5,000 jobs vacant in UK automotive due to skills shortage

New Automotive Council report reveals depth of skills shortage facing the sector.

• Up to 5,000 current vacancies in the automotive industry causing significant impact on business operations.¹
• Groundbreaking new Automotive Council report sets out skills requirements for UK automotive sector, with engineers most difficult to recruit.
• UK automotive industry workforce now the most productive in Europe – but growth potential could be undermined by lack of new talent.

9 February, 2016 Up to 5,000 job vacancies in the UK automotive industry could be vacant due to a skills shortage affecting the sector, according to a new report published today by the Automotive Council.

The report¹, which was developed by automotive industry consultants SMMT Industry Forum on behalf of the Automotive Industrial Partnership, surveys a range of British-based automotive firms, from vehicle manufacturers to component suppliers, to identify the areas of employment most difficult to recruit, and provide an important means for industry and government to tackle the skills issue. Around 19% of the unfilled vacancies cited in the report are identified as ‘critical’ and having a significant impact on company operations.

Of the top 10 job types for which recruitment is most difficult, the majority are in engineering – with the top two in-demand roles being design and production engineers. The knock-on effect, according to the report, is that companies are hiring temporary contractors and increasingly recruiting from abroad.

The renaissance of the UK automotive industry since the recession has brought significant success to the sector and helped to sustain just under 800,000 jobs across Britain. 2015 was the best year in a decade for car production with 1.59 million vehicles built², and volumes are forecast to reach an all-time record two million by 2020.³ The UK also achieved notable success in productivity levels, which have increased 40% since 2010 to make UK labour productivity the highest in Europe.⁴ But this success could be undermined by the lack of skilled engineers to fill new jobs, despite efforts made by companies to increase training and apprenticeships.⁵

Jo Lopes, Chair of the Automotive Industrial Partnership and Head of Technical Excellence, Jaguar Land Rover, said, “These are very significant findings which present a valuable basis for government and industry to jointly tackle this issue head-on and ensure that the growth potential of the industry in the coming

years is fulfilled. The Automotive Industrial Partnership has already made some important steps since its inception – including the introduction of a range of training programmes – and it will have a crucial role to play in addressing the skills challenge.”

Skills Minister Nick Boles said, “Our automotive workforce is the most productive in Europe and this goes a long way to explaining why production hit record levels last year.

“But this report shows we cannot be complacent. The sector needs to maintain its high productivity and international competitiveness and address the required demand of skilled workforce, engineers and designers. That’s why our apprenticeship reforms are putting employers in the driving seat, to deliver the high-tech, long-term skills our economy needs.

“The Automotive Industrial Partnership is a good example of government and industry working together, and I welcome this report.”

Mike Hawes, SMMT Chief Executive, said, “The automotive industry has already invested heavily in apprenticeships and training for existing staff to grow and develop a new generation of skilled workers. However, even more support is needed. The struggle to fill vacancies is holding back growth and opportunities for business, and it is essential that both government and industry work together quickly to identify ways to plug this gap. Future schemes must focus on quality not just quantity – and more support is needed to promote STEM subjects in schools.”

The Automotive Industrial Partnership was initiated in early 2015 by the Automotive Council to bring together major automotive businesses in order to help ensure future skills needs are met for UK vehicle manufacturers and supply chain companies. Since its inception, the Partnership has developed a ‘jobs framework’ – an industry standard hierarchy of roles – to make it easier for companies to structure positions and for employees to follow clear career development paths. It has also implemented a number of new training programmes, and is developing the Automotive Apprenticeship Matching Service to retain more high calibre apprentices in the industry.⁶

In addition to the new personnel needed, there are also many new training requirements due to the adoption of new automotive technologies in the industry. According to the report, 71 different types of learning are required for more than 20,000 people working in the industry – 15% of whom have an immediate need for new training. The most critical training requirements are in lean manufacturing (minimising waste), advanced problem solving and tool making.

The report sets out a range of recommendations to tackle the skills shortage. These include the implementation of a co-ordinated approach to STEM (science, technology, engineering and mathematics) subjects in schools, as well businesses ensuring that apprenticeship opportunities on offer from government are maximised.

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Notes for editors

¹ About the report: Employers’ views of the jobs and skills required for the UK automotive industry

Devised by the Automotive Industrial Partnership, the report features a survey of 61 UK automotive companies, including eight vehicle manufacturers and 23 suppliers, collectively employing around 83,200 people in the UK. It identifies where the main gaps lie in skills availability, as well as how critical these gaps are

2,500 vacancies from the companies surveyed were found to be ‘difficult to fill’ or ‘challenging’, which when extrapolated to the whole industry (around 160,000 people employed), puts the potential number of these jobs at almost 5,000.

The full report can be downloaded at www.automotivecouncil.co.uk, www.automotiveip.co.uk and www.smmt.co.uk (after 00:01 on Tuesday 9 February).

² SMMT Production International Exchange (PIE) data

³ SMMT/AutoAnalysis 2015 report: The future of UK automotive manufacturing in 2025 and beyond (http://bit.ly/1PaNEQG)

⁴ Automotive Council 2015 report: The international competitiveness of the UK automotive industry (http://bit.ly/2089pHc)

⁵ SMMT: 2015 Automotive Sustainability Report (http://bit.ly/1P09Cla). Training provided by automotive firms rose from 2.5 days per employee to 3.3 days in 2014.

⁶ For more information, visit http://www.automotiveapprenticeships.co.uk

About the Automotive Council

The United Kingdom Automotive Council was established in December 2009. It is a joint UK government-industry organisation tasked with establishing the UK automotive sector as a world leader.

The Automotive Council aims to:

• Create a transformed business environment for the automotive industry in the UK to provide a more compelling investment proposition for related industries;
• Develop further the technology roadmaps for low carbon vehicles and fuels, and exploit opportunities to promote the UK as a strong candidate to develop these and other technologies;
• Develop a stronger and more competitive automotive supply chain;
• Provide a stronger public voice for the industry to support the value of the industry to the UK and to global partners;
• Ensure a strategic, continuous conversation between government and the automotive industry in the UK.

www.automotivecouncil.co.uk

Media contacts

Ben Foulds (SMMT)  020 7344 9222  [email protected]

Jason Raj (BIS)  020 7215 5946  [email protected]

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Malcolm Jones,

Principle Engineer at Industry Forum, 

has over 20 years experience in lean. 

 

One of the less well known groups I studied with while undertaking my education in Japanese manufacturing practices was the TP Management Group at the Japan Management Association. TP Management, Total Productivity Management (not to be confused with TPM, Total Productive Maintenance), is an overarching policy deployment practice which incorporates Lean, TQM, TPM et al as required. In TP Management terms, these processes are means to actualise business strategy, not the strategy itself.

Like the Deming Prize for Quality and the JIPM TPM Prize, there is a TP Prize,but with far less prescriptive criteria.
TP Management is based on a foundation of principles and in awarding the TP Prize the assessors are looking for innovative examples of the application of those principles. The winners of the TP Prize, inaugurated in 1985, include plants from Toshiba, NEC,Canon, Toyota Auto Body, Matsushita Electrical, Hitachi, Mitsubishi, Nissan Motor and Sekisui Chemical. In my
own visits to TP prize-winning plants I saw examples of implementation at Matsushita Refrigeration, NEC Satellite Communications, Sony, Snow Brand Dairy products and Shiseido cosmetics. One research paper, presented at a
TP Prize conference in the 1990’s has greatly influenced my thinking about manufacturing strategy. As TP is a nonprescriptive
approach, the researchers were interested in how companies chose to actualise the policy deployment process in their operations, and came up with 11 approaches, split into 2 categories. The two basic categories were ‘programmes for actualising the business strategy’ and ‘programmes for strengthening the internal environment’. This mirrors Western thinking about strategy which distinguishes between market based approaches and competency based approaches.

In TP terms, Total Productivity is a function of both Product Power (the attractiveness of the product to the market – product innovation) and Resource Utilisation (the effectiveness of the processes to deliver the product –process innovation). Both are necessary and neither is sufficient, although the company’s position in the supply chain may have an influence on where a
company focuses its resources.

Figure 1: Upgrading through TPM

 

 

The competency (resource utilisation) based strategies identified were:

Programmes for Strengthening the
Internal Environment:
1. Use TPM as the Base
2. Develop through JIT
3. Move from DC (Direct Costs) and FC (Factory Costs) to TC (Total Costs)
4. Build Integrated Partnerships with Customers and Supplier
5. Restructure to maximise the use of systems and human resources
6. Practise True Policy Management

The first three of these have a focus on the trilogy of Quality, Delivery and Cost. TPM is seen as the application of TQC
type process to automated manufacturing based on equipment efficiency. In their interpretation TPM expands a TQM approach focused initially on improving quality by reducing variation to a focus on reducing costs and leadtime based on eliminating equipment losses (zero targeting). In its final TP led development, policy deployment is used to expand the focus to include customer, employee and social satisfaction indicators, improving product competitiveness through early management processes, expanding employee autonomy and incorporating environmental concerns though the Safety,Health and Environmental Pillar activity.

Figure 2: JIT Construction System

 

 

In Western industry we see this approach being used most prominently in FMCG (fast moving consumer goods) and process
industries. Used by consumer giants such as Unilever and Proctor and Gamble this approach has been combined with
the supply chain approach, numbered 4 above, with Supply Chain being added as an explicit TPM Pillar activity.

Again, if we think in Western strategy terms of those factors which are merely qualifiers, rather than differentiators which
give competitive advantage, then this makes sense in industries under intense cost pressure from retailers and consumers
and required to produce at low cost with 100% effective availability. As the ability to produce the right quality at the right
time is a mere qualifier in FMCG, quality and leadtime focused approaches in the factory have never gained too much
traction in industries which are inherently lean in their flow production processes.

The way the extended supply chain is managed does give competitive advantage in consumer industries, together with a reliable low cost manufacturing base. The TPM concept of ‘vertical startup’, the problem free introduction of new products and equipment and rapid ramp up to production rate is also key in these industries where product innovation is also a key driver of competitive advantage and growth.

Figure 3: Supply Chain Optimisation

 

 

Although we can point to Western precursors, the JIT approach was developed in Japan, beginning at Toyota in the 1930s. Lean is best thought of as a Western description of this approach and the term ‘lean’ itself has struggled to gain currency in Japan itself. Those companies in Japan taking a JIT approach to leadtime reduction tend to focus on flexibility as the competitive feature of their Lean systems. One example is in Japanese modular house building. It is common for a Japanese family to move in with relatives while an existing house is demolished and a new one put up on the same site. This has led to demand for modular housebuilding where major structures are pre-fabricated in the factory and then assembled on site, reducing the time the family is without their own home. Although design is modular, each house is unique and the demand for short leadtimes has led to the development of Lean systems which reduce the total leadtime from sales to construction.

Lean is ubiquitous in Western engineering industries, particularly in automotive and aerospace, but here it is a qualifier,
not a differentiator. This has led to the development of alternative forms of lean – Agile Manufacturing and Quick
Response Manufacturing for example, but these are fundamentally lean approaches with the emphasis on flexibility which
we see in the Japanese development of JIT. One area where Lean has proved to provide competitive advantage is in the
US healthcare industry and this is being mirrored in the socialised healthcare systems of Europe.

As a result of the lack of intrinsic differentiation to be derived from Lean production systems, suppliers to OEMs tend towards a value adding strategy where modules rather than components or materials are supplied and the ability to add value to a module is used to differentiate.

Figure 4: TP Portflio

 

This focus on the product power, not just resource effectiveness, is used to secure ongoing business, as this form of differentiation also increases the barriers to entry for lower cost suppliers.

Although Lean and TPM can both be seen as cost reduction strategies, Lean in the elimination of waste and TPM in the reduction of losses, the cost reduction approach identified by the JMA researchers is based on reviewing management accounting processes. Japanese management accounting in advanced manufacturing companies has tended to focus on driving the behaviour required by the company’s chosen strategy. One example I have seen is the allocation of indirect costs to products based on set-up times in a company where the strategy is based on small batch flexibility.

The cost reduction strategy identified here however is based on what Western accountants have called Value Stream Costing, a switch from trying to optimise costs in specific areas to optimising overall cost, even if that means sub-optimal costs in some area – insufficient recovery of some equipment asset costs for example.

