors, employees and partners that SAP will aggressively defend against the claims made by Oracle in the lawsuit. SAP will remain focused on delivering products and services – including those from TomorrowNow – that ensure success for our customers.”

The battle is about future software service revenues but it is unclear what, if any, the action will have on customers.