Does the UK have a future in manufacturing? The latest wave of globalisation has accelerated the movement of production around the world, strengthening the impression of the end of manufacturing in this country. However, the UK could be well placed to be a hub of co-ordination and innovation in future industries – if we update the way we think about manufacturing.

According to Deloitte1, by 2003 just under 30 per cent of European companies did not have production in their home market. Most people equate the physical production process with manufacturing, and so this has been taken to signal the death of manufacturing.

This is far from the truth for two reasons. First, manufacturing is more than production, encompassing the full cycle of activities from research and development (R&D), through production, and on to service provision and end-of-life management.

Second, companies may be offshoring (moving an activity abroad) but are they also outsourcing (having another company carry out the activity for them). Control of a global production network is an important option for UK companies, so that they can access lower costs of production while still maintaining control of the process.

An example of successful network globalisation is Domino Printing Sciences, a world leader in inkjet and laser printing solutions based in Cambridge. Domino’s management team set up a Shanghai factory and gained more than 30 per cent of the Chinese inkjet printing market. Then they restructured their manufacturing network, with Cambridge focusing on new and higher-end product families for the European Union and American markets, and the Chinese factory focusing on mature product families for global markets. Domino sells in 120 countries with eight manufacturing facilities in five countries.

Much of the movement of production is what the economy needs. As industries mature, production processes stabilise and products become commodities. Such industries cannot remain in a high-wage location, like the UK, and compete. The practices and experiences of global players demonstrate that the ownership of innovative ideas and co-ordination capability are far more critical than owning properties and resources. Our target has to be emerging industries, developing novel production processes and having first-mover advantage with new products and their associated services.

Inventing new industries and controlling global networks sounds like a great future, but we should also be realistic about the threats to the economy that arise from rapid offshoring and outsourcing.

Production is linked to other activities that mean we have to outsource carefully. In a 2003 survey carried out by the Institute for Manufacturing2 (IfM), 54 out of 100 respondents said production was critical to their ability to innovate. If we do not take the linkages into account, we may damage other parts of our companies.

At the national level, we may also be seeding our future competitors. Companies to which we outsource production will not stay in that part of the value chain forever. What makes our R&D and innovation capability better than other countries? If we cannot protect those parts of the value chain, then we must take real care when removing ourselves from the production part of the chain.

Globalisation is not new, and the threats to the economy may have intensified, but they have always been present. The UK needs to understand that it has opportunities to act as a global coordinator and source of new industries and processes, but it will not be able to take advantage of those opportunities if it does not update the way it thinks about manufacturing. The Department of Trade and Industry has made a good start through the Manufacturing Forum, but this initiative needs to reach through Whitehall and beyond if it is going to ensure UK companies fulfil their promise as global leaders in future manufacturing industries.

[1] The Challenge of Complexity, Deloitte, 2003.
[2] Making the Most of Production, IfM, 2003.