Figure 5: TP Deployment

 

This is an example of the link between Lean and Systems Thinking as developed by Jay Forrester and his colleagues at MIT.
The fundamental principle of systems thinking is that you cannot optimise a system by individually optimising its parts. It is probably fair to say that the accounting principles derived from the mass production management strategy of GM in the 1950s have hung on longer than the mass production system principles themselves and accounting is in some sense playing catch up with operations. Value Stream Costing and other activity based accounting approaches which aim to directly apportion costs and reduce misleading allocations are central to these efforts.

After considering these three approaches to Quality, Delivery and Cost Improvement the researchers went on to identify three further extensions of these, the first of which is extended supply chain management. The approach here is an extension of the overall optimisation approach to include the upstream and downstream supply chain, forming a true partnership from supplier to customer. Using the logic of systems thinking described above, where optimising individual operations leads to a suboptimal
system, this requires the sharing of data between all parties, following a gain sharing philosophy. This necessitates
an unusual level of transparency between the various parties in the supply chain, but this has the added benefit of reducing demand amplification, the phenomenon whereby variations in the actual end customer demand are amplified by the supply chain transactions, creating far greater variability in the final production schedule.

The fifth approach is termed restructuring, but this is deceptive in Western terms. The approach outlined here is based on aligning company systems with business objectives and emphasising the development of human resources. The closest parallel in Western business literature might be the concept of the Learning Organisation and indeed one compelling characterisation of the development of Toyota in the 20th century was its ability to function as a learning organisation.

The development of the learning organisation, and in particular formal lessons learned systems, is only one part of this approach, the other being the alignment piece which is based on monitoring the links between the attainment of business objectives and the development of the company’s constitution. The most sophisticated versions of this system see companies tracking both their constitutional strengths through assessments such as The 20 Keys or even ISO 9001, 18001, 55001 etc,
actual performance in meeting their business targets and the constitution building activities. The TP Portfolio is a diagram which links activity and performance and illustrates if a company is in a performance ‘bubble’ where the results are not the result of activity controlled by the organisation, but rather by external factors out of their control, or indeed in the ‘engine racing’ zone where there is intense activity but poor results due to misalignment with the strategy.

The final competency based strategy is based on a full blown Policy Deployment system using TP Management concepts and the ‘catchball’ process of agreeing objectives at various levels in the organisation. This is most often seen in Western manufacturers in the form of the X-Type Policy Deployment matrix, originally developed by Ryuji Fukuda. These however tend to be based solely on performance objectives and omit the alignment with constitutional objectives which is characteristic of TP Management.

These are six generic manufacturing strategy approaches and each company needs to modify and combine as required by the overall business objectives of the company. One way of looking at how to develop your own strategy is to compare your own situation with the general development of manufacturing over the last 60 years.

The graph below illustrates how in aggregate terms the world has changed from one in which there was more demand than supply and where Quality and Delivery could be seen as differentiators to one where supply exceeds demand and Cost and Innovation are now seen as differentiators and Quality and Delivery merely qualifiers.

Figure 6: Supply and Demand Trends

 

 

 

 

 

 

In markets where quality is still a differentiator, an approach such as Six Sigma, improving quality through reducing variation may be appropriate. This is not considered in our Japanese examples except as a precursor to TPM as the companies surveyed were no longer active in markets where Quality is an important differentiator. If delivery performance, particularly in

terms of the extended supply chain is a differentiator in your marketplace then an extended Lean/Supply Chain approach could be valuable. In markets where price is still a differentiator, then a well developed TPM approach can give significant benefits,
especially when including Supply Chain development in an FMCG environment.

Advanced TPM approaches can also be beneficial when product and process innovation are key differentiators in over supplied markets. Where overall costs are an important consideration, new accounting approaches aimed at optimising total costs are especially useful. Mature Lean organisations may also wish to reflect on the opportunity for developing advanced policy deployment system to ensure that their systems are aligned with changes in the market place.

The strategy development process is based on first deciding what markets to be in and then what capabilities are required to deliver value to that market. This is sometimes described as ‘where to play and how to win’. The approaches outlined above are ‘ways to win’ and which combination is developed will depend on where you decide to play.

I have not detailed any of the market led approaches based on product innovation, but one alternative is to recognise your current capabilities (how you win) and then investigate new markets where these winning characteristics enable you to join the game. This can be as one of three types of innovation led companies – need seekers, who actively engage with the customer; market readers, who closely watch markets and competitors; and technology drivers, who launch innovative products in new markets based on their strength in R&D.

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The future has always been uncertain, prone to surprise us. We all learn to live with this condition with more or less
success. Where large sums of money are at risk a more systematic approach has grown up. One example is audit where a risk based approach has been adopted. Auditors examine those parts of the organisation whose operation could have serious consequences in future. The priority is to scrutinise the areas where the potential negative impact is greatest.

The whole insurance industry is another example of risk management that everyone is familiar with. The key idea here is risk sharing to reduce the potential cost to individuals. Risk management also has been developed as a body of knowledge and practice in the investment community. The key idea is the distribution of possible profit outcomes for a particular project or programme. If this distribution is understood then it will be easier to take action which reduces the likelihood of a negative outcome. If this perspective is used routinely then an investment business will secure better overall returns.

It is now widely recognized that the current business environment has shifted in directions which make risk management more pertinent. VACU is the acronym which summarises the current environment as more volatile, ambiguous, chaotic and uncertain. A number of different trends have come together to make this state of affairs ranging from geopolitics to the rapid spread of digital tools and techniques.

In 2009 the International Standards Organisation issued ISO 31000 covering
principles and practices of risk management which is aimed at any organisation of any size in any sector. The standard is intended to help organizations increase the likelihood of achieving objectives, improve the identification of opportunities and threats and effectively allocate and use resources for risk treatment. ISO 31000 cannot be used for certification purposes, but does provide guidance for internal or external audit programmes. Organizations using it can compare their risk management practices with an internationally recognised benchmark. Business services organisations are offering an increasing range of products to help firms strengthen their risk management capability. For example Deloitte suggest an effective capability will engage senior management, have a strategic focus, have a risk sensing function which includes the use of sources external to the firm, use a mix of digital and human elements, have quantitative outputs and produce time series data. The UK training market is developing with, for example, two day introductory courses to risk management now available.

