Manufacturing study highlights value of UK-based production

The study — Industrial systems: capturing value through manufacturing — was produced by the Royal Academy of Engineering following roundtable discussions with a range of senior executives and structured interviews with leading industrialists.

The study said: ‘In the complex, globalised world of modern manufacturing, companies are finding new ways to capture value. Much value (and employment) is now enabled by the production process rather than coming from production itself. Throughout the lifecycle of a product, opportunities for creating value are increasingly being taken by manufacturers rather than allowing other organisations to capitalise, so production can become a strategic activity within businesses rather than an end in itself.’

The study placed such conclusions in the context of its stance on ‘capturing value’. It said: ‘… capturing value from modern manufacturing is not just about capturing the implicit value in making and selling products — it is about capturing value throughout the lifecycle of those products, benefiting many companies and requiring many different kinds of skills throughout the value chain.’

As an example of this type of activity, the academy uses the example of Rolls-Royce’s aero gas turbine business, where an engine service package is provided to an airline to support its aircraft. UK companies can also use ‘home-based’ production activities to protect their intellectual property and expertise, while production can also enhance research and design capacity, and enable infrastructure for other businesses to be created.

The academy argues that the ‘distinctions currently drawn between service industries and manufacturing industries are not always helpful’. The study said: ‘Some have sought to deal with this by thinking in terms of a new emerging “manu-services” sector, but taking an industrial systems view, the distinctions between the activities are not important — just the way in which value is captured and enabled by manufacturing activity. Dealing with manufacturing as a topic in isolation of the services that support — and are supported by it — does not provide the full picture.’

In terms of the UK government’s intervention in industrial policy, industrialists who spoke to the study team called for a ‘level playing field’ with international competition. The study added: ‘While there is an appreciation of the hands-off, open market approach to business in the UK, most of those interviewed recognised instances where it was expected that the government would intervene both to protect “crown jewels” and parts of the industrial or wider systems that are critical to the capturing of value elsewhere. How to determine what the UK crown jewels are therefore becomes essential — a better approach is needed and the process needs to be transparent.’

Other points stressed by the study include:

• The skills base is critical for sustaining location-specific or niche-based industrial systems;

• The government needs to identify key strategic policy areas, such as education, health, energy and transportation as part of the UK’s industrial system; and

• More mechanisms need to be developed to leverage the benefits associated with industry’s interaction with the UK academic network.