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Manufacturing Advisory Service: summary & conclusions - evaluation report 1

URN No: 87/500

SUMMARY AND CONCLUSIONS

Introduction

  1. The Manufacturing Advisory Service began in 1977 and is the Department's longest established consultancy support scheme. Expenditure to date totals £55 million and nearly 12,000 firms have had assisted consultancy projects.
  2. Interim studies of the Service were carried out during 1978-81. Encouraging results were instrumental in securing a marked expansion of MAS in 1983.
  3. The objectives of the present full evaluation were to assess MAS achievements over a longer period against its main policy objectives of:
  • improving industrial productivity
  • demonstrating the commercial benefits of consultancy

Additionally we have examined the impact of MAS on the consultants themselves, and reviewed the efficiency of Service operation.

Main Findings

Take Up

  1. Most MAS projects (60%) have been in small establishments with under 200 employees. This proportion has been rising as eligibility criteria have changed.
  2. Nearly half the projects (48%) were in establishments owned by parent groups with over 500 UK employees. During the period covered by this review, MAS eligibility rules related to establishment size, not the size of any parent organisation. (Recent eligibility changes now preclude these establishments). Evidence on benefits suggests these small subsidiaries of larger groups do not offer higher or lower value for money than small independent firms.
  3. In its early years MAS was geared towards engineering, and by 1985 the Service had reached 60% of engineering firms with 60-1000 employees. Elsewhere in manufacturing industry MAS penetration rates were half this level. Changes in eligibility to include smaller enterprises with fewer than 60 employees have markedly decreased penetration levels in all sectors.
  4. Regional take up patterns closely reflect the national spread of eligible establishments in manufacturing industry.

Productivity

  1. Following their consultancy projects, over three-quarters of participants implement the majority of the consultants' recommendations. This happens swiftly, and is normally completed within 12 to 18 months.
  2. For our sample companies the full project implementation costs average £45 thousand. Consultancy costs, including the Department's contribution, amounted to a further £5 thousand.
  3. Productivity benefits commonly arise through reduction in stock levels and savings in associated interest charges; reduced manning; and lower materials costs. These benefits average £45 thousand a year, roughly the same value as the once for all project costs.
  4. Pay back on MAS projects is fairly rapid, and in almost all cases was achieved in under two years.
  5. Survey evidence shows that productivity benefits continue for at least three years, and in the majority of cases can be expected to extend well beyond that.

Attitudes

  1. We found in our survey sample that about 60% of MAS participants had not previously used consultants. The main barriers perceived were cost/value for money, and a preference for relying on internal resources.
  2. Experience of using consultants through MAS has provided users with more information and helped to counter these barriers. A large majority (85%) of those interviewed described their consultant as offering good value for money. Nearly as many (75%) felt their consultant introduced new ideas into the company.
  3. As a result of their MAS experience, over half of those without previous consultancy experience said that they would be much more likely to use consultants again on an unassisted basis, and most of these had already done so.
  4. We also found a favourable shift in attitudes for MAS participants who had previously used consultants. Half of these said that they would be even more likely to use outside advisers in future. Not all previous consultancy experiences had been as effective as MAS.

Additionality

  1. Under MAS, no additionality criterion are applied to applicants. Nevertheless, additionality must be achieved if the Service is to be worthwhile.
  2. For advisory services we distinguish between two sorts of additionality and propose objective measures for their estimation.
  • Consultancy additionality - MAS influence on the decision to seek outside advice and
  • Project additionality - MAS influence on the steps taken to improve company productivity

Both are relevant in assessing overall value for money.

  1. Survey evidence suggests a large majority (85%) of projects were significantly additional in at least one of these ways, with about half being additional in both senses.
  2. Additionality patterns have been analysed. The observed degree of additionality was found to be independent of establishment size, ownership status, industrial sector or region.
  3. From companies' responses to questions about their willingness to contribute towards the cost of their consultancy, and noting the effect of introducing the 25% levy on users, we feel that there is still scope for a small increase in company contributions. This should increase value for money, though as contributions rise towards 50% signs of reluctance to use the Service increase sharply and might deter those most in need.

National Efficiency

  1. We have attempted to determine the net national benefits of MAS. This is an ambitious objective and the results must be interpreted with caution. Firm data on MAS benefits was obtained from just over 40% of our 100 sample companies, and modifying these direct effects to take account of additionality is subject to uncertainty. With these qualifications in mind, we concluded that net national benefits were considerable; and easily outweighed the net Exchequer costs of the Service.
  2. Our estimates of net national benefits are more modest than those found in previous MAS studies. We regard our estimates, based on a larger sample and using data over a longer period, as more robust. They indicate that MAS has been a good investment of public funds.

Consultants

  1. Over 800 consultants are registered under MAS, yet less than half had been used in the period covered by this study. MAS business has been heavily concentrated on a small number of consultancy organisations. Ten organisations have taken 55% of the work. PERA, the main Service contractor, accounted for nearly half of this. (In the period since we carried out our survey the number of active consultants has doubled).
  2. Half the consultants we interviewed had noted a more confident approach by clients commissioning outside advice. This was most marked among smaller firms, and several consultancy practices felt this was directly associated with DTI advisory services.

Service Operation

  1. Operation of MAS by the contractors at the Production Engineering Research Association and Salford University Industrial Centre was praised by participants. The simplicity of the Service was highly valued, as were the Senior Industrialists' contributions particularly by the smaller establishments.
  2. We found that the monitoring and control of the contractors' operations by the Department is effective. Both PERA and SUIC maintain computerised record systems. We queried the need for an additional in-house database to monitor the Service. This system is in any event reaching the limits of its capability and will be unable to cope with increasing numbers of BTAS products.
  3. Hiving off MAS to SUIC in the North West region has worked well. Local operation offers advantages over a centralised system in terms of using local industrial knowledge, achieving a higher profile, and establishing more permanent industry-adviser links.

Main Conclusions

  1. These findings, and the detailed supporting evidence in our main report, have led us to the following conclusions:

(i) The majority of MAS consultancy projects generate high commercial returns and an awareness campaign based on a selection of successful MAS case studies would help promote MAS objectives.

(ii) Among smaller establishments there appears to be a general improvement in attitudes towards seeking consultancy advice. Such changes in attitudes, and use of consultancy advice, might be monitored more closely in future.

(iii) If suitable organisations can be identified, the Department might wish to consider extending arrangements for local administration of the Service.

(iv) The Senior Industrialist plays a valuable role in MAS, and this operational feature may be relevant to other DTI advisory services.

(v) Contracts with PERA and SUIC follow a standard format that is no longer appropriate as requirements for management accounting become more demanding.

(vi) Existing contracts with PERA and SUIC allow them to undertake advisory projects, without limit. This may merit further consideration.

  1. Conclusions were reached on two further points, and since compiling the report actions have already been taken in line with the findings:

(vii) Value for money could be enhanced further by a limited increase in company contributions. [In July 1986 charges were raised from 25% to 33%.]

(viii) While accepting the need to maintain high standards among MAS consultants, the number of active consultants should be increased. [From the position in 1985 as recorded in the report, the number of active consultants has now doubled.]

Postscript

In April 1987 the Department closed the productivity element of the Business and Technical Advisory Service (the successor to MAS) to allow BTAS assistance to concentrate on helping small and medium-sized firms put more effort into design, quality management and marketing.

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