Health and safety at work involves certain legal obligations in respect of the workforce but is not for the most part seen as a strategic aspect of business. Nonetheless risk management is a core function and in the UK the Health and SafetyExecutive make available free online an excellent set of resources, tools and techniques. There is probably in most organisation some capability to use such tools effectively at operational level. The challenge is to develop that capability so that it can operate at strategic level.
Military and security planning is another domain where there is good experience of risk analysis. For example the
fundamental process is to first identify an asset and a threat to it. The next stage is to review the existing level of
protection to identify the vulnerabilities. Prioritizing vulnerabilities provides the basis for a work programme.

For many organisations the new global standard on digital payment security will also be a useful resource. This is version 3.1 which was released in April 2015. The Payment Card Industry Data Security Standard (PCI DSS) is a
proprietary information security standard for organizations that handle branded credit cards from the major card schemes
including Visa, MasterCard, American Express, Discover, JCB, and China UnionPay. The standard is mandated by the card brands and administered by the Payment Card Industry Security Standards Council.

It was created to increase controls around cardholder data to reduce credit card fraud via its exposure. Validation of compliance is performed annually, either by an external Qualified Security Assessor that creates a Report on
Compliance for organizations handling large volumes of transactions, or by Self-Assessment Questionnaire for
companies handling smaller volumes. There is some evidence that firms are reluctant to implement the standard because of its complexity and expense. Also there is worrying evidence that senior managers in the UK routinely take unnecessary risks in project management even though project complexity is increasing thanks to digitalisation. For example in project management it is well established that quality, cost and timeliness are hard to optimise as a totality. Typically it is safer to specifically select which of the possible pairs are the priorities for any given project. However reviews of project failures in the UK still find that the most common cause of failure is the unrealistic targets set by senior management at the start of the project.
Almost everyone has heard of SWOT analysis as part of strategic planning and clearly any alignment of weakness and novel threat will be a big priority in strategic risk management. Many people are also familiar with the environmental scanning framework, PEST, covering political, economic, social and technological domains. This is frequently extended to cover legal and environmental and also sometimes ethics and demographic. These extension raise the question of how risk is segmented in strategic risk management.

ISO 31000 uses a risk management process which consists of the three steps: Establishing the Context, Identification and Assessment. Establishing the Context means that all the possible risks are identified and the possible ramifications are analyzed thoroughly. The best segmentation of risk for a particular firm should be clarified in this phase.
It is worth remembering that risks could be either internal or external – possible internal risks might be
employees of the company or operational inefficiency in a certain process.

Operations and Supply Chain professionals must consistently update their skills and knowledge to thrive in a
competitive environment. As the leading training and consultancy organisation, Industry Forum can offer the
right programme and certification. For further information please visit www.industryforum.co.uk/training or email [email protected]

 

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The Indian online newsletter, ETAuto.com, has just run an article on the progress of Mercedes in India. In 2007 the company acquired a 100 acre site in Pune. Currently, 80% of the Mercedes cars sold in India are produced locally. Capacity has been doubled in the course of 2015. Sales in 2015 are 34% up on the same period a year ago and they are planning for significant growth in 2016. The company are looking for more local suppliers but they want partners who can also operate globally.

Besides Germany, Japan has a beneficial history of economic collaboration with India. India’s largest automaker is currently Maruti Suzuki India which is wholly owned by Suzuki Motor Corporation. In the last fifteen years, royalty payments from the Indian subsidiary to its parent have increased by a factor of 6.6.

It has just been announced that Japan is offering to finance 80% of India’s first high-speed rail project, the 505km route between Mumbai and Ahmedabad, at an interest rate below 1% provided India buys 30% of the equipment from Japanese firms. The cost of the project which is subject to a competitive bidding process has been estimated at $15bn. In August 2014 the national government lifted the ban on FDI in Indian railways and now 100% finance is allowed. The limit in the defence sector has been raised from 26% to 49%.

These three examples illustrate the record level of success of the Indian economy currently in attracting Foreign Direct Investment (FDI). The latest global results for 2015 show India as leading the global economy in inward FDI having moved up four places since 2014 to the top position in the global FDI rankings overtaking China and the U.S. The share of manufacturing within the FDI total has been increasing and currently stands at 47% with a further increase likely. The traditional view had been that Indian strengths were in services rather manufacturing. In 2014, 18,600 jobs were created in the automotive sector by FDI with Germany and Italy providing nearly half the capital. Aerospace is also emerging as a strong sector for FDI.

This success is down to the confluence of several different factors but part of the credit must go to the effectiveness of the Indian government in making potential investors aware of its future national plan for manufacturing which was launched in September 2014 by the Prime Minister. The Made in India programme has the major objective of job creation and skill enhancement in twenty-five sectors of the economy. These sectors include: automobiles, chemicals, IT, pharmaceuticals, textiles, ports, aviation, leather, tourism and hospitality, wellness, railways, design manufacturing, renewable energy, mining, bio-technology, and electronics. A recent survey of investors found that India’s attractiveness included labour costs, market growth prospects with 18 per cent of the population in the 16 to 25 age group, R&D capability and the stability of the social, economic and political environment. Infrastructure investment is seen as a priority for further FDI. The first high-speed rail project ties in neatly with this.

Comparisons between China and India are inevitable especially as they are the two largest economies in the BRICS group of emerging economies. Infrastructure is recognized as an issue where China is ahead. On the other hand, India has the advantage of a long familiarity with English, the language of international business.

A useful way of understanding how India’s auto sector has developed is provided by Gautam Sen’s book, A Million Cars for a Billion People. He sees 1980 as a benchmark year when vehicle production in China was negligible and in India it was well under 100,000. In contrast Japan produced 11 million vehicles in that year.

By the turn of the century, the Indian automotive scene had been transformed, initially through collaboration with Suzuki in the firm Maruti Udyog. Indira Gandhi gave the keys to the first vehicle from the firm to a lottery winner at the end of 1983. The millionth vehicle was produced after eleven years but the next million only took four years overtaking the total volume of the Ambassador.

But in terms of overall sector development, the important next step came from truck manufacturer, Tata. In 1994 Tata produced its first non-truck success in the form of a multi-utility vehicle.  The vehicle side of the Tata group is TELCO and when Rajan Tata took over in TELCO he set some very ambitious development goals. Many observers thought they were unrealistic but by the end of 1997 TELCO had over 400 engineers working on their car for India. An abandoned Nissan factory from Australia had been transferred to India for the project. The car was launched at the start of 1998 and had taken 31 months to develop. As the first all-India car it was developed into a family of four vehicles which had sold a million units in total by 2009.

