Cooperation + Partnership = Good Business Conduct

After all the recent election excitement, we now have a coalition government for the first time since the Second World War. Putting any political preferences to one side, I have long believed that cooperation and partnership between people and organisations is the best way to conduct business, as well as trying to run the country.

A good example of this is the model of the trade association. Our company belongs to five of these organisations, and over the years it has done our business and me personally, a power of good.

In the surface finishing industry we are members of the SEA, IMF, BSTSA and SAMFA (South African Metal Finishing Association). In our role as machinery merchants, we are also members of the EAMTM (European Association of Machine Tool Merchants).

One of the great disciplines of belonging to these associations is the requirement on you and your company to adhere to a strict code of business ethics, and not do anything to undermine the business of another member company. Whilst some may think that this flies in the face of true capitalism, it has its place in both old fashioned values and modern business practices.

It is self-regulatory, as few want to rock the boat and become blacklisted. And as well as enhancing corporate responsibility, this check on a company’s behaviour enables it to build a strong, trusted brand name and reputation among its peers.

Another benefit is the shared responsibility for the health and well-being of an industry and its members. In essence, the creed that we are stronger together than we are when apart. Helping each other, sharing knowledge and lending expertise in lots of small ways all adds up to sustaining an industry that functions more profitably and more efficiently. This helps both large and small companies to survive the worst of recessionary pressures, take advantage of opportunities and adapt to changes in the marketplace.

In addition, the associations enable us collectively to pool our resources towards areas such as research and development (especially important in a technically complex industry such as ours), market research, export strategy, publishing and exhibitions. They can also provide lobbying power for subjects such as environmental legislation. These kinds of activities would be beyond the capability of many smaller companies

Over the past two years, I was privileged to serve as chairman of the EAMTM UK division. If you think we have had it bad in the surface finishing industry, boy you should take a look at the machine tool business! But despite the downturn, the spirit of cooperation has never been better, something for which Riley Surface World can be profoundly grateful.

Of course, an organisation that operates on a Europe-wide level is not without its difficulties. Just think of the European Union in microcosm. And yet, because we are in a globalised economy, the merging of national associations is inevitable. This brings economies of scale and creates far greater opportunities for business development and is something that perhaps our existing trade associations should consider.

So as we optimistically look forward to the next five years of political stability and economic recovery, let’s continue to operate in a way that is cooperative and inclusive towards the rest of the companies in our industry. We are all in this together now.

Birmingham - colossus of the UK auto industry

I have just seen the BBC documentary ‘Requiem for Detroit’, a hard-hitting indictment of how a once great industrial city has been turned into almost a ghost town by the inexorable decline of the US automotive industry which, apart from the music business, Detroit depended on almost exclusively for its economy.

The programme had a powerful impact on me because I grew up in, and still live close to Birmingham, the nearest kind of place in Britain that we have to Detroit.

Birmingham was once home to the colossus of the UK auto industry, British Leyland, with famous brands such as Austin, Morris, Rover, MG and the rest. This once great institution was brought to its knees back in the 1970s by a combination of the oil crisis, the recession, poor quality standards and trade union militancy.

Fast forward forty years and Ford, General Motors and Chrysler seem to have followed the same predictable route. Global competition, inflexibility, arrogance, out of date working practices and the fallout from the banking crisis have all contributed to a catalogue of woe. Almost like a car crash in slow motion.

Of course, as we know in the finishing industry, it is not just the primary vehicle producers that suffer. Detroit, just like Birmingham, is home to thousands of sub-contractors that depend on the monolithic car companies for their bread and butter.

But despite all of its problems, Birmingham has re-invented itself as a city with a much more diverse range of industries and services. Anyone entering the city now on the old elevated M6 can see Fort Dunlop, once a cathedral of tyre production and now home to scores of small business units, retail outlets, hotels and apartments.

Birmingham city centre has now been transformed and is the UK capital of conferences, exhibitions, live entertainment and waterside leisure developments. Even the old jewellery quarter has become a major visitor attraction.

