Do-it-yourself improvements

Best practice by self-assessment is the future of manufacturing, the CBI tells the Government

The CBI called on the Government this week to back a national campaign aimed at boosting productivity in Britain’s manufacturing industry – a move which it claims could add an extra £60bn to the nation’s GDP.

Speaking to 200 manufacturing bosses at its London headquarters on Tuesday, Alec Daly, chairman of the CBI’s National Manufacturing Council, said the Government must work with business to bring about a cultural change within Britain’s factories through the use of benchmarking and best practice.

‘No other approach is as simple, comprehensive and universally adoptable,’ he said.

The launch of the best practice campaign, explained in detail in the CBI’s Fit for the Future report, comes in the wake of several past attempts by the CBI to get companies to invest more in training or in new systems. But advisers have found that simply telling companies what they need to change and how to change it does not work.

Best practice involves getting firms to assess how well they perform compared with the best of the competition. And because companies are led to own up to what their weak points are – instead of being told by experts – they are more open to taking action to make improvements.

The evidence for this is already available, as the CBI has been running a benchmarking self-assessment programme, Probe, across more than 1,000 companies over the past two years. The results have shown up vast gaps -freely admitted by the companies’ workforce and senior management alike – where improvement is possible.

Once the firms have accepted the best practice route and how to get there, CBI advisers say real improvements have been made, measurable through indicators such as stockturn, labour productivity, and absenteeism.

But while the Probe test confirmed that Britain has roughly the same share of world class companies as our competitors, the number of low-achievers is disproportionately large. This ‘tail’ is where the CBI sees the biggest potential for major increases in manufacturing productivity that could have the most dramatic impact on the economy.

Not only could British manufacturing industry boost its contribution to GDP by about £60bn, but if all other economic sectors followed suit, the increase in GDP could be around £300bn, the CBI predicts.

‘Whether you are a sceptic about these figures or are convinced by them, there is no other business initiative going on at the moment which even approximates to that impact,’ said Daly.

The CBI initiative comes at a time when major improvements in productivity look set to slow. During the past three or four years, UK manufacturing has seen encouraging performance: a growth rate that compared favourably with many major competitors; a halt in the decline of manufacturing’s share of GDP (now 21%); a strong export performance; and a flood of inward investment.

Britain’s productivity levels in manufacturing have dramatically improved since the mid-1980s. But the improvements are levelling out, and UK performance improvements have slowed at a time when several major competitors are making major strides in renewing their own restructuring efforts.

‘The danger is, if we don’t keep up the impetus, it will go off again,’ said Daly.

The scope for further improvement is wide. While Britain’s business investment as a share of GDP has been roughly in line with European rivals over the past 15 years, the UK started from lower levels of both capital stock and productivity, and still needs to invest faster to catch up.

‘If we are to raise our economic performance to that of leading economies, we need to have a period during which we invest more than comparable countries, and at current rates clearly we are not,’ the Fit for the Future report says.

Within overall investment spending, some of the gaps between British manufacturing and our major competitors are embarrassingly large. On research and development spending most British companies lag well behind. The Department of Trade and Industry’s R&D Scoreboard shows the UK’s biggest manufacturers (with a few notable exceptions, mainly in pharmaceuticals) invest between 2-3% of turnover in R&D, compared with 4-5% in France, Germany, Japan and the US. Smaller companies are even further behind.

And while figures show that Britain spends more on employer-provided training than our European competitors, the advantage this might give the UK is not obvious. The CBI is convinced that some of this spending is ‘to combat market failure of the education system.

‘We’re not ignoring the constraints on investment caused by national differences in, say, education or infrastructure,’ said Daly. ‘But we are saying that as industrialists we can do as best as we can within these constraints. And some companies still manage to be world class within this environment.’

While there may be nothing new in the CBI’s document by way of economic or industrial statistics, what is different is the focus it creates. There have been many attempts in the past by the CBI and DTI to get companies to boost competitiveness.

During the last Government, Trade and Industry secretary Michael Heseltine set up the DTI’s competitiveness division aimed at looking into these areas.

Dr Bob Dobbie, who headed that unit, is now on the CBI’s National Manufacturing Council. And the DTI is already involved with a benchmarking project for UK companies.

But the CBI has concluded that despite these Government measures, and the actions of the smaller regional advisory agencies, the message is still not getting across to enough companies fast enough. And the old style of business advisers telling companies how they should improve has not worked either.

‘We keep asking ourselves the question, are we making a difference? And we are constantly disappointed by the answer,’ said Daly. ‘We are looking for a single message that will galvanise them.’

The CBI sees its National Manufacturing Council as the catalyst in getting this best practice message across. Formed just two years ago, and made up of about 40 practising industrialists from UK manufacturing companies of all sizes, it already runs a series of events including competitiveness forums, designed to promote the spread of best practice.

But according to Daly, it cannot do the whole job on its own. He wants best practice to be the preferred route to improvement offered everywhere – by Business Link and the Tecs, by the Chambers of Commerce, Investors in People, the DTI and the CBI.

‘We need a national campaign to promote best practice. It should be business led, but Government backed, and it should use the existing network of business support and advice units,’ he said.

‘Possibly the answer will be to set up a separate body to run this. Let it have a go at this for two years, and then see what happens.’

{{Recognise yourself?

Winning companies:Are led by visionary, enthusiastic champions of changeUnlock the potential of their peopleKnow their customersStrive for operational excellence and total qualityAre constantly introducing new products and servicesNever assume they have ‘got there’

A typical world class company is achieving:Order-to-delivery times cut from five weeks down to three daysManufacturing cycle times down from 15 days to four hoursQuality (first time pass) improved by 20-30%99-100% orders delivered on time in fullHeadcount lower than in 1990}}

{{Performance levels: The best versus the restProcess sector Average Top 10%

Delivery reliability 95.0% 99.0%Scrap rate 2.8% 0.4%Total stockturns 9 16Average component set-up time (minutes) 43 10Training – existing employees (days) 7 13Absenteeism 3.4% 1.8%Added value per production employee (£000) 38 68}}

{{Engineering sector Average Top 10%

Delivery reliability 93.0% 100.0%Scrap rate 1.2% 0.3%Total stockturns 9 18Average component set-up time (minutes) 30 10Training – existing employees (days) 6 10Absenteeism 3.3% 1.0%Added value per production employee (£000) 28 45}}

{{Electronics sector Average Top 10%

Delivery reliability 92.0% 99.9%Scrap rate 1.0% 0.1%Total stockturns 7 11Average component set-up time (minutes) 20 3Training – existing employees (days) 4 10Absenteeism 3.3% 1.3%Added value per production employee (£000) 23 35}}