Sen’s book also covers a number of fascinating topics such as the response of Maruti and Korean automakers to Tata’s success and how Tata went on to start the low-cost Nano programme. The lesson of this brief review of the development of the Indian automotive sector is that the goals set for the sector for 2020 should be taken very seriously especially in the context of India’s current success in attracting international investment.

• The Make in India campaign for automotive explains the sector of the sector in the following terms
• Tractor sales in the country are expected to grow at CAGR of 8-9% in the next five years,
• Two-wheeler production has grown from 8.5 Million units annually to 15.9 Million units in the last seven years.
•  India’s car market has the potential to grow to 6+ Millions units annually by 2020.
• Large automotive clusters in the country have emerged: Delhi-Gurgaon-Faridabad in the north, Mumbai-Pune-Nashik- Aurangabad in the west, Chennai-Bengaluru-Hosur in the south and Jamshedpur-Kolkata in the east.
• Electric cars are likely to become a sizeable market segment in the coming decade.

It will be fascinating to watch the relative progress of Make in India and Made in China: 2025 in coming years.

 

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In 2013 The Policy Exchange published David Willetts’ paper on Eight Great Technologies. This emerged in parallel to an exercise by the European Commission to identify Six Key Enabling Technologies (KETs) as part of the Horizon 2020 R&D programme. One of Willetts’ eight was Robotics and Autonomous Systems which was not explicitly highlighted by the Commission but wrapped up partially in the more general heading Advanced Manufacturing Equipment. The Commission have set up a KET Observatory to publish regular reports on how the Community is progressing in each area. The latest, published at the beginning of this year, found that advanced manufacturing equipment is the only one of the 6 KETs where Europe has global leadership. In March 2015 the Coalition published an important document about the UK’s segment of this European strategic cluster – the Government response to the national strategy proposal, RAS 2020: Robotics and Autonomous Systems which Innovate UK had published in July 2014.

Willett’s original analysis observed that outside automotive the UK utilised robots to a much lesser degree than Japan and Germany but he put the case for supporting RAS partly on the potential future use of autonomous systems in automotive and aerospace, two sectors where the UK is remains globally competitive. The substantial investment that has taken place recently in UK automotive both in the vehicle manufacturers and the supply chain will have strengthened the UK robotics user base with over 70 per cent of recent sales of robots in the UK currently going into the sector.

According to RAS2020 the technology will have some effect on 15 percent of the UK GVA worth over £200bn. In manufacturing there could be an increase in the productivity of over 20 percent and an increase in employment of 7 percent. Within the public sector there are significant potential benefits in security, healthcare and infrastructure management. In agriculture and the food supply chain there is potential for raising yields, increasing shelf-life, reducing waste and energy inefficiency and improving traceability. Energy sectors such as civil nuclear and offshore are also significant application areas for RAS.

The strategy recommends that investment should be managed nationally in terms of five strands – assets, challenges, clusters, skills and coordination and that there needs to be some means of integrating the work of different funding agencies and a new national RAS Leadership Council. Outreach and public dialogue should continue and connect with public concerns. Developing national standards and the promotion of the UK as a destination for inward investment by UKTI are also priorities.
The Government response took the form of a letter in March 2015 from Minister of Science, Greg Clark, to Professors Rob Buckingham and David Lane. He confirms that the UK’s research and innovation capability in RAS has grown over the last few years. Within Framework 7 the UK secured 80m million Euros of research funding from the total robotics research budget of 485m Euros – this budget has risen to 700m Euros in Horizon 2020. Significantly, Clark has agreed to the establishment of a RAS Leadership Council.

In aerospace Clark points out that the UK now has one of the world’s most capable unmanned aircraft systems test and evaluation facilities in the West Wales UAS Environment at Parc, Aberporth. In automotive he refers to the substantial investment under way as part of the Automotive Industrial Strategy with significant public funding. The Government has also invested £20m in four new Centres of Doctoral Training in RAS. He suggests that the UK has major potential to benefit from the growth in global markets in industrial robotics, healthcare robotics, intelligent transport and automated farming.

It is important to be realistic about the competitive environment for this industry. Half the 24 teams in the finals of the US’s DARPA Robotics Challenge in June 2015 came from the US and 9 were Asian. Only three were European – 2 from Germany and 1 from Italy. The US industry is likely to benefit greatly from the US’s current military technology priorities where there is a strong drive to increase the US’s global lead. Plimsoll have just published an analysis of 80 firms in the UK robotics sector. Just under 60 per cent of firms get a performance rating of good or better but at the other extreme, over a quarter of the firms are making a loss and ripe for takeover.

In August 2013 Edelman, the global PR firm, noted that robotics progress may be held back by two image issues. The first is the widespread belief that the technology will create unemployment. The second is the consequence of the widespread controversial overseas use of drones by the US. In June of this year Edelman reported that since then, across the globe, the general level of public trust in technology has started a significant decline.

Also in 2013 the International Federation of Robotics published a study by London based Metra Martech on Robotics and Employment which presented evidence that in practice robotics is creating overall employment increase via the downstream impact of the technology. Manufacturing jobs are also safeguarded by the higher productivity and competitiveness that the technology can bring which helps higher wage rate countries stay in manufacturing. The food industry, the largest manufacturing sector in the UK, is a fruitful application area where the technology is a way of making the workplace safer, meeting more stringent regulations and increasing job quality. In the UK, where the business services sector is now as large as manufacturing, capability in robotics implementation and support will help keep this sector on its expansion track.

The UK strategy covers the reputational dimension explicitly in terms of extending public outreach and engagement, continuing to change public perception and improve understanding of public concerns. A good start was made on this with the Sciencewise study of public thinking on RAS which found that the area where the public must strongly disapprove of deploying the technology is care of the elderly, children and the disabled.

One of the most important attitudinal constraints for the technology in the UK, identified by the All Party Parliamentary Manufacturing Group and confirmed by ABB Robotics, is the lack of ambition in some SMEs and the persistence of short term thinking. There is plenty of help and advice available to these firms on how to boost agility and flexibility via automation but there needs to be a wider appreciation that the utility of robotics isn’t just limited to the large scale long production runs found in automotive.

