The slide in European manufacturing output as the world economy hits the buffers has serious implications for everyone working in logistics. As allied business activities, manufacturing and logistics are joined at the hip and what’s bad for manufacturing is bad for logistics, too.
(Sure, retail and logistics are also conjoined twins, but I hope there’s nobody out there hoping that retail is bursting to take up the slack from the decline in manufacturing.)
So is the future black for European logistics? I’m an optimist. I think it might be a paler shade of grey. And here’s why. I think UK manufacturing will come through the current downturn in rather better shape than it did from the economic Armageddon it suffered in the early 1980s.
The pattern from past recessions is that European manufacturing declines, recovers a bit when the upswing comes – but not all of the markets it had before. Some of the capacity has slipped permanently eastwards.
This time I have a feeling it might be a little different. I admit that I’m sticking my neck out here – especially given that, as I write, the Chartered Institute of Purchasing and Supply is reporting the worst manufacturing confidence index since the dark days of the 1992 recession.
And I agree there are plenty of Job’s comforters around saying that we’ve brought the disaster all on ourselves through a failure to invest in new equipment and training. But there are also plenty of informed voices out there who reckon that British manufacturing, at least, is in a healthier shape than at the outset of the previous recession. Professor Mike Gregory from the Institute for Manufacturing at Cambridge University has spent years touring the globe looking at other people’s factories and says of British manufacturing: “I think we’re rather good at factories these days.”
He believes British manufacturers have made a lot of progress over the past ten to 15 years – since the last recession – in core production skills. And he adds: “There are plenty of opportunities for British manufacturers to add value through a production cycle – not least by knitting production together as system integrators.”
Gregory makes a pertinent point. There’s not much chance for British manufacturers to compete on the low-value processes, many of which were off-shored years ago. But the competitive buzz these days is all about bringing ever-more complex products to market faster – and that’s where the high-value skills of expert system integrators score. And, of course, where supply chain managers have an important part to play.
Next I talked to Daniel Morgan, a senior CBI policy adviser who’s knowledgeable about manufacturing. He makes another optimistic point: although British manufacturers still lag behind the US, Germany and France when it comes to productivity, the UK is closing the gap on America.
And he points out that the recent debacle in the financial markets has sounded a warning bell for policy-makers at the highest levels. “I think the signal is that we need a more balanced economy than, perhaps, we’ve been focusing on in the past ten to 15 years,” says Morgan. Financial services, it’s turned out, haven’t been the saviour of the British economy. So maybe it’s time for manufacturing to have more place in the policy-maker’s sun.
Finally, Julie Madigan, chief executive of the Manufacturing Institute, tells me she’s optimistic that more of the best young talent will opt to work in factories rather derivatives dealing rooms. She sees the image of manufacturing turning round, after years of dark satanic mills portrayals in TV programmes. The Institute’s “Make it in There are plenty of informed voices who reckon British manufacturing is in a healthier shape than at the outset of the previous recession. Manufacturing” campaign is playing a part in changing perceptions.
Says Madigan: “When you educate young people about the realities and opportunities of modern manufacturing, their perceptions transform.” But she adds: “There’s an urgent need to instil the high-level skills we need for industry into the school curriculum and onwards, through higher and further education, into apprenticeships and through high-level programmes for those already working in manufacturing.”
None of the people I’ve spoken to believe that 2009 is going to be a cake-walk for manufacturing and logistics. Some hard months (possibly years) lie ahead. But there’s a sense that the fundamentals have, over the past decade, been coming together in a way which offers hope for the future.
But, first, manufacturers must find ways to ride out the present recession. And they will be certainly looking for logistics pros to play a part in that, by slimming supply chains, seeking new efficiencies and cutting costs.
Peter Bartram is a business writer, journalist and author of 20 books.