Many commentators have hailed the end of British manufacturing, sometimes in celebration, sometimes in mourning. The optimists cite the strength of the nation’s services sector and what already seems an old-fashioned phrase, all those ‘invisible exports’, as the new focus of industrial muscle. Pessimists worry that we will soon end up with no significant industrial base, as countries like India and China secure their place in the sun with a strategy based around cheap manufacturing strength.
It is hard to see which side has the most coherent argument. Indeed, Office of National Statistics numbers showed that the reason the UK economy expanded some 0.6 per cent in the first three months of 2006 was down to the best growth in manufacturing output for seven years and offset a decline in the country’s struggling retail sector.
A shift to services
What cannot be denied is the rate of transformation in the UK economic landscape. At least five million jobs have been lost over the past 30 years as a result of a shift to services and the sector now represents just 15 per cent of UK GDP. In 1996 that was still 21 per cent. But in the words of former trade and industry secretary, Alan Johnson, what is left – the remaining hard core of British manufacturing – is now “where we want it: high value, high skill and high wage”.
Some complain Labour could – and should – do more to boost metal-bashing. The government, despite its trade union links, has maintained a more or less impeccable free market approach to manufacturing disasters, such as the closure this year by PSA Peugeot-Citroën of a shop in the West Midlands it alleged was the most expensive manufacturing facility in Europe. That row does not come close, of course, to last year’s furore over the collapse of MG Rover. The days of the state bailing out massively inefficient concerns like British Steel or Leyland belong in the era of flares and prog-rock, it seems.
What role does IT play in manufacturing during 2006? “What we are seeing is the ongoing trend to consolidate systems around major ERP platforms like Oracle and SAP,” believes Hugh Evans, a senior member of the manufacturing and life sciences team at consultancy Deloitte. “Some 23 of the biggest manufacturers – though we include aerospace and defence in this category – run SAP now.”
"“What we are seeing is the ongoing trend to consolidate systems around major ERP platforms like Oracle and SAP”"
Hugh Evans, senior member, manufacturing and life sciences team, Deloitte
Manufacturers have gone beyond the first flush of use of these systems and are now interested in secondary exploitations of their power, such as data warehousing, he adds. “Manufacturing almost by definition is about a well-organised set of procedures that lent themselves quite early on to automation. So these companies really need to get the next level of help, in terms say of analytical applications. It’s still ERP in the sense that it is all about that single customer master file idea and looking at things in a holistic sense.”
An example is Rexam, the world’s fifth largest consumer packaging supplier, a £3 billion FTSE quoted organisation that produces some 50bn cans a year. Its CIO Paul Martin recently told MIS that although the company invested in SAP in 2001, it was only in 2003 that it really started to motor with the product.
Rexam’s success with integration
“We needed to streamline our approach, integrate where we could, and find new ways of connecting generally,” he says. “This re-engineering could only happen with the right kind of applications platform to support it.”
The company has gone from no electronic integration with its customers to where 90 per cent of product is ordered online. Other observers say what’s actually happening is that while manufacturers have undoubtedly invested in ERP, they have tended to stick to carefully bounded areas like finance, and not done much to exploit other parts of these systems. More than likely most manufacturing CIOs in this year’s MIS 100 will see their priorities as cost reduction, consolidation and squeezing more supply chain efficiencies.
There is a certain conservatism, in fact, in manufacturing use of information and communications technology. Recent spending analysis by Gartner suggested that worldwide technology spending in manufacturing organisations globally will grow at 3.1 per cent annually, from 2004’s £228bn to £266bn by 2009, but in Western Europe, including the UK, that figure slips to just 1.1 per cent.