Bad debt looms for UK manufacturing industry, despite recent success
The UK’s manufacturing sector had a successful few months as it reached its highest output for 10 years and its best quarter for three and a half years.
However, the sector’s bad debt owed to companies increased by 260.24% in the final quarter of last year, compared to the third.
In the same review period, the industry also saw an 8.67% rise in County Court Judgments (CCJs).
The information was provided in the Watchdog report, released by global credit provider and business intelligence expert, Creditsafe.
The report also found that company failures only dropped by 1.06% in the final quarter of 2017, compared to 30.79% in the same time period of 2016.
“While there is certainly cause for cautious optimism as we see the financial health of the UK’s manufacturing base strengthen for a second consecutive quarter, there has been a large increase in bad debt owed by the sector that we should be wary of,” said Rachel Mainwaring, Operations Director at Creditsafe.
“CCJs are also up across the manufacturing sector suggesting that there may be some contagion in unpaid bills.”
“We’ll be keeping a close eye on this as we look to the next quarter, hoping for positive improvement in terms of overall debt in the industry.”
The Watchdog report tracked quarterly economic developments in Manufacturing, Banking and Financial, Farming and Agriculture, Hospitality, IT, Construction, Professional Services, Retail, Sports & Entertainment, Transport, Utilities, and Wholesale.
Gartner: Leaders Lack Skilled Smart Manufacturing Workers
With organisations rapidly adopting industry 4.0 capabilities to increase productivity, efficiency, transparency, and quality as well as reduce cost, manufacturers “are under pressure to bring their workforce into the 21st century,” says Gartner.
While more connected factory workers are leveraging digital tools and data management techniques to improve decision accuracy, increase knowledge and lessen variability, 57% of manufacturing leaders feel that their organisations lack the skilled workers needed to support their smart manufacturing digitalisation plans.
“Our survey revealed that manufacturers are currently going through a difficult phase in their digitisation journey toward smart manufacturing,” said Simon Jacobson, Vice President analyst, Gartner Supply Chain practice.
“They accept that changing from a break-fix mentality and culture to a data-driven workforce is a must. However, intuition, efficiency and engagement cannot be sacrificed. New workers might be tech-savvy but lack access to best practices and know-how — and tenured workers might have the knowledge, but not the digital skills. A truly connected factory worker in a smart manufacturing environment needs both.”
Surveying 439 respondents from North America, Western Europe and APAC, Gartner found that “organisational complexity, integration and process reengineering are the most prevalent challenges for executing smart manufacturing initiatives.” Combined they represent “the largest change management obstacle [for manufacturers],” adds Gartner.
“It’s interesting to see that leadership commitment is frequently cited as not being a challenge. Across all respondents, 83% agree that their leadership understands and accepts the need to invest in smart manufacturing. However, it does not reflect whether or not the majority of leaders understand the magnitude of change in front of them – regarding technology, as well as talent,” added Jacobson.
Technology and People
While the value and opportunities smart manufacturing can provide an organisation is being recognised, introducing technology alone isn’t enough. Gartner emphasises the importance of evolving factory workers alongside the technology, ensuring that they are on board in order for the change to be successful.
“The most immediate action is for organisations to realize that this is more than digitisation. It requires synchronising activities for capability building, capability enablement and empowering people. Taking a ‘how to improve a day in the life’ approach will increase engagement, continuous learning and ultimately foster a pull-based approach that will attract tenured workers. They are the best points of contact to identify the best starting points for automation and the required data and digital tools for better decision-making,” said Jacobson.
Long term, “it is important to establish a data-driven culture in manufacturing operations that is rooted in governance and training - without stifling employee creativity and ingenuity,” concluded Gartner.