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Current Industry & Economic Trends Impacting the 

Manufacturing Industry

69%* of manufacturers are putting their supply chains under the microscope

When the COVID-19 outbreak struck, manufacturing organizations found themselves questioning nearly every aspect of their operations. Manufacturers of all shapes and sizes mobilized to understand the situation, predict what was coming next and adapt the way they operated in response to what was happening. Manufacturers needed to be agile to cope with the constantly changing dynamics; they had little choice.

Virtually overnight, we saw a raft of changes implemented, including the adoption of digital technologies, revised working practices and new supply chains. This was a lesson in agility itself. We even saw numerous firms temporarily repurposing to produce products they probably wouldn’t have made otherwise such as ventilators, face shields and test kits.

Having implemented a number of changes to rapidly respond to the unfolding situation, many organizations were left with an artificially inflated perception of their agility. Once the dust had begun to settle and there was scope to take stock – particularly by looking at other manufacturers around them -the true level of their agility became apparent.

One senior executive in a recent Agility Assessment survey conducted by The Manufacturer and sponsored by HSO, said: “If I’m honest, the reason why so many organizations said they were ‘highly’ or ‘extremely’ agile last year is because they genuinely believed they were. Many implemented programmes to counteract the COVID-related chaos and they survived. But in reality, most, including us, thought they were better than they were and, as it happens, we were no more agile than anybody else.”

Supply Chain Volatility & Re-Shoring of Suppliers

The biggest issue impacting manufacturers this year is supply chain disruption. Research revealed that for 69% of manufacturers, sourcing raw materials/components from suppliers is at the top of their list.

There are unrelenting pressures on company supply chains, from increased costs and geo-political uncertainty, which are creating unacceptable lead times.

This poses an incredible strategic risk to manufacturing businesses and as a result they are now placing their supply chains under the microscope and adopting a new range of strategies to manage relationships with suppliers both at home and overseas., including diversification of supply chains by increasing or reducing the number of suppliers, as well as investing in a range of technologies to monitor up and down their supply chains.

The bottom line is most manufacturing organizations continue to be significantly impacted when it comes to sourcing raw materials and components. This is despite us now living in the so-called “new normal” with most of the pandemic’s effects, in theory, behind us.

The silver lining through all of this is that it has forced many manufacturing organizations to take advantage of technology to forecast better. There is no escaping volatility, but the use of the right supply chain technologies can dramatically mitigate the worst impacts of disruption. Over the coming months and years, using Artificial Intelligence (AI), and Machine Learning (ML) to help identify and predict events, will take manufacturers to a new level.

According to research, over 81%* of UK manufacturers have diversified their supply chains. Whilst it is important to have a positive trading relationship with overseas markets, almost 50% of companies surveyed are now more cautious about supplying the UK.

The research also found that 40%* of companies have increased investment in supply chain resilience in the past year and a further 20%* are exploring new ways to do so.

According to a recent Make UK report, dashboards and analytics dominate the most popular digital tool for almost half of companies. However, there is minimal take up of AI, robotics, automation, augmented reality and virtual reality. Surprisingly, some manufacturers don’t even use technology to monitor their supply chains. This represents a massive opportunity for UK manufacturers.

“Supply chain disruption has created unprecedented times for businesses across the globe in recent years",

"a pattern of volatility which is fast approaching a permanent state. However, resilience in supply chains is growing and driving new behaviors as companies diversify and increasingly seek new ways of doing business and managing their processes.” Verity Davidge, Director of Policy, Make UK

Recruitment Challenges and Shifting Priorities

Recruiting and retaining skilled staff is one of the biggest obstacles faced by manufacturers when it comes to achieving their business goals over the next 12-24 months. Almost six in ten* businesses were actively trying to recruit new staff in the first three months of 2023, but 80%* said they faced challenges hiring staff.

At a time when the latest Office for National Statistics figures show that there are over 91,000 vacant manufacturing jobs in the UK, attraction and retention must be key focuses for industry.

It became evident from The Manufacturer research, that recruitment challenges are impacting manufacturers of all sizes and in every industry vertical. Furthermore, a couple of common themes are apparent: labour is increasingly hard to source, and workers’ priorities have shifted. Also, many foreign nationals returned to their home countries during the pandemic, and many are now unable to secure visas to return to the UK. These are people that are heavily relied upon, and industry is struggling to replace.

A Board Member at a global automotive manufacturer told The Manufacturer a similar story. “Recruitment is taking up vast amounts of our management team’s time. There just doesn’t seem to be enough of the right people in the labour pool at the moment,” he said.

Interestingly, though, the same executive explained how they are hearing and witnessing similar things across Europe, indicating that the labour and recruitment challenges are not necessarily Brexit-related. This is a theme reiterated by several other manufacturers we spoke with.

The pandemic has had a noticeable impact when it comes to workers’ priorities, which have shifted significantly over the last two years.

“What we’ve seen is many of our older workers, having experienced totally new working arrangements during the pandemic, now looking to continue along that track. As a result, some have taken early retirement. Meanwhile, many of our younger workers have left and switched to roles that enable them to take advantage of remote working – even if it meant leaving the manufacturing industry,” one engineering firm CEO told The Manufacturer.

The theme of workers’ priorities shifting extends across the board. It has caused all the manufacturers that were interviewed by The Manufacturer to re-evaluate and adapt their offerings to be seen as more attractive in the eyes of potential talent.

For one UK-based contractor, the “local” job pool has dried up as individuals seek roles that they can perform remotely.