And beneath the glossy veneer of new enterprises the old manufacturing skills still remain. Birmingham may not have such large plating and finishing houses as it did in its heyday, but there are still large numbers of specialist coating, polishing, blasting, peening and cleaning companies that are beavering away and serving the new industries that are filling the gap left by the decline of the motor industry. At Riley Surface World we know this is the case because those same companies are constantly knocking on our door to buy used equipment.

So if we think we have problems in the UK finishing business, they pale into insignificance when you look at the shocking decline of Detroit and other American cities. With USA unemployment at double the level that it is here, we can be proud that our enterprise and diversification has so far staved off the worst effects of the global downturn.

Manufacturing is about to make a comeback. Suddenly politicians are starting to talk about elevating engineering back to its rightful place as a high priority occupation for the new generation.

Yes, there are still many problem areas. The recent mothballing of Corus in Middlesbrough has parallels with what has happened to Detroit, albeit on a smaller scale. Nevertheless, our company is seeing constant evidence of a UK-led revival in manufacturing and its associated industries.

I am confident that, in the years ahead, Birmingham and other British cities will once again become major players in the global economy.

Changes in the course of one year

At the beginning of 2010, with the snow falling outside, salt in short supply and travelling conditions difficult, I find myself looking back to what was happening in our industry this time last year.

It is remarkable how quickly things can change in the course of one year. In January 2009, our company, like many others apart from perhaps the large supermarkets, was staring into the abyss.

Suddenly, out of the blue, turnover was at least 25% down and falling. After the worst banking crisis in modern history and doom and gloom everywhere you looked, there seemed to be no prospect of an upturn in the near future. Plans had to be put on hold, budgets chopped and exhibitions cancelled. It was time to get our heads down and concentrate on ‘the knitting.’

We all believed that we were in for a long haul of stagnation and depression. In fact, to use the old football cliché, it was a year of two halves. By the middle of June, things began to get busier.

‘Of course’, I hear you say, ‘It is no surprise that a company like yours starts to thrive in a recession. You are, after all, just glorified scrap merchants; scavengers that capitalise on other people’s misery. When things are tight, companies buy second hand. You also benefit from lots of industrial plant & equipment coming onto the market as the result of closures and liquidations.’

While this view may be partially true, it does not tell the whole story. In fact, the used machinery market mirrors economic trends just like any other business. When the surface finishing sector is busy and turning a profit, so are we. When times get tough, we also feel the pain. And whilst opportunities may arise as the result of factory closures, such as de-commissioning projects and asset sales, we still need to have a buoyant industry sector to dispose of the machinery that has been acquired and to keep sales moving.

The big difference between this and other past downturns is that this time, the whole world went into recession at the same time, so we could not utilise our normal flexibility to find new markets.

And although an upturn is welcome, it brings its own problems. Good quality finishing machinery is now in short supply and our future success depends on our ability to constantly replenish our stocks.

So as I reflect on a more optimistic outlook at the beginning of a new decade, here are some predictions from the Old Riley Almanac:

Firstly, things will not be as bad as expected. There is life out there! Manufacturing, surprisingly, is undergoing a resurgence; maybe not in the kinds of volumes that we have been used to, but certainly in niche markets where the access to finishing expertise and equipment becomes a priority.

Secondly, surface finishing technology in its broadest sense will continue to evolve and change. There will be an increased number of companies coming into this sector in the coming months and years, many of them more innovative and flexible than the traditional finishing shops. They will have their own ideas, methods of working and innovative technologies that will find new markets and breathe new life into the industry.

Finally, our old friend the internet will open up the world even more, enabling all of us to take advantage of the many opportunities that are out there. For our part, we can now buy and sell across international boundaries as we never could before, helped considerably by the continuing weakness of sterling. So as countries across the globe emerge from recession in increasing numbers during 2010, we should all be poised and ready to benefit.

Things can only get better, and for all of us in the beleaguered surface finishing industry there are reasons to be cheerful at the start of 2010. A happy new year to one and all!

Interview by Metal Finishing News

Head over to Metal Finishing News website to read the interview here.  You can also read the same interview here (PDF format).

The quality standards of service

A question came into my head recently whilst staying at a budget-priced national chain hotel (which I will return to later): are surface finishing companies in the manufacturing or service sector? It is a distinction that is not always obvious. An electro-plating sub-contractor is an important cog in the production cycle, but at the same time has to deliver a high level of service to the primary manufacturer. The company will not simply be judged on the quality of finish it provides, but on a whole range of other criteria, such as price, delivery, courtesy, communication skills etc.

If we accept that, by and large, we are in the service sector, what is the quality of service that the industry is delivering? If you have any doubt about how quality standards have improved in the UK, let’s consider the example of that budget hotel again. Twenty years ago or more it was unheard of to have a good experience in such an establishment. They were not quite Basil Fawlty but not far away. The offer was uncomfortable beds, indifferent food, surly staff and prohibitive pricing. Not only that, but most places did not accept credit cards.

The business has now been transformed. The beds are plush, the food is varied and delicious and smiling, highly trained staff do their best to pander to your every need. All in the name of customer care.

In the same way, manufacturing standards have overwhelmingly followed the quality model. In the UK for instance, the old ramshackle motor industry dominated by British Leyland has been supplanted by gleaming new organisations such as BMW Mini, Honda, Nissan and Toyota, all with quality written through them like the proverbial Blackpool rock. This also extends to their dealerships which are, of course, totally in the service sector.

As consumers we no longer expect or tolerate poor standards of service and quality. From hotels and garages to supermarkets and steak houses, such is the level of competition that they all have to conform to the highest quality standards or go to the wall.

So where does this leave the surface finishing industry and companies such as ours that are suppliers to it? There has been an unfortunate tendency in the past to regard many finishing processes as ’black arts’; dependant on the deft touch of experienced operatives with their bag of tricks to produce a satisfactory result.

What the British finishing industry does best is to harness the technology to achieve innovative finishes that are the envy of the rest of the world. It is one of the reasons that we still have cutting edge industries in this country like Defence, Formula One and Life Sciences.

So the technology must be matched by a service philosophy that is the equal of those slick budget hotels, restaurants and fast fit depots that can be found on the outskirts of every large town. Manufacturers need to know that not only will the finish be of the highest standard, but it will be supplied on budget, on schedule and with a seal of customer care.

The UK is now a service-led economy. We have to maintain our competitiveness and ensure that our finishing standards continue to be the envy of the world. We should learn from the best of international service standards and couple our undoubted technical know how with the desire to please that is the hallmark of a quality industry.

REMATEC exhibition in beautiful Amsterdam

I am writing this article having recently returned from the REMATEC exhibition in the beautiful city of Amsterdam. Having seen a marked decline in other trade shows this year, it was very refreshing to see how buoyant this event still is, reflecting the healthy state of remanufacturing in general.

So why are remanufacturing equipment suppliers and contractors bucking the global manufacturing downturn? Recent studies suggest that there are over 70,000 remanufacturing companies in the USA alone, turning over $50 billion per annum. The market is huge, encompassing automotive, aerospace, marine, electronics and many more sectors too numerous to mention.

The first answer is clearly to do with cost savings. With budgets everywhere under pressure, the cost of remanufactured goods is 40 – 60% less than new. And such is the quality on offer that it is often difficult to tell the difference between new and remanufactured products. When you throw in the fact that most items are supplied with a warranty, it makes an attractive proposition.

Secondly, this trend is being driven by legislation. For instance, EU regulations dictate that only 15% of a car can end up in a scrapyard. That percentage will drop to 5% in 2015, a requirement that should boost the industry’s growth, since remanufacturers need a steady supply of broken-down goods for the process to work efficiently.

Finally, there are the environmental issues. Materials represent 70% of costs for a new product, but only 40% for a remanufactured one. And because there's less casting and smelting, a particularly power-hungry aspect of production processes, energy costs are up to 85% lower than in manufacturing new products.

The growth of remanufacturing is forcing OEMs to rethink their entire business models. Until recently, many products such as cars, photocopiers, white goods and other electronic items were designed with built-in obsolescence. So consumers could be persuaded to buy new models every 2 or 3 years. The shocking decline in the auto industry means that manufacturers will not be able to constantly develop new models because there will not be markets for them. Instead they will have to be designed with future remanufacturing potential in mind. In the long term, this will benefit both manufacturers and consumers.

What does this mean for our industry? I believe that there is already increased demand for efficient, environmentally-sound surface technology equipment. The plethora of new cleaning and degreasing equipment suppliers is evidence of this. This trend also extends to powder coating, specialist coatings, shot blasting, polishing, heat treatment and many other surface finishing processes.

Machine tool suppliers are also acutely aware of this trend. Remanufacturers require machines for grinding, milling, lapping, honing and many other metal cutting and forming processes. The fact that the machine tools themselves are being remanufactured produces a product cycle that feeds upon itself. We are remanufacturing the machines in order to remanufacture more machines, and so on!

At Riley Surface World we are seeing a deluge of enquiries from remanufacturers of all types and sizes. From one man doing up alloy wheels in his garage at home to large aerospace companies applying new specialist coatings to old parts, the scope is enormous. Those of us that depend on surface finishing for our livelihoods ignore the potential of remanufacturing at our peril.

Two exhibitions in Germany

I recently spent a week in Germany visiting two exhibitions that are of international importance to our industry: the Surface Technology Show at the vast Hannover Fair and the Resale exhibition of second hand machinery in Karlsruhe.

Firstly, let me pass comment on how enjoyable it is to visit Germany nowadays. Despite being half German myself, I had always thought it was a rather dour and over-regulated country, expensive and unwelcoming. Not true. The food is wholesome and tasty; the beers and wines are very drinkable; the service is generally impeccable and most people have a sunny demeanour. And, despite our weakened currency, everything comes at a very reasonable cost.

Surface Technology at Hannover is, as you would expect, dominated by German-owned manufacturers and chemical producers. This year, there was only a sprinkling of overseas exhibitors, lending the show a slight global flavour. This included one very enterprising UK barrel plant supplier, Eagle Engineering, flying the flag for British excellence.

In stark contrast to the last event in 2007, the hall had only a steady trickle of visitors, rather than the torrent normally expected, a symptom of German and international downturn. However, fewer numbers can be an advantage for both exhibitors and visitors. For exhibitors, there is more time to evaluate the quality of the enquiries and to establish more precisely what information they require. For visitors, they have the exhibitors’ full attention and an unhindered view of their presentations.

For my part, two days at Hannover was time very well spent. It was an opportunity to re-kindle relationships with manufacturers, something that is of vital importance to our business as we rely on them for spares, manuals and general technical support. It was a chance to establish new partnerships with manufacturers from emerging countries. And I could research the latest trends in machinery development and take advantage of buying and selling opportunities. Even in a recession, there is always the prospect of a deal!

And so to the Resale show in the charming city of Karlsruhe. In the past fifteen years, this has become a global event, with 60% of visitors coming from outside Germany. My company first exhibited in 2004, and has subsequently had several successful and enjoyable visits. In particular, we had enjoyed a high level of enquiries and business from India, Pakistan and South-East Asia.

This has all changed. The combination of European recession and the trends for Asian companies to produce their own equipment, hold their own trade shows and generally keep business in-house has eaten into the cash-cow that Resale used to be. For UK dealers like us, it is now a shadow of its former self.

So what is the future for exhibitions in the Surface Technology sector? With Surface World at the NEC now fast approaching later this year, it is a valid time to pose the question. In my view, events like these deserve our wholehearted support. In a globalised world, where internet trading dominates our daily lives, there is no substitute to interacting with real people, discussing real issues, making real friendships and forging real and longstanding business relationships.

Riley Surface World will certainly be represented at this year’s event and will be taking full advantage of the opportunities that it brings for us. It would be very sad to see the demise of the trade show, so long may they continue.