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The forces of global competition are accelerating the pace of new product introduction. As a result OEMs are expecting higher standards of performance from their supply chain. This often leads to a strategic appraisal of suppliers by OEMs to identify the suppliers which are critical to their new product strategy to ensure that they have developed an effective approach to new product introduction.  The rapid rate of innovation is forcing even major companies to upgrade their supply chain management capability as the complexities multiply.

The strength of European advanced manufacturing is based on the strength and depth of its supply chain. One effective approach to supplier appraisal uses VDA 6.3, a process based audit standard for evaluating and improving a manufacturing organisation’s processes consistent with ISO9001 and customer specific requirements in the automotive industry. The standard was developed by the German automotive industry and can be used for both evaluating potential or existing suppliers and for internal assessments. Industry Forum provides training and support in the use of VDA 6.3.

For a broader global perspective, the leading US professional association for supply chain and operations management, APICS, a not-for-profit international organisation is a premier global provider of research, education and certification programs for supply chain excellence, innovation and resilience.  APICS has over 41,000 members and more than 250 international partners including Industry Forum.  Last year APICS merged with the Supply Chain Council who developed the cross-industry standard for supply chain management, the Supply Chain Operations Reference (SCOR) Model.   In May 2015 it was announced that APICS would merge with AST&L, the professional organisation for transportation and logistics. The merger extends the APICS’s end to end supply chain body of knowledge in line with the overall global supply chain trend for greater integration.

The SCOR model helps users communicate and improve supply chain management practices within and between all interested parties in the extended enterprise. The model extends from the supplier’s supplier to the customer’s customer. It is based on three pillars covering process modelling, performance measurement and best practices.  The process model identifies six distinct processes – Plan, Source, Make, Deliver, Return, Enable. The performance measurement pillar offers 150 key indicators.  All best practice examples are current, structured, proven and repeatable.

The SCOR approach involves setting a suitable scope for the improvement program so that it supports the overall business context.  The project team needs to be assembled with care to make a balanced team, ensuring that members have problem solving experience. The initial data collected can be benchmarked against a SCOR database. A gap analysis enables the most promising areas of opportunity to be identified so the problem solving projects take place within a sound strategic framework. More detail about SCOR can be found in Peter Bolstorff’s book, Supply Chain Excellence.

An effective way to build up a firm’s capability to create an effective supply chain is through the APICS Certified in Production and Inventory Management (CPIM) programme. It focusses on an organisation’s internal operations taking an in-depth look at the production and inventory activities within the internal operations of a company providing a comprehensive view of materials management, master scheduling, forecasting, production planning and much more. To date, over 100,000+ professionals are CPIM certified. To earn the APICS CPIM designation, operations management professionals must successfully pass five exams.  These are process orientated topic areas providing participants with the best possible educational assessment and knowledge base:

• Basics of Supply Chain Management: The basic concepts in managing the complete flow of materials in a supply chain from suppliers to customers. Supply chain concepts are introduced and basic terminology emphasised, as are relationships among activities in the supply chain.
• Master Planning of Resources: Demand management, sales and operations planning and master scheduling are examined in-depth.
• Detailed Scheduling and Planning:  Inventory management, materials requirements planning, capacity requirements planning, procurement and supplier relationships.
• Execution and Control of Operations: The principles, approaches and techniques needed to schedule, control, measure and evaluate the effectiveness of production operations.
• Strategic Management of Resources: Strategic planning and implementation and a look at how market requirements drive the resources and processes of an organisation.

An APICS CPIM qualification will provide individuals with functional knowledge of production and inventory management so that they can predict outcomes more accurately. They will be able to improve efficiency across the processes of their organisation’s supply chain and increase profitability by optimising their organisation’s inventory investment. In this way the ROI on systems and technologies can be maximised.  Consequently, achieving CPIM means greater confidence and industry recognition with accelerated career development and better employment opportunities for the individual getting the qualification.

From an organisational standpoint the benefits of CPIM include creating a common understanding, vocabulary, processes and frameworks within their organisation to address their supply chain challenges and opportunities plus building the capability to streamline operations from a strategic perspective including the tools to manage global supply chain activities effectively where suppliers, plants, distributors and customers are located around the world.

Industry Forum is providing a full programme of courses leading to the APICS CPIM qualification using their in depth experience of supply chain development in both the automotive sector and other sectors such as aerospace, industrial products, electronics and medical devices. This expertise includes many projects working across a whole supply chain from OEM down to the lower tiers.

 

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The success of car making in the UK is now widely recognised with the stream of good news stories continuing into 2015. The situation in the UK supply chain has not been so widely publicised but a recent report from the Automotive Council by Phil Davies at BIS helps put this right. Davies concludes that good progress is being made in bringing automotive supply back to the UK from overseas and that the activities of the Automotive Council have been important in bringing this about.

Changing assessments of risk are a significant factor. A recent study by Deloittes  predicts that automotive suppliers who get risk management right will be more competitive, more profitable and less likely to encounter the threat of disruptive recalls with serious financial consequences. Risk management continues to rise up the strategic agenda of OEMs and this makes supply chain proximity is an increasing priority for vehicle manufacturers.

Back in 2011 Matthew Holweg of Cambridge University had shown that around 80 per cent of all component types required in vehicle assembly could in principle be produced in the UK. In fact, the volume of UK supply chain business increased from £11.8 billion in 2009 to £15.9 billion in 2013. In 2014 the turnover of the parts manufacturers expanded more rapidly than that of the car manufacturers and so it is likely that the share of their purchasing which goes to UK firms is now increasing after a long period when the trend was in the other direction.

The Automotive Council was set up in 2009 to strengthen the links between government and industry and is a model which has been widely adopted by other sectors. This led to the formation of the Automotive Investment Organisation in 2013 to make the case for overseas investment in the UK supply chain.  10,000 new supply chain jobs as a result of inward investment from overseas have been created in the two years to April 2015.

The Coalition’s Advanced Manufacturing Supply Chain Initiative has supported 48 individual supplier projects in the automotive sector and nearly £90 million investment has been secured. The investment goes into capex, R&D and skills and so far more than 1200 jobs have been safeguarded. There are a number of projects in development.  In addition the Employer Ownership Automotive Supply Chain Project has bought a further £20m government funding for skills development.

