As we move further into Quarter 3 of 2020, I have taken some time to sit back and reflect on what has been the most unfamiliar period of my career so far. At the end of March, the business world crashed to a very blunt stop and ever since many have been battling on to varying results as we adjust to this new normal. Our industry is one that relies on capital expenditure, QM systems solutions range from £100k to £5 million pounds, and when uncertainty hits any market, the first instinct is to reduce spend until that “sunny day” returns.
I fully understand this from a personal perspective. Holidays become less extravagant, if at all. Weekly shops become more modest, significant purchases are delayed and items are frequently repaired rather than replaced. If you are anything like me though, your alcohol consumption dramatically increases. However, from a business perspective, there couldn’t be a better time to invest in the future and in particular invest in automation. I have spent some time contemplating the benefits of investing NOW and have detailed them below for your reading.
The Brexit Factor: is providing the UK with an opportunity to bring more manufacturing home. This will mean more skilled jobs and a manufacturing industry to be proud of once again. According to Statista the Manufacturing sector currently contributes 17.51% of the UK’s total economy, this accounts for 45% of total exports, totalling £275bn. http://www.themanufacturer.com/uk-manufacturing-statistics/.
During the 70’s the manufacturing industry contributed to 25% of the UK economy, whilst signs are suggesting the manufacturing industry is growing, Brexit will provide a fantastic opportunity to ramp up growth in manufacturing considerably. People frequently say to me “We can’t compete with China’s pricing”. My answer to this is “Of course we can”. It is true that labour is more expensive in the UK than other countries due to a number of factors including the lifestyles we are accustomed to, however, if we can produce more automated systems, we can manufacture the components significantly quicker and to higher and more accurate repeatable levels. Well-engineered automated systems do not get sick, do not require regular breaks or holidays, do not require pension contributions or salary increases or paying for overtime. Once purchased they can run to whatever pattern you require any time of day or night.
The China Factor: Many companies in the UK have lost business to Chinese manufacturers over the years; initially, the difference in price was significant, resulting in companies taking their business to China, however prices within Chinese manufacturing continue to rise as a society in China strives to gain more wealth. The two things that have always been a risk with Chinese manufactured product, is the quality and the delivery. And although the initial prices have been significantly lower, the quality has frequently needed refining, costing companies millions in the process. I would argue that once the errors made by Chinese manufacturers have been costed and calculated, in many cases the total cost difference between the UK and Chinese manufacturing would be negligible. And if the UK invests in more and more automation, China will no longer be a plausible alternative as I believe we can produce better products at the same cost locally in the UK. If we can automate and drive costs down, we can provide customers with lower lead times, with lower transport costs as well as a far better quality product. If there is one thing we have learned from the current COVID pandemic, it is that as a nation we are at risk when we are purchasing a product from China and abroad. I have spoken to many customers during this pandemic whose business has simply switched off overnight due to not being able to source mechanical and electrical components from China and abroad. Let’s face it, it’s the other side of the world and we are in lockdown. It seems that confidence is being lost with China and companies are realising that we need to control our own destiny and manufacture our own products, just like we used to.
The Financial Factor: To regenerate the economy the government has introduced multiple levels of tax support from a reduction of VAT at set times to support the hospitality industry through to providing a supportive Furlough system and emergency business funding such a CBIL’s, but the biggest and most significant financial opportunity lies within the current lending rates driven by the reduction in the bank of England base rate from 0.75% to 0.1%. This means that significant bank loans can be acquired at unprecedentedly low rates proving that there is no better time to borrow money and with an average ROI for an automated system (project dependant) of 2-5 years it’s a ‘no brainer’ to invest now! If you look at how each and every manufacturing company had to adapt to comply with social distancing measures whilst using manual operators, it is evident that workforces could not operate anywhere near the way they used to, resulting in a significant reduction in staff, throughput, turnover and ultimately profit. An automated system would have no such concern as the system would take over the task freeing up staff for more significant and skilled tasks within the business. This means that if we do have a second wave of this virus or indeed any other virus, our companies can still operate keeping more people safe and healthy whilst still producing high volumes of quality parts.
The VIRAL factor: This is the first time in my life that I have worked through and during a medical global pandemic of this scale. I am sure, like me, you will find the whole process has been a mixture of emotions. Initially, I think the severity of what was being reported was perhaps wrongly perceived as being overdramatized by the media, but I think we all hit the ground with a thud when the realisation struck home. As we reflect, at a period where we are by no means clear of this pandemic, it is time to plan for our businesses with a second wave or a future pandemic at the forefront of our consideration. Linked very much too many of my other points listed above, we must take control back of our manufacturing sectors. We need to buy British to help build our economy as well as buying from companies that don’t have obstacles such as being nearly 5000 miles away. I think we have all seen from this pandemic that air travel can be stopped overnight for extended periods of time. Borders can and will be closed making the distribution of goods very difficult for prolonged periods. I would suggest people invest in automation with a longer-term return on investment in mind. Rather than looking solely for a reduction in operator cost, we must look at the wider picture when providing justification for automation. This may include the stability of the manufacturing process, controlling operational costs, seeing the overall benefits UK manufacturing provides, as well as the obvious reduction in labour costs when using an automated system. A 5-year payback will provide a much more robust business model providing stability to allow UK companies to grow. All QM Systems machines are designed for at least a 10-year production lifespan and with service agreements in place, this can be significantly increased.
In Summary: Automation may in some cases have a higher initial cost than human operators, but there is a significant difference between the price and the cost of something. The price is what you initially pay, the cost is what you spend in the end. I would challenge all manufacturing sites across the UK to think hard about this and to consider automation as the future of their manufacturing process and let’s make the UK a world-beating manufacturing hub for a global market. The UK currently sits just inside the top 10 manufacturing countries at present, with a mindset of investment in automation it wouldn’t be long before we realise a top 5 position and become dominant market leaders. We all have different outlooks on life and will look at situations differently. My underlying message within this blog is to discuss how we can drive the UK forward to a far more efficient and lean manufacturing nation. We are the best in the world on our day. I believe in the UK, so let’s automate and become the global leaders offering ‘innovation in automation’
Kristian Richardson – Commercial Director