Generating between 11% and 12% of the UK’s overall wealth, 60% of exports and 2.6 million jobs, according to the Institute of Mechanical Engineers, manufacturing continues to play a vital role in the nation’s economy and its growth is integral to recovery from the recession.

Equally so, innovation is vital for growth – both business and economic – but presents probably the biggest challenge for any organisation when it comes to deciding what to do about it. From changing organisational structures and filling critical roles in new and different ways, to partnering on new products and services and embracing disruptive technologies, many facets within every manufacturing organisation are ripe for innovation.

Recent research commissioned by SAP of UK manufacturers explored the attitudes towards innovation within the sector. Despite an acute awareness of the challenges they face, the report found many to be in a self-confident mood, generally optimistic about their own business prospects. In particular, four key areas of focus emerged; growth, innovation, skills and value-chains.

Spotlight on growth

Although the UK manufacturing sector is showing an ambitious desire for growth, a variety of challenges exist which obstruct businesses reaching their full potential, challenges which are largely out of their control. Despite the current ‘state of play’, manufacturers still have power over their own destiny, and every challenge brings with it its own opportunity.

Whilst some businesses acknowledge an increased threat from international competition, others see it as a chance to diversify and expand. With new technologies and processes constantly being developed, businesses are able to efficiently produce products for their home markets and grow into overseas markets. Creating new products for domestic and overseas markets is considered an opportunity for growth over the next twelve months.

Innovation nation

Whilst the current economic climate is a significant barrier for firms achieving immediate growth, interestingly it is also the biggest driver in motivating businesses to innovate. Other significant drivers of innovation include changing customer demands, increasing sales and cost reduction / need for increased efficiency. External pressures are forcing manufacturers to re-evaluate their processes and how they do business with their customers. It is how companies do business with others where organisations should place a greater deal of significance when looking to drive innovation.

In order to effectively innovate, it’s important for firms to build close relationships with their customers and also understand their customers’ customer. With a greater understanding of customers and their changing demands, greater innovation can allow businesses to form more valuable partnerships within their business network. As a result, manufacturers can look beyond their own company to build their strength, allowing them to better integrate with suppliers, customers and even their competitors.

Plugging the skills gap

One of the current challenges facing the manufacturing sector is the ever-widening skills gap. In order to support growth, organisations must have the right talent in place to help support increasingly complicated business processes. Yet talent retention and attraction are both obstacles that manufacturers must overcome.

The inconvenient truth for many businesses is that, if left unchecked, the skills shortage can have long-lasting consequences on a firm’s ability to grow. Skills shortages in R&D, production and support services are seen as having the biggest impact on the ability of companies to grow. These are the very skills that characterise the manufacturing sector and skills shortages are only going to intensify with an ageing workforce and a scarce talent pipeline.

Despite the shortage in skills restraining potential growth, measures are being taken to ensure that those entering the workplace are trained and ready. Apprenticeship programmes have always formed a solid basis for the manufacturing sector, and their role and benefits are as important as ever in today’s world.

Joined-up manufacturing

Manufacturing is characterised by ever longer and more complex value chains. A product produced entirely in one country is now something of a rarity and manufacturers are aware that joining forces with others, whilst improving collaboration and knowledge sharing internally, can lead to increased efficiencies, enable access to new markets and technologies and provide a gateway to greater innovation. Indeed, partnerships within the value chain can emerge as the area where innovation is seen to yield the biggest impact on organisational performance.

Joined-up thinking extends to the manufacturing industry as a whole though. The Government clearly has a role to play, ensuring consistent and supportive fiscal policy and legislation to optimise the UK manufacturing environment. The buck does not stop at the Government, however. The future of manufacturing is dependent on optimising the whole network in which manufacturing operates.

In summary, UK manufacturers have faced unprecedented challenges in recent years from a contracting market, competitive threats from emerging economies and ever tighter manufacturing timescales. A focus on survival has dominated the landscape and companies have adopted a siege mentality and significant resilience as a result. The spotlight is now shifting to growth and companies need to open up their boundaries and work collaboratively with others to conquer new markets and create new products and services.

These are exciting times for manufacturing. Challenges still abound but so do opportunities. UK manufacturing remains world-class and with an open mind to innovation, poised to emerge from the economic storm stronger than ever.