My Industry - Techni-Show

My Industry
Growth ambitions of Dutch technology industry
Colophon
Author
Jurjen Witteveen
ING Economics Department
[email protected]
Editorial Committee
Peter van den Bergh
Leonne Joosten
Arnold Koning
René Nieuwenhuis
Arie Noomen
Marcel Peek
Serge de Reuver
Jorgen Schouten
Guy Walraven
Tom Wennink
Bert Woltheus
ING Corporate Clients
ING Business Banking Oost-Brabant
ING Sector Management
ING Business Banking Oost-Nederland
ING Risk Management
ING Economics Department
ING Business Banking Rotterdam
ING Business Banking Zuid-Holland
ING Corporate Clients
ING Lease
ING Sector Management
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
2
Foreword
In May 2011, ING published ‘My Industry 2030: Holland’s going to make it’, a report that described the strength of Dutch
technology industry and its opportunities for global growth in the long term. The report also expressed the following ambition:
that technology industry should be capable of doubling the added value it delivers within 20 years.
Three years on, the Dutch economy has gone through a difficult period. Only exports, of which industry accounts for a large
share, have generated growth. So what is the outlook for growth in the coming years? What are the ambitions of industrial
companies themselves in term of growth? Where do we stand now, and where might we be in around five years’ time? Those
are the questions addressed in this report, which is based in part on the results of a survey of more than 300 companies in the
technology industry and interviews with various companies and representatives in the sector.
ING adopts a sectoral approach. By specialising in industry, also at the regional level, our aim is to remain close to parties
operating in the sector. This study has helped us to deepen our knowledge and develop a greater understanding of the sector
and so enable us to tailor our service as closely as possible to the needs of industry.
This report is an initiative of ING, but could not have been written without the cooperation of and input from a great many
companies and institutions in the sector. We would like to thank everyone who agreed to give interviews. We would particularly
like to thank VNU Exhibitions, the organiser of ESEF / Techni-Show, for its assistance throughout the course of the study.
I hope that this report provides you with new insights, helps you with your strategy and contributes to the strengthening of the
manufacturing industry in the Netherlands.
Annerie Vreugdenhil,
Director, ING Business Banking
3
Contents
Summary and conclusions 5
1.
Introduction: industry is back on the map 9
2.
Technology industry: facts and figures 15
3.
Ambitions for international growth 19
4.
Strategy and investment 31
5.
Analysis of the identified challenges 38
Round up: route to 2030 43
4
Summary and conclusions
Positive signals for and from manufacturing industry
Increasing sales and R&D activities are top priorities for investment
Route to 2030: more intensive cooperation
5
Summary and conclusions
Positive signals for and from manufacturing industry
Industry is back on the map
Awareness of industry’s importance has grown again in the last few years.
Rightly so, since industry is the largest sector not only in terms of exports (60%
of the total), but also procurement (annual purchases of approximately € 60
billion in the Netherlands), on which other sectors depend. With anticipated
growth of 2% in 2014, the sector will have grown faster than the economy as a
whole in four of the last five years. In the coming years, Dutch industry will have
to become even stronger to lift the Dutch economy to a higher growth path.
Growing importance of technology industry
In the last ten years, the added value generated by technology industry has
grown faster than that of industry as a whole. A contributing factor has been the
higher R&D intensity, especially in the mechanical and electrical engineering
industries. In a European context, the sector is performing well: in a benchmark
of eight countries in the euro-zone, the Netherlands ranked third in terms of
growth of industrial production in the last ten years.
Outlook is positive, but also depends on the growth ambitions of
businesses
Dutch technology industry develops and produces high-value, and often
complex, products that are sold around the world. This success in the global
market, in combination with the growing worldwide demand, gives hope for the
future. Whether the opportunities will be seized depends on the ambition and
strategy of the companies in the sector. Among the companies surveyed for this
report, 84% of those that have formulated a strategic plan have also specified
a target for growth:* 20% of them plan to realise further growth exclusively
abroad, 25% exclusively in the Netherlands, and 55% both at home and abroad.
Companies that already operate abroad are also focusing more specifically on
other countries to achieve further growth.
* Survey of 311 companies in manufacturing industry at the end of 2013, conducted in association with VNU Exhibitions
62%
€63
2
Share of exports
Industry is largest exporter
billion
Annual procurement in Netherlands
Industry is largest purchaser
1
In a benchmark of
eight euro countries
and the UK, the Dutch
technonlogy industry
ranked in the top three
in terms of growth of
production
3
84% of the companies with
a strategic plan have also
formulated a growth target.
6
Summary and conclusions
Increasing sales and R&D activities are top priorities for investment
Europe important for suppliers, OEMs looking further afield
Europe is still the dominant region for Dutch manufacturers. Among suppliers,
97% want to secure growth in this region. Original Equipment Manufacturers
(OEMs) see opportunities further afield. One in three OEMs intend to pursue
growth in North America, Latin America, China and other Asian countries.
A further 22% want to increase sales in Africa. A quarter of the companies
that want to generate growth outside the Netherlands intend to increase
production abroad. On balance, this will be at the expense of production in the
Netherlands.
Source of concern: many companies do not have a strategic plan
Forty-four percent of companies in the technology industry do not have a
strategic plan. This is a worrying finding, since operating on the basis of a
documented plan offers a company stability and assurance. Furthermore,
effective management and reporting to stakeholders are practically impossible
without a strategic plan. Nevertheless, there are companies that have been
successful without one. Often, these are companies with a Director/Major
Shareholder who maintains tight control and has a sharp focus, which is clearly
conveyed to the employees. A distinctive feature of these companies is their
ability to respond quickly to market developments.
Investment priorities: sales, R&D, machines, personnel
Growth is impossible without investment. Evident priorities for technology
industry in the coming years are to increase the level of R&D and sales
activities. Investment in new machines and training and recruitment of
personeel are also high in the agenda. Among the larger suppliers, 30% intend
to increase investment in robots. These are the appropriate investments for
achieving the growth ambitions, which is a hopeful sign. Only 7% of companies
said they are not in a position to raise the level of investment.
Of the companies that plan
to pursue growth abroad,
92% will focus on Europe
44% of companies
have no strategic plan
Companies plan to
increase investment
mainly in R&D and sales
7
0
Summary and conclusions
2010
Route to 2030: more intensive cooperation
Progress has been made, challenges in the chain
The 2011 report My Industry 2030 made the argument that it should be possible
to double the added value of technology industry in twenty years. It identified
four challenges that need to be addressed: availability of staff, the quality of the
R&D programme, greater flexibility in operations and access to raw materials.
Some progress has been made in each of these areas in the last three years. The
number of graduates in technical subjects has risen, for example, although there
are still widespread concerns about the labour supply at lower and secondary
vocational education level. Meanwhile, spending on R&D has risen. Almost 60%
of OEMs plan to increase R&D expenditure further in the coming years. Suppliers
in the SME sector face the challenge of meeting the steadily increasing demands
of the OEMs (in relation to product development, for example).
Technology industry needs to grow even stronger
Doubling the added value in twenty year is no easy challenge. It calls for annual
(nominal) growth of 3.5%. After two lean years (2012-2013), annual growth of
4.7% up to 2018 will be required to get back on track. Regardless of the precise
growth rates, technology industry will have to become even stronger during
this period. Further industrial growth can only come from top-rate knowledge
of (products and markets, high-quality production, automation, flexibility and
efficient use of energy and materials.
■
_
2015
2020
2025
Added value
Added value: route to 2030
Added value: route to 2030
40.000
35.000
Annual growth 3.5%
30.000
25.000
20.000
Annual
growth
needed
4.7%
15.000
10.000
5.000
0
2010
2015
2020
2025
2030
■ Added value
_
Added value: route to 2030
The availability of skilled people will have to remain a key objective of
companies, schools and the government. In terms of R&D, the manufacturing
sector in the Netherlands is not per se outshone by its counterparts in other
countries. There is also nothing amiss with the industry’s ambitions for growth.
Many companies, even in the traditionally domestically-oriented metal sector,
intend to look abroad for growth. The important thing now is to put those plans
into practice, and that will require intensive cooperation.
8
1. Introduction: industry is back on the map
Key role for industry in economic growth
Industry is largest purchaser and exporter
Dutch technology industry has many outstanding companies
Ambition for 2030: Doubling of added value
9
1 Introduction
Key role for industry in economic growth
Industry is back on the map
The economic crisis has demonstrated the importance of industry. The belief
that the services sector would generate sustained, long-term growth has proved
utopian; the actual development and production of goods is an important pillar
of an economy. Although industry suffered the severest blows in the recession
of 2009, it has recovered strongly since then. While the economy remained
weak in 2012/2013, industry performed reasonably well. In 2014, industrial
production is forecast to grow faster (+2%) than GDP (+0.5%), in which case
industry will have grown faster than the economy as a whole in four of the last
five years.
Looking back: number of jobs has fallen, production has risen
Looking back a few decades, the value of industrial production and the sector’s
added value have clearly been rising steadily. Partly due to price effects, the
long-term growth of the total economy has been stronger, and industry’s share
in the economy has therefore declined. The increase in industrial production
has been achieved with a steadily declining number of people working in the
sector.
More production with fewer workers
Labour productivity on the basis of added value in 5 sectors,
1995-2012 (index, 1995=100)
1400
35%
1200
30%
The increase in labour productivity has been greatest in industry, making the
sector a driving force of economic growth.
160
150
1000
25%
800
20%
130
600
15%
120
400
10%
200
5%
0
0%
_
_
_
_
1970
1975
1980
1985
1990
1995
2000
Size of industry (added value, index 1970=100)
Size of economy (nom. index, 1970=100)
2005
2010
140
Aantal werkzame personen (x 1.000, L-as)
Aandeel industrie in BBP (excl water/energie, R-as)
Omvang economie (nom., index, 1970=100)
Omvang industrie (toegevoegde waarde, index 1970=100)
110
100
90
80
_
_
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
Industry
Construction
_
_
Agriculture
_
Trade, hospitality and transport
Business services
Number of working persons (x 1,000, left-hand axis)
Share of industry in GDP (excl. water/energy, right-hand axis)
10
Source: CBS, ING Economics Department
160
1 Introduction
Industry is largest purchaser and exporter
Industry drives exports and is important for other sectors
Industry’s declining share in the last few decades masks the sector’s relevance
for the economy. Industry is crucial for exports, as well as creating business
activity in other sectors. For example, industrial companies require various
service activities that have been outsourced over the years, such as transport,
ICT and facility management. Due to regulation, other sectors also owe
their existence in part to industrial companies, including consultants and
accountants. Consequently, industry is the largest purchaser of goods and
services from other sectors.
Shares of sectors in direct exports
How much does one sector buy from other sectors in the Netherlands?
Industry
70
Trade and transport
60
Business services
50
Financial services
40
Mining
30
Agriculture
20
Other
10
0%
10%
20%
30%
40%
50%
60%
70%
€ bn.
63
54
39
33
22
13
3
0
Industry Trade and Govern- Business
Contransport
ment,
services struction
education,
care
Source: CBS, ING Economics Department, figures for 2012, procurement for regular activities
12
Utilities
Agriculture
Mining
11
60%
1 Introduction
40%
Dutch technology industry has many outstanding companies
20%
0%
% van totaal aantal bedrijven (ca. 19.000)
■ zzp-ers
Dutch-Shape in Borne designs and manufactures tools for producing complex composite parts for the
aerospace industry, including wings, tails and engine housing. Dutch-Shape has helped to build almost all of the
world’s large planes. Founded in 2006, the company has more than doubled its annual turnover from just under
four million to eight million euro in the last two years.
% van t
■ 0 tot 49 werkz. pe
Top
3%
largest
■ 2 tot
10of
werkz.
pers. companies generate
■ 100 en meer werk
60%
technology
■ 49 of
tot 100
werkz. pers industry’s
production value
100%
HGG is a global player that manufactures a wide range of innovative and top-of-the-range CNC cutting
machines. The machines are used to profile complex (bevelled) edges and 3D profiles, such as pipes,
beams, hollow sections and various other profiles. HGG designs all of its own systems, and the machines
are all fully modular in terms of mechanics, electrical engineering and software. The production is located in
Wieringerwerf in the Netherlands and Davao in the Philippines. Since 2010, HGG has doubled its turnover to
24 million euro and its workforce from 50 to 100.
80%
60%
40%
20%
AWL-Techniek manufactures state-of-the-art automated welding equipment. Its primary target group is
suppliers to the automotive industry, for whom high volumes, speed and quality are crucial requirements.
AWL currently has production facilities in the Netherlands, the Czech Republic and China. It has also formed a
strategic partnership with JR Automation in America. AWL-Techniek has 350 employees, including 50 outside
the Netherlands. Creativity, open communication and expertise in every regular welding process allow AWL to
pursue a strategy aimed at annual growth of 15%.
Vanderlande Industries in Veghel supplies automated material-handling systems and associated services
for rapid, reliable and labour-saving goods handling in distribution centres and sorting facilities. Another
important market is baggage handling systems for airports. The company has 1,200 employees in Veghel,
who are mainly engaged in the development, design and testing of new systems. The systems are produced
in the US, China, the Czech Republic and Spain and then assembled at the customer’s location. The company’s
turnover has risen from 610 million euro in 2008 to 741 million euro in 2013. Vanderlande owes its growth, or
success, to its constant focus on innovation and delivering customer value.
Source: CBS, EIM, ING Economics Department
0%
% of total number
of companies
(approx. 18,000)
% of total production
(approx. € 78 bn.)
■ Self-employed
■ 2 to 10 working persons
■ 10-49 working persons
■ 49 to 100 working persons
■ 100 and more working persons
12
1 Introduction
Ambition for 2030: Doubling of added value
Manufacturing industry key to achieving growth
The domestically-oriented (service) sectors are under pressure. Industry is
by nature more closely connected to international economies and can achieve
stronger growth through exports. Manufacturing plays an important role in
industry’s ability to exploit these (export) opportunities and is therefore crucial
for the Netherlands’ healthy economic future.
In this report, manufacturing industry comprises the following sectors: rubber
and plastics, metal, electrical engineering, mechanical engineering and
transport equipment.
Ambition for 2030: Doubling of added value
The Dutch technology industry is a knowledge-intensive sector with an
extensive supply network. The industry in the Netherlands includes numerous
prestigious companies (some of which were mentioned on the previous page)
and there are a number of top-class knowledge institutes in the country. The
challenges facing the world in the fields of energy, raw materials, health care,
mobility and food scarcity, in combination with the growing global population,
provide opportunities for Dutch industry (through collaboration within and
between sectors) to develop and sell new products.
Dutch technology industry has considerable potential. In the report My Industry
2030 (May 2011), it was argued that it should be possible to double the added
Bron: CBS, ING Economisch Bureau, Times Higher Education Ranking
value of manufacturing industry by 2030. To achieve this ambition, companies,
public authorities and research institutes (the so-called triple helix) will have to
address the most important challenges actively and jointly. Three years ago, the
major challenges were defined as follows :
• Availability of first-rate staff
• Top-quality research and development
• More flexible operations
• Access to raw materials
On the way to 2030, this report considers the period 2014-2018. In addition to
addressing the challenges set out above, growth in the sector will also depend
on the ambition of entrepreneurs. More than 300 manufacturing companies
were asked about their growth ambitions and investment plans in the coming
years. That survey forms the core of this report.
The next chapter presents some key facts and figures about Dutch
manufacturing industry and trends in the last 10 years. Chapters 3 and 4 then
discuss the growth plans of industrial companies. Where do companies plan to
seek growth, and how?
Chapter 5 briefly analyses the steps that have been taken to address the four
challenges mentioned above and presents some conclusions. What shape is the
sector in and can it achieve its growth ambitions?
13
1 Introduction
Ambition 2030
2030
A corridor of high-tech industry running from
Brainport (Eindhoven) via Science Port Holland
(Delft) to Kennispark Twente forms the basis of the
Dutch economy.
14
2. Technology industry: facts and figures
Added value of technology industry rises as share of
production declines
Dutch technology industry is relatively small, but growth
rate is above average
Growth comes from abroad
15
2 Technology industry: facts and figures
Added value of technology industry rises as share of production declines
Production of technology industry is € 78 billion
In 2013, the output of Dutch technology industry came to € 78 billion and it
generated added value of approximately € 20 billion. Technology therefore
accounted for more than a quarter of industrial production in the Netherlands.
That share has declined slightly in the last ten years. On the other hand, the
added value (wages and profits) of technology companies is rising faster than
that of industry as a whole. This has been due mainly to the growth of profits in
the last decade.
Mechanical engineering leads the way
The driving force behind the growth of technology industry has been
mechanical engineering, which is currently the most important segment of the
industry with a share of 27% (and a share of 33% of added value). It is closely
followed by the suppliers to the metal sector. The growth of the electrical
engineering sector has been more stable, but its profitability is under pressure.
The rubber and plastics industry accounts for 10% of technology output, while
production in the transport equipment industry has fluctuated severely.
Production of technology industry (=total procurement + added
value) and share in manufacturing industry
Development of production volume in five sectors of technology
industry and share of the total value of technology output
100
35%
80
30%
60
25%
40
20%
140
Index 2003=100
Share
130
Toegevoegde waarde aandeel maakindustrie in totale industrie
(R-as)
Machinery
27%
120
Productieaandeel maakindustrie in totale industrie (R-as) Metal
24%
110
Totale inkoop
100
Toegevoegde waarde
Industry -total
90
20
15%
0
10%
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
■ Total procurement
_
_
Electrical
engineering
23%
R&P
10%
Transport
equipment
17%
80
70
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
■ Added value
Share of technology in total industrial production (right-hand axis)
Share of technology in total added value of industry (right-hand axis)
Source: CBS, ING Economics Department
16
2 Technology industry: facts and figures
Dutch technology industry is relatively small, but growth rate is above
average
170
160
150
140
130
120
Technology industry: production (2013) and share
of national economy (added value) in eight euro
countries
€ 31 bn.
7,2%
€ 190 bn.
5,0%
€ 78 bn.
4,4%
€ 56 bn.
4,9%
€ 995 bn.
13,5%
€ 87 bn.
10,3%
€ 305 bn.
4,3%
€ 175 bn.
4,5%
€ 340 bn.
6,8%
Source: Oxford Economics, CBS, ING Economics Department
The Netherlands is a small player in Europe
With production of € 78 billion (2013), Dutch technology
industry is a small player in the EU. Its share of European
output is less than 3%. The Netherlands is of course a small
country, but the role of technology industry in the Dutch
economy is also smaller than in many other countries in the
euro-zone. The generally acknowledged absolute leader
in terms of technology industry is Germany, with output of
almost € 1,000 billion, which represents a third of the EU’s
production and accounts for 13.5% of the added value of
Germany’s economy.
110
whereas
other countries rely more on one or two of these
100
sectors.
Especially in the case of technology industry, this
90
can
cause major fluctuations in the economy. Finland,
80
for
example, relies more on technology industry and its
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
economy is less diverse. Consequently, the country enjoyed
high growth in the period 2003-2008, but in the crisis in 2009
the economy contracted by 8.5% (partly due to the downturn
at Nokia). Because of Dutch industry’s more diversified
structure, this country’s GDP contracted by just 3.7% in 2009,
which was also significantly less than in Germany (-5.1%).
Growth of production among the highest in the eurozone
Until 2011, the growth rate of the Dutch technology industry
did not lag far behind that of Germany. The gap with
Germany has only widened in the last two years. However,
in a benchmark of eight euro-zone countries (see the figure
below), the Netherlands still ranks in the top three. In terms
of growth, the star performer in the last ten years has been
Austria, where the technology industry has been helped
in part by the strong growth of car production, mechanical
engineering and electrical engineering in Bavaria.
Development of volume of technology industry
production in eight euro countries, 2003-2013 (index)
170
The Netherlands’ strength lies in the diversity of
manufacturing industry, with technology industry as
one of the pillars
The strength of Dutch industry (and exports) lies in the
sector’s diversity. The Netherlands has three substantial
sectors in manufacturing (technology, chemicals, food)
100
160
150
140
130
120
110
90
80
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
17
2 Technology industry: facts and figures
Growth comes from abroad
Technology industry: development of exports and production volume
2003-2013, index
130
125
120
115
110
105
100
95
90
_
2003
2004
Export volume
2005
_
2006
2007
2008
2009
2010
2011
2012
2013
Production volume
Exports and domestic sales of technology industry
130
100 x € bn.
125
80
120
60
115
40
110
20
105
0
100
2003
Export volumes of five sectors of technology industry, index 2003=100
180
160
Export
Productievolume
Exportvolume
120
100
80
60
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
■ Domestic sales
90
2003
Exportvolume
100.000
2004
_
2005
2006
2007
2008
2009
2010
2011
_
_
2003
2004
2005
Electrical engineering
Rubber and plastics
2012
_
_
2006
2007
2008
Metal
2009
_
2010
2011
2012
2013
Transport equipment
Mechanical engineering
2013
Productievolume
Binnenlandse afzet
Source: CBS, ING Economics Department
80.000
60.000
Binnenlandse afzet
140
95
■ Exports
_
Export share at level of ten years ago
It is often said that “growth has to come from abroad”. This is largely true, and
certainly applies for technology industry given the lengthy period of low investment in the Netherlands. However, exports have only been the driving force
behind manufacturing for a relatively short time. Although they had been growing
slightly fasterProductievolume
up until 2007, it was exports that collapsed in the great recession
Exportvolume
of 2009. It is only
since then that the gap in the growth rate between domestic
and foreign sales has really widened. The share of exports in total sales is still not
higher than it was around ten years ago. The metal and mechanical engineering
sectors have been the fastest growers in terms of export volume in the last few
years. Exports of transport equipment are still slightly lower than ten years ago
and significantly lower than the peak year of 2007.
Exports are expected to account for a large share of turnover in the coming years,
but that will depend in part on the export ambitions of Dutch industrial companies, including SMEs. For this study, 311 companies in technology industry were
asked about their plans for achieving growth.
Export
180
18
3. Ambitions for international growth
Structural growth requires a strategic plan, but 44% of companies don’t have one
Plans for growth in the Netherlands and abroad
Almost 30% of companies with sales only in the Netherlands want to expand
into other countries in the coming years
Focus on Europa, but OEMs looking further afield
Market growth in Europe is modest, but so are the business risks
More than 40% of companies want to secure growth in foreign markets
entirely from production locations in the Netherlands
US important export market; Asia calls for more production in the region
Dutch technology industry can build on its position in relation to
neighbouring countries
Production returning to the Netherlands, or is it leaving?
Shift to skilled work in the Netherlands is continuing
19
3 Ambitions for international growth
Survey of 311 manufacturing companies at the end of 2013
Ambitions of manufacturing industry
To establish the growth ambitions of Dutch manufacturing
companies, a survey was conducted among just over 300
companies at the end of 2013. They were asked about their
strategy, their plans for achieving growth abroad and their
investments. The characteristics of the respondents are
described on this page. The results are presented in the rest
of this chapter and the next one.
Sector: Reasonably representative of the actual
situation
Share in
Share in
realitysurvey
Size: On average, companies in the survey are larger
companies*
Share in
Share in
realitysurvey
Rubber and plastics
Metalworking
Electrical engineering
Mechanical engineering Transport equipment
Self-employed
2-4 employees
5-9 employees
10-49 employees
50 and more employees
7%
8%
57%58%
14%
12%
16%
20%
6%
3%
52%16%
17%
16%
9%
11%
16%
33%
6%
24%
International sales: 1/3 none, 1/3 up to 30%,
1/3 > 30%
Position in the chain: Substantial proportion regard
themselves as OEM / end manufacturer
Respondents: Directors and management
80% % of turnover from abroad
80%
80%
70%
70%
60%
60%
50%
50%
50%
40%
40%
40%
30%
32%
34%
33%
30%
20%
20%
10%
10%
0%
0%
None
Up to 30%
30% or more
70%
62%
72%
60%
30%
31%
20%
7%
OEMs/end manufacturer
* The large number of self-employed in the statistics includes some who are economically inactive
Supplier
Not known
10%
10%
15%
3%
0%
Director-Large Other board
Shareholder/
position
Managing Director
Management
position
Other
N.B. 311 companies (out of a population of 18,000 companies in technology industry) represents a margin
of error of 5.5% with a reliability of 95% for the questions that were answered by all the companies.
Source: Survey by ING Economics Department / VNU Exhibitions
20
3 Ambitions for international growth
Structural growth requires a strategic plan, but 44% of companies don’t
have one
“Having a
strategic plan
is reassuring,
especially
in difficult
periods”
Remarkably large number of companies have no strategic plan
A company that wants to grow needs a plan, especially in the current climate.
The first noteworthy finding from the survey is that 44% of the respondents said
their company has not formulated a strategic plan. A strategic plan is defined
here as “a written plan setting out objectives and, at least in outline, a roadmap
for achieving those objectives”. While the absence of a structural plan does not
mean that a company lacks vision, the large number of companies without one
is certainly remarkable.
My company does not have a strategic plan, by size of company
The recipe for a good corporate strategy includes a number of ingredients,
including a mission statement (why does the company exist?), a vision (what
does the company want to achieve?) and goals and objectives (tangible results).
A strategic plan, which does not have to be a lengthy document, describes how
those objectives will be achieved.
“Without
a strategic
plan, effective
management
and reporting
to stakeholders
are practically
impossible”
A substantial number of the slightly larger companies (up to 50 employees)
covered by the survey also have no strategic plan. It is possible that in these
cases a Director/Major Shareholder maintains tight control and knows precisely
where he wants to go with the company. However, that is impossible without
clear communication and delegation to employees, and a strategic plan is
essential for that.
The strategic plan should in any case contain a description of the business
chain and developments in it and how the company is reacting to the changing
circumstances. A plan that is not imposed from above, but is formulated from
the bottom up, will generate wider support within the organisation, and will
enhance the company’s reputation among customers and other shareholders
and have a positive effect on labour productivity.
A large majority of self-employed entrepreneurs and companies with ten or
fewer employees, in particular, do not have a strategic plan, possibly because in
these challenging times their focus has been exclusively on securing orders of
any kind in order to generate at least some turnover and income.
Source: Survey by VNU/ING Economics Department, visie-strategie.nl
80%
70%
73%
65%
60%
50%
Overall percentage: 44%
40%
37%
30%
20%
11%
10%
0%
Self-employed
2-9
employees
10-49
employees
50 or more
employees
21
3 Ambitions for international growth
Plans for growth in the Netherlands and abroad
75% of companies with a strategic plan intend to secure at least part
of their growth abroad
Of the 168 companies that have drawn up a strategic plan, 84% have specified
a target for growth. More than half (55%) want to achieve growth both in the
Netherlands and abroad. One in five companies are concentrating exclusively
on international growth, while a quarter will only pursue growth in the Dutch
market.
Survey of 311 companies in Dutch technology industry
54% have a
strategic plan
84% of these have
adopted a target
for growth
Where will they grow?
25% exclusively in the
Netherlands
Time horizon of strategic plan*
2014
20% exclusively
abroad
2015
2016
55% in the Netherlands
and abroad
&
2017
2018 and beyond
0%
Source: Survey by VNU/ING Economics Department, * measurement in Nov/Dec 2013
5%
10%
15%
20%
25%
30%
22
3 Ambitions for international growth
Almost 30% of companies with sales only in the Netherlands want to
expand into other countries in the coming years
Growth initially through exports
To gauge the level of ambition of Dutch manufacturers, it is interesting to
explore the extent to which companies that currently earn money exclusively in
the Netherlands intend to start exporting in the coming years. Seven percent of
these companies (companies that do have a strategic plan and a growth target)
plan to generate growth exclusively abroad and a further 21% intend to do so in
the Netherlands and abroad. Scarcely any companies mentioned plans to start
their own production abroad. In other words, they will initially export to these
markets.
Mainly companies with existing links to other countries want to
secure further growth there
Companies that are looking to other countries for future growth are the
companies that already generate turnover in those countries. Of the companies
that already secure more than 30% of their turnover abroad, a third will pursue
growth exclusively in those countries and no longer in the Netherlands. Almost
a quarter of this group of companies intend to increase production abroad.*
Where do companies want to grow? (broken down by existing share of foreign turnvoer)
Where will turnover be increased?*
Only in Only
Netherlands Netherlands abroad
and abroad
No turnover abroad
Up to 30% of turnover abroad
30% or more of turnover abroad
*
72%
22%
5%
7%
10%
34%
21%
68%
61%
% of companies that
intend to start or expand
production abroad
2%
19%
24%
56% of the companies that
secure more than 30% of their
turnover abroad and have their
own production location in
another country plan to expand
that production capacity in the
coming years.
This question was only answered by companies with a strategic plan that includes a growth target (total 141: 29 with no turnover abroad, 50 with up to 30% and 62 with more than 30%),
which means the results are indicative for the sector
23
3 Ambitions for international growth
Focus on Europa, but OEMs looking further afield
Gap in ambition between OEMs and suppliers lies mainly in relation
to emerging markets
Almost all of the companies that want to increase their foreign sales are
targeting Europe. This is particularly true of manufacturers that see themselves
as suppliers, 97% of whom want to secure their envisaged growth on the
European continent. Almost a quarter feel there are opportunities for suppliers
in North America. OEMs clearly see a larger market and feel that there are still
plenty of opportunities in the faster-growing economies with the manufacture of
products, generally more complex and made to the customer’s specifications,
such as machines and installations, in smaller volumes.
Roughly a third of the OEMs feel there are opportunities for growth in North and
Latin America as well as China and elsewhere in Asia. A further 22% want to
increase sales in Africa in the coming years. A growing number of companies
are gaining a foothold in the continent with perhaps the greatest potential, but
also the most risks. Nor are the companies planning to establish production
capacity in Africa (see page 22), but are focusing entirely on exports.
Where does your company want to increase turnover?
Region
Manufacturing
industry as a whole
Europe
China
Rest of Asia
US/Canada
Africa
Latin America
Oceania
OEMsSuppliers
92% 83%97%
21% 32%14%
24%
32%
19%
27% 34%23%
11% 22%5%
19%
34%
9%
7% 15%2%
24
3 Ambitions for international growth
Market growth in Europe is modest, but so are the business risks
Countries with high growth rates generally have higher operational
risks
The fact that most manufacturing companies will seek growth in the ‘slowgrowth’ region of Europe is not necessarily negative, but most companies will
be faced with modest growth of the market and will often have to win market
share in order to grow.
On a positive note, there are relatively few political, financial, economic or
security risks attached to doing business in most European countries. It is
also easier to maintain control of the business when activities are less widely
dispersed geographically, especially for smaller companies.
Low
Expected import growth 2014-2018
Singapore
United States
Size of the circle represents
volume of imports (2013)
Germany
France
Operational risks (EIU)
Belgium
Taiwan
United Kingdom
Czech Republic
Poland
Spain
South Korea
Malaysia
Italië
South Africa
Brazil
Mexico
China
Thailand
Turkey
Vietnam
Egypt
Russia
High
India
Indonesia
Argentina
0%
5%
10%
15%
20%
Expected import growth 2014-2018
Source: EIU, Unctad, ING Economics Department
25
3 Ambitions for international growth
More than 40% of companies want to secure growth in foreign markets
entirely from production locations in the Netherlands
Proximity to the customer and lower costs are the main reasons for
increasing production capacity abroad
More than half of the companies that want to increase their turnover abroad do
not expect to need additional production capacity abroad to do so (53%, third
column in the figure), while 43% currently have no international production
capacity and will therefore have to generate the planned growth entirely
through exports. Success with the growth plans will therefore be beneficial for
the scale of production and for employment in the Netherlands.
Obviously, more companies that intend to pursue growth will establish
production facilities abroad. Of the companies that intend to seek growth
outside Europe, 43% say they want to increase production in other countries.
Asia is most frequently mentioned as the region where these companies will
expand production. North America, where more companies want to increase
sales, is mentioned less frequently as a region where companies plan to start or
expand production.
Start-up / expansion of company’s own foreign production within five
years?
100%
9%
13%
80%
60%
40%
62%
76%
16%
19%
53%
38%
20%
0%
43%
25%
15%
Total manufacturing
industry
(311 respondents)
■ Yes
Source: ING Economics Department/VNU
Where will extra production
be located?
Weet niet
Europe:30%
China:
30%
Nee
Rest of Asia: 50%
Ja
Africa:0%
US/Canada: 25%
Latin America:
45%
Oceania:0%
■ No
Companies with
strategic plan and
growth target
(45% of total)
31%
Plans for growth
outside the
Netherlands
(34% of total)
Plans for growth
outside Europe
(15% of total)
■ Don’t know
26
3 Ambitions for international growth
US important export market; Asia calls for more production in the region
Local establishment increasingly necessary to
realise growth outside Europe
Forty-three percent of the companies whose strategy is
wholly or partially based on achieving growth outside
Europe say they plan to expand their own production
abroad, while a further 19% see it as an option. Suppliers,
on the other hand, will pursue growth closer to home. The
impression is that, particularly in Asia, production is
increasingly being established within the region for the
regional market. Looking at imports of technological
products by the largest economies, all outside Europe,
what stands out is the relatively small volume of imports by
China and Japan, countries where a lot is produced for the
domestic market. Most of what is imported is produced in
the region.
In contrast, the US does import a lot and for years the bulk of
the imports, particularly of electronics, have come from Asia.
The US is a particularly interesting growth market for Dutch
manufacturers. It is a large market with healthy prospects
for growth and limited risks in terms of doing business and
it is favourably situated for exports. Trade could be further
boosted if a free trade treaty is concluded between the US
and the EU.
Source of imports of technological products by US, China, Japan, 1995-2012
70% US, imports 2012: € 793 bn.
GDP: € 12,630 bn.
60%
70% China, imports
■ 1995
2012: € 77 bn.
GDP: € 6,392
bn.
■
2000
60%
■ 2005
50%
■ 2010
70% Japan, imports
■ 1995
2012: € 179 bn.
GDP: € 4,634
bn.
■
2000
60%
■ 2005
50%
50%
■ 2011
■ 2012
40%
40%
30%
30%
30%
20%
20%
20%
10%
10%
10%
40%
0%
0%
Western Emerging
Europe
Europe
Asia
Source, ING Economics Department
Middle East/ Latin US/Canada
North Africa America
1995
2000
2005
2010
2011
2012
Japan produces a lot itself or imports from
neighbouring countries
1995
2000
2005
2010
2011
2012
Relatively modest imports: a lot of what is made in
China is for China
1995
2000
2005
2010
2011
2012
For years, half of the technological products
imported by the US have come from Asia
■ 2010
■ 2011
■ 2012
0%
Western Emerging
Europe
Europe
Asia
Middle East/ Latin US/Canada
North Africa America
Western Emerging
Europe
Europe
Asia
Middle East/
Latin US/Canada
North Africa America
27
3 Ambitions for international growth
Dutch manufacturing industry can build on its position in relation to
neighbouring countries
German technology industry has developed supply
chain in Eastern Europe
It is mainly the emerging countries in Central and Eastern
Europe that have gained in importance for the large European
economies, particularly Germany. This has been largely at the
expense of Western Europe and North America. Asia’s share
has also grown, but Asia is significantly less important for
Europe than for the US. But here too, the situation seems to be
stabilising, and there has even been a slight decline in Asia’s
share of Germany’s imports of technological products.
Netherlands accounts for a substantial share of UK
imports and its share in the large economies outside
Europe is stable at around 0.5%
Dutch industry’s share of the imports of the large markets has
declined over the years. This is an automatic consequence
of the emergence of Central and Eastern Europe and Asia
as production regions. More importantly, however, Dutch
industry has continued to grow and to profit directly and
indirectly from the emerging markets. Looking at the position
of Dutch manufacturing industry in relation to its neighbours
to the east and the west, Germany and the United Kingdom
import a substantial proportion of their technological
products from the Netherlands. There are still opportunities
for suppliers in the high-tech segment in Germany, as well
as in Switzerland, where there are a relatively large number
of OEMs, and in Austria. And the market in Germany is not
confined to the south of the country: North Rhine-Westphalia
was voted the most promising region in Europe this year.
Source of imports of technological products by Germany, United Kingdom, 1995-2012
The Netherlands’ share of ‘technological’ imports of
five large economies, 1995-2012
70% Germany, imports 2012: € 352 bn.
GDP: € 2,666 bn.
60%
8%
50%
70% UK, imports
■2012:
1995 € 176 bn.
GDP: € 1,926
bn.
■
2000
60%
■ 2005
50%
■ 2010
40%
40%
30%
30%
20%
20%
10%
10%
1%
0%
0%
0%
Western Emerging
Europe
Europe
Asia
Middle East/ Latin US/Canada
North Africa America
1995
2000
2005
2010
2011
2012
Western Europe accounts for more than half of the
UK’s ‘technological’ imports
1995
2000
2005
2010
2011
2012
East European growing as supplier to Germany at
the expense of Western Europe
■ 1995
■ 2000
■ 2005
■ 2010
■ 2011
■ 2012
7%
6%
■ 2011
■ 2012
5%
4%
3%
2%
Western Emerging
Europe
Europe
Asia
Middle East/ Latin US/Canada
North Africa America
_
1996
US
_
1998
Japan
_
2000
China
2002
_
2004
2006
Germany
_
2008
2010
2012
UK
8%
7%
6%
5%
4%
Source, ING Economics Department, fDi, European cities and regions of the future
28
3%
2%
1%
3 Ambitions for international growth
Production returning to the Netherlands, or is it leaving?
Asia and Latin America important regions as production location
Fifteen percent of the companies in the survey expressed the intention of
starting (6%) or expanding (9%) production abroad within five years. A further
9% said they did not know, the vast majority of whom were companies that
do not yet have production facilities abroad. After Europe, Asia was the most
frequently mentioned region for an increase in production, but Latin America
was also mentioned relatively often (23%). The main explanation for this
will be the often heavy import duties that many South American countries
impose, which often makes local production essential if a company is to remain
competitive in that market.
Expansion of foreign production at the expense of production in the
Netherlands
On balance, the expansion of production will still be at the expense of
production in the Netherlands. For one in three companies that intend to start/
expand production abroad, the decision will mean less production in the
Netherlands. Expansion of foreign production can also generate additional
work for establishments in the Netherlands, but that only applies for 13% of the
companies surveyed.
Reports of reshoring not confirmed
Although expansion of production abroad will be at the expense of production
in the Netherlands, there have been some reports of production returning
from other countries, particularly in Asia, where wage costs are rising quickly,
the quality is not always good and transport costs and delivery times are also
factors. On that basis, production might also resume in the Netherlands.
This seems to be a case of wishful thinking. Ten percent of companies that have
production facilities in Asia are considering recalling production from Asia
within five years, but none of these companies mentioned the Netherlands as a
production location, but rather other regions in Europe. These results are only
indicative, since the number of companies in the survey is small, but it does
show that we should not expect too much from ‘reshoring’. Growth will have to
come from exports, a recovery of the domestic economy and the strengthening
of Dutch industrial companies through production centres in other countries.
Relocation of production: MCi and Inalfa
The substantial investments made by Dutch suppliers in Asia, Eastern
Europe and the US could have consequences for employment in the
Netherlands. Some less-skilled production work, in any case, is moving to
other parts of the world.
For example, several years ago the economic crisis forced Mirror
Controls International (MCi), a supplier in Woerden, to carry out a major
reorganisation and shut down production in the Netherlands entirely. A
new plant was opened in China in 2009 and the remaining production
work moved to Ireland (for the European market) and Mexico (for the
North American market). Only research and development remained in the
Netherlands.
At Inalfa, a manufacturer of sliding roof systems for cars, the expansion of
production capacity in Eastern Europe and Asia means the activities in the
Netherlands will increasingly focus on skilled work. Venray in Limburg will
be the centre of future R&D, with all new roof systems for European clients
being developed and tested there. New products will be made in Venray
for testing, but assembly will gradually move to Eastern Europe or Asia.
