An important success factor in successful New Product Introduction is the attitude of consumers in the target market. The internet represents new ways of informing potential buyers and stimulating purchase decisions. To make the most of the net knowledge of attitudes in the target group is vital.

Mckinsey reports that in China there are 632 million internet users currently – compared with 277 million in the US. In both domestic markets internet sales account for around 6-8 % of retailing. The Chinese e-tailing market at USD 295bn is currently larger than the US at USD 270bn.

Until recently Chinese manufacturers were thought to be lagging behind firms in the West in internet use. McKinsey senses an important increase in the rate of uptake of these technologies by Chinese firms.

This should mean a surge in productivity and better access to finance for Chinese firms. Besides better richer communication with the market, the internet globally is helping smaller, potentially disruptive firms, enter market and in some instances grow rapidly. Chinese firms can be expected to benefit in this way.

McKinsey anticipate that the innovative capability of Chinese firms will also progress rapidly. Examples include mobile phone maker Xiaomi who is developing net based user centred design capability – also Lenovo who have moved into crowd-sourcing new product ideas.

Mckinsey’s analysis ties in with important new work by Peter Williamson at the Judge Business School in Cambridge, UK, following on his study of the Chinese strategy of globalising by cost innovation.

In his latest work he finds that China has moved beyond cost innovation to develop rapid innovation capability by integrating technologies.

By Western standards, Chinese innovation is often unorthodox – for example designing a fast computer by linking standard chips.

Overall, the Chinese are industrialising innovation with an approach shaped by their relative lack of PhDs. They are using the classic principles of Fordism to create innovation processes which take place in a lot of small steps using trade school graduates.

They are also pushing the boundaries of simultaneous engineering. Lenovo have been successful with this approach as the classic waterfall sequence isn’t needed with a modular design with well specified interfaces like PCs. Pearl River Pianos have also moved beyond sequential development to reduce cost and compress time.

The Chinese have embraced the fast iteration approach typical of the Lean Startup methodology. Some Chinese markets support this approach well because there are customer segments who are happy to buy innovative products and then provide fast feedback on the product aspects where more work is needed. It is becoming routine to launch platforms and let users suggest what to add. This approach has been used effectively by medtec firm, Mindray, for example.

Like the Tech City firms in London the Chineses have adopted flexible horizontal organisation but this is coupled with a strong vertical hierarchy which sets ambitious goals for each team. These goals often cover extremely rapid production scale up for new products.

All in all, Peter Williamson believes the Chinese are emerging at the cutting edge of global management practices. He suggests that China is now taking a global lead in business models in the way that Japanese manufacturing did in the 1980s.

In summary, China’s contribution is in building management systems that can deliver accelerated innovation to keep pace with a fast-changing domestic consumer market. In this way a distinctive Chinese management style and a Chinese way of doing things are rapidly developing.

Clearly it would be a mistake for UK firms to neglect these developments. Major engineering firms in the UK have been reshoring their supply chains to better manage NPI. UK supply chain firms often have to upskill to meet expectations when this happens.

There is some evidence now that big pharma is actively seeking collaboration with Chinese firms, in part to get access to their new methods and approaches.

Big pharma have deep experience in managing their development and innovation processes as you would expect from the UK sector which spends most on R&D. In other sectors many firms need to prioritise improving their understanding, management and development of their NPI process. This where SMMT Industry Forum’s insight, experience, planning and training can ensure smooth new product introductions and a profitable Return-On-Investment. For more information on SMMT Industry Forum’s NPI capabilities, please visit the Industry Forum website.

The big lesson from the Chinese case (apart from the importance of the internet) is the way that they are actively re-engineering their NPI systems to suit their circumstances both in terms of skills supply and market expectations. UK firms should make this active and explicit management of the NPI process a priority fot 2015. This is likely to include adapting it to suit both their capability and skills supply plus working out the best way of enlisting customer input and co-operation.

This work is likely to highlight the importance of suppliers in successful NPI. The judgement of whether a potential supplier will be an asset from the NPI angle is something many firms struggle with. SMMT Industry Forum can help with this via its training offering for the VDA 6.3 Supplier Audit.

As Chinese GDP growth falls back to more normal levels it is easy to misread this headline as a weakening of the competitive threat. While a major factor in the GDP growth rate decline is a drop in the overall level of investment, the recent studies by Mckinsey and Williamson show that investment is being concentrated on projects with strong growth opportunities. This means that UK firms must adapt their strategies accordingly. Getting a better grip of NPI should be high up the list of priorities for the UK in 2015. Industry Forum is ready to help.

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The process approach underpins a vast amount of contemporary business management and strategy whether this is the improvement of existing business processes or the introduction of new processes in support of innovative products and/or services.

The Audit Standard VDA 6.3 is a standardised procedure for the conduct of process audits to assess organisational performance and capability for their product realisation processes. The standard is intended to complement and reinforce widely adopted standards such as ISO 9001, ISO/TS 16949 and other sector specific quality derivatives of ISO 9001 such as those for aerospace and medical equipment. Such audits are a vital element in determining whether an organisation/supplier has the capability to meet the needs of a purchaser. Getting this judgement right can make all the difference to the success of a project.

VDA 6.3 may also be used to good effect internally within an organisation. In this case, the goal of the audit is to analyse processes throughout the whole product life cycle so that risks and weaknesses are detected both in the processes themselves and in their interfaces. The audit report can then form the basis of an improvement plan.

VDA 6.3 was developed by the Verband der Automobilindustrie (VDA) which is the national association for the German automotive industry. They devised VDA 6.3 as a unique procedure beyond any comparable approach worldwide. It was introduced in 1998 and substantially revised in 2010. The revision has been prompted by an appreciation that the time between the formulation of the concept for a new product and its manufacture is becoming increasingly shorter. As a result, various areas within companies have to operate in parallel to an ever greater degree which places greater demands on organisations, their processes and their staff.

The standard now covers:

• Potential analysis – to assess a new supplier, new location or new technology
• Project management
• Planning the product and process development
• Carrying out the product and process development
• Supplier management
• Production
• Customer support, customer satisfaction and service

Risk analysis is a major element in the preparation for an audit. Besides the process inputs and outputs, risk analysis must consider:

• How does the process operate?
• How is the process supported by various functions and other areas of the organisation and by direct personnel?
• What material resources are required to carry out the process?
• What level of effectiveness is being achieved by the process?

The outcome of the VDA 6.3 audit is determined through a quality matrix and is allocated one of three values:

A – Quality-capable
B – Conditionally quality-capable
C – Not quality-capable

Within the matrix each of the six elements from project management to customer support is assessed. There are detailed rules for deriving the outcome value from each of the stages. VDA 6.3 auditing is a skilled process and accordingly VDA 6.3 sets competence requirements for auditors.

For the six process elements, from project management through to customer service, the standard provides a questionnaire which covers the minimum requirements, examples of requirements and proof of compliance plus reference information. The questions are closed questions for the auditor to answer within the audit but to get the answers the auditor must ask open questions, based on the risks identified.

For example, on project management there are seven questions including: Is the project organisation established and are tasks and authorities specified for the team leader and team members? The minimum requirements include having a project management process with authorities within the project team clearly specified with all expertise provided for implementation.  At the other end of the life cycle, six high level questions cover customer support, customer satisfaction and service. The first question is ‘Are the customer’s requirements for the Quality Management System, product and process satisfied?’  This is a broad question covering, amongst other things, the organisations quality management certification status, supply of spares for products moving outside series production, packaging meeting customer requirements, product requalification requirements and conformance with legislation.

The potential analysis is part of the sourcing process and examines potential suppliers. It evaluates the experience of the potential supplier in creating similar products.

In conclusion, VDA6.3 is an approach that can be used by any manufacturing organisation to help drive process improvement. Although developed by the automotive industry if is not exclusive to automotive organisations.

Industry Forum, as part of the SMMT, are well placed to deliver training and support on VDA 6.3. For individuals with no previous experience Module A which gives an overview of the requirements of the Process Audit and its underpinning methodology, is the best place to start. Module BII is internal auditor training. This module enables delegates to understand the structure, content and scoring evaluation system of VDA 6.3. They will be able to apply these elements to their own process areas. Module E incorporates Module A, BII and Module C (the exam module). This qualifies delegates to undertake VDA 6.3 audits externally (at suppliers).

The Confederation of British Industry (CBI) has just published an influential report, ‘Pulling Together’, that shows that to convert the current sense of optimism in the UK manufacturing sector into sustainable success we need stronger supply chains in the UK. In this way growth can filter down to all manufacturing sectors (and beyond) and into all the regions of the UK. Companies across the world are re-evaluating their supply chains. Mastering process audit disciplines and using the results as a powerful improvement plan are an excellent way for UK businesses to benefit from these current trends.

SMMT Industry Forum is the only UK approved training provider licensed and qualified by VDA to deliver sanctioned VDA 6.3 training. For more information visit the Industry Forum website VDA section or call the VDA Team on +44(0)121 717 6600.

Industry Forum provide an overview of VDA 6.3 Process Audit

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Value added is part of the productivity ratio and productivity matters because growth in productivity is the only sustainable way of increasing GDP. It is widely recognised that the UK has shown some puzzling trends in productivity since 2008. This is now seen as part of a much broader global situation.

According to the Conference Board, worldwide productivity growth weakened for the third year in succession in 2013. In 2010 global labour productivity growth was 3.9 per cent and by 2013 it had dropped to 1.7 per cent. Different factors are thought to have been operating in emerging economies and in the advanced economies. There is some hope that progress in the latter in 2014 may help stabilise the global decline.

The UK productivity puzzle has been studied extensively and certain key points have been identified. Falling productivity has been concentrated in financial services, utilities and the extractive industries which all face special circumstances.

The majority of the UK’s economy is the service sector where historically productivity growth has been weaker than in manufacturing. McKinsey have just recirculated a 1992 report which examines the variation in advanced economies service sector productivity growth. For example, McKinsey found in the case of the US that service sector productivity growth did not mean lower service sector quality. The report concludes that competitive pressure is an important driver for service sector productivity growth.

This is relevant to the UK with its high share of GDP taken by the service sector. Many successful countries including Switzerland, Singapore and Germany have a much higher manufacturing value added per capita than the UK. The UK’s underlying position in labour productivity means an absolute level which remains significantly behind the US and several European countries. Even before 2008 and the emergence of the productivity puzzle, the UK faced a major productivity challenge.

In the last decade UK policy analysis was mostly framed in terms of five drivers for productivity growth- competition, investment, innovation, skills and enterprise. The ONS has done a lot of analytical work within this framework.

In UK automotive manufacturing, investment in 2012 at £1.7bn was one third up on the previous peak in 2008. R&D expenditure was even higher at £2bn in 2013 – another all time record. Sector value added in 2013 at £13.6 bn up 36% on 2008. In the vehicle manufacturing sector, 2013 total value added was over 50% higher than in 2008. The automotive manufacturing gross surplus – that is total value added less labour costs – in 2013 reached £7.5bn, up nearly 80% on 2008.

In 2013 the auto sector generated almost 10% of the UK’s total manufacturing gross surplus.

There is a sharp contrast therefore between the general trend in the global economy and the specific situation of UK automotive sector. The key point is that the global economy is not homogenous. The brands that are at the heart of the UK auto sector, and the product performance and service quality that now underpin them, are in tune with the values of the consumers in the parts of the global economy that are vibrant and dynamic.

The depth of the sector’s value adding capability is evident when the 80% increase in sector gross surplus between 2008 and 2013 is contrasted with only 26% increase in vehicle manufacturers’ purchases over the same period. This means that even though a high proportion of vehicle manufacturers’ total turnover is taken by bought in goods and services the overall business models are very effective in generating value added and gross surplus.

A high proportion of the UK automotive sector is part of global corporations headquartered outside the UK. Securing continuing large scale investment and R&D outlay means competing with other locations across the globe within the same group. A good record in the generation of gross surplus is a major plus point in this context. This surplus must in the first instance fund the depreciation charge on past years’ investment and also contribute to the global financial management within the corporation in an industry where any sort of competitiveness requires large R&D and investment budgets. .

The automotive supply chain within the UK like many other UK manufacturing sectors, is a mix of global and locally owned firms. Vehicle manufactures have been encouraging the supply chain to invest and develop modern capabilities to support their programmes in this country. There is evidence of a positive response in that the segment of the supply chain that is easily identified with ONS data doubled the level of annual capital expenditure between 2008 and 2012.

Vehicle manufacturers’ purchasing also involves other manufacturing sectors beyond the segment ONS specifically identifies. The business services sectors also benefits, especially the design engineering sector.

The CBI recently published an important report on the future of UK manufacturing supply chains in October. The report anticipates that potentially half a million new manufacturing jobs could be created by 2025. The work was completed in collaboration with A T Kearney. Action is especially needed to boost and R&D and develop the skills base. Higher quality products supported by better customer service are priorities.

Industry Forum was set up nearly 20 years ago as a national initiative based on partnership between major automotive inward investors and the Government of the day. It has brought new capability and skills into the UK industrial ecology and has worked in the automotive, aerospace and other engineering supply chains both nationally and globally. It offers approaches drawn from Japan, Germany and the United States. It is working extensively under the direction of the UK Automotive Council implementing the national sector strategy. We look forward to further deep involvement in developing the potential of UK national supply chains.

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A year ago the Department of Education published an important report on 3D printers in schools and their potential uses in the curriculum. The aim was to find out whether this technology offered new opportunities for the teaching of science, technology, engineering and maths (STEM). Improvements in this area are important in terms of increasing the flow of talented young people into professions which will underpin the future competitiveness of the UK.

21 schools were helped to buy the relevant equipment. The feedback from the exploration was that this technology has significant potential as a teaching resource and can have a substantial impact on pupil engagement. Many of the schools involved commented on how motivated pupils became using the printer. As a result of this study important changes have just come into operation in the national curriculum.

Ultimaker UK, a SME based in Chorley, Lancashire, have responded to these developments by setting up the CREATE Education Project which uses a 3D printer designed and made in Holland. This is based on an acronym strategy:

• Community – with accessible hubs and regional and national competitions collaborative learning will be a keynote of the programme.
• Reliability and Support – the programme provides service managers to support schools and guarantee a high level of equipment availability.
• Education – the programme is aimed at ‘pushing the envelope’ in learning and development, driving the curriculum forward in the UK and Ireland.
• Access – 50 schools have been selected to acquire an Ultimaker 3D printer at a discounted rate to provide a regional network of hubs to make things easier as the community expands. Free open source software from Cura is available for the Ultimaker 3D printer and the Youimagine.com website provides an international platform to access 3D ideas and aid learning.
• Teachability – the design approach within the programme encourages experimentation which can be easily shared with others.
• Economics – it is perfectly feasible for parent-teacher groups to set a fundraising goal to rapidly acquire the necessary equipment.

This will all help the UK keep pace with Germany and the US where the widespread use of this technology has been promoted through the Fablab Movement (a series purpose built digital fabrication and rapid prototyping workspaces).

In London’s Tech City the first 3D printing café has just opened and in the City itself, the Mercer’s Company, have helped establish Fablab London – a 4000 sq ft creative space with digital fabrication tools and education workshops. This facility opened in September and is located alongside Bathtub 2 Boardroom offering support to early stage startups. The idea is that many financial services employees will be interested in using these facilities to develop their careers in a new direction.

University College London’s Institute of Making has established the MakeSpace workshop available to all students and staff with a public programme involving masterclasses and maker residencies. This facility brings together equipment and expertise from a wide range of disciplines encouraging users to engage in the craft, design, technology, history, philosophy, art and engineering of making.

With this sudden rush of activity, it is surprising that the New Scientist first wrote about additive manufacturing in the early seventies. Nonetheless, this is the year that Lego have confirmed that it is working on a strategy for the digital toy age whereby customers may be able to use the technology to make their own bricks and figures.

These developments don’t only impact on the UK’s manufacturing sector. The UK’s rapidly expanding business services sector is now as large as the manufacturing sector in terms of value added. Leading firms in this sector have been developing their capability to support customers on this rapidly changing scene. For example, Econolyst is a UK consultancy which is world leading in its capabilities based on twenty years’ experience of additive manufacturing.

Another example is Bird and Bird, one of Europe’s largest firms specialising in the legal dimensions of information technology and headquartered in London. They have identified several strategic issues in this field and have been commended by the FT for their work on the IPR strategy for a crowdfunded 3D printing pen.

Bird and Bird judge that one of the most important impacts is likely to be on product liability legislation given the change in supply chains that this technology will bring. They report that the US is planning a total revamp of their legal framework in this area stimulated, no doubt, by global leaders such as 3D Systems based in the US. Such changes would have major implications for the insurance sector, which is a big overseas earner for the UK.

Bird and Bird suggest that the commercial use of 3D printing is most advanced in IT, electronics, aviation, automotive and healthcare but there are important implications for distribution and retail. All sectors are likely to feel the impact of the technology’s dramatic impact on time and cost compression in product development. The net result may well be a substantial increase in total innovation in advanced economies where prototyping work is already a big segment in the emerging 3D printing services market.

A number of different viewpoints have opened up on how the future will develop. One good source is the 40 page report, Impact of the Maker Movement, published by Deloittes, based on the Maker Impact Summit held at the end of 2013. This study concludes that new links are being forged between creativity and production, resources and markets which will bring big changes to many major institutions in advanced economies. A good counterbalance to this is the Manufacturing Futures Lab Lecture on Additive Manufacturing given by Professor Phil Dickens of Nottingham University at Imperial College London last year. Professor Dickens started work on additive manufacturing in 1990 and was a professor at Loughborough for 11 years.

The strength of the UK higher education sector in additive manufacturing research needs to be more widely recognised, especially the capabilities that have been developed through EPSRC (Engineering and Physical Sciences research Council) support for innovative manufacturing. The leading role of the aerospace supply chain in developing additive manufacturing has also helped the UK. While the US is probably ahead of Europe, within Europe it is still an open question whether the UK or Germany is in the lead. It is worth noting that 3D Systems has established its European headquarters in the UK.

A good example of industry/higher education collaboration in the UK aerospace sector is the 1.2m titanium wingspar that was 3D printed in just 37 hours at Cranfield University last year. The design file was created by BAE engineers in Lancashire and rendered in Cranfield using Wire and Arc Additive Manufacturing. The goal is to take this technology and make it operational so that it meets the demanding standards that apply to the aerospace supply chain.

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