The call has come from the manufacturers’ association Make UK on the back of a survey and report is has produced with the business cloud software specialist Infor, which reveals the impact that the economic shocks of the past two years, and the knock-on effects to supply chains, have had on UK manufacturers.
For example, longstanding strategies such as operating on a just-in-time basis, have been “turned upside down” with disruption and increased volatility becoming normal. Manufacturers are increasing their numbers of suppliers “significantly” so that they have more options in the event of future disruption. And these suppliers are increasingly being located in the UK or Western Europe.
According to the survey, the biggest disruptor over the past two years has been the Covid pandemic, with 93% of companies saying it had caused some form of disruption (for 47% the impact was “catastrophic” or “major”), followed by leaving the EU for 87% of respondents (with 32% describing the impact of Brexit as being catastrophic or major).
Almost two fifths of companies (38%) have increased the number of suppliers they use during the past two years, with 42% having enlarged their UK supply base and more than a quarter increasing supplies from Western Europe, including Turkey. Some 43% expect to increase their UK suppliers further in the coming two years, with a quarter predicting an increase in suppliers from Western Europe and Turkey. But just 12% of companies say they intend to reduce the number of suppliers they use from the Far East.
Other findings of the survey of 132 UK manufacturers are that:
• 80% of companies report that increased energy costs have disrupted their supply chains;
• other major supply chain challenges include increased raw materials (cited by 79%), transport costs (74%) and transport availability (54%);
• almost a quarter of manufacturers now have 51–100 suppliers, and 14% have more than 200;
• more than a third of companies have increased the number of suppliers they use during the past two years, with almost half of companies increasing their UK suppliers
• one in five companies have implemented digital supply chain monitoring, but there are concerns over smaller companies having a more basic approach.
“For decades, manufacturers have used increased globalisation and supply chains to drive efficiency and create lean manufacturing processes which have helped them grow and remain competitive,” comments Make UK’s director of policy, Verity Davidge. “However, the economic shocks of the last few years have created a perfect storm which has turned these models upside-down and forced companies to re-evaluate their business strategies and seek suppliers much closer to home.
“As a result, we may now be seeing the era of globalisation passing its peak, with disruption and volatility for global trade fast becoming normal,” she adds. “For many companies, this will mean leaving ‘just in time’ behind and embracing ‘just in case’.”
The Make UK / Infor report: reveals how manufacturers are changing their supply chains
Based on the survey findings and the likelihood of increased volatility being more common in future, Make UK is calling for the Government to help ensure the UK economy is in a much stronger position to respond to any future disruptive events. It particular, it is calling for:
• the Government to establish a cross-industry and government resilience taskforce;
• supply chain software management to be included in the Help to Grow: Digital scheme;
• data on lead times of raw materials to be published to help businesses to plan ahead;
• capital allowances or tax breaks to be offered to businesses that adopt digital technologies such as blockchain; and
• regional institutions and long-term initiatives to be established to provide supply-chain support.
“Following a succession of shockwaves – Brexit, Covid and instabilities in Europe – supply-chain strategists are examining the vulnerabilities of their supply chains,” comments Andrew Kinder, Infor’s senior vice-president for international strategy and sales support. “Long-held beliefs in lean, just-in-time and offshoring are being questioned, as volatility and uncertainty replaces predictability and reliability. The rules of supply chain are being redrawn. Resilience trumps efficiency with winners being those who have been able to rapidly adjust their supply chain strategies to accommodate the succession of shocks.
“Digital technologies play a part in building resilient supply chains and this survey by Make UK provides much needed insights from manufacturers on their response to this new norm and their use of digital to navigate the storm.”
The report based on the survey is called Operating without Borders – Building Global Resilient Supply Chains and can be downloaded from the Make UK Web site.
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