Inside business: British factories forge ahead

UK manufacturers are leaner, fitter - and are even outperforming the Germans. Colin New reports

How good are Britain's factories? Sterling's rise has thrown the performance of British manufacturing businesses into sharp relief especially against Germany, a major trade competitor. A year ago, a pound was worth 2.3 marks; today it is worth almost three - a rise of 30 per cent, hitting manufacturers hard. In contrast to the burgeoning service sector, currently growing at a year-on-year rate of 4.5 per cent, manufacturing output is flat with export orders at a five-year low.

So how much further can the pound rise before exports slump as manufacturers give up the struggle to compete? Economists talk airily of a narrowing productivity gap, and of Britain's lower labour costs, but hard evidence of how UK manufacturing businesses compare with their foreign rivals has been rare.

Until now. Building on the success of the annual Management Today Best Factory awards, which are conducted in conjunction with Cranfield School of Management, a group of German academics from the Export-Akademie of Baden-Wurttemberg this year joined forces with us at Cranfield to put German factories through exactly the same assessment procedures.

These cover every aspect of manufacturing: inventory profile; cost structure; employee profile and performance; product innovation; and management information control systems. To provide an even better insight, the distorting effects of discrepancies in industrial make-up and factory size between the two countries' factories was eliminated by choosing "matched pairs" from the respective samples: factories that operated in the same industrial sectors, and were of more or less the same size. While economists use one or two simple measures to assess relative manufacturing performance, the use of such a highly detailed questionnaire on a matched pair basis in two countries has for the first time made possible a detailed comparison across a wide range of performance characteristics.

The differences that emerge are startling - and spell good news for British exporters. While the overall performance characteristics are broadly similar - which comes as no surprise, since economists reckon that the gap between Britain and Germany has been steadily closing since the early 1980s - UK factories in fact score slightly better on almost every characteristic. British factories have learned important lessons from the Japanese and switched between products more quickly, lost less of their overall capacity on machine set-ups, have a lower level of customer complaints and achieve better scrap or yield loss rates.

In some areas, UK factories scored significantly better: clear differences emerged in the number of stockturns, employees' absenteeism levels and the ex-stock availability of goods on the shelves. In the UK, stock in the matched plants turned over three times as fast as in comparable plants in Germany. With 5.89 per cent absenteeism, German employees are almost twice as likely not to turn up for work as their British counterparts. And when it comes to dispatching orders from the warehouse, German factories' average ex-stock availability levels of 82 per cent are well behind the equivalent UK level of 94 per cent.

But the picture isn't totally one-sided. German factories are significantly slicker when it comes to product innovation, bringing new products to market in just over 14 months, compared with the almost 18 months achieved by British factories. Moreover, German factories' "current innovation rate" - the rate of new product introduction over the previous five years - is around 1.5 percentage points higher than in the UK. Worryingly, their future innovation rate, which anticipates the extent of new product introduction over the next five years, widens the gap to almost twice this, at 2.78 per cent.

But how reliable and representative are these figures? Although the Management Today/Cranfield School of Management Best Factory awards have been running since 1992, German factories only commenced their own version of the award in 1996, and on a "pilot" basis for the first year, in order to iron out any teething problems. Just 40 German companies participated, which inevitably restricted the number of matched pairs that could be constructed.

A more complete picture will emerge next year when a full-scale German evaluation goes ahead. In the meantime, factory managers, economists and the Chancellor alike will all be hoping that this year's welcome news of Britain's growing industrial resurgence is not countered by more results from companies such as ICI, which has already blamed a pounds 150m fall in profits on the high value of the pound.

Research Fellow Marek Szwejckewski and Dr Keith Goffin assisted in the research and the preparation of this article. Further details are available from Cranfield School of Management, Cranfield University, Cranfield, Bedford MK43 OAL.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Marketing Services Manager - (communications, testing, DM)

£32000 - £35000 per annum + benefits: Ashdown Group: Marketing Services Manage...

Guru Careers: Finance Account Manager

£Neg. (DOE) + Excellent Benefits: Guru Careers: A Finance Account Manager with...

Ashdown Group: Java Developer - Hertfordshire - £47,000 + bonus + benefits

£40000 - £470000 per annum + bonus: Ashdown Group: Java Developer / J2EE Devel...

Ashdown Group: Direct Marketing Manager - B2C, Financial Services - Slough

£45000 - £55000 per annum + Benefits: Ashdown Group: An exciting opportunity h...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas