In the past there has been much discussion in the UK press about the relative performance of manufacturing industry in different European countries. Often the focus has been on Germany’s strength, compared to the disappointing and steady decline of UK manufacturing.

In the past few years, however, questions have started to arise over the competitiveness of German manufacturing as companies have started to move their plants abroad.

To go beyond the rhetoric, it is necessary to make systematic comparisons of the performance of manufacturing companies in the two countries. This can help identify the key areas where manufacturers need to concentrate.

Over the last decade, we have studied companies in the UK and Germany by collecting key performance data and conducting ‘audit’ visits at many factories. Our database profiles the performance of hundreds of companies from various sectors and allows systematic comparisons to be made.

For example, to look at the engineering sector, we took a ‘matched sample’ from our data, covering 28 manufacturing plants in Germany and 64 in the UK.

The comparison was based on 24 performance measures, which covered all aspects of manufacturing performance (not just quality and productivity). Significant differences were found to exist in the average performance between companies in the two countries in four areas.

German companies have more efficient production processes, with scrap rates averaging two per cent, as opposed to 4.1 per cent in the UK. Quality, including low levels of scrap, has been a traditional strength of German companies. Employee turnover was also significantly lower in Germany (3.3 per cent versus 6.5 per cent).

The UK has advantages in employment flexibility, but management needs to ensure that the knowledge of line employees is utilised fully, in order to hone the performance of manufacturing processes. Ideas from experienced employees are essential for process design – the creation of reliable, efficient manufacturing processes that bring a sustainable competitive advantage.

Component manufacturing lead times (the average time it takes to make components or sub-assemblies in the factory) of over 18 days in Germany were nearly double those found in the UK.

Similarly, customer lead times (a measure of delivery lead times) were better at UK plants. The reason that UK lead times have fallen is because Britain has been quicker in adopting lean manufacturing. So UK plants appear to be more advanced in some aspects of their manufacturing and supply chain management (and our audit visits have shown this as well).

From the 24 variables studied, there are many areas where there were no significant differences. For, example, in the engineering sector there is no difference between the German and UK manufacturing plants with regard to on-the-job training levels, for either existing or new employees.

And the mean annual innovation rates show no real difference between the countries. This shows that German engineering plants are not more ‘innovative’ than their UK counterparts.

However, with global competition both countries’ manufacturers need to boost their levels of innovation.

The survival of manufacturing depends on designing products that excite customers, are suitably branded, and that cannot easily be copied.

Looking objectively at the engineering sector, companies in both countries have significant opportunities to improve. UK companies must learn more about achieving higher levels of quality, and reducing staff turnover.

Meanwhile, leading edge supply chain methods are yet to be adopted in Germany.
Of course, performance data does not in itself tell companies how to run their manufacturing plants more effectively. Therefore during our audit visits to many manufacturing plants, we have collected information on ‘best practice’ and published this widely.

The broadest conclusion to be drawn, as companies in the Europe Union face unremitting international competition, is that manufacturers must become quicker at learning.

This means that they have to understand global trends in both customer needs and manufacturing best practice, and react fast. To support this, it is high time for the European Union to create a ‘Manufacturing Academy’ to sharpen the performance of our manufacturers in both product design and process design.

Otherwise, the value creation associated with manufacturing will continue to exit Europe stage left.