Advanced Manufacturing orders are booming, but key issues need addressing.9 July 2021
CHRIS OWEN – LEADER OF THE PEER NETWORK GROUPS FOR ADVANCED MANUFACTURING
Chris Owen discusses the issues facing Leicestershire’s Advanced Manufacturing sector – some of these have been created by Brexit and Covid but others are more long-standing and linked to the way these companies are founded and grown over the years. Chris shares some practical advice on how these issues can be addressed to help the businesses ensure their survival and growth.
Which sectors of manufacturing are you focussing on and what are the issues they’re currently facing?
I focus on advanced manufacturing which encompasses automotive, aerospace and anything else that involves technical engineering like industrial products and electronic products. Even though those areas can be quite sophisticated technically, I’ve found that the business issues they need to resolve are quite generic and fundamental.
Things like how to win more orders through marketing including digital marketing and websites; managing and engaging with staff and measuring their performance so that you can become more efficient and reduce costs; the competitive positioning of products and services in certain markets to help grow your business and make it stand out; how to put this all together in a plan for the future, so that you can become more strategic and less ad hoc and reactive.
Tell me more about the issues relating to staff and people management.
With smaller mid-sized manufacturers, people issues can be their main challenge. Many companies have started as family businesses and over the years, they have appointed other family members into managerial positions which is understandable. However, this can mean that those family members haven’t worked in other companies so haven’t had the opportunity to gain different perspectives and experience the formal systems that are in place in larger businesses, for HR and so on. On top of this, often, they’ve not had any formal training and development in the areas for which they’re given responsibility, so they have to learn on the job and obviously they will make some mistakes along the way.
In my experience, mid-sized advanced manufacturing companies are founded and run by people who are very competent technically in their field of engineering and often very good at operations. They aren’t quite so strong when it comes to things like how to market their products and services, how to manage customer relationships, sales processes, or strategic planning.
HR and people-related issues are also a big area where things can go wrong, particularly for manufacturing, because they tend to employ quite a few people in the production processes – the operators and people who are down on the shop floor doing the assembly. So these companies need to be good at developing their people so that they retain them and that makes it easier to recruit new staff when they’re needed because you have a good reputation as an employer.
These businesses tend not to be big enough to have HR departments, so the owner manager becomes the person trying to handle this on top of everything else. Unfortunately, they’ve never had any HR training, so they do what they have to do to remain legally compliant (if they know what that is) but the rest is ad hoc often with no policies or employee engagement. And that’s a situation that is likely to end badly.
Leadership is an issue that comes up very frequently in our Peer Network cohorts because, again, the people who find themselves in leadership positions have never had any formal leadership and management development. Some advanced manufacturing companies are big enough to have someone with HR responsibility but, again, they are often people who have grown up with the company and been made HR manager but they’re not HR professionals.
How have Brexit and COVID affected advanced manufacturing companies?
One of the long-standing issues for this sector is how to market and how to boost sales. However, most of the companies I’ve been talking to recently are so incredibly busy because they’re inundated with sales. The workload of sending out quotations and securing sales is enormous for them and they’re struggling because they don’t have the team capacity to be able to manage that customer demand either in terms of quoting or having the capital assets or people to meet that demand.
In many cases, I’ve seen shortages of materials in the supply chain. They can’t get the raw materials in to make the product and there’s a big issue with, for example, semi-conductors for the automotive sector.
Materials prices have also gone up astronomically so, along with materials shortages, those are two big headaches for manufacturers and they’re having to look at ways to reduce their costs and retain some of their profit margin. Having a full order book is great, but not if you can’t cope with delivering it. The answer is either to build your internal team to increase capacity or to outsource and use flexible business models like partnering with other people. This is the type of challenge we discuss in our Peer Network and we’d work out the pros and cons of each.
I’ve found that senior leadership teams can be the biggest bottleneck in terms of decision making and taking action, simply because they’re busy doing the estimating and quoting and managing the customers – and they recognise that themselves.
They have to scale up their team and its capabilities to be able to cope with customer demand. How to scale up to meet customer demand, without dropping the ball, is a big challenge for the sector.
COVID has created pent up demand and some of it is genuine, brand new demand. So people aren’t spending money on holidays or travel but they are spending on their homes and gardens and their environment because they’re spending more time at home and have disposable cash. They’re choosing to build extensions on their houses and go out and buy things they wouldn’t have before, so the construction industry has gone bonkers. Garden equipment, cycling, health and leisure, interior gyms, home offices – all of this is genuinely new demand.
Brexit has meant that more and more people are now seeking local sources for components of products – that’s a genuine trend. And a lot of SMEs are now seeing situations where customers are coming to them and saying ‘you make A, B and C for us right now but we really want somebody who can make D and E’. The manufacturers are thinking that they probably could produce these new products but without the capacity, and being full up with current demand, they don’t have the opportunity to pivot into new opportunities.
The thing is, there are so many opportunities out there, that manufacturers have got what I call ‘opportunity indigestion’. They’ve got 8 to 10 things that they could do but picking which is the right one to invest in, is a nightmare for them. Often, they’ve got incomplete information, they’re faced with an uncertain future and it’s very difficult but that’s the role of strategy.
That’s where we come back to those core business skills that I was talking about when we started; many of the smaller mid-sized manufacturers I work with have an aversion to the idea of strategy because they think it’s about creating meaningless missions statements and ‘visions’ and I have some sympathy with that! But at the same time, they will say to me ‘what I need to know is which products I should be making and which markets I should be serving’. If they can answer those questions, they will have a strategy – and a meaningful one that will help their business focus and succeed.
What’s your overall message to advanced manufacturers, finally?
My message is this: I understand your business and your challenges. Advanced Manufacturing is hugely important to the Leicestershire economy and a special focus for the Business Gateway. We want to support you in ironing out those internal issues and giving you the capacity and resilience to capitalise on these opportunities, to grow your business in a sustainable and secure its success for the future. Joining my Peer Network group will give you the opportunity to discuss the common issues facing small and mid-sized manufacturers. Just knowing what other people do and the things that have and haven’t worked well for them is so incredibly valuable and is guaranteed to help you work smarter and save time.
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