“Employees expect more flexibility and have realized they can be recruited for a flexible job anywhere in the country. This has had an impact on the availability of local candidates, which we’ve seen dwindle significantly.

“As we are not in a position to offer remote working, we have had to add to our attractiveness as an employer by offering flexible working arrangements where possible,” the firm’s Engineering Director explained.

Obviously, while some manufactures can offer flexible working, others simply can’t. To compete, these firms are having to look at diverse ways to attract talent, including financial incentives. “We’ve increased our pay rates three times now and while it has helped attract people, many still want perks that we simply can’t offer, like home working,” one Operations Director said.

“We’ve also added a night shift premium to boost the appeal of our overnight operations. Fortunately, we’ve been able to pass these costs on to our customers, without any issues,” he added.

Other firms have shifted their focus on candidates to secure talent. Whereas historically they would have set their sights on recent graduates to fill their skilled positions, now, they are focusing on first recruiting individuals with the right attitude and then training them to the level they need them to be.

A Manufacturing Director at a large food and beverage company told The Manufacturer, “We’ve reviewed our entry requirements to make recruitment happen, making sure we’re not solely focused on academic qualifications when considering candidates, but also their wider potential and other capabilities and attitude. In fact, 80% of employees on our career builder programme have not formally studied since leaving compulsory education”.

The gravity of the situation was summed up by the Chief of Digital Manufacturing at a global aerospace and defence firm: “We are seeing significant shortages in talent in every area from shop floor operators to highly technical roles.

“Investing in future skills is going to be our next challenge beyond the recruitment challenges. It is important to strategically plan for the changes in technology and business models from a skills perspective.”

The British Chamber of Commerce is now calling on government to work with business on recruitment solutions including skills training, investment, and urgent reform of the Shortage Occupations List. Jane Gratton, Head of People Policy at the BCC, said “People shortages are a massive issue and employers can see little sign of improvement. The higher number of unfilled job vacancies is damaging businesses and the economy. Firms are struggling to fulfil order books and turning down new work.”

An Appetite for Investment

Despite the agility, supply chain and recruitment challenges being faced by many manufacturers, firms are pushing forward with and, in some cases advancing, their investments in key business areas. 78%* of manufacturers have accelerated their investment plans in products, people, premises, processes to mitigate recent world events.

This is surprising given recent world events and other domestic factors. But what it does show is that there is still confidence in the manufacturing sector and industrial firms are willing to spend money now the dust from the pandemic has somewhat settled to stand themselves in better stead going forward.

One area where manufacturers are investing is digital technology. As the Chief of Digital Manufacturing at a global aerospace and defence firm said: “Investment in digital technology and business transformation have been critical areas of focus.” Such technological investments are a win-win for organizations as they can take advantage of the technologies’ primary benefits and attract talent in the process.

Recent graduates and younger generations in particular have a desire to utilise the latest technology in their roles. Organizations that persist with outdated processes and systems risk alienating themselves as potential employers from this tech-savvy cohort.

Meanwhile, other manufacturers are realizing that technology investments do not need to be “big bang” and that a step-by-step approach is often just as intuitive.

For one heavy engineering company, the desire to introduce robotics and automation was frequently outweighed by the associated cost and training implications. This is a trend often heard, and it’s understandable. But the reality is that many companies are now benefitting from technology without the large investments that are perceived to be necessary.

For example, some digital investments can be delivered in weeks, not months or years. By starting simple, like a piece of automation that replaces a manual spreadsheet or process, companies can realize benefits quickly, efficiently and cost effectively.

Manufacturers must embrace change, harness digital and boost agility

A common theme that we at HSO are finding is that many manufacturers have a desire to streamline their ways of working to become more efficient – a reality that feeds into the overall agility puzzle.

Now, the concept of Digital Transformation is one that is linked very closely with streamlining and the associated efficiency and agility gains. But many organisations simply don’t know where to begin. Mention “Digital Transformation” and it is often the case that a lot of companies will tell you they are not in a position to embark on a lengthy, expensive journey.

But the bottom line is that streamlining working practices through Digital Transformation doesn’t necessarily require a large investment and years of effort; as we’ve proved repeatedly with our customers.

When it comes to being agile, start by looking at what processes you’re able to automate. Realising agility gains can begin with something as simple as replacing a spreadsheet with a digital solution, one that significantly reduces the need for human involvement. This kind of Digital Transformation is quick and cost effective to implement and will bring immediate benefits.

Something else we hear a lot from HSO customers is how they struggle to harness the power of all the data they are collecting. While it’s admirable they are focusing on data and capturing as much as possible, the reality is the entire process can be for nothing if no valuable insights are being obtained.

One of the keys when it comes to taking advantage of data is making it both meaningful to and accessible to the people who will reap the biggest rewards from it – often your shop floor personnel.

Start by asking these individuals and teams what kinds of data they could benefit from and understand how they could potentially use it. These conversations are so important, yet they sometimes do not happen. When they do, we often see specific requests from the shop floor which can be facilitated quickly and cost effectively, and which bring significant benefits in terms of efficiency, agility, and productivity.

By automating manual processes and properly leveraging the data you have, your organization can start realizing agility gains right away, and with very little in the way of capital investment.

We’d love to continue the conversation around agility and discuss any specific challenges your organization is facing. Please get in touch to discover how HSO can help you begin, or further progress, your Digital Transformation journey.


The 2023 Manufacturing Agility Assessment Report is due out later this year

Conducted by The Manufacturer and sponsored by HSO, you are invited to take part in the survey over the coming months.

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