Professional Engineering

Grab export opportunities

It was trade overseas that saw manufacturing become one of the first sectors to exit recession at the end of 2009 and which led its resurgence during 2010. Most are agreed that exports offer the best growth potential for engineering firms this year, although there are worries that global financial problems could choke off demand. This may be particularly true in markets that UK firms rely on in Europe and the US.

Street Crane is one example of a manufacturer that has successfully branched out to trade with many different countries and it hopes to add more to its list of customers in 2012. Managing director Andrew Pimblett says the crane maker began to look beyond the UK in the early 1990s. “We reached a stage in the early to mid-1990s where we had 40% of the British market for complete cranes,” he says. “We realised we weren’t going to be able to continue to grow without dropping our prices to stupid levels. So we had a bit of a brainstorming session over starting crane manufacturing operations around the world.” But that wasn’t the ideal solution, Pimblett recalls. “It would have been massively capital intensive – we would have needed to finance factories in the US, China, India and elsewhere.

“Then we hit on the idea of licensing our technology to other crane manufacturers overseas.” Street Crane forms partnerships with crane manufacturers in the markets it wants to enter, providing the designs and components such as the hoist, travelling machinery and electronics. The main structure is then typically made overseas to Street Crane designs. The exclusive licensing deal means that Street Crane will not compete with its partners to secure business in the target market, and gives the indigenous manufacturer access to “world-class” crane technology. 

Pimblett says: “Combined with the fact that Street has invested hugely in product development and we have a product that is considered world-class, that has given us a huge advantage. The proposition that we put to these independent manufacturers is therefore attractive. It means they can run an operation with low overheads with little or no design facility. They don’t have to invest in product development, because they are riding on the back of ours.

“When we tried the concept in the late 1990s we rapidly came to the conclusion that we were on to a bit of a winner.”

In India, Street has a partnership with K2, of Chennai in Tamil Nadu. The market is growing exponentially and Street expects the Indian firm to become its biggest customer. “If our projections are correct,” says Pimblett, “India will be our biggest market in two years’ time. The rate of growth is astonishing.”

This year, Street hopes to crack markets in Central and South America. Pimblett has made two trips to Brazil and is working on securing partners in Mexico. “We’re looking at employing Spanish and Portuguese-speaking sales people.”

The personal touch is crucial when looking to win business in markets overseas, he says. “The number-one rule is to get out there yourself. Don’t ever think that a government trade mission or consultant can do it for you. You’ve got to get on your bike and out there.” 

Finally, Pimblett advises, when the orders do come in, make sure you have protected yourself by taking out credit insurance. “As you move into new markets you will find that you are continually taking on board new customers on which you have very little information.

“Therefore, to reduce the risk of taking on a big contract with someone who’s not going to pay you, the best thing to do is get in bed with a credit insurer. The insurer will provide you with a credit limit that they are prepared to insure. It might be zero if the company is no good. 

“But those are the ones you probably don’t want to do business with – that could be risking the crown jewels.”

Innovate to thrive

Surviving, not thriving – that may be the situation for many firms in 2012 but the economic outlook should not prevent companies from taking the time to innovate, says the Design Council. The council runs a programme called Designing Demand which assists engineering companies to position design at a strategic level within the business, which should lead to a greater degree of innovation. Manufacturers that have been on the programme include Ceres Power, Gripple, and electrical systems maker Baldwin and Francis. 

Ellie Runcie from the Design Council says: “It may be natural in the current climate for businesses to hunker down and protect people’s jobs, but even in bad times design can be used to help determine the next chapter in the life of a business. Design can add value to your product, your service offering or your brand. It adds something that your customers weren’t expecting or exceeds their expectations.”

The results can be a marked improvement in financial performance, says Runcie. “Firms that are treating design as a major consideration are transforming their prospects.” 

But the message about design’s potential to increase turnover and spur innovation may not have fully permeated the engineering industry. “Most engineering firms still see design as being something quite fluffy,” she says.

Runcie adds: “Product development and design management are generally poor among small firms, but interest in what we are doing is growing among engineering businesses. We can build their capability to do design themselves after we have gone. We help them through learning by doing, identifying what the greatest needs are in terms of product development, or in product design and engineering, or user-centred testing and research.”

She concludes: “You can’t afford not to think about design, whether it’s with us or somebody else. It’s sometimes seen as being to do with the logo or the icing on the cake, making the product look pretty, but it’s so much more than that. It’s a way of assessing what the best thing is for a business to be doing in 10 years’ time.”

One company that fully understands the impact that good design can have is Igus, the Northampton-based bearings and chain maker. On average it launches 80 new products a year, regardless of whether times are good or bad. This creative process has proved to be a vital way of protecting the company from economic ups and downs.

“New product development is in our DNA because we are committed to meeting our customers’ needs,” says Justin Leonard from Igus UK. “Product development is not something that we only do when markets are buoyant. This has proved to be a successful strategy for us – we grew during the last economic downturn in 2008, and believe it will serve us well this year too.”

Igus’ new products sometimes result from discussions with customers. Or they may emerge from blue-skies thinking by the company’s team of engineers. An example is the new Robolink multi-axis joint for humanoid robots and lightweight automation applications. 

The key to success, says Leonard, is having an agile nature. “We invest heavily in test labs and development facilities. There are high costs, but it’s something we have to do if we want to be successful in the long term.”