It is not unusual for many global manufacturers to have complicated supply chains sourcing materials and components from a variety of countries. With Brexit looming in the not too distant future we have seen a number of international manufacturers considering re-shoring their supply chain to the UK.
Why use international suppliers?
There are a number of benefits associated with using a global supply chain. The key one is ofcourse price, a lower cost of living in other countries gives a clear competitive advantage and significantly drives down cost. There are also contractual reasons why companies might wish to set up production bases abroad. As part of tenders/distribution deals a company may need to create jobs and infrastructure in that given country. The final key reason that a manufacturer may use overseas production is simply scalability and capacity, in a larger country with more workers it's easier to mass produce products.
This is not to say that it’s without its risks. Any business relationship across borders may be subject to communication problems, longer lead time and possible discrepancies with working practises. A prime example being the negative publicity associated with high suicide rates at Apple’s Chinese production facilities, and repeated stories of sub-standard conditions.
Why are companies Re-shoring?
Many of the countries where manufacturing has been outsourced have been done so primarily due to their cheaper production costs, but over the last decade these countries have aimed to transform themselves away from being ‘bargain basement’ manufacturers, investing heavily in infrastructure, training and working conditions. With pay rising in many of these countries, their cost effectiveness is in the balance and an unpredictable factor like Brexit may just push them over to not being competitive when compared to sourcing from the UK.
At the same time, the UK has spent this time refocusing its output. Although it may be uncompetitive for low value and high volume work, it has concentrated on offering quality and expertise. Indeed internationally the UK is seen as a centre for excellence for high precision manufacturing. With this clear distinction in the sorts of products the UK manufacturers, it has found it is easier to reposition itself within the global market place.While exports are vitally important for the UK manufacturing, reshoring represents a serious opportunity and is a chance for manufacturing to show it can be competiive whilst still delivering high quality.
January is normally a time that businesses will re-evaluate their supply chains and send out drawings for pricing, it will be interesting to see if any major players in the industry start weigh up bringing their production back home.