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In this issue...

Innovation – the centre of corporate strategiese
Lord Sainsbury, UK Minister for Science and Innovation
British Innovations
On the road again
Christopher Macgowan, Chief Executive, Society of Motor Manufacturers and Traders
Fossil Fuels – An Energy source for the Future
Greg Lewin, President, Shell Global Solutions
Chain of success
Kenny McKay, Director, and Will Wright, Manager, Restructuring practice at KPMG
Innovation and the Patent Office
Lawrence Smith-Higgins, Head of Awareness Information & Media The UK Patent Office
Benefits of association
Dr Michael Moore, CEO, PIramed Ltd
Innovation and strength in the UK biotech sector
Aisling Burnand, Chief Executive, BioIndustry Association
Simfonec: Helping make good research BIG business
Heron Evidence Development: Successful deal of missed opportunity
Springwell Ltd: Match-maker for Innovative Technologies
Korn/Ferry International: Pharmaceutical companies desire to break the mould
A quality core interface
Dominique Kleyn head of BioPharma Business Development, Imperial College London
Evolutec Group: Creating a range of commercial options
Moving forward
Dr Ceri Williams, Senior Manager, Science and Innovation at Yorkshire Forward and Dr Danielle Hankin, Bioscience Cluster Manager
Oxitech: Revolutionising SIT Programmes
Oxford Expression Technologies: Meeting the needs of the post-genomic era
Business Services
Innovating business related services
Norma Rose, Director-General, Business Services Association
BT: Innovation Strategy and Innovation Continuum
UK Film Council: How the UK wins in the international film industry?
On the defence
Major General Alan Sharman CBE, Director General, Defence Manufacturers Association
ProEtch: Precision parts of quality
Wallop Defence Systems: Aircraft Countermeasures and the Dual Spectral Threat
Education, Education, Education
Ruth Kelly, Secretary of State for Education and Skills
Applied Sciences at Wolverhampton - Innovation in Higher Education Professor Trevor Hocking, Associate Dean, International Development
Wind energy
Marus Rand, Chief Executive, British Wind Energy Association
Vital energy
Ian Leitch, Commercial Director, Energy Industries Council
Waterman Group: Solutions to solve climate control legislation
Winning the war against germs
Dr Ron Mitchell, Managing Director, GB Environmental
Show me the money! Funding for innovation – who can help?
UK: Innovation Nation?
Launching the “Innovation Nation?” initiative
Innovation in the 21st Century
Gemma Harman, Director of Strategy & Media, BT Chief Technology Office
UK Manufacturing - a driving force for innovation
Andrew Manly, Director General, Manufacturing Technologies Association
Waterman Group: Single project model 3D
Renishaw: Achieving global manufacturing competitiveness in the UK
Yorkshire Forward
The European Nanotechnology Trade Alliance
Del Stark, Chief Executive, European Nanotechnology Trade Alliance
University research drives a new wave of innovation
Omar Cheema, Nanotechnology Business Development, Imperial College London
Oxford Instruments: Enabling nanoscience and nanotechnology
Semefab (Scotland): A real driver of change
Metal Nanopowders: New products that meet your needs
Regional Development
London Development Agency: One jump ahead
91Advantage West Midlands: At the heart of it all 95


Chain of success

Many managers know that an efficient supply and distribution chain is a key component of a successful business. Over the last 10 years or so there has been a sustained move to rationalise supplier numbers and to develop deeper and stronger relationships with those that remain. However, closer links and greater dependency on the supply and distribution chain can bring an increased level of business risk should one of these key supplier or customers experience financial or operational difficulties.
By Kenny McKay, Director, Restructuring practice at KPMG and Will Wright, Manager, Restructuring practice at KPMG

In recent years there have been a number of collapses in the UK and Europe of key suppliers to the automotive industry. In many cases, the knock-on effect has been disruption to delivery timetables and, in order to secure continuing supplies, customers who are unable to secure a replacement supplier have had to swallow significant price rises (sometimes double or triple normal prices). Not taking this approach could otherwise result in major disruption to their production lines of up to six months.

Furthermore, even if this short term approach means that production can continue, it certainly does not guarantee a sustainable long term solution. In many cases, all it buys is a little time in which to source and secure a more long term deal with an alternative supplier. However, clearly this is not a position of strength from which to begin the long and difficult process of negotiating and establishing new supplier relationships.

As is the case in other industries, businesses that end up in crisis or collapse display signs of distress long before the problems become acute. Spotting these warning signs early is critical to help ensure that the problem business has sufficient available time and resources in which to deliver a turnaround.

Typical warning signs can include:?

KPMG?s Restructuring practice has extensive experience of this issue within the automotive industry and has seen the problem from both sides. Our experience tells us that one of the keys to a successful outcome for all parties can be early and active intervention to affect a successful restructuring plan in order to prevent the risk of a serious interruption to a business becoming a reality.

Typical examples of potential supply chain disruption

Example 1 - Background

A major OEM had identified a problem in its supply chain. One of its key suppliers had lost control of its largest operation and was regularly stopping assembly lines. Each attempt by customer supplier development teams to fix the problems worked for a short period but poor performance always returned. We were introduced to the management by the customer and, following a brief diagnostic, were engaged to support the supplier?s management team with the dual objectives of recovering delivery performance, stabilising the financial position and returning the operation to profitability.

What we did

We introduced a simple cycle of twice-daily meetings to turnaround the business, briefed key customers and started to fix fundamental problems with production scheduling, materials management and shop fl oor supervision. Once delivery performance had started to improve we began to address more fundamental issues: reducing costs, improving the financial structure of the business, changing the make-up of the management team, introducing a redundancy programme and negotiating key supplier arrangements and reorganising the shop fl oor.


Within weeks, delivsery performance had recovered to 100 percent with unplanned transport costs dropping to zero after ten weeks. Over half the management team changed and the output of the plant increased despite a significant cut in headcount and temporary labour. The financial position was stabilised and the business returned to profitability.

Example 2 - Background

It was a call that every chief executive dreads - the directors of a major component supplier informed him that it was unable to meet its payroll commitments and was to petition for Administration at the end of the week.

What we did

At the customer?s request we undertook a brief diagnostic review that determined the extent of the problem. Some immediate cash management assistance was required to provide the supplier with sufficient cash fl ow to help meet its short term commitments. Despite having gained a little time however, it was clear that the longer term forecasts showed the supplier heading towards insolvency if it did not stem the losses in its core business. Working with management of both the customer and supplier a radical restructuring plan was developed and agreement brokered with key stakeholders.


The supplier avoided formal insolvency and as part of the restructuring plan the customer acquired part of the supplier?s business. The rescue package protected the customer from a potentially expensive disruption to its supply chain and the remaining stakeholders of the supplier enjoyed a better outcome than could have been the case with formal insolvency.

For further information please contact Kenny McKay, Director, KPMG LLP on 020 7694 3188 or Will Wright, Manager, KPMG LLP on 0121 335 2772. © 2005 KPMG LLP, the UK member firm of KPMG International, a Swiss cooperative. All rights reserved. Originally produced in the United Kingdom. KPMG is the global network of professional services firms who provide audit, tax and advisory services. KPMG LLP operates from 22 offices across the UK with 9,000 partners and staff. KPMG recorded a UK fee income of £1,066 million in the year ended September 2004. KPMG LLP, a UK limited liability partnership, is the UK member firm of KPMG International, a Swiss cooperative. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative.