| Thank you for that introduction, Mr Chairman.
I was pleased to be invited to this Conference to lend my support to PICME and its work in helping to drive improvements in the UK's process industries.
The Process Industries Centre for Manufacturing Excellence, - as its' title suggests – geared to helping companies achieve manufacturing excellence. The economic significance of the sectors in which it operates – chemicals and plastics and rubber – only serves to emphasise the importance of its role.
The fact that this Conference was substantially over-subscribed shows a recognition on the part of companies in these sectors of the need to improve performance. And a desire to do so. I hope that this Conference gives you the information that you want about how that improvement might be achieved.
Manufacturing Matters
The Government attaches enormous importance to the manufacturing industry. Manufacturing companies make up a fifth of our economy. They directly employ four million people. And they account for 60% of our exports.
I was delighted that after the General Election I was given additional responsibility for chemicals and rubber key manufacturing sectors.
Sustained quality and improvement in manufacturing is the necessary basis for a healthy economy. For the UK to succeed as a global economic force, our manufacturing industries will have to be at the competitive edge.
There are many companies who are already operating at this competitive edge. The best of British manufacturing is very much the best in the world. And I am pleased that the sectors represented here today have examples of the best. Highly productive, leading edge companies, from whom others can learn.
But unfortunately, that is only part of the story. Taken across the piece our productivity performance lags well behind that of our major competitors. Manufacturing productivity in the United States, for example, is 55% higher than in the UK. It is 32% higher in France. And 29% higher in Germany.
In the face of this stark statistic and the ever-increasing global competition that confronts us, there is only one viable response. We need to raise sharply our productivity. We need to invest and innovate. And we need to be a moving target for developing countries.
There are not low tech and high tech sectors, but low tech and high tech processes.
According to the PICME analysis to be presented later today suggests that, even in the process sectors, the UK's overall competitive performance is only classed as "average" when compared to world-class companies. We have a long 'tail' of under-performing companies. If the UK process manufacturing plants could raise their performance to world class levels that would allow them to increase output by nearly a third. Put another way, that would increase the value added per employee by something over £16,000 on average.
Government Policy
Clearly, whether we can achieve increased levels of producivity lies in your hands. You are the ones who have to drive improvement. But I recognise too that Government has a responsibility to create the right environment for innovation and productivity. We do this in a number of ways and through a number of policies.
Firstly, bringing economic stability. We now have the best macro-economic framework we have had for many decades. The UK now has the lowest inflation rate for 30 years. And long term interest rates are at their lowest for 35 years.
Secondly, by removing barriers to investment and ensuring that we set a balanced regulatory regime.
Thirdly, through creating the right competitive frameworks which deliver open and dynamic markets.
Fourthly, by developing the right education and training framework to provide the aptitudes and skills that industry needs. We have, for example, sought to strengthen the sector network by establishing the new Sector Skills Councils which will enable business sectors to provide leadership for strategic targeted action to meet their sector's skills and business needs. I am delighted that the chemicals industry is one of the trailblazers in this approach, and I know that other parts of the industry are looking to develop similar initiatives.
Fifthly, investing in the science and technology base, in ways relevant to the needs of industry. There is a close correlation between levels of innovation and levels of performance and profitability. That is particularly true in a science-based industry such as chemicals. The tax credits for R and D of large companies announced in the Budget will hopefully encourage greater levels [additional] of R&D activity in the UK. The Government has put large additional sums into the science base. The 2000 Spending Review added £725 million to the Science Budget over three years – an increase of 7% per year in real terms. We've also invested large sums to encourage universities to transfer their work into industry.
And last, but not least, is the promotion of enterprise and best practice. It is this element I want now to concentrate on, as it is the adoption of best practice that lies at the heart of PICME and at the heart of this Conference.
Best Practice
I acknowledge that times are tough for manufacturers around the globe. And the weakness of the Euro has created additional difficulties for UK manufacturing. So the pressure is on to drive competitive improvement. Applying best practice in manufacturing, and throughout the supply chain, is one clear way of taking out wasted costs and improving quality and output. Sharing experience, knowledge and ways of working is a valuable tool in helping businesses to become more competitive.
Analysis by the Engineering Employers Federation found that US-owned firms use lean-manufacturing techniques far more widely and more intensively than UK owned firms.
