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Defence & DSEi Special

and then grow. Many did not survive. The key was to recognise the full implications of the changes that the business need to make. The old system of “allowed” levels of profit on top of a generous overhead recovery structure was replaced by commercial competition. To survive businesses had to move away from a defined level of profit and recognise that they were in a competitive environment. The old model was that the selling price was the estimated cost to produce plus the desired level of profit.

So Cost + Profit = Price

Businesses needed to understand that price was determined by the market and move to the “Toyota” model so:

Price – Cost = Profit

The only way to make a profit (other than through innovation) was a steady reduction in cost

This was achieved by restructuring contracts and cash flow to allow optimum batch builds for the manufacturer’s benefit rather than building to meet specific delivery dates. Equipment was designed to utilise as many common modules as possible – thus increasing the size of manufacturing batches. For the customer it simplified and streamlined the holding of

spares while simplifying on board repairs. Again with common spares batch building became the norm. Two further developments sustained the SME. As the Prime Contractor moved into the main procurement role, additional layers of procurement emerged. In the 1980’s design was against a procurement specification and often the supplier had no real visibility of the application. As the procurement emphasis changed, supply was frequently to a system manufacturer rather than to the shipbuilder. For the final buyer (the MoD) this created another layer of profit inflating the end cost. For the SME it provided the security of “design in” and the knowledge that (as long as the equipment worked) every time the system supplier picked up another Contract then second or third tier supply would follow. The same underwriting of design came with the UK shipbuilders reacting to overseas demand in the 1990’s and 2000’s. As a niche supplier we found ourselves designed into UK built vessels for Oman and Qatar as well as Malaysia. When the Spanish shipbuilder Bazan (now Navantia) built Cazaminas mine hunters based upon the UK “Sandown” Class we were able to transfer supply of much of the power conversion equipment to Spain. And we had already benefited from this sort of transfer through the sale of the “Sandown” Class to Saudi Arabia.

Once close contact had been established with Spain it was a logical development to offer equipment to their F-100 Frigates. Once that supply had been established we were able to leverage our products as Navantia successfully marketed their vessels internationally so that we are currently supplying to Australia for their “Hobart” Class based upon the Navantia design. Small businesses such as Gresham can benefit from their size providing that that

they have the flexibility to recognise change and to adapt quickly and positively. There is much equipment in service littered with the names of those who failed to do so.

Gresham Power | Jake Moir is Managing Director, Gresham Power Electronics. Pictures courtesy of BAE Systems


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Components in Electronics July/August 2011 27

See us at the DSEi exhibition on Stand N8-390

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