Winter 2017 Q3 - South West

Welcome to the SWMAS Winter 2017 (Q3) Manufacturing Barometer report, mapping the trends, current views and confidence of manufacturing SME’s across the South West of England.

This latest Manufacturing Barometer represents the collective voice of 126 senior decision makers in South West manufacturing SME’s who have shared their views to reveal the latest insight into business performance and forecasts for the future.

Reflecting the outcome of last quarter’s Barometer, which reported manufacturers’ intention to improve productivity through focusing on existing people and processes, this quarter’s Special Focus looks harder and deeper at how businesses are managing productivity improvement. ‘Productivity and Culture’ explored how they manage productivity at each level - strategic, leadership and delivery of change.

 

The Core Trends

The headline for this quarter is that 75% of the region’s SME Manufacturers anticipate an increase in sales in the next six months– the highest figure recorded since Quarter 3 2013 (78%) and higher than 72% nationally, this is a reflection of the confidence of our business leaders. Only 6% anticipate a reduction in sales – the lowest figure recorded since 5% in Q1 2014. Coupled with 65% of manufacturers looking forward to an increase in profits over the next six months, this is good news.

Comparatively, however, only 46% experienced a growth in profits in the last half of 2017. The gap between predicted sales increases and actual increase in profits seen over the last six months continues to raise questions about productivity.

Encouragingly, 58% aim to deliver against their growth targets by investing in machinery and premises. This is a rise of 15% on the last quarter’s Barometer report.

The Quarter 2 2017 Manufacturing Barometer also showed that manufacturers were prioritising development of existing people (and processes).This quarter, plans to recruit new staff are recorded by 53% of respondents. Although a figure 12% higher than last quarter, it may not be quite in step with anticipated growth as this finding again raises questions around the ability to find suitably qualified staff to feed business growth – something reflected in Barometer feedback last quarter and the conversations our Productivity Specialists are having with business leaders. Whilst some manufacturers are achieving growth through investment in new machinery and premises, the importance of improving productivity through existing staff and facilities remains a focus.

 

Special Focus: Productivity & Culture

This quarter the Manufacturing Barometer asked manufacturers to look at the extent to which productivity good practice is integrated into the culture of UK SME manufacturing businesses.

At a strategic level, respondents divulged that  they are positioning themselves to achieve their productivity goals. Around 70% are confident that they have mostly or completely defined productivity improvement as a key strategic objective, and that productivity improvement is championed by the board and senior managers. There is a slight softening of that confidence (63%) when identifying budgets and resources to enable productivity improvement, but overall the position is that a focus and drive for productivity improvement is integrated at a Strategy and Vision level

Exploring productivity improvement at the Leadership and Management level, the weight of responses indicate that most manufacturers would like to achieve better results. Furthermore, variations in how department leaders measure and communicate current and targeted performance indicate that effective measurement and communication could be a factor in businesses’ ability to deliver and achieve productivity improvement goals.

In the final special focus category we looked at delivering and sustaining productivity improvement. This revealed that whilst most manufacturers recognise the need, many do not always perform well in this area, or achieve insufficient results. Over 40% of South West manufacturers identified that they would like to improve across all three activities at the level: having resource in place, enhancing the engagement of their existing people in identifying and improving productivity, and their ability to sustain and share learning about the changes made.

 

Conclusions

Overall, manufacturers are confident that they will grow and make a profit, but, as recent history shows, the strides made might be smaller than the ambitions set, particularly if underlying barriers to improving productivity are not addressed. Looking at capacity to grow, the views captured this quarter show that this is unlikely to come from new staff or investment alone (just over 50% intending to recruit and 58% intending to purchase new machinery and premises), so the focus on productivity and getting more out of existing people and processes remains.

With the Special Focus this quarter showing that difficulty in engaging staff in increasing productivity proves one of the biggest hurdles to delivering and sustaining the improvements required by businesses, the findings of the Winter 2017 (Q3) Manufacturing Barometer suggest that workplace culture at this change level has to evolve. The call to action is for manufacturers to look harder at how they involve their leaders and their people to unlock their own hidden potential and achieve their productivity ambitions.

 

You can download your copy of the Winter 2017 Q3 South West Manufacturing Barometer report below:

2017_Q3_Winter_South_West_Results.pdf

Productivity 2020

This quarter, the Manufacturing Barometer's special focus is on productivity good practice and the extent to which it is integrated into the culture of UK SME manufacturing businesses. If you are interested in the subject of productivity and improving it in your business, take a look at our Productivity 2020 programme - it aims to help manufacturers increase their productivity by at least 20% by 2020.