The CBI's National Manufacturing Council estimates indicate that if UK manufacturing firms adopted the productivity levels achieved by their international competitors, the UK could increase its GDP by around £60 billion. The PICME analysis I mentioned earlier suggests that the chemicals and process sectors have the capacity to make similar pro rata savings.
I appreciate that it is difficult for companies on their own to search out and apply best practice in lean manufacturing and process efficiency. We at the Department of Trade & Industry therefore see it as our role to help. We have done this in a number of ways.
We work closely with the CBI, TUC and other stakeholders in promoting the adoption of best practice through the Fit for the Future campaign.
We are establishing a Manufacturing Advisory Service to help companies adopt best manufacturing practices in a convenient and easily accessible form.
And we are working with individual sectors and Trade Associations on sectoral approaches to best practice through the Industry Forum mechanism.
The Industry Forum approach was born out of the needs of the automotive sector. The international vehicle manufacturers operating plants in the UK needed much better standards on quality, cost, and delivery from the automotive component suppliers here in the UK.
Unless those suppliers could put in place a programme of continuous improvement to achieve global competitiveness, they were in danger of losing out as the vehicle manufacturers looked elsewhere in search of the standards they demand. Every company, of whatever size, and wherever they fell within the supply chain, had to become more competitive.
But it was not just enough to say those words. The concept is simple, but the practice is very much more difficult. The Society of Motor Manufacturers & Traders working with global vehicle manufacturers, component suppliers, and the DTI - devised a project to help companies effect change. Through what became the SMMT Industry Forum, they developed a series of programmes to help component suppliers combat these competitive pressures in a structured, practical format, delivered by a team of high calibre engineers.
This approach proved immensely successful, with individual companies achieving startling levels of improvement. So much so, that this became a trigger for a number of other sectors to try and adapt this Industry Forum approach to their own sectors and their own supply chains. The DTI has been more than happy to support this process.
There are now Industry Forums in a range of sectors - including aerospace, textiles, ceramics, metals manufacture, and tourism. And PICME is, of course, the Industry Forum for the chemicals, plastics and rubber sectors.
PICME
In a world where companies are faced with many daily battles to survive, it may be hard to stand back and evaluate your manufacturing approach or your relationships with others in the supply chain. But it is a necessary step, if you are not going to spend the rest of your days in crisis management or "fire-fighting" mode.
But I realise too that it is not enough for Minister's or others to exhort you to do better. We've got to supply you with the practical tools to help you realise your potential. That is where the Industry Forum approach and PICME come in.
PICME is not yet another in a long line of Government initiatives. It was developed by the industry for the industry. It offers practical support. It provides your company with a diagnosis of the primary issues impacting upon lean manufacturing in your plant. It points out where improvement might be most beneficial. And it provides hands-on support in helping you effect such change.
Above all, it works. Although still a relative infant, PICME has already demonstrated what it can do it a wide range of different sectors and operations within the process industries.
You will be hearing later today some case study examples of what PICME has achieved in working in collaboration with individual companies. I do not want to steal their thunder. I only want to say that all the companies that have so far been through this process have benefited enormously.
Many have seen improvements measured in hundreds of thousands - or, indeed millions - of pounds. For example, tool changeover times have been reduced in one case by 85%. Production capacity has been improved by up to 25%; And stock levels cut by 45%. Within just 12 companies, prospective benefits are calculated to be worth £8.5m just for the first year.
As the impact of globalisation grows ever more apparent, so the pressure on companies to offer quality products and services at competitive rates grows ever stronger.
There is a compelling need to improve performance at all levels. The most powerful process that any company can adopt to improve productivity and competitiveness is the transfer of best practice. PICME and the Industry Forum approach can help companies learn from best practice elsewhere, and apply those lessons to their own situation.
We at the DTI certainly believe in PICME. We have supported it to the tune of one and a half million pounds to help it develop the tools and spread the message.
PICME may not be a universal panacea for all the problems you face, but it is a confident stride in the right direction. It is dedicated to helping you to identify ways and means to reduce costs, and that is the bottom line for any business. It offers you an opportunity to join the best, or become the best.
No company is so good it cannot do better. No one in this room is working for an organisation which cannot improve.
This is PICME's first Annual Conference. It is at once a look back, and a glimpse at a potential future for the industry. I hope you will embrace PICME as part of your future.
Thank you. And I wish you all a successful Conference and a successful future.
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