Jason Ford
News editor
We asked a leader in factory automation how the UK can boost its lagging productivity, ahead of the International Festival of Business, which opened today
Last summer Sajid Javid, secretary of state for business, said that Britain is home to a number of innovative and dynamic businesses but that productivity is well below its potential.
“In stark terms, it now takes a worker in the UK five days to produce what his or her counterparts in Germany can deliver in four,” he said.
In parallel, George Osborne used his summer Budget to announce a 15-point productivity plan that would help to position Britain as the wealthiest major economy by 2030.
Measures announced include cutting corporation tax and fixing the Annual Investment Allowance at £200,000; investing in skills by introducing an apprenticeship levy; and investing in the Northern Powerhouse and supporting infrastructure.
But what can businesses – large and small – be doing on their side to boost productivity? We put this question to Brian Holliday, managing director, Digital Factory, Siemens UK & Ireland ahead of the three-week International Festival of Business (IFB2016), which opened today in Liverpool.
He said: “Key productivity levers for companies large and small include investment in people, process and technology.
“People will always be the most important asset for engineering and manufacturing companies and it is important that companies engage workers through best working practices and continuously invest in quality training provision. Vocational training like apprenticeships, time and again demonstrate great outcomes for trainees and companies alike.
“Productivity is a must and production and commercial processes need to be constantly reviewed and improved through systematic methods like those described by the EFQM model.
“Finally, technology is becoming increasingly important, pivotal indeed, as manufacturing becomes more connected and complex. Digitalisation is accelerating and to stay ahead companies need to invest in technologies that drive productivity such as informational productivity like PLM software and to derive greater industrial productivity through the increasing automation of repetitive tasks.”
Week One of IFB2016 is focussed on manufacturing with the organisers stating that tens of thousands of international delegates will be at the Exhibition Centre Liverpool looking to do business with UK companies. A full schedule of events can be found on the IFB2016 website.
Siemens is launching its new UK brand positioning – ‘Ingenuity for Life’ – and hosting the Solving the Productivity Puzzle conference on Day 2 of IFB2016.
Siemens says it has a vision of tomorrow’s manufacturing, with products finding their way independently through the production process.
“In intelligent factories, machines and products communicate with each other, cooperatively driving production,” they say in publicity material. “This is what Industry 4.0 is: the road to the Fourth Industrial Revolution.”
But in what ways can Industry 4.0 help solve the UK’s productivity puzzle? For this we turn again to Holliday, who said: “Acatech in Germany estimate that when fully implemented, Industry 4.0 could boost industrial productivity by 30 per cent.
“This seems to be a reasonable projection given Copenhagen Business School’s estimate that UK manufacturing productivity could be boosted today by about 23 per cent through automating to the same extent as other leading manufacturing economies.
“Industry 4.0 is a long-term vision that demonstrates how increasing value-add – productivity – can be extracted through the digitisation of the complete supply chain. Platforms to achieve this can be built on today in four principle ways:
- Building a digital backbone for the organisation (Including, design, make and service information + hosting simulation and virtualisation tools.)
- Implementing the sensor and industrial communication systems that collect important status data. (e.g. Open platforms like ProfiNet and OPC UA)
- Building collaborative systems with cyber-security in mind.
- Using Data Analytics to understand processes better. This will be increasingly handled in the Cloud and at Siemens we achieve this in Mindsphere.
IFB2016 takes place 13 June – 1 July at the Exhibition Centre Liverpool.
The real reason UK is lagging behind in productivity is the grave difficulty that small firms have in raising money from the banks for new machines. During the 90s I raised £250.00 to buy an old mill and two winding machines that together did the work of 50 operatives. This did not reduce my workforce but enabled me to compete in Europe and employ many more workers. Today it is impossible to do the same. I feel sorry for anyone trying to start or grow a small business today
Quote “We asked a leader in factory automation how the UK can boost its lagging productivity”
Gosh, I wonder what his answer would be? Shall I ask a snake-oil salesman what he would recommend to cure my dodgy back?
I would urge caution when discussing Productivity, for example the George Osborne plan was addressing the whole economy productivity. Manufacturing accounts for less than 10% of GDP and this has been steadily falling year-on-year. It would be interesting to see a quantitative comparison of UK manufacturing productivity vs service sector, but I would guess that the former is much higher than the latter. If so, the more urgent issue is to increase engineering and manufacturing activity and hence their share of the whole economy. That means new companies replacing those lost in the recession since 2008 as well increasing output. No doubt Industry 4.0 is a help in productivity improvement, but won’t help much overall if the manufacturing base keeps declining.
The cynicism expressed in the opening sentence is unjustified and unhelpful.
Many years ago I lead a team of engineers on a visit to an American factory producing the same product as we all did in our factories in the UK, South Africa, Australia, Denmark France and Belgium. The productivity in the U.S.A. was way better than ours and we wanted to find out why. We discovered in the first minutes of our visit before we actually got onto the factory floor. They produced six specific products: two each packed in three quantities. They supplied the whole of the U.S.A. ! All our factories supplied our customers with tailored packs: different quantities per unit pack, different language for each market : my factory produced 144 products ! Each change from one specification to the next meant shutting down the production line, cleaning it then setting up for the new product. We lost about an hour of production time each change. That was the difference between U.K. and U.S.A. productivity. I remember asking the Vice President for Production how he stopped his marketing people offering customers products tailored to their ideas. He said he made sure the cost estimates were too high to be acceptable. I tried that and was told by the marketing department that they would get the product made by a sub-contractor. They argued that productivity was not important to them: They claimed the customer would pay the costs and we could get the profits.
