Walsall-based PP Control & Automation (www.ppcanda.com), which employs more than 200 people, is a supplier of electrical control systems, cable harnesses and sub-contract manufacturing solutions. Managing director Tony Hague believes that manufacturers should target growth rather than cost-cutting to increase their profit margins.

He has seen the company secure a number of contracts from OEMs looking to boost their capacity through strategic out-sourcing, and feels this is an approach that more of the industry should adopt.

Mr Hague said: “We are up about 20% over the course of the last 12 months, and most of that work has been from customers looking to out-source more of their non-core manufacturing activities.

“The ways in which machinery builders pursue profit growth are vastly different, depending on both their culture and the markets they serve.

“In essence, there are only two ways to achieve this ‘holy grail’, and the first one typically focuses inwardly on cost cutting. The alternative is to grow market share; and more times than not, this will deliver the best outcome.

“For example, imagine a machine builder that produces 10 machines a month, each selling for £200,000 with an average profit of 10%. If that company could build and sell 12 machines a month — with the same overheads and direct costs — that would add £40,000 a month to the bottom line — almost £500,000 per year. You would have to cut a lot of costs to get that level of profit.”