Background – Business and the British Economy
Lord Digby Jones, a dedicated “Captain of Industry” emphasises in both his books, “Fixing Britain” (2011) and “Fixing Business” (2017) the apparently self-evident fact that, “If it were not for the wealth created by Business there would be no tax revenue, there would be no Public Sector.” He goes on to assert that, “Business is predominantly a force for good, along with globalisation, but there are challenges and opportunities connected with both that need to be addressed.”
He points out that, “The world reached its first billion people in 1804. Between 1900 and 2000 it nearly quadrupled, from 1.6 billion to 6.1 billion. But there was a bigger net increase in global population in the first 12 years of the 21st century (900 million) than the entire growth from the beginning to 1804….!”
The opportunities for Business in general, and for the manufacture of consumer goods and infrastructure of all kinds in particular, are unprecedented – as is the competition.
Background – British Manufacturing
There’s a widespread misperception that UK manufacturing is either already dead, or soon will be. This is not true. Manufacturing’s share of the UK economy has certainly declined. Services have grown more quickly. Likewise, employment in the sector has shrunk because of significant productivity improvements. Nevertheless, according to the ONS, real value of UK manufacturing output has increased in 35 out of the past 50 years. From £120bn in 1970 it grew to £160bn in 2010 but fell from 35% of GDP to 10% over the same period.
In other words, UK manufacturing is in absolute growth mode, and only in relative decline. Further, the line between manufacturing and services is becoming blurred as more and more companies are operating in both areas, or bundling goods and services together in customised packages for clients.
Much of the success of British Manufacturing over this period can be attributed to the widespread adoption of Lean principles, especially amongst larger companies which have taken the long view of the associated culture change. The Internet of Things, so-called 4th Industrial Revolution, Connected Factories, Servitisation, Collaborative Robotics etc. are considered by some as novel successors to Lean. However, the Lean Tools and Lean Principles are arguably, like British Industry, still alive and well.
Amongst the “majors” Lean has been good for eliminating waste, improving working conditions, converting traditional Push methodologies to Pull, reducing lead-times and the associated cash-funded inventories and improving on-time delivery in full. Corporates “joined up the dots” between “islands of excellence” for Lean to produce tangible, sustainable benefits that quite literally flowed to the bottom-line.
However, the success of Lean amongst mid-size Manufacturers, upstream to the corporate supply chains, has been less uniform. Some have been heard to say, “We tried Lean and it didn’t work for us,” or even, “We tried Lean and it doesn’t work” – at all. Evidence suggests a tendency for these “islands of excellence” to develop and remain in mid-size manufacturing companies. Results appear less readily to connect with the bottom line, and create weaknesses in the overall Supply Chain.
If it remains true to say that, “Those with the best Supply Chains win” then arguably British manufacturing is still exposed at the mid-size level. Is this the time for Lean 4.0?
Maestro Business & Academy Ltd
Maestro’s legacy goes back to a founder who was nominated for a Nobel Prize in Economics for Working Capital Management. Quite large quantities of cash can become semi-permanently embedded in “redundant” inventory. It could be released from Working Capital to fund growth and productivity through faster response to customer demand. So, he developed the tools of Demand Flow Technology or DFT. This is an objective, data-driven mathematical approach to be compared with the more subjective and analogue, traditional Lean. See Wikipedia.
Lead times of weeks or days can be reduced to days or hours with Maestro’s deployment of flow by linking and synchronising the output of the complex relationships of Manufacturing Processes. In-Process and Finished inventories are reduced proportionately from weeks to days or hours, releasing cash into the business. Instead of the traditional start-stop-start associated even with Pull, Product flows seamlessly from one Process to the next in real time. In other words, by “joining up the Lean dots” or the “islands of excellence” smaller order quantities can be produced faster and more economically as customer demand trends ever further in that direction.
Maestro’s knowledge and experience was gained over the last 20 years working with large corporates, although also in some of their smaller facilities. See case studies.
The book flow beyond Lean – Stories from the Lean Edge
The general and relentless tightening of inventory-averse financial controls continues to drive demand for smaller orders, and therefore faster response. Markets seek an ever-greater diversity of products as they offer ever-greater choice. All of this adds costs through more time lost to machine set-ups, skills training on product diversity and more capital expenditure on additional capacity. This is exacerbated by the trend towards re-shoring back to the UK, either directly from countries like China or via Eastern Europe. See blog “Unsure about Re-Shoring?” More and more products are returning to be produced in smaller quantities by a workforce declining in numbers.
Operations in some companies are therefore falling behind their customers’ need for ever faster response and better on-time delivery. Free cash-flow becomes even more critical than before, if that were possible.
For more information on book content
Michael Morris. UK Operations Director. See LinkedIn