https://cdn.mtdcnc.global/cnc/wp-content/uploads/2021/03/23172529/Picture-1-451x360.jpg
    Tooling

    Tooling up for post-pandemic transition

    • By MTDCNC
    • March 23, 2021
    • 10 minute read

    For manufacturers and the supply chain, the Brexit transition period has added an extra obstacle to the already challenging landscape created by the pandemic. In fact, who would want to run a UK manufacturing business at the moment?

    As part of our cutting tool technology report, MTD magazine spoke with Graeme Troughton, Managing Director of Vargus Tooling UK and David Craig Wilsher, UK Division Director, ZCC Cutting Tools Europe GmbH to get the perspective from two relatively recently appointed business leaders of UK cutting tool companies.

    How long have you been in your 

    leadership position?

    Graeme Troughton (GT): I started with Vargus on June 1st 2020.

    David Craig Wilsher (DCW): I was promoted to the position of Director – UK Operations in June 2020

    What was the first strategy you 

    wanted to adopt and how will you 

    deliver that change? 

    GT: When you first start a new job its important to first analyse the business functionality and current market positioning before making any changes. When planning to make significant changes, we need to understand the implications of doing so. I’m just arriving at the point of drawing out a roadmap for the business moving forward over the next 3 years. 

    DCW: The first strategic change adopted was to completely overhaul the customer database. I inherited 300+ distributors both independent and via the national buying group THS (Troy). For me, this strategy was not going to work for a company like ZCC-CT, trying to make an impact in the UK cutting tool sector.

    We completely changed the dynamic with regards to our route to market, applying a geographic distribution model affording business protection with attractive discounts and working margins. Today the distribution network consists of 20 partners across the UK&NI and the Irish Republic. The second strategy was to review discount terms awarded, putting in place a template applying discount levels against reward and recognition. This is ongoing, but there are now clear targets and goals set against annual growth.

    The next step is building a strong technical team to support distribution. This has been a success to date with the ZCC-CT UK team renowned for technical application support.

    What have you implemented to minimise the impact of the pandemic on your business and how do you expect to bring the company back to pre-Covid levels and beyond? 

    GT: Like most companies, we have had to adapt to not being able to visit customers which is a critical part of how our business operates. With the use of modern technology including Microsoft Teams and Zoom, we have managed to deliver as many training sessions and product seminars as ever before. 

    Despite the lockdown and lack of site visits to end-users, we have managed to win pockets of new business due to our company’s continual investment in R&D which has meant our new product releases has allowed new growth areas.

    DCW: The only implementation ZCC-CT placed on the UK business was remote working. We have been fortunate as we could continue customer/distribution support from our home offices. Not furloughing staff provided customers with the continuity to continue ongoing projects and assist with cost savings during this difficult period.

    During 2020, ZCC-CT maintained and even grew UK market share, our commitment to customers by staying open for business has allowed us to expand our outreach. We are also reaping the benefits during the early weeks of 2021. Our pre-Brexit planning has enabled us to continue providing the service levels our partners have become accustomed to. The UK cutting tool sector is a challenging market and extremely competitive, but we genuinely believe that we have the experience and knowledge along with the highest quality products at the most cost-effective pricing to provide UK manufacturing with the best solutions.

    With many cutting tool suppliers importing from overseas, how has the end of the Brexit transition period impacted your business and how are you overcoming this? 

    GT: Vargus UK carries over £800,000 of stock. This is all available for next day delivery. This is because most of our tools are manufactured in Israel, and Israel has an existing trade agreement with the UK. We have seen very little, if any impact on deliveries. Our next day deliveries on all orders was 95.8% in January with most of our delayed orders coming from our non-Vargus supplied products.

    DCW: Like many manufacturers, ZCC-CT centrally holds stock in the EU, so over the past two years we have undertaken a post-Brexit planning process. We identified early on that regardless of a ‘Deal or No Deal’ the main challenges were surrounding the UK leaving the customs union. So, we mainly focused our activities on the new customs processes that were likely to throw up many new procedures and paperwork.

    Throughout the planning process, we have sought advice from many sources and difficult decisions have been made to ensure that we could maintain the excellent service levels that we pride ourselves on. The result of all this hard work and planning has been very satisfying. Throughout January where the industry has seen many challenges and disruption with imports into the UK, ZCC-CT achieved over 96% success rates for next day shipments into the UK. I must thank DHL for all their assistance during the planning process and during the first few weeks of 2021.

    What do you see as the longer-term challenges and/or benefits for UK manufacturing post-Brexit? 

    GT: Without wanting to get into the political battle, I think that in the longer-term Brexit will give the UK greater flexibility when it comes to being innovative, which of course throughout history we have shown to be great pioneers of industry. The EU in my opinion can sometimes stand in the way of innovation and when you have to get 28 countries to sign-off anything new, it causes delays. The challenges Brexit may cause are vast and one of the issues may be attracting top talent from the EU due to work permits. There may also be an issue of being pushed-out on delivery times for many products due to EU solidarity.

    DCW: I see Brexit as a great opportunity for UK manufacturing. However, in the short term, the greater challenge will be overcoming the pandemic and keeping everyone safe and well. The industry has seen many challenges brought on by Covid-19 that has drawn manufacturing into an unforeseen recession. 

    Sectors such as aerospace that had seen year-on-year growth are suddenly contracting by up to -65% productivity. This is having a knock-on effect throughout the supply chain, and in turn, it places intense pressure on the entirety of UK manufacturing. Towards the end of 2020, there were signs that manufacturing was recovering as businesses had put relevant Covid-19 procedures in place to function safely. 

    Regarding Brexit, I am sure that post Covid-19, the UK manufacturing sector will thrive. The UK has always been at the forefront of engineering and I see no evidence that this will change into the future. The main challenges that I foresee will be ever decreasing manufacturing costs and competition from around the world. UK manufacturing will need to be at the forefront of innovation through investment, and that will include cutting tools. I anticipate huge resources being allocated over the coming months and years, not only for capital equipment but the implementation of lean processes and cost drivers such as Industry 4.0.

    How will you guide your business through these challenges in the mid-to-long term? 

    GT: How we manage our business post-Brexit will depend on how the market changes, the positives with Vargus are that we are a very flexible and adaptable business. We invest heavily in new product development, we are the industry leaders in threading products and we plan to maintain this position and strengthen our portfolio of products and move into new areas.

    DCW: There is a clear and defined business plan for the growth of ZCC-CT in the UK and the initial 10-year plan 2016 – 2026 is on track. We wanted to build the business to a level where a UK Division of ZCC Cutting Tools Europe GmbH could be established, this came to fruition during October 2020. 

    My task in the coming years is to continue to guide the business through the continuation of the initial 10-year plan that has been set. The ZCC-CT UK team and our loyal customer base are invested in the successful strategy applied. Of course, the strategy is not entirely rigid, and we will continue to amend the business plan to better the company in areas such as real estate and staffing, but our fundamental footprint for the UK market will remain intact.

    In the future, innovation will be critical to generating growth. What do you see as the key growth areas in the next 2 to 5 years and how will your company cater for this growth? 

    GT: At the moment, we aren’t in a position to state our intentions, but all I can say is in the future we will have some big announcements regarding new products for our business. This will help us to develop the potential for new growth opportunities. 

    DCW: Post-Brexit and Covid-19, UK manufacturing costs will undoubtedly play its part as the industry looks for ways to reduce costs. Investment in capital equipment, production equipment and tooling will become more influential. This comes at a cost. So, for ZCC-CT, we must continue our innovation path to provide customers with the best possible tooling solutions with the most cost-effective pricing structure.

    Fortunately, R&D and product innovation receive heavy investment with a percentage of overall turnover being placed against this function. During 2020, ZCC-CT continued to invest in the opening of new facilities to improve material processing, sintering, pressing, coating and quality functions. These facilities will benefit our customers going forward as we improve production performance without overly inflating purchasing costs.

    Key growth areas over the coming years will be the usual sectors such as aerospace, automotive, oil & gas and medical – but also environmental manufacturing. Green energies and space exploration will become increasingly important to the UK economy. ZCC-CT are well placed to facilitate these industries and we will put in place a complete support network based in the UK to cater for all customer requirements from initial enquiry, remote process engineering, off-site component prove-out through to implementation and consumable management. I believe these values are increasingly important with businesses relying on these external functions to provide process optimisation along with greater profitability. Moving forward, we will be exploring partnership opportunities to bring all these functions together, something that demonstrates our increasing commitment to UK manufacturing.

    What other market segments are aligned to your business strategy and what technology do you have in the pipeline to serve these markets? 

    GT: Market segments that are critical to our business currently are oil and gas, aerospace and automotive. We have new product releases coming through our pipeline on tools specifically dedicated to the medical and power generation sectors and we are already seeing growth in these areas. Other than this, we are innovators in our digital offering and offer world-class tool selection and CNC programming software for our products. This is constantly being developed and after investment, some fantastic adaptations will be released in the coming months and years. 

    DCW: The short-term model for ZCC-CT is globalisation of brand awareness as a priority. The business was founded in the 1950s and in the main, it has focused on the Asian continent. The globalisation strategy began in the early 2000s and has been a great success. 

    ZCC-CT belongs to the Minmetal Corporation which covers widespread market segments including financial services through to real estate, the company is well placed to facilitate future investment when it is felt necessary. The company mottos are ‘Your Partner Your Value’ & ‘All in Our Hands’ – it is our goal to use the resources at our disposal to provide customers with the best products available at the most cost-effective pricing.

    https://cdn.mtdcnc.global/cnc/wp-content/uploads/2021/03/23172529/Picture-1-451x360.jpg

    Tooling up for post-pandemic transition

    For manufacturers and the supply chain, the Brexit transition period has added an extra obstacle to the already challenging landscape created by the pandemic. In fact, who would want to run a UK manufacturing business at the moment?

    As part of our cutting tool technology report, MTD magazine spoke with Graeme Troughton, Managing Director of Vargus Tooling UK and David Craig Wilsher, UK Division Director, ZCC Cutting Tools Europe GmbH to get the perspective from two relatively recently appointed business leaders of UK cutting tool companies.

    How long have you been in your 

    leadership position?

    Graeme Troughton (GT): I started with Vargus on June 1st 2020.

    David Craig Wilsher (DCW): I was promoted to the position of Director – UK Operations in June 2020

    What was the first strategy you 

    wanted to adopt and how will you 

    deliver that change? 

    GT: When you first start a new job its important to first analyse the business functionality and current market positioning before making any changes. When planning to make significant changes, we need to understand the implications of doing so. I’m just arriving at the point of drawing out a roadmap for the business moving forward over the next 3 years. 

    DCW: The first strategic change adopted was to completely overhaul the customer database. I inherited 300+ distributors both independent and via the national buying group THS (Troy). For me, this strategy was not going to work for a company like ZCC-CT, trying to make an impact in the UK cutting tool sector.

    We completely changed the dynamic with regards to our route to market, applying a geographic distribution model affording business protection with attractive discounts and working margins. Today the distribution network consists of 20 partners across the UK&NI and the Irish Republic. The second strategy was to review discount terms awarded, putting in place a template applying discount levels against reward and recognition. This is ongoing, but there are now clear targets and goals set against annual growth.

    The next step is building a strong technical team to support distribution. This has been a success to date with the ZCC-CT UK team renowned for technical application support.

    What have you implemented to minimise the impact of the pandemic on your business and how do you expect to bring the company back to pre-Covid levels and beyond? 

    GT: Like most companies, we have had to adapt to not being able to visit customers which is a critical part of how our business operates. With the use of modern technology including Microsoft Teams and Zoom, we have managed to deliver as many training sessions and product seminars as ever before. 

    Despite the lockdown and lack of site visits to end-users, we have managed to win pockets of new business due to our company’s continual investment in R&D which has meant our new product releases has allowed new growth areas.

    DCW: The only implementation ZCC-CT placed on the UK business was remote working. We have been fortunate as we could continue customer/distribution support from our home offices. Not furloughing staff provided customers with the continuity to continue ongoing projects and assist with cost savings during this difficult period.

    During 2020, ZCC-CT maintained and even grew UK market share, our commitment to customers by staying open for business has allowed us to expand our outreach. We are also reaping the benefits during the early weeks of 2021. Our pre-Brexit planning has enabled us to continue providing the service levels our partners have become accustomed to. The UK cutting tool sector is a challenging market and extremely competitive, but we genuinely believe that we have the experience and knowledge along with the highest quality products at the most cost-effective pricing to provide UK manufacturing with the best solutions.

    With many cutting tool suppliers importing from overseas, how has the end of the Brexit transition period impacted your business and how are you overcoming this? 

    GT: Vargus UK carries over £800,000 of stock. This is all available for next day delivery. This is because most of our tools are manufactured in Israel, and Israel has an existing trade agreement with the UK. We have seen very little, if any impact on deliveries. Our next day deliveries on all orders was 95.8% in January with most of our delayed orders coming from our non-Vargus supplied products.

    DCW: Like many manufacturers, ZCC-CT centrally holds stock in the EU, so over the past two years we have undertaken a post-Brexit planning process. We identified early on that regardless of a ‘Deal or No Deal’ the main challenges were surrounding the UK leaving the customs union. So, we mainly focused our activities on the new customs processes that were likely to throw up many new procedures and paperwork.

    Throughout the planning process, we have sought advice from many sources and difficult decisions have been made to ensure that we could maintain the excellent service levels that we pride ourselves on. The result of all this hard work and planning has been very satisfying. Throughout January where the industry has seen many challenges and disruption with imports into the UK, ZCC-CT achieved over 96% success rates for next day shipments into the UK. I must thank DHL for all their assistance during the planning process and during the first few weeks of 2021.

    What do you see as the longer-term challenges and/or benefits for UK manufacturing post-Brexit? 

    GT: Without wanting to get into the political battle, I think that in the longer-term Brexit will give the UK greater flexibility when it comes to being innovative, which of course throughout history we have shown to be great pioneers of industry. The EU in my opinion can sometimes stand in the way of innovation and when you have to get 28 countries to sign-off anything new, it causes delays. The challenges Brexit may cause are vast and one of the issues may be attracting top talent from the EU due to work permits. There may also be an issue of being pushed-out on delivery times for many products due to EU solidarity.

