The UK manufacturing sector is experiencing a resurgence with several OEMs reshoring their productions endeavours back to home soil after years decades of subcontracting engineering and production business to offshore companies.
The latest figures from EFF, the manufacturing body, indicate that the UK is now ranked as the ninth largest manufacturer in the world. As you would expect, the US and China are leading in the manufacturing front. However, our re-emergence into the top ten leading manufactures is a testament to the reinvigoration of our manufacturing sector in the recent past.
The main draw of offshore manufacturing has always been the price advantage you stand to gain owing to lower labour costs. This proposition has enticed very many manufacturers. It is important to note that while the wage gap between the UK and overseas competitors has lessened in the recent past, we still cannot compete on that front as labour costs are still comparatively high in the UK. This leaves many speculating as to the reasons why manufacturers are reshoring. Notable reasons that have been proposed include:
#1. Improved Delivery
As you might appreciate the vast majority of business operations rely on component arriving on time. When this happens to be from across the world, you have to factor in ample lead time for components processing and delivery. Sometimes the lead times can be as much as a couple of weeks and in worse case scenarios, it can be months. This will place a huge strain on any business, even the best-prepared companies
There is also increased risk exposure. The longer goods are in transit, the great risk they are exