Are British factories an endangered species?
The cost base for manufactures is at an all-time high
There is no doubt that the manufacturing landscape is tricky to navigate:
- The cost base for manufactures is at an all-time high
- International competition has never been more acute
- Production operations have never been easier to transfer overseas
With the rate of change accelerating fast, the outlook for manufacturing is far from rosy. The basic business model for large numbers of factories up and down the country can’t be sustainable in the long term.
Yes, there will always be some products that will be made locally, such as items that are produced in low numbers, items with a short shelf life, (such as pre-packed sandwiches) heavy items such as bricks and those that need to be changed quickly to adapt to market needs. However, in general, if businesses want to continue to manufacturer products in our country, then they need to think long and hard about how they can do this whilst building revenue, staying competitive and continuing to prosper as a business.
Many manufacturers rely on their technical expertise to keep them at the bleeding edge of innovation. Others do everything they can to provide a higher quality product. These companies can often stay one step ahead of their competition, but this is not always possible for everyone. Is there another way?
Yes there is. It is called servitisation and it could possibly revolutionise manufacturing, not just in the UK, but worldwide.
The idea of manufacturers providing services is not new. At a basic level, manufacturers have been supporting their product offering with spare parts for generations. The next step in the servitisation model is to offer intermediate services such as a helpdesk, periodic maintenance, repair and overhaul. Again, many of these are standard fare and have been for a long time, even so these intermediate services present a fantastic opportunity for businesses to strengthen relationships with their customers, and provide ways to generate additional revenue streams for the business.
But it is with advanced services where the opportunity for business growth is even greater.
With an advanced service offering the customer receives an outcome, or capability, rather than purchasing a product. For example, an office manager might sign up for the provision of ‘document management solutions’ rather than buying a photocopier. Similarly, an airline might enter into an agreement for a number of flying hours rather than ordering a jet engine. In northern Europe, consumers have already been offered a 'pay per wash' option as part of a trial run by their domestic washing machine manufacturer, and this trend will surely continue.
The advantages with these advanced services are numerous for both customer and producer; the customer benefits from a ‘pay-per-use’ model rather than spending a large amount of cash up front. The customer also benefits from a guaranteed product performance as well as commitments regarding product development and enhancements over time. In return the customer agrees to a longer-term contract over several years and a stronger partnership between manufacturer and customer is formed, all of which improves long-term cash flow and customer lifetime value.
The manufacturer, instead of selling products is now in the business of selling outcomes, bundling together a range of products and services tailored to individual customer’s requirements. If carried out correctly, the business transformation through servitisation should allow for a new lease of life for manufacturers up and down the country.
Who said our factories were an endangered species?
Canoo Awards Manufacturing Contract to VDL Nedcar
Canoo, a trailblazing company in the electric vehicle (EVs) manufacturing industry, has officially announced owned and contract manufacturing plans that will ensure the company manages to deliver on its promise to consumers of production and delivery of vehicles in Q4, 2022.
During the company’s first Investor Relations Day, Chairman & CEO of Canoo, Tony Aquila, named VDL Nedcar as its contract manufacturing partner. VDL Nedcar, which I’m sure many of you will already have heard of, is the only independent Vehicle Contract Manufacturer in the Netherlands and has enjoyed fifty years of growth under owners, including Mitsubishi Motors and Volvo cars. According to the report, Nedcar will manufacture the Lifestyle Vehicle for the United States and European Union markets, while Canoo builds a US-based mega micro-factory.
"We conducted an exhaustive search, invested significant amounts of time and resources that span the globe, in our search for our Phase 1 contract manufacturer. VDL Nedcar is the right partner," said Tony Aquila, Investor, Chairman and CEO of Canoo, Inc. "They are the top trusted European manufacturer building high-quality products for leading OEMs, and they significantly outcompeted the other contenders. VDL is also independently owned by the van der Leegte family of entrepreneurs - which aligns with our commitment to support businesses that form the backbone of communities. This strategic partnership will enable us to deliver vehicles to market while we build our Phase 2 factory in Oklahoma. It also strongly positions us for geographic expansion in Europe and builds a lasting relationship with VDL Groep of companies. Our investment will help us scale quickly and fulfil our mission to bring affordable, purpose-built EVs to Everyone."
Canoo and VDL have already gotten to work on vehicle manufacturability and production planning so that Canoo can successfully lay the groundwork for its upcoming US manufacturing operations expansion, which will be completed in Oklahoma in 2022. The Nedcar facility currently expected to produce around 1000 units for both the US and European markets in 2022, with an additional 15000 targeted for the following year.
"Canoo's bold approach to designing and building electric vehicles makes them an ideal partner as we work together to shape the future of mobility," said John van Soerland, CEO of VDL Nedcar. "This partnership advances our strategic vision to provide a contract manufacturing solution and expand our expertise in the EV arena."
Currently, Canoo is entering its GAMMA phase of development and is on track to start production soon. The company intends and expects to launch its Lifestyle Vehicle in Q4 2022, closely followed by the Multi-Purpose Delivery Vehicle and Pickup Truck.
Watch this space.