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Joining instructions: Aerospace firms could improve through taking part in SIG, says Rolls-Royce
The aerospace sector in Britain is enjoying a period of growth following an uptick in the fortunes of the civil market around the world. But with that expansion comes the fear that suppliers may struggle to compete in a more demanding global environment.
The world aerospace market is expected to double in size in a decade, with 22,000 new aircraft in the civil sphere. But this success, driven principally by demand from the Far East, poses new challenges for British companies.
Andy Page, a supply-chain development expert from aeroengine maker Rolls-Royce, says: “We have a strata of suppliers which has grown and been successful over previous decades, during which competition has increased around the world, and we see this in a number of other industries. But the world is becoming a smaller place from a trading point of view, and we therefore need to put that energy into driving them to be competitive, because their peers now are no longer in the UK – they are anywhere around the world.”
Rolls-Royce has put its money where its mouth is, injecting £10 million into a scheme called Sharing in Growth (SIG), a £110 million government-backed programme that is intended to equip aerospace suppliers with the business acumen to cope with the demands of the 21st century industry. Page is chief executive of the initiative, and the chairman is Bryan Jackson, a former Toyota man.
Jackson believes that the aerospace sector is facing similar challenges to those experienced some years ago by the now modernised and globalised automotive industry. “The engineering in terms of added value is much more significant in aerospace than it is in automotive, but carmakers had to go through the trauma much earlier,” he says.
“What’s happening now is that aerospace is desperately trying to emulate that, following much of what the auto industry did, but it’s difficult – and we are making fewer aeroengines than cars, obviously.”
The aim of SIG is to help suppliers negotiate the path to greater – or future – prosperity. Companies involved must devote £250,000 annually over a four-year period, which is matched by funds for training in business improvement provided by the programme. The £250,000 figure is the cost to suppliers in terms of time spent training the workforce – not a cash investment that needs to be provided.
The programme is not just about lean manufacturing and similar methodologies, says Jackson: “It’s much more than lean. We say it’s a holistic programme, so we’re really looking at the full gamut of running a business.
“People talk about lean because they can identify with it, see it and feel it, but we’re talking about a broader spectrum of behaviour: cost planning, the structure of a business, the development of a business and the development of people – so it’s all-embracing.” The two colleagues believe that makes SIG a rare beast – certainly in terms of aerospace programmes, and perhaps more widely too.
“I don’t think there’s been anything like it – in any industry,” says Jackson. “We hope SIG will be the guinea pig that can be expanded further into any industry. Even the NHS could potentially benefit from a similar approach.”
So far, 13 companies have signed up to the scheme, with a larger number of applications – from 18 firms – rejected. But SIG expects to recruit another 27 companies. Jackson emphasises that they are not turning down applications “willy-nilly”.
“It is a thorough process,” he says. “The people who haven’t got on the SIG programme have, in most cases, recognised they are not ready for it. In some cases, their approach to the future might not have been right.
“But we’re not picking winners – that wouldn’t be a good test of what we’re trying to do.” Companies must meet the programme’s criteria, including having a certain turnover, as well as making the commitment to the cost of their people’s time. “We’re looking for commitment to the application, and the dedication and willingness of the management and people to take it on board,” says Jackson.
The British aerospace industry is second in value only to that of the US. Page says that the establishment of the aerospace Catapult centres and the £2 billion Aerospace Technology Institute earlier this year indicates that the government is now taking the sector seriously. Ultimately larger companies could grow from SIG, he says, backed by banks that want to see bigger engineering businesses.
But old problems are raised too. Jackson says: “The education system in this country has been a laboratory experiment over the last 25 years. Some of it good, some of it not so good. The bottom line is we’re not performing on skills, and we have to change that.
“Governments of all colours have a problem. I speak to people from all political sides and I think there is an understanding that you need a balance. I’m not advocating that we should be the leading manufacturing country. I’m just advocating that we need a strong manufacturing part of the economy.”
We need exports to fly high
Dr Andrew Mair, chief executive of the Midlands Aerospace Alliance, says the industry tends to be overshadowed somewhat by automotive firms in the region – but that nonetheless his organisation has 300 members on its books.
“All of these work in the aerospace industry to some degree,” he says, “although some serve other sectors too. Many are in the flying or finished parts supply chain, or are in engineering services, or in making tooling and equipment for companies in the UK and across the world.”
Mair believes the industry is faced with a “potential crisis of capacity”. He says: “The opportunities are there – it’s whether we have the capability to take advantage of them. That’s true from Rolls-Royce right to the lower tiers of the supply chain.”
He says British companies must up their game to compete with engineering businesses in Europe and elsewhere. Sharing in Growth can help, he believes: “It is a substantial investment that is required: but the investment is not in cash, it is in time committed by people. Companies are matching the time of their management cadres with the external resources being pumped in. It’s a big investment to make in a growth period, when a lot of companies feel constrained.”
The scheme may help British firms to continue to work for giants such as Airbus, BAE Systems or Rolls-Royce. “These big companies are benchmarking their performance against competitors in Germany and the US. The primes in the UK also need to make sure they remain competitive.”
But the long-term success of Sharing in Growth would mean suppliers developing their business in countries abroad, with “neutral parties who can evaluate how good they are”. Mair says: “It’s really about export potential and the sharing of global growth, not just growth in the UK.
“And it is unusual, because it is focused on a small cadre of companies and is investing a lot of resources into those – and there is a relatively short period of time to make a difference.
“For a lot of these companies, it will be the first big injection of this kind of support they’ve received.”