Finding the right tools for manufacturing to fend off a triple dip recession

 

UK car workers at Honda’s Swindon factory last week found themselves facing the same fate as so many of their European counterparts as 800 workers were laid off. Unlike US based manufacturers, government support for the UK car industry, apart from car scrappage schemes during the credit crunch, is thin on the ground. In the US the emphasis has been on growth rather than austerity. The result is US people are more willing to go out and spend money, because their government has more directly intervened. In Europe manufacturers cannot rely on the same state backing in the face of government austerity and concerns over the Eurozone’s stability.

As recently as last week sales in the automotive industry showed a UK sector in growth during the past year, but this latest news demonstrates the thin line that many manufacturing companies are forced to tread, or face being caught under or over producing for their target markets. Capacity glut can be especially damaging to businesses, so manufacturers need to improve their processes if they are to avoid surprises in the future. It is a place where automation within the back office has a role to play.

Recently discussing these problems with manufacturing customers highlighted how the simplest of issues could cause considerable problems. Large manufacturers can expect to have many thousands of suppliers on their books, and these will be pan European in many cases, but if procedures are not correctly put in place then purchase orders, invoices and payments will quickly be disrupted. Good examples are conditions placed on purchase orders for freight and duty on goods coming into the country. If an invoice is submitted in $US, paid in €, but reported in £ then a variation is thrown up if a system is incorrectly set up. With a variation detected, the PO is halted for manual verification and approval. That takes time, payment is delayed and the manufacturer looks inefficient and unprofessional.

Expanded across 500 or 5,000 suppliers, the cumulative issues within manual business procedures results in a significant impact on a business’ ability to deal with a changing market landscape. Prior to automation, the time taken to manually resolve such issues can be considerable, with customers talking of dealing with just three approvals a day. Post automation, these numbers climb into the hundreds per day, which radically improves a department’s capabilities and early awareness and resolution of problems.

It seems strange to be discussing automation, which can lend itself to head count reduction, in the wake of news on large scale job losses, but the truth is that if back end processes were better automated within the manufacturing industry, we would see an improvement in operations in terms of supply and demand, payment and cash flow. With data capture automated and smartly indexed, business intelligence would improve and manufacturers would be better prepared to make core operational decisions early enough to stave off last ditch solutions such as the mass redundancies that will typify an economy flirting with a triple dip recession.

Automating the automotive industry

 

 

 

 

 

 

 

 

For one industry 2012 was far from a year of doom and gloom. The UK posted the largest year-on-year increase in car sales, hitting 2m vehicles sold, by far the highest rate for more than a decade. Sales of UK-built cars rose 11% in 2012, while the remaining UK-manufactured vehicles (eight out of 10) are exported.

Automotive is again one of the UK’s manufacturing success stories, home to seven volume car manufacturers, seven commercial vehicle manufacturers, 10 bus and coach manufacturers, eight major premium and sports car producers, and over 100 specialist brands. Not forgetting eight Formula One teams, of which current World Champion Red Bull Racing is headquartered, like ReadSoft UK, here in Milton Keynes.

Aside from Germany, the UK has the strongest premium brands in terms of global market share, producing more than one million vehicles and two million engines each year. The key to this success has been product, with every new vehicle to emerge proving that cars designed and built in Britain can be every bit as prestigious as their international rivals. Strong consumer demand and interest in fuel-efficient cars is driving further interest, and the nascent alternative fuel/electric car market is starting to mature. All of which means automotive manufacturing levels are set grow to pre-recession levels by 2014.

Critical to this ongoing growth is the supply chain. At present, almost 80% of all component types required for vehicle assembly operations can be procured from UK suppliers, an industry which alone generates an additional £4.5 – £5bn of value annually.

In this industry we therefore see considerable opportunities to maximise business effectiveness through the application of back office process automation.  Around 2,350 UK companies regard themselves as ‘automotive’ suppliers, employing around 82,000 people, which generate a tremendous amount of paperwork, and not just terms of Accounts Payable (AP). Automotive manufacturing could apply automation to delivery notes, sales orders, forms, AP, AR, their internal legal, HR and SharePoint systems to greatly improve day to day operational efficiencies.

Multiple business area automation is a great way to keep things running smoothly, and what is clear is there remains great potential to further improve the industry landscape. Despite the strong New Year figures from the automotive industry, it could have been better still if we consider the latest data from the Office for National Statistics, which shows the output per hour of private-sector workers fell by almost 4% in 2012.

To bring automation to all automotive IT might sound like a big ask, but generic application templates can rapidly bring most processes quickly into an automated workflow, quickly reducing the long term workload. If systems are working on a ‘straight through processing’ basis and are joined up – using a platform such as ReadSoft XBOUND – then the management information system (MIS), finance and operations will be better equipped to meet their SLAs.

By removing the need to manually process or handle issues, manufacturers and their suppliers find they have room to breathe, are better positioned to plan forward and add real value to the business, and find new ways to gain more marketshare, such as expanding production plants here in the UK, and investing in expansion, especially in China and India, where there is the potential to double global production by 2020. Bringing better efficiency into automotive manufacturing, an industry that is estimated to support 7.5 jobs elsewhere in the economy for every job in UK vehicle assembly can only be good news for the UK’s wider economy.