Further comment to the above, the HM Treasury paper that George Osborne quotes from, as well as showing the German & US productivity is 25-30% higher than the UK’s, it shows Japan’s as 15% LOWER. Yet Japan has a much higher level of investment in, and implementation of, automation and robotics. Please can your leader in factory automation explain?
I saw this happening when comparing production methods in our UK factory with the Japanese one. The Japanese people were automating processes just because they could; not because doing so gave them increased productivity. They liked gadgets and enjoyed doing the engineering.
While I fully agree with JW’s points, it seems that productivity in economics is very different from what engineers mean by productivity. I believe that economists use GDP / wages bill, and that figure includes a lot of the infamous zero-hours contracts and the low paying service sector.
In the days when the UK was manufacturing it gave a more meaningful picture of industrial investment, but no it just reflects the large number of low-pay jobs in the UK.
We need to have a change in mindset if we are to progress manufacturing fortunes in this country across the board and that is exactly what needs to happen. For many years the rewards available to those in the manufacturing sector were biased to the administrative side so that is where the ‘next generation’ aimed for so the best trained and talented by passed the lower steps leaving the ‘coal face’ end of manufacturing starved of the best staff and even having those with the purse strings having direct personal experience of very important sectors of manufacturing. The result being often a business top heavy with administrators trying to run the business with a great number of low or unskilled staff trying to produce products with sub standard processes. This will not change overnight but more emphasis need to be made to change the perception of manufacturing to those making their career choices.
So, upgrading to ‘Industry 4.0’ is the solution for the UK? Won’t the rest of the world do likewise? Therefore there will be no overall comparative improvement in the UK’s performance as measured against the competition. Surely it goes deeper than that – there needs to be more awareness, assistance and incentives at all levels – from government leaders and departments, down through industry leaders, company managers and right down to the bottom line employee (who, unfortunately, is often ignored, even though they can be pivotal in making the necessary changes in their work area but are not empowered to do so).
It is sad to relate that whenever our editor deletes one of my posts, it is almost invariably one that goes to the very heart of an issue! The managerial and economic ‘rubbish’ that passes for the present administration of our state, I sincerely believe is the root cause of almost every issue that affects we Engineers as we seek to improve. It is a herd of elephants in the room, which for some reason most either ignore or are too afraid of the consequences to comment upon. . Alter that and perhaps we will progress.
SBW’s comment about US productivity verses UK: I can echo that precisely in the textile and synthetic fibre industry. US associate factories (of ICI, my 60s employer) made a fraction of the ‘variants’ that we did: we spent some 20% of our week, changing specs! They operated the pile-em-high, sell ’em cheap approach: and whilst the purist in me as a professional Engineer baulked at the concept, it taught me a valuable lesson. Later when I worked in the US, we had a problem with bearing failures on a particularly stressed rotating drive roller (making polyester tire! chord) In fact the selling price of the product was so high, that rather than taking time to effect a re-design, (the professional Engineer’s approach?) the firm actually took-on another purchasing-officer/buyer! to scour the country for the appropriate bearings. I kid you not!
SBW’s comment about US productivity verses UK: I can echo that precisely in the textile and synthetic fibre industry. US associate factories (of ICI, my 60s employer) made a fraction of the ‘variants’ that we did: we spent some 20% of our week, changing specs! They operated the pile-em-high, sell ’em cheap approach: and whilst the purist in me as a professional Engineer baulked at the concept, it taught me a valuable lesson. Later when I worked in the US, we had a problem with bearing failures on a particularly stressed rotating drive roller (making polyester tire! chord) In fact the selling price of the product was so high, that rather than taking time to effect a re-design, (the professional Engineer’s approach?) the firm actually took-on another purchasing-officer/buyer! to scour the country for the appropriate bearings. I kid you not!
That is most interesting. I did wonder if I was alone in seeing that aspect of productivity. By the way what happened to my comment to which Michael Blamey has responded?
I once discussed my observation with a friend who had managed a battery factory in the USA. He was convinced that workers in the USA worked harder because they were more interested in their employer being successful.
Ahh ! I’ve just spotted the link to my original comment ! Sorry I missed it first time around.
The too cheap to turndown, unskilled labour market we have created from the EU with poor English language skills has lead to poor communication and therefore production yield issues. This is damaging productivity but industry keeps going for the cheap labour without considering all the hidden costs. Quality of human resource is even more critical to productivity than plant investment yet it is not considered in the same way.
Jack Broughton: “I believe that economists use GDP / wages bill, and that figure includes a lot of the infamous zero-hours contracts and the low paying service sector” actually Productivity = GDP (or total Value Added) / hours worked (not wage bill). It is therefore independent of pay rates, other than the effect of wage cost on the value add.
Of course Productivity will increase if you replace people with robots or automation, but then what happens to the people who have been replaced? If we are lucky they go back into work and contribute more value (but probably at the same productivity level as before until they get replaced by more robots) or they are unemployed. If the latter, then although Productivity has gone up, we will see a negative effect on the other key indicator of the nations output, GDP/capita.
Thanks JW, I’m not an economist, but have recently been looking more at the subject to understand the Brexit issues.
I agree that the definition of productivity is a problem in itself: the ONS issue a guide that is 207 pages long, and do not publish any productivity data apparently. My opinion of economics is that while it applies some scientific methods, it is more akin to law in relying on judgements and interpretations of rules. The number of values that rely on the relatively small difference between two inaccurate very large numbers is frightening: eg, economic growth and immigration.
It is no wonder that they did not spot the 2007 economic crisis (or any of the other major problems).