    DCW: I see Brexit as a great opportunity for UK manufacturing. However, in the short term, the greater challenge will be overcoming the pandemic and keeping everyone safe and well. The industry has seen many challenges brought on by Covid-19 that has drawn manufacturing into an unforeseen recession. 

    Sectors such as aerospace that had seen year-on-year growth are suddenly contracting by up to -65% productivity. This is having a knock-on effect throughout the supply chain, and in turn, it places intense pressure on the entirety of UK manufacturing. Towards the end of 2020, there were signs that manufacturing was recovering as businesses had put relevant Covid-19 procedures in place to function safely. 

    Regarding Brexit, I am sure that post Covid-19, the UK manufacturing sector will thrive. The UK has always been at the forefront of engineering and I see no evidence that this will change into the future. The main challenges that I foresee will be ever decreasing manufacturing costs and competition from around the world. UK manufacturing will need to be at the forefront of innovation through investment, and that will include cutting tools. I anticipate huge resources being allocated over the coming months and years, not only for capital equipment but the implementation of lean processes and cost drivers such as Industry 4.0.

    How will you guide your business through these challenges in the mid-to-long term? 

    GT: How we manage our business post-Brexit will depend on how the market changes, the positives with Vargus are that we are a very flexible and adaptable business. We invest heavily in new product development, we are the industry leaders in threading products and we plan to maintain this position and strengthen our portfolio of products and move into new areas.

    DCW: There is a clear and defined business plan for the growth of ZCC-CT in the UK and the initial 10-year plan 2016 – 2026 is on track. We wanted to build the business to a level where a UK Division of ZCC Cutting Tools Europe GmbH could be established, this came to fruition during October 2020. 

    My task in the coming years is to continue to guide the business through the continuation of the initial 10-year plan that has been set. The ZCC-CT UK team and our loyal customer base are invested in the successful strategy applied. Of course, the strategy is not entirely rigid, and we will continue to amend the business plan to better the company in areas such as real estate and staffing, but our fundamental footprint for the UK market will remain intact.

    In the future, innovation will be critical to generating growth. What do you see as the key growth areas in the next 2 to 5 years and how will your company cater for this growth? 

    GT: At the moment, we aren’t in a position to state our intentions, but all I can say is in the future we will have some big announcements regarding new products for our business. This will help us to develop the potential for new growth opportunities. 

    DCW: Post-Brexit and Covid-19, UK manufacturing costs will undoubtedly play its part as the industry looks for ways to reduce costs. Investment in capital equipment, production equipment and tooling will become more influential. This comes at a cost. So, for ZCC-CT, we must continue our innovation path to provide customers with the best possible tooling solutions with the most cost-effective pricing structure.

    Fortunately, R&D and product innovation receive heavy investment with a percentage of overall turnover being placed against this function. During 2020, ZCC-CT continued to invest in the opening of new facilities to improve material processing, sintering, pressing, coating and quality functions. These facilities will benefit our customers going forward as we improve production performance without overly inflating purchasing costs.

    Key growth areas over the coming years will be the usual sectors such as aerospace, automotive, oil & gas and medical – but also environmental manufacturing. Green energies and space exploration will become increasingly important to the UK economy. ZCC-CT are well placed to facilitate these industries and we will put in place a complete support network based in the UK to cater for all customer requirements from initial enquiry, remote process engineering, off-site component prove-out through to implementation and consumable management. I believe these values are increasingly important with businesses relying on these external functions to provide process optimisation along with greater profitability. Moving forward, we will be exploring partnership opportunities to bring all these functions together, something that demonstrates our increasing commitment to UK manufacturing.

    What other market segments are aligned to your business strategy and what technology do you have in the pipeline to serve these markets? 

    GT: Market segments that are critical to our business currently are oil and gas, aerospace and automotive. We have new product releases coming through our pipeline on tools specifically dedicated to the medical and power generation sectors and we are already seeing growth in these areas. Other than this, we are innovators in our digital offering and offer world-class tool selection and CNC programming software for our products. This is constantly being developed and after investment, some fantastic adaptations will be released in the coming months and years. 

    DCW: The short-term model for ZCC-CT is globalisation of brand awareness as a priority. The business was founded in the 1950s and in the main, it has focused on the Asian continent. The globalisation strategy began in the early 2000s and has been a great success. 

    ZCC-CT belongs to the Minmetal Corporation which covers widespread market segments including financial services through to real estate, the company is well placed to facilitate future investment when it is felt necessary. The company mottos are ‘Your Partner Your Value’ & ‘All in Our Hands’ – it is our goal to use the resources at our disposal to provide customers with the best products available at the most cost-effective pricing.