Davies’ analysis highlights the importance of well-designed business to business communication in achieving strategic business goals for the supply chain.  He finds that SMMT ‘Meet the Buyer’ events are effective and there should be stronger efforts to communicate with lower tiers in the supply chain. He concludes that despite the efforts so far which have clearly bought excellent results, there remains an information failure where buyers and sellers are unaware of what each other has to offer, despite the range of new communication channels now available in the digital realm. These findings are particularly important given the expansion opportunities that exist elsewhere in the UK transport equipment supply chain cluster such as aerospace and railway equipment where significant development programmes are under way.

In 2014 BIS published a study of how good practice in industry and government could strengthen UK supply chains.  It highlighted major business challenges where the evidence shows that supply chain collaboration produces results. For example, supply chain collaboration can solve problems in skills, finance, innovation and supply chain efficiency, balancing the whole supply chain.

A report in 2014 by the All Party Parliamentary Manufacturing Group – Making Good,  A Study of Culture and Competitiveness in UK Manufacturing –  developed the theme of effective communication for strategic change. It concluded that there is still too much reluctance on the part of owners and managers in UK manufacturing to engage with the kind of support packages and business development programmes that would boost business competitiveness via innovation, automation, skills, exporting and long-term financing. The Group recommends that politicians need to focus on changing the overall business culture and promoting the long-term attitude changes required. They issue the stark warning to the new government  it would be disastrous if the result is a change in the rules of the game. A sustained cross-party approach is needed to press home the key messages.

In the robotics industry, ABB Robotics have endorsed the All Party Manufacturing Group Study highlighting the importance of effective supply chain communication in boosting UK productivity. Apart from the automotive sector, the UK lags international competition in the use of robots as a means of getting better value added per person.  ABB and other robot manufacturers know they must convince manufacturing SMEs to invest and to abandon the prevailing approach identified in the Parliamentary Group study of ‘make do and mend’.

ABB’s own research shows the UK SMEs lack the skills and resources to use robotics confidently. ABB tackle this by demonstrating the benefits that robot investment has brought elsewhere to SMEs in competitor countries and showing how robot investment can produce a rapid return. They endorse the Parliamentary Group’s stress on the need for a consistent long term policy framework. This should cover a much better integration of industrial and educational strategies.

Improving supply chain collaboration is a priority across major economies, including for example in the US Defence Industry. In April the Pentagon have released Better Buying Power 3.0, the latest iteration in a strategic long term drive to improve defence acquisition and supply chain collaboration. Under earlier iterations, the US Navy piloted a Superior Supplier Incentive Program and this approach is to be adopted by other services.

To achieve the US’s strategic goals, defence acquisition has to integrate inputs from many perspectives, balance competing needs and satisfy different stakeholder requirements.  This means that more technically qualified program leadership is needed with proven competence in terms of experience based standards. Stronger partnerships between different communities are also required so that emerging threats are spotted earlier and effectively countered more rapidly.  Just as in ABB Robotics’ analysis, the Pentagon see the need for continued efforts to promote technical education right the way across the defence supply chain.

The key point from all these different initiatives and studies is that better supply chain collaboration means a long term strategic commitment involving multiple stakeholders delivering consistent messages, particularly to smaller firms at the lower levels in the supply chain. The importance of this approach is the way it delivers real and tangible results as the world becomes more uncertain and risks proliferate.

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This year Bosch, the global electronics firm who are a major player in the automotive supply chain, are recruiting nearly 80 engineers in the UK as part of a much larger worldwide expansion. A spokesman explains that as connectivity expands in every business sector from mobility to industrial technology, the importance of software does too. This is driving their worldwide demand for more engineers.

A survey of the UK labour market in March 2015 by the Recruitment and Employment Confederation finds that salaries are rising quickly across a number of sectors. The most sought after categories are engineering and financial. According to the chief executive of the Confederation increases in starting salaries are being driven by skills and talent shortages .

In the USA, The Manufacturing Institute in Washington DC has completed a forward look at the recruitment needs of the US manufacturing sector, working with Deloittes with a survey of 450 firms. The results suggest that a major skills shortfall is emerging in US manufacturing.  It threatens the sector’s ability to meet customer demands, its ability to increase production and its ability to implement new technologies and raise productivity. A major factor is the retirement of the ‘baby boomer’ generation coupled with the difficulty of attracting suitable quality younger recruits to the sector.

The forward look proposes the introduction of major programs involving a wide range of stakeholders. The sector as a whole must communicate with the younger generation how much it presents viable career options. Clear competency models are needed coupled to role based skill requirements as part of major training and talent management strategies. The industry must pursue high performance team working supported by high performance management.

In the UK, the automotive sector has come together with other key players to form the new Automotive Industry Partnership, a similar approach to that proposed in the US by the Manufacturing Institute.  It aims to inspire the next generation of automotive engineers and technicians, create new routes into automotive careers and increase skill levels in the industry.  The Automotive Industrial Partnership consists of the UK’s largest automotive employers – Aston Martin, Bentley, BMW, Ford, General Motors, GKN, Honda, Jaguar Land Rover, Nissan and Toyota – as well as SEMTA and SMMT. It is estimated that by 2020 at least 50,000 jobs in the UK automotive sector will need replacing, with skills priorities in strategic advanced technologies linked to increased connectivity, advanced propulsion and lightweighting .

Automotive Industry Partnership initiatives include:

• Supporting the development and roll out of robust and high quality new world class Apprenticeship Standards, with the development of Trailblazer Apprenticeships in seven key areas
• Piloting a range of programmes to attract more work ready new entrants to the sector, including giving 4,500 Year Six students an experience of working in the industry through a one day production simulation and taking on 960 11-16 year old Industrial Cadets, to develop vital industry skills in team working, communications and problem solving over a six day programme
• Providing a route to work for 19+ year olds, with a 15 day programme offering vocational training and simulated work activities designed by their potential future employers
• Assessing functional and employability skills leading to further work experience at a host company, helping young people with little or no workplace experience and vocational skills on a route to possible future apprenticeships
• In depth research to establish automotive industry employers’ current and future skills needs
• Developing industry approved high quality learning and development solutions that are relevant to job roles across the whole industry
• Formally accrediting quality assured training organisations to deliver industry approved frameworks, qualifications and programmes
• Upskilling the existing workforce and retraining and recruitment initiatives to bring new talent to the industry, which will benefit large manufacturer and SME supply chain employers
• Attracting 10,000 apprentices and 2,000 graduates by 2018

Looking further ahead, Nesta, the UK national innovation think tank, have just published the results of a survey of young people’s opportunities for and attitudes to digital creativity, entitled Young Digital Makers. It starts with a recent House of Lords report on digital skills which warns that there is a lack of skills in the UK in making with technology which means that with digital business developing so rapidly there is a serious risk that the UK could be left behind.

