Manufacturing in Scotland

Macbryde, Jillian and Mendibil, Kepa and Paton, Steve and Davidson, Laura and Bititci, Umit (2009) Manufacturing in Scotland. Preprint / Working Paper. Strathclyde Institute for Operations Management, Glasgow, UK. (

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Set against the backdrop of current thinking that UK manufacturing needs to move into higher value, this report, commissioned on behalf of the Scottish Manufacturing Advisory Service (SMAS) Board, set out to: Give an account of the current status of manufacturing SME’s in Scotland including current activities, aspirations, strategies and challenges facing them; Assess the progress Scotland has made towards high value manufacturing; Make recommendations as to the type of support needed to enable Scottish manufacturing SMEs invest in their long-term future. The resulting report is based on findings of a survey that delivered responses from 435 Scottish manufacturing companies and in-depth interviews with directors of 45 companies. This research was carried out during the period April to September 2008. Our research suggests that there have been significant shifts within manufacturing SMEs in Scotland. The most notable shifts include: A shift in the basis of competition. Our research suggests that the primary basis of competition for Scottish manufacturing SMEs is not price. Increasingly Scottish SMEs are adding value through quality and customer service. A shift in the nature and scope of operations. Whilst the primary business function of manufacturing companies remains production, there is evidence of increasing levels of design and service activity taking place. Companies reported they expected this trend to continue as the shift in the basis of competition away from price towards innovation and customer service gains pace. These changes suggest a move towards high value manufacturing. However there are major challenges facing Scottish SMEs if they are to compete on new value propositions. Of particular concern are: Lack of strategic vision and understanding of the capabilities and competencies needed to compete on the new value propositions. Whilst companies largely recognise the need to improve manufacturing efficiency, many have not embraced the need to develop and improve processes that deliver value to the customer (eg. Customer service processes, new product development processes etc). If customer service, innovation and quality are key differentiators and the way they add value, then companies need to ensure they have sustainable processes to deliver this value. Changes in operational activity have tended to be the result of evolution and opportunity rather than coherent operational strategy. Many companies need help in generating and enacting strategic change There is a lack of appreciation of the potential value of innovation in delivering value (and indeed the understanding of innovation in its many guises). Almost all companies interviewed reported some problems finding and retaining staff. Whilst in some cases labour shortages were due to specific skills and knowledge, there was also a general problem recruiting people with basic employability who had a desire to work in manufacturing. The poor image of manufacturing was a worry to the vast majority of interviewees. Many companies recognised the potential to exploit opportunities overseas. Some alluded to the fact that it might not be enough to market and export overseas, but that a manufacturing presence may be needed to fully exploit the opportunity. In terms of the support needed, companies stated that they would be looking increasingly for help and support in the areas of manufacturing efficiency and sales and marketing. Supply chain was also an area where companies reported they would be looking for help and support. Companies also suggested that they would like to see improvements in terms of “community”, with a number of interviewees looking for help in accessing not just help and support, but also introductions to other organisations. The research team believe that whilst not always recognised by the companies, support is also needed in the areas of strategy (and linked to this leadership) and in developing and improving processes that add value. Finally, the research suggests worryingly low levels of manufacturing entrepreneurship in Scotland, with only 3% of companies surveyed established within the past 5 years. This is worthy of further investigation. 4 Key findings and recommendations are expanded upon in Table 1. However the key recommendations can be summarised as: Manufacturing SMEs continue to require support in manufacturing efficiency, sales and marketing and supply chain. As companies move away from price as the main basis for competition and towards alternative value propositions, they also need support in developing and enacting strategy. Of particular urgency, companies need help in developing and improving the processes and capabilities that deliver value (beyond traditional manufacturing) Establishing processes that support innovation and product development will be central to the sustainability of many Scottish SMEs Further work needs to be done to investigate the apparent low levels of manufacturing start-ups Further work is needed to understand the areas where Scottish SMEs can actually compete on high volume /low complexity – often due to “localisation” factors Consideration should be given to supporting companies who wish to establish manufacturing overseas to exploit global opportunitiesA skills strategy must be created in line with the needs of manufacturing industry The poor image of manufacturing in Scotland needs to be addressed