Manufacturers failing to leverage services for growth
UK manufacturers are actively moving up the value chain although only half the sector is providing services as well as core products, new data has concluded.
The ‘Servitisation Report’, released by Barclays Corporate, has said the situation leaves the UK at a competitive disadvantage globally.
The report, which includes a survey of 200 manufacturers across the UK, reveals the sector is focused on bringing higher value goods to market. More than half (51%) of respondents claim to have already moved up the value chain significantly in recent years, while another 40% are in the process of becoming a more value-added manufacturer.
However, across the sector 44% of manufacturers still provide no services to accompany their products, with 82% of this group having no intention of ‘servitising’ their operation at all.
Servitisation is defined as the process of providing a service complementary to key product lines, from maintenance and upgrades to training and end of life disposal. Key UK manufacturers leading this field are named as BAE Systems and Rolls Royce.
In an assessment of manufacturing servitisation globally, the report finds UK manufacturing is missing out on opportunities to move up the value chain and compete more effectively internationally.
Mark Lee, head of manufacturing, Barclays Corporate, said the results showed a sector that was evolving by necessity, but not embracing servitisation fast enough.
“Manufacturing and servicing have in the past been somewhat uneasy bedfellows, with manufacturing sales teams focused on big product orders rather than time and resource consuming servicing contracts. However, quality of service is often now the difference between a contract going to the service-driven manufacturing countries and one that is secured by a UK firm,” he said.
“Servitisation should also allow manufacturers to diversify income streams, with servicing providing more consistent revenue at times when orders may dip. In many ways it is insurance against a temporary fall in demand.”
Breaking down what types of services are being offered by the sector, 70% of those with a service offering provide maintenance and repairs, while 53% provide spare parts and 51% offer training for their products. Just 20% offer transport services and least popular is retailing products; just 7% of UK manufacturers that do provide services are also end user retailers, which equates to 4% of the total manufacturing population.
The bank said that at present there was a real question about the UK’s competitive advantage in manufacturing. Just 14% of the sector believes the UK is a global leader, compared with 63% of respondents who say the UK is part of the pack and 23% that assert the UK is lagging behind.