For Nesta, digital making involves a range of skills and understanding based on the idea that learning about technology should be based on making things with it. Nesta have found that face-to-face interaction with others is a vital part of developing learning in practical activities and they have focused on organisations that create that kind of opportunity.

Nesta have found that digital making gets strong support from parents:

• 89% think it is a worthwhile activity
• 84% think it is important for careers and jobs
• 74% would specifically encourage a career in digital making
• 99% think computing should be taught in schools
• 53% have bought something to help children do digital making

But only 12% are able to signpost children to online or face-to-face opportunities.

There are important gender differences in attitudes to digital making. 17% of boys use digital making as a way of making money whereas only 9% of girls do.  Nearly half the boys surveyed find digital making technology interesting whereas only a third of girls do.

Nesta conclude that young people need to be supported as digital makers across the UK, not just in London where there is a concentration of opportunities for them.  Nesta have also found that there aren’t enough technology professionals to work with the broad mass of young people on digital making but he survey found plenty of examples where non-professionals facilitate digital making with suitable resources and support. They want clear pathways to excellence to grow young people’s ambitions as digital makers and help them fulfil their potential in and out of school.  Nesta are currently planning the next step for the UK digital making programme.

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Advanced Manufacturing is a major competitive strength in the European Union according to a study published in February 2015 by the Key Enabling Technologies (KETs) Observatory. The Observatory’s role is to provide national and regional policymakers with information on KETs for European competitiveness by comparing the EU with North America and East Asia.

The Observatory finds that Europe retains the leading global share in advanced manufacturing exports and patents. This is based on the capability to integrate a number of different technologies into manufacturing processes and the associated equipment. This capability has to be linked to a deep understanding of the challenges and requirements of customers and the markets that they serve. This ability to produce usable and relevant advanced manufacturing equipment helps safeguard Europe’s position ahead of emerging economies. But, the global export share in advanced manufacturing of East Asia is rising steadily and is well ahead of North America, so there is no room for complacency about Europe’s lead.

From a UK point of view, the customer sectors for advanced manufacturing include the thriving transport equipment manufacturing sector which covers Automotive, Aerospace and Rail. In terms of advanced manufacturing patents, in 2011 the UK ranked third in Europe behind France and Germany which had a 20 percent share of European patents. In advanced manufacturing production in 2012 the UK ranked fourth behind Germany, Netherlands and Italy but ahead of France.

One of the most immediate impacts of advanced manufacturing is a dramatic fall in the costs and timescale for new product development thanks to the development and spread of low cost additive manufacturing equipment which is extremely effective in prototyping. This is one of the many current developments in digital business which favours start-ups and SMEs. But a prototype, however rapidly it is produced, is of limited value unless it is in a state where it can be scaled easily in manufacturing.

Start-ups often use contract manufacturing with a low cost emerging economy supplier. This strategy carries plenty of risks such as the obvious lack of control involved and the need to establish an excellent relationship with the manufacturer from a different business culture. Other potential risk areas include quality, securing IPR, capacity, agility and flexibility. There is also the question of financial risk management particularly as this is the stage in a start-up’s development where external finance often enters the equation. This complex of issues is high on the agenda in the growing accelerator movement in the UK and elsewhere whereby new firms are helped to develop effective strategies for sustainable growth.

The largest UK manufacturing sector in employment terms is the Food and Drink sector. It is the second largest in Europe and only slightly smaller than the German sector. It has been steadily expanding its share of export markets. In 2013 the sector developed 16000 new products – between 2 and 3 for every firm in the sector. It is supported by an active UK contract manufacturing and packaging industry which is spread across the country with particular concentrations in the North West and the Midlands. The perishable nature of the goods is an obvious driver for an indigenous contract manufacturing capability.

In advanced engineering in recent years, global majors based in the UK have also become interested in building up local supply because of the requirements for rapid new product development. This theme has been picked up by the CBI and at the end of February the Coalition Government published a national plan for developing manufacturing supply chains.

The opportunities for increased UK manufacturing supply are substantial. The plan estimates that UK firms currently satisfy only half of the UK demand for manufactured components. The plan identifies a number of new opportunities:

£5bn potential extra automotive sourcing opportunities
30,000 potential jobs in the offshore wind supply chain by 2020
A new shale gas supply chain which could be worth £15bn by 2030
£4.7bn new value added from nuclear new build supply chain

To develop these opportunities, manufacturing supply chain firms should combine product and manufacturing process innovation with business process and systems innovation – a route to an increase in overall productivity. New capital equipment as a source of new technology is a good starting point. Good support and advice is needed for smaller firms to get this investment right.

One source of support and advice is the Manufacturing Advisory Service (MAS) which was started by the previous government and extended by the Coalition. MAS run a quarterly barometer survey and the latest results (for the last quarter of 2014) show that 54% of manufacturing SMEs surveyed predict that they will increase investment in new technology in the first half of 2015. This is the highest figure since the barometer began at the start of 2012 when the figure was nearly 20% lower.

It remains to be seen how the manufacturing supply chain plan survives the 2015 election but the extent of industry support for this approach, plus the scale of the opportunities available, increase the chances that continuity will prevail. An important factor in the success of manufacturing sectors such as Automotive and Aerospace has been a degree of policy stability which helps create a favourable investment climate and encourages the development of positive business relationships in the supply chain.

The impact of the digitalisation of the whole business domain is being felt by global manufacturers as well as smaller firms in the supply base. One important dimension is the development of a global manufacturing footprint that is capable of operating effectively throughout the whole product life cycle. In today’s global markets demand can fluctuate significantly and different manufacturing approaches will be suitable for different patterns and stages of demand. A global approach to manufacturing means a global approach to managing supply. The performance of suppliers in the UK is increasingly compared with competition from across the globe which adds to the pressure for the UK manufacturing supply base to set ambitious goals for performance improvement. These pressures are set to intensify.

Such conditions have been present in Automotive manufacturing supply chains for some time. SMMT Industry Forum has extensive experience in effectively supporting manufacturing organisations, across multiple sectors, understand and improve capability and capacity through a combination of expertise, insight and best practice.

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