The Role of Industry Print E-mail
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Written by Peter Grundy   
Sunday, 31 August 2008 19:00

To move forward, do we need to return to the past?

Better Manufacturing Everywhere you travel, there are different regimes. Some are democratic, some autocratic, some dictatorships and so on. Industry, electronics in particular, needs political stability but, above all, it needs long-term strategies.

A number of approaches can be adopted. Governments can fund R&D, underwrite grants for regional support or specialized training, or provide many other offerings, but they are all subject to short-term politics or global industrial changes. A few regimes have set up industrial support that lasts long term regardless of political hue. Japan springs to mind. For at least 10 years, the MITI organization has supported industry in general, and provided training, research and financial backing. Unfortunately, most Western governments only act over the lifetime of their respective administrations. Let’s consider some of the options.

Regional grants. In Europe, it was common in the 1990s to offer special grants to bring industry to locales of high unemployment or that otherwise seemed ignored. This mostly was funded by local (or national) governments. This policy worked well at the time, but seemed to overlook other regions that offered lower wage rates and logistics costs, and once these regions awoke to that realization, the available grants suddenly seemed less attractive. In the early part of this century, Europe saw a migration of electronics from Ireland, UK, Scandinavia and many other areas to Eastern Europe. Shortly afterward, however, even Eastern Europe began to see volume manufacturing move to Asia.

So the initial investment obviously worked because many companies moved operations to supported regions of “established” Europe, but saw the opportunity of reduced costs once Eastern Europe became open and available. This is not a criticism: CEOs and senior management have a fiduciary duty to maximize returns for shareholders.

Shareholding. For capitalists, shareholding is a good thing but, sadly, some companies put shareholders on a pedestal, and capitalism usually assumes shareholders are kings.

Shareholders must be patient, as should industrial operations. Profits should be used wisely, not just to boost investor egos. Sometimes I think Western organizations might have lost sight of this. While shareholders are vital to support industry, they must balance their input with the invested company’s output and long-term needs. Maybe government has a role in moderating the amount that individuals can invest, but also moderating the returns they can generate. Clearly, there must be potential for a net gain, of course, or else what would be the point in investing?

Training. This is possibly the most important factor of governmental support. Training is expensive. All industries need trained staff. Training is not just highly qualified graduates with theoretically good things to offer; it is an entire spectrum that encompasses graduates, student apprentices, technicians and craft-based specialists. All industries require a range of staff with a huge range of skill sets so that the balance of skills suits the company’s philosophy. A university spin-off developing biomechanical sensors, for example, would need a large number of highly qualified graduates, while an established press-shop would need apprentices and craft technicians, but relatively few graduates. The educational output depends on the variation of skills required.

Government has an enormous role to play in supporting education so that the correct balance of skills is available to industry. If government does not understand this fundamental need, an imbalance will result in which either too many or too few persons have the skills required. In the UK, there was once a very good supported apprentice scheme: disclosure; I am one of its products who put all industry-based workers into a melting pot, whereby industry would assess and guide candidates toward the best career fit based on their individual skills and what industry needed. We now have a system that tries to persuade every young person to get a college degree. Consequently, we have far fewer specialist apprentices and craft technicians than are needed. Graduates, meanwhile, are convinced they are worth a fortune and are the best thing to industry since sliced bread.

Asian industry is about to fall into the same trap. The Chinese government is rightly proud that it produces three million engineering graduates every year, but these graduates quickly join the spiral and force up wage rates. Europe and the US have already suffered this pain, but do not seem to have learned.

In the UK, there was once an organization called the EITB (Engineering Industry Training Board) that supported all aspects of training from universities to technical colleges and craft apprentice training. It provided skills for all levels of industrial needs. Is it time to bring back this type of support?

Long view. All “Western” governments operate on a political basis. If the parliament in question runs on a four-year term, for example, it is unlikely to set up a 12-year support program because subsequent administrations are likely to modify what has been established. The exception to this is Japan, whose MITI organization is basically funded by government, but has license to operate based on industry need and outside of political meddling.

Industry needs the long view. Some projects can last eight or more years from inception to fruition and need support all the way. The nature of this support may be financial, training, infrastructure, regional and so on. If industry sees stability, it is far more likely to start projects that might seem fragile at the start, but become stronger toward the end.

There is a definite need to set up support structures that last the life of a project and not just the life of a government.

Where do we go next? I suppose this could be construed as a plea for the EITB-type organizations of the past, but it goes beyond that. EITB worked well in the 1970s and 1980s, but as an entity may not be ideal today. Instead, this is a plea to all governments to think for the future and plan for long-term support of industry needs.

In the UK, a new organization called the EKTN (Electronics Knowledge Transfer Network) provides connections between all relevant parties. This is a good start, but needs to be expanded to provide skills and knowledge. For now, EKTN tends to be used by graduates and post-graduates and is in danger of being hijacked by academics. Again, this is not a criticism, but a warning that all aspects of industry are important.

Various trade bodies are actively pursuing industry-based needs and even support individual engineers, but their scale of operations is limited by funding. If governments can supply the level of support needed over the long term, we may have a chance of competing in the future.

Peter Grundy is director of P G Engineering (Sussex) Ltd. and ITM Consulting (itmconsulting.org); This e-mail address is being protected from spambots. You need JavaScript enabled to view it . His column appears bimonthly.

Last Updated on Wednesday, 03 September 2008 08:07
 

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