| MANUFACTURING
SECTOR PATHFINDER |
| Introduction |
| Two
brainstorming sessions were held with the members of the
Group who for diary purposes were scheduled separately in
the sessions. The members of the Group were John Ward
(Chairman), Jim Adamson, Malcolm Bateman, George Bennett,
Archie Bethel, Gordon Brown, Melford Campbell, Hugh
Currie, James Daglish, Ian Galloway, Scott Grier, Cameron
McLatchie, Charles Morrison, Sam Russell, and Duncan
Whyte. |
| The findings
were circulated for finalisation of the Draft Report. The
Draft Report was then discussed on a wider basis, with a
further cross-section of knowledgeable and informed
people in the manufacturing sector, and the STUC. The
intention was not to re-invent the findings, but to take
a broad view of the Draft Report for completeness. |
| Following
this process a Final Report was submitted on 4 March
1999. |
| |
| General
Consensus |
| The
indigenous manufacturing base, which led the world in the
early part of this century has eroded away. This has
created serious problems with vocational skill employment
and value added. It was considered that this had been
caused by: |
- the development of a
risk averse culture;
- lack of
competitiveness in world markets;
- inability to get
Scottish intellectual product to market.
|
| Whereas
inward investors have brought enormous capability and
employment to Scotland, their value added has remained
low. The Scottish manufacturing base has found it
difficult to move up the value chain with inward
investors because the product design and product
ownership has in most cases not been attracted to
Scotland. Equally the research capability in universities
and hospitals, has not been able to link into foreign
manufacturers for the same reason. Without significant
product design and ownership in Scotland, this will not
change. |
| Success in
improving living standards and the quality of employment
will derive directly from increasing value added in the
economy. This in turn can only be secured by achieving
high productivity and international competitiveness. To
capture this requires that Scotland converts its
intellectual property into competitive products and sells
these in the global market. The future development of
manufacturing is central to this conversion process and
to securing the economic rewards which result. |
| |
| Recommendations |
| The five
areas of focus have been selected to address these issues
at three levels: |
- concept of the
specific area of focus;
- suggested actions
for immediate implementation;
- longer term
recommendations.
|
| There is no
hierarchy proposed in five areas of focus, however the
first four have specific short-term recommendations. It
was considered by the members of the group that those
need urgent attention. |
| |
| Competitiveness |
| Concept |
| Manufacturing
and other tradable services must be competitive to
succeed in the global market. This can only be achieved
where there is a competitive infrastructure, on which a
competitive culture can be built. Beyond this, it
requires a view of the future and a clear strategy to
manage the changes, which this will drive. The living
standards and quality of employment in Scotland will only
improve if international standards of competitiveness are
achieved. |
| |
| Immediate |
- Level playing field
across UK for business rates and taxes.
- Specific actions to
achieve a competitive skill base:
|
- basic skills;
- IT literacy;
- European languages;
- lifestyle
discipline.
|
- Current skills focus
is on education and social inclusion which are
fully supported by the Group.
- However the majority
of the population are already in the workforce,
and their skills must be competitive. Create a
specific focus on competitive skills in the
workforce:
|
- specific grants for
upskilling;
- support for
accreditation of prior learning.
|
- The Scottish
Parliament should review the plethora of
organisations which build links between business
and schools. From this review, it should decide
which to sponsor and then measure the
effectiveness of achieving outcomes.
- Implement a programme
to simplify and reduce regulation and constraints
on growth.
- Implement a National
Benchmarking Programme:
|
- at a Scottish Level;
- at industry/public
sector level;
- at company level.
|
- Rebalance government
assistance to provide additional incentives to
those participating and demonstrating
improvement.
- Sponsor a best
practice-sharing programme within and across
sectors.
- Create a competitive
ethos based on success in schools, through
academic achievement and sport.
- Create a
Parliamentary Committee on Competitiveness, with
a remit to establish competitive targets across
all aspects of the Parliament's work, and to
track and measure the success in achieving these
targets.
|
| |
| Longer
Term Requirement |
- Create a multi-modal
transport and access strategy extending for 25
years, to address:
|
- competitive parts
and product cycle times from source to customer;
- global access to
customers by air from Scotland, for marketing and
delivery purposes;
- leading edge
electronic access capability; and
- evaluate how to
create a world class hub airport capability across
Scotland, with road and rail linkage.
|
- Create a national
e-commerce strategy, which might consider:
|
- personal computer
provision to all school children from 8 years;
- Scottish web site
with directory of products and services;
- provide incentives
and support to create web sites;
- encourage creation
of virtual companies and structures which can access
design centres and customers on a global basis;
develop a detailed
national road map of the steps necessary to achieve a
successful e-commerce platform. Assign
responsibilities for achievement and measure success.
|
| |
| Attitude |
| Concept |
| The
manufacturing contribution to wealth creation and value
added is not understood. As a career, it is not
fashionable and increasingly it is not attracting first
class skills. Without a change in culture, manufacturing
will continue to decline. A number of ideas are
suggested. |
| |
| Immediate |
- Abolish student fees
for university courses in science and
engineering. This could also apply to colleges
and Modern Apprenticeships. Similar incentives
could also be considered for European languages.
- Put in place a
programme to make manufacturing better understood
in the civil service:
|
- cross-rotate civil
servants into manufacturing on a secondment basis, as
part of career development;
- involve
manufacturing leaders with civil servants in advising
Ministers and being part of UK and European policy
negotiations.
|
- Bias SHEFC funding to
engineering and science.
- Provide resources to
schools and/or industry to improve mutual
understanding, and to improve the image of
manufacturing. These could include:
|
- secondment
opportunities for career guidance teachers;
- programmes for
managers from industry to spend time in classrooms;
- facilities in
industrial companies to host/involve school children;
- encourage practice
of open days for communities to visit manufacturing
sites;
- encourage employee
volunteering from manufacturing sites into local
community.
|
| |
| Longer
Term Requirement |
- Parliament to lead a
national focus on the role and importance of:
|
- wealth creation;
- value added;
- manufacturing and
tradable services.
|
- The vital
contribution of these factors to the living
standards and quality of employment must be
understood across Scotland.
- Encourage media
platform, showing short "exemplars" of
manufacturing success. This should be built on
existing Scottish Enterprise programme. A
development of the documentary format developed
by John Harvey Jones should also be encouraged to
display manufacturing success in Scotland.
|
| |
| Risk |
| Concept |
| We have
become risk averse with the result that business starts
are disappointing and our ability to create global
manufacturing companies has largely disappeared. Growth
in the longer term will only come from investing and
taking risk. An environment must be created where risk
taking is encouraged. |
| |
| Immediate |
- Tidy up legal
anomalies such as the ability to provide security
on floating assets.
- Consider means to
facilitate the ability to provide security on
opportunity rather than assets. Schemes such as
the "Small Firm Loan Guarantee Scheme"
and "Export Credit Guarantee Scheme"
might be considered as a framework for providing
support.
- Encourage
entrepreneurs who have experienced genuine
failure to get back into risk taking. The media
"exemplars" suggestion above might be
considered.
- Provide support to
new ventures in creating web sites and accessing
world market.
|
| |
| Longer
Term Requirement |
- Present approach
takes inventions/research and rolls these forward
into the market place. This has had limited
success.
|
| As an
alternative a process should be created which works back
from demand and opportunity, to fit Scottish creativity
into what the customer wants. The commercialisation
should be built around risk takers and those with
business leadership. |
| The
following process, which builds on the Scottish
Enterprise cluster model, should be implemented: |
- industry sectors
should be organised to create intelligence on market
trends and areas of opportunity and demand. This
analysis should be made available as widely as
possible;
- universities and
hospitals should make available areas of research and
invention, for which they have received government
funding. A process of IPR protection will have to be
devised, to avoid piracy, possibly through Scottish
Enterprise;
- risk takers/business
should have access to both to identify areas of
opportunity where risk can be taken and ventures
started, which will integrate and commercialise the
research/invention;
- the Singapore Model
and Michael Porter's Cluster Theory, which are
relevant to their approach, should be evaluated.
|
- Exploit the existing
manufacturing base to move up the value chain and
increase value added. This would include:
|
- help to inward
investors to attract Development Missions;
- help to indigenous
companies to manage change, and upgrading to remain
competitive.
|
- Incentives should be
focused to support this risk:
|
- to the risk takers
who are integrating and commercialising the
creativity;
- to SHEFC/research
hospitals, who should have opportunity funding to
achieve a level of commercial rollout from their
research funding, into successful manufacturing
ventures;
- to the individuals
who create the intellectual property, which is
commercialised.
|
| |
| Incentives |
| Concept |
| The present
bias of incentive programmes is toward employment. In the
long run Scotland's success and standard of living will
come from adding value and creating wealth. The present
bias should be realigned. |
| |
| Immediate |
- Research funding,
through SHEFC and research hospitals, to be
partly re-focused on practical applications. As
noted above a target for commercial rollout into
the market place should be given to each.
- To provide
incentives, a significant measure of the
financial gain from commercial rollout in the
market place should be retained by the
individuals or department, which developed the
IP.
- Incentive funding
should be rebalanced to achieve value added and
value retention, rather than exclusively jobs.
This should apply equally to indigenous as well
as foreign investment. Incentives to indigenous
companies should recognise "Greenfield"
start up conditions, as apply to inward
investors.
- Inward investors
should commit to a percentage value added.
- A system of credits
and incentives should be put in place for
indigenous companies to encourage:
|
- business starts;
- management of
change;
- business growth and
upgrading to maintain competitiveness;
- design
commercialisation and rollout;
- international
development.
|
| This could
include a range of options, which may or may not be at
the option of the Scottish Parliament. For instance: |
- NHI holiday;
- local rates holiday;
- ability to trade tax
losses for an initial period;
- Uniform Business
Rates across the UK;
- specific grants.
|
- Specific grants for
personal finance, which is committed to risk
ventures, possibly on a pound for pound basis,
for:
|
- family finance;
- Business Angel
finance.
|
| |
| Manufacturing
Strategy |
| At the
beginning of the century, Scotland led the world in
manufacturing - this indigenous base has now largely
eroded away, because: |
- the industry did not
manage change;
- investment in the
future was not maintained;
- competitiveness was
lost;
- global opportunity
was lost.
|
| In
constructing a Manufacturing Strategy for the future,
these mistakes must not be repeated. |
| Mid-century,
Scotland became European leader in oil and electronics
production, although these industries were largely
foreign owned and in the case of electronics with low
value added. These are now at risk as a result of: |
- global competition
and prices;
- focus on jobs rather
than value added, for inward investment projects;
- inability to
capitalise on the inward investors, by increasing
value added and breaking-in Scottish intellectual
property.
|
| Again, in
constructing a Manufacturing Strategy for the future,
these lessons must be learned. |
| The
framework should be defined on a sector basis, with the
sectors covering existing and emerging industries. |
| |
| Longer
Term Requirement |
- Create a national
framework, based on industry sectors, covering
existing and emerging industries, to address the
questions:
|
- what is the future
of manufacturing?
- what valued added
can be secured, by extending the value chain from
design to customer support?
- what specific steps
will be put in place to make it happen?
|
- Scotland is rich in
intellectual property. A national framework
should be created to align the following wealth
creating steps:
|
- practical research;
- product deployment;
- skill development;
- basic skills;
- focused incentives;
- Scottish brand
image.
|
- Scottish Parliament
leadership in setting competitiveness targets and
measurements.
|