Source: Financieele Dagblad, 20 December 2013
29
3 Ambitions for international growth
Shift to skilled work in the Netherlands is continuing
Companies looking mainly to Eastern Europe to reduce costs
Half of the companies that want to start or expand their own production abroad
are doing so mainly to be closer to their customers, but the costs are still the
main factor for a substantial number (a third). Proximity to customers is the main
reason for expanding production outside Europe, while relatively often starting
or expanding production in Europe is driven by cost considerations. In that
case, Eastern Europe is the most popular region, while parts of central Europe
(including the Czech Republic) have developed a strong infrastructure with
high-grade, increasingly automated plants.
Personnel costs constituting around 20% of turnover, must be
reduced further
As shown on the previous page, production will continue to expand outside
the Netherlands in the coming years. Although the differences in wage costs
will narrow steadily in the course of the decade, the gap is expected to
remain wide. Naturally, setting up production in Eastern Europe with a view
to personnel costs is only interesting for a labour-intensive process, such as
the assembly of small parts in the electrical engineering industry. Nowadays,
personnel costs (including the buffer of flexible workers) in manufacturing
industry come to roughly 20% of turnover. That figure will have to be reduced
by several more percentage-points in the coming years through automation,
particularly in the metal industry. This will be offset to some extent by higher
personnel costs in relation to R&D, quality control and service.
Average hourly wage costs in industry, 2012, euros
50
45
45
41
40
36
35
30
33
32
31
31
25
28
27
27
20
24
21
15
19
16
15
10
9
5
9
8
7
7
6
5
0
CH
Forecast nominal increase in wages
up to 2018
Bel
Ger
14%
Source: BLS, PWC, survey by VNU/ING Economics Department
Fin
Aut
Fra
12%
NL
US
Jap
Ita
UK
Spa
13% 12% 13% 14% 16%
Sing
Kor
33%
Gre
Cze
Bra
38%
Est
Tai
Hun
Pol
39%
Mex
2
2
Chn
Phil
38% 56% 48%
30
4. Strategy and investment
Product development a priority for many companies
Additional investment in R&D and sales
Type of financing tailored to investment situation
New reality calls for more intensive cooperation
Suppliers focusing more on machines and robots
Great potential in additive manufacturing, but still a long way to go
31
4 Strategy and investment
Product development a priority for many companies
More than half of the companies want to secure growth with new
products
As already mentioned, a great many companies in the technology industry
do not have a strategic plan. Almost all of the companies that do follow a
documented plan have set themselves a growth target, and many of them
intend to seek that growth abroad. Europe remains the most important region
in that respect, but many companies still see opportunities for growth in North
America and Asia.
To achieve this growth, the largest group of companies (38%) plan to develop
new products for the markets in which they are already operating. Entering new
markets with existing products will be the principal growth strategy for more
than a quarter of the companies.
Growth matrix: how do companies plan to achieve their growth
targets?
Products
Existing
Market penetration
Existing
20%
New
Product development
38%
Market
Growing in new markets and/or with new products requires an intensive
effort and investment, especially in an industry like manufacturing, which is
characterised by global competition and rapid technological advances. The
priority areas for investment in the coming year according to manufacturers
themselves are sales and R&D.
Source: ING Economics Department/VNU
Market development
New
27%
Diversification
16%
32
4 Strategy and investment
Additional investment in R&D and sales
Almost 60% of OEMs plan to increase R&D spending
Four items stand out when it comes to planned additional investment by
manufacturing companies in the coming years: sales, R&D, machinery and the
training and recruitment of staff. These are four key areas for achieving growth
and the high percentages among some groups of businesses are a hopeful
sign. For example, almost 60% of the OEMs say they intend to spend more on
R&D. More than half of the OEMs also mention sales as one of the three priority
areas for additional investment. Following the slump in demand in the autumn
of 2008, there was a period when companies turned inwards and concentrated
heavily on managing their costs. Many companies are now operating on
a sound financial footing and have their costs under control, and are now
looking outwards again, for potential clients. The heavy focus on sales by many
companies confirms this, and should lead to growth of orders.
In what is Dutch manufacturing industry going to increase investment in the coming years?
Total
Companies
with growth
target
1 to 10
employees
=1
=2
10 or more
employees
=3
OEMs
Suppliers
Sales
46%
60%
41%
49%
52%
45%
R&D
37%
49%
27%
45%
59%
31%
New machines
37%
32%
36%
37%
35%
37%
Training/werving personeel
31%
34%
24%
36%
20%
35%
Robots
19%
24%
8%
27%
16%
22%
Premises
14%
13%
18%
11%
8%
16%
New production technology (not 3D)
13%
16%
10%
15%
14%
14%
ICT
11%
11%
3%
16%
11%
12%
Automation of logistics
8%
11%
2%
12%
7%
9%
No capacity for additional investment
7%
3%
12%
3%
5%
6%
3D-printing / additive manufacturing
6%
5%
5%
6%
5%
7%
Source: ING Economics Department/VNU, respondents could select up to three categories
33
4 Strategy and investment
Type of financing tailored to investment situation
Lending follows economic cycles
Investments have to be financed, for example by the bank. Since the outbreak
of the financial crisis in 2008, there has been a lot of fuss about the level of
lending by banks, which had declined in the ensuing period due in part to the
recession. When things picked up, however, investment, the demand for credit
and lending increased again.
Lion’s share of manufacturing companies see room for investment
Looking specifically at manufacturing industry, 7% of the companies in the
survey said they had no room for additional investment. This applies in
particular for smaller companies, one in eight of which said they did not have
sufficient resources. Among larger companies, 97% said they have sufficient
resources to increase investment.
Development of business investment and business credit
Financing: business phase and risks
50%
25%
40%
20%
30%
15%
20%
10%
10%
5%
0%
0%
-10%
-5%
-20%
-10%
-30%
-15%
-40%
_
_
-20%
2004
2005
2006
2007
2008
2009
2010
2011
2012
Bank financing generally at a later phase of a business
The financial landscape is changing. New suppliers are appearing all the
time, which is a welcome development because of the need to ensure there
is sufficient capital for business in the Netherlands. New financial concepts
are also emerging, such as supply chain finance. There are major differences
between the suppliers. Some financiers – like the bank – offer credit, while
others provide capital. In general, the distinction corresponds with the level
of risk. Capital providers generally accept more risk because they contribute
equity or subordinated loans. They will also demand a higher return
commensurate with the greater risk.
2013
Low
Bank credit
Leasing / Factoring
Innovatiekrediet
Risk
High
Subordinated loans / Mezzanine
Personal savings
Risk capital
preperation
Investment fund
Start
Growth
Expansion
Consolidation
Business phase
Production of business credit (gross, % year-on-year), left
Volume of business investment (% year-on-year), right
34
4 Strategy and investment
New reality calls for more intensive cooperation
Cooperation in sales
Increasing effectiveness of investment calls for more cooperation
In many areas of investment, a company needs to cooperate to become more
successful. Additional investment in sales, for example, is more than just a
question of hiring an extra sales representative or an agent in another country.
It also involves looking for partners, perhaps immediately before or after the
company in the chain, with whom it can cooperate. An example might be a
metalworking company that seeks cooperating with a specialist in finishing.
There is still a trend among manufacturers of end products to delegate more
and more of the production and development process to suppliers. They also
have higher expectations and make stricter demands on the quality provided
by their suppliers. Cooperation in relation to sales, for example, could generate
extra business by enabling suppliers to offer a product that better matches the
demands of the end customer.
Cooperation in R&D
Clearly felt need for greater R&D effort
Dutch manufacturing industry is characterised by a relatively high R&D
intensity and the sector therefore makes a substantial contribution to the quality
of the Dutch knowledge economy. First and foremost, however, R&D is crucial
for the company’s own survival. OEMs in particular feel the need to increase
R&D investment in order to remain at the forefront in terms of product quality
in what is now often a global competitive struggle, and 59% intend to increase
their investments in the coming years. However, it is not just about investment
itself; the process of innovation is also changing and calls for more intensive
cooperation between parties in the chain. This is discussed in more detail on
page 40.
R&D expenditure as percentage of added value, 2011*
35%
30%
25%
20%
31%
22%
15%
10%
5%
10%
7%
0%
Electrical Pharma
Me- Transport
engineering
chanical equipengineering ment
Source: CBS, ING Economics Department,* most recent available figures
5%
5%
4%
4%
3%
2%
Food,
Basic Chemicals Oil
Rubber
Informetal
industry
and
mation drink and
plastics and com- tobacco
munication
35
4 Strategy and investment
Suppliers focusing more on machines and robots
Process innovation is crucial for competiveness of suppliers to metal
industry
The further down the chain a company’s position, the less it needs to
concentrate on (product-oriented) R&D. System suppliers in the high-tech
segment will still have to focus on product development, not least because of
the demand from OEMs, but suppliers of components can afford to devote less
attention to product development. This is also evident if we look at the focus
of the investments planned by the various parties in the manufacturing chain.
Suppliers mention R&D far less often, while referring more often to expansion of
machinery and robots more often.
This machine from AWL welds body part for the automobile industry.
The high level of automation guarantees that large volumes can be
produced to a consistently high standard.
Sample chain in manufacturing industry and focus in innovation
Product
innovation
Source: ING Economics Department/VNU
OEM
Car
Manufacturer: BMW
Customer: consumer
System integrator
Complete roof system
Manufacturer: Edscha
Customer: BMW
Sub-assembly
Hydraulic system
Manufacturer: Power-Packer
Customer: Edscha
Components
Metalworking
Manufacturer: Brinks Metaal
Customer: Power-Packer
Process
innovation
Investment in robots a priority for 30% of the larger suppliers
Especially the larger suppliers (> 10 employees) plan to invest more in robots.
It is one of the top three investment categories for 30% of these companies,
compared with 10% among small suppliers. The smaller suppliers are
more inclined to invest in machines. However, this creates the risk for small
companies of falling even further behind because the use of robots increases
the efficiency of the entire manufacturing process. This is all the more urgent
because the (larger) end manufacturers still want to delegate more production
to the chain and want to use fewer, but larger, suppliers. Smaller SMEs will
obviously have to find their role in the chain (appropriate to the business’s
ambition) and gear their strategy to that. Important questions are: what is my
customer doing, and my customer’s customer? How can I ensure that I can still
sell my product in five years’ time? And what will be my unique selling point in
five years’ time?
36
4 Strategy and investment
Great potential in additive manufacturing, but still a long way to go
Additive manufacturing in the spotlight
3D printing is receiving a lot of publicity, not least in the media. The ‘industrial’
synonym for this is additive manufacturing (AM). With this process, a product
is constructed layer by layer, in contrast to traditional techniques such as
milling, where material is removed to produce a useable product. The AM
process not only saves on materials, more importantly the method can be
used to manufacture products that cannot be made with other techniques (see
photograph).
High on the agenda in the aviation sector
AM has really taken off in the manufacture of
plastic products in the last few years, in particular
for the production of prototypes and consumer
goods. However, rapid advances are now also
being made in the high-tech manufacturing
industry, which is the field that Dutch industry
should focus on. The aviation sector is leading
the way in this respect, with companies like GE
Aviation betting heavily on AM - for example, it
acquired a company specialising in AM, not only
to acquire its expertise but also to keep it out of
the hands of competitors. By 2020, GE Aviation
expects to be producing 100,000 components
Because of the enormous freedom the AM technology allows, products can be made with for instance
a honeycomb structure, which means they can be significantly lighter while retaining their rigidity and
strength. Free forrm channel structures can also be printed with it.
This makes local and more even cooling or heating possible. With this layered production technology,
products can also be manufactured in a single piece rather than in separate parts, which means there
are fewer separate components and so increases the reliability of the product.
Source photo: Additive Industries AddLab
using AM and estimates that it will reduce the weight of a plane engine by
around 450 kilos.
It will be years before AM is widely used in the sector
Further advances will be needed in terms of the speed, accuracy and
reproducability before the process can be used more widely in the metal
industry. Specifically, with the current generation of machines, changing the
type of metal powder causes considerable delay. A high degree of accuracy
is required in the high-tech segment, which means the efficiency of the postproduction control process (via 3D scanning) will have to improve. Six percent
of the companies in the survey said they want to invest more in 3D printing/AM
in the coming years. Although this is a small percentage, it does not necessarily
mean that the Dutch manufacturing industry will miss the boat.
As already mentioned, the machines and the production technique will have
to be developed further. However, companies would be well-advised to study
the technology more closely and investigate how they could benefit from it
in the future. Some companies in the metal sector have installed a relatively
simple home printer to give their employees the opportunity to learn about this
emerging technology. In particular, adapting to the enormous freedom that 3D
allows will require a major change in the way people think and design.
The Netherlands now also taking steps in AM
Until recently, Dutch involvement in AM was fairly limited. Most machine
builders (for applications in the metal sector) are German. There are already
some fairly large specialist AM companies in Belgium. In the Netherlands,
last year a consortium of ten parties launched the Addlab, with the aim of
accelerating the introduction of AM applications specifically for Dutch hightech manufacturers. Another initiative is Additive Industries, a start-up whose
ambition is to develop the next generation of AM machines.
37
5. Analysis of the identified challenges
ndustry
M
y In
dustr y 20
30
1.Despite positive developments, availability of staff is still
an issue
2. R&D remains the basis of structural growth
3. Steps taken in increasing flexibility
Holland’s going to make it
4. Feared scarcity of raw materials driving demand for sustainable
solutions
mbities van de Nederlandse maakindustrie
38
5 Analysis of the identified challenges
Despite positive developments, availability of staff is still an issue
‘Availability of top-class staff’ still high on the agenda
One of the conclusions three years ago was that ‘the availability of top-class
staff’ was the biggest challenge facing manufacturing industry. The issue
has clearly not gone away. After sales, R&D and investment in machinery,
training and recruitment of staff is still regarded as the most important area for
investment by manufacturing industry in the coming years.
Not yet an urgent problem
In general, companies do not yet encounter serious problems in filling
vacancies. Nevertheless, a great many employees will be retiring in the period
2018-2030. It is therefore important that the current promotion of technology,
through the National Technology Pact for example, does not diminish.
Crucial factors for the success of the campaign are how it is translated at the
regional and local level and the active involvement of schools and companies
themselves.
Adjusting to contemporary demands is a major challenge
There are also some concerns about whether employees have the skills to meet
contemporary demands. Automation calls for different competences, in terms
of knowledge of ICT and software, for example. Training and education by
companies themselves is an important factor in that regard. Companies are also
required to be more flexible, and sooner or later that also affects the workforce.
Fixed working hours with fixed wages do not help a cyclical sector like
manufacturing industry that faces global competition. In the study My Industry
2030 it was argued that “the Netherlands needs ambitious entrepreneurs”. The
phrase “and ambitious employees” could be added to that.
Number of HBO/university technology graduates is growing again
25%
15.000
20%
12.000
15%
9.000
10%
6.000
5%
3.000
0%
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
■ HBO/university graduates per year in the disciplines technology, manufacturing industry
_
_
and construction (right-hand axis)
Share of graduates in the disciplines technology, manufacturing industry and construction
in total number of graduates
Share of female graduates in the total number of graduates in the disciplines technology,
manufacturing industry and construction
“There are positive developments at university/HBO
level, but a threat of shortages at lower levels”
“What I need most of all are ambitious and motivated employees”
39
5 Analysis of the identified challenges
R&D remains the basis of structural growth
Further increase in private R&D spending required for higher growth
path
R&D lays the foundations of a knowledge-based economy. The Netherlands still
has top-class research institutes, as well as companies that base their future on
R&D. Concerns are often expressed about the level of spending on R&D, but
official figures show that spending was higher in 2012 than in 2011 across the
board. Research expenditure rose from 2.04% to 2.12% of GDP, whereas at the
international level, the magic threshold is considered to be 3%. Spending by
manufacturing industry is not low (see page 31) and companies seem to be
aware of the need to invest more. Manufacturing industry will not be able to
reach a higher growth path without an increase in private R&D investment.
R&D spending, absolute and as % of GDP
14
X € bn.
12
10
0,7%
0,66%
8
0,22%
0,23%
1,16%
1,22%
2011
2012
6
4
More intensive cooperation needed
More successful R&D programmes require intensive cooperation, however, not
only vertically in the chain, but also horizontally and in close collaboration with
research institutes. Moreover, there is a need for cross-sectoral cooperation
to find solutions for complex challenges in areas such as health care, ageing,
mobility, energy and nutrition, where opportunities for growth exist worldwide.
Collaborative ventures generally start small but, as is the case with innovations,
they can be the start of something big. The Addlab (see page 37) is an entirely
private initiative. In a partnership, not only can more knowledge be created and
shared, there is also a wide range of possibilities for raising capital.
OEMs moving closer to the customer, the chain has to follow
The trend of parties moving up the chain is continuing. OEMs, especially
specialist machine builders, are operating closer to their customers and
have to offer them ‘solutions’ that the customers themselves have thought of.
Hoger
Consequently,
the onderwijs
larger OEMs are looking for suppliers that can assume more
tasks for them.
This is no longer just production activities but increasingly
Instellingen
development activities. Suppliers must have a certain scale to take on this role,
Bedrijvencooperation can provide the answer. Finally, there is another
and more intensive
trend among OEMs to make acquisitions, mainly for the purpose of acquiring
the target’s technological know-how. The objective of the OEM is to accelerate
the pace of product development.
2
0
■ Companies
■ Institutions
■ Higer education
40
5 Analysis of the identified challenges
Steps taken in increasing flexibility
Greater flexibility in various respects
Increasing the flexibility of their operations became a priority for many
companies following the slump in demand in 2008 and the rapid recovery
during 2009. On the procurement side, companies have been far more critical
in assessing the conditions and timing of purchases. There is still a certain risk,
but agreements on that are also being made more frequently with customers.
Especially since 2008, companies have also been trying to keep the stocks in
the chain as small as possible. However, this demands a great deal of flexibility
in order to be able to meet demand at all times.
The ‘flexible buffer’ in a company’s workforce has been a well-known
phenomenon for years, and it can be as large as roughly a quarter of the
workforce.
To retain expertise, companies are increasingly joining forces to create pools
to avoid losing employees for whom there is no work in slow periods. Labour
flexibility is important for manufacturing industry, but retaining know-how is
perhaps even more important.
A growing number of companies are also using ‘hour banks’ to increase
the flexibility of their permanent staff. Openness and transparency towards
employees about operations helps in this and companies that are progressive in
this regard can respond more quickly to change.* Major steps have been taken
with these developments. As well as increasing flexibility in order to respond to
short-term fluctuations, retraining of staff for the medium and long term is also
needed to prepare them for the greater role robotisation, automation and ICT/
software will play in manufacturing.
Profit and loss in manufacturing industry**
100
Purchasing (% of turnover: 57)
Flexibility on the procurement side: suppliers that can grow with the company,
coping with unexpected situations (e.g.. non-delivery), safeguarding a permanent
supply of raw materials, absorbing or profiting from exchange rate fluctuations.
Important partners: suppliers, financiers.
Staff (% of turnover: 20)
Flexibility of staff: personnel costs can be adjusted more easily to turnover,
the right employees are available in good times. Important partners: government,
trade unions, knowledge institutes/schools
50
Other costs
0
Pre-tax profit
* See also ING, Tussen ratio en gevoel, April 2013, ** CBS, figures 2011
(% of the turnover, 12.5)
Financial (interest rates, depreciation (% of turnover: 3.5))
Appropriate capital structure to allow flexibility in financing, supply chain
financing for lower working capital. Important partners: financiers, sometimes
customers
(7% of the turnover**)
41
5 Analysis of the identified challenges
Feared scarcity of raw materials driving demand for sustainable solutions
Companies experiencing few problems in relation to raw materials
A fourth challenge for the (European) technology industry concerns access
to raw materials, in particular metal-containing minerals. The EU accounts
for 3% of the global production of these commodities. Up to now, companies
have not faced physical shortages, but in the past there have been enormous
price increases for scarce earth metals due to geopolitical developments
(export restrictons by China). To a large extent, the ‘raw material challenge’ is a
European challenge and the EU is conducting research into the desirability and
feasibility of creating stockpiles of critical materials.
Concentration of production of mineral raw materials
Canada
• Cobalt
Russia
• Platinum Group Metals
USA
• Beryllium
Japan
• Indium
Mexico
• Fluorspar
India
• Graphite
Brazil
• Niobium
• Tantalum
Rwanda
• Tantalum
South Africa
• Platinum Group Metals
Source: European Commission
Congo
• Cobalt
• Tantalum
China
• Antimony
• Beryllium
• Fluorspar
• Gallium
• Graphite
• Germanium
• Indium
• Magnesium
• Rare earths
• Tungsten
Demands for sustainabilty from large manufacturers pushing chain
in the right direction
At the same time, industry is finding solutions under the motto of ‘sustainability’.
Companies are looking for solutions in recycling and the use of substitutes.
The more urgent the situation, the greater the effort that is being made, and
generally also the better the results. Large industrial companies, including car
makers, are taking the lead in this by setting firm targets for partners in the
chain. The auomotive sector is investigating ways to eliminate rare earth metals
from electric motors. That will immediately reduce demand for the rare earth
metal neodymium. There are not only risks to the supply of this metal because
China controls its production, producing it also causes pollution. Ending its use
will therefore enhance the brand’s sustainable image.
Suppliers have to be aware of the steps the end manufacturer plans to take
in relation to sustainability, since they will ultimately affect the entire supply
chain. One thing is certain: there is no longer any turning back from the path of
sustainability.
42
Round up: route to 2030
Dutch technology industry needs to shift up a gear
43
Round up: route to 2030
Dutch manufacturing industry needs to shift up a gear
Stronger technology industry needed to achieve the sector’s growth
target
Doubling the sector’s added value in twenty years will not be easy. It requires
annual (nominal) growth of 3.5%. After two lean years, growth of 4.7% up to
2018 will be needed to get back on track. That is not impossible now that the
world economy is picking up and the volume of manufacturing production is
forecast to grow by 3% in 2014 and 2015. Regardless of the precise figures,
technology industry has to become stronger in the coming years. Further
industrial growth can only be based on top-class knowledge, high-quality
production, automation, flexibility and efficient use of energy and materials.
Added value: route to 2030
40.000
35.000
Annual growth 3.5%
30.000
25.000
20.000
The availability of the right people must remain a key issue for companies,
schools and the government. The Dutch technology industry sector is not
per se weaker than other countries in terms of R&D. The further investments
planned by OEMs, in particular, offer hope. There is also nothing wrong with
technology industry’s ambitions for growth. Many companies want to grow
outside the Netherlands, including the traditionally domestically-oriented metal
sector. It is now a question of implementing the plans, which will require more
intensive cooperation.
Annual
growth
needed
4.7%
15.000
10.000
5.000
0
2010
■
_
2015
2020
2025
2030
Added value
Added value: route to 2030
40.000
35.000
Source: CBS, ING Economics Department
30.000
25.000
Annual growth 3.5%
44
With thanks to
Accell Group
Additive Industries
ASML
ASML
AWL
Bons en Evers
Buhold Industries
Buhold Industries
Cryotek
Dieseko
Dutch Shape
ESEF
FME
Gietburg
Hebels Staalservice
Helvoet
Helvoet
Hess AAC Systems
HGG
Kasteel Metaal
Kendrion
Metaalunie
Metaalunie
Philips
Philips
Resato
Vanderlande Industries
Techni-Show
VNU Exhibitions
René Takens
Daan Kersten
Peter Wennink
Lucas van Grinsven
Brand van ‘t Hof
Martin Evers
Cees van der Burg
Geert Raateland
Piet Tel
Ton Kraak
Guus Engelen
Frank Klein Tank
Geert Huizinga
Herman Heuving
Joost Hebels
Peter Rijkoort
Bas Schuurs
Kees Krowinkel
Mark Helder
John Kasteel
Piet Veenema
Richard Schuitema
Foort Jan Wisse
Hans de Jong
Eric Drent
Michel Hooftman
Herman Molenaar
Gert-Jan Braam
Daan Rodenrijs
45
Disclaimer
The views expressed in this report reflect the personal views of the analyst(s) about the
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The final text was completed on 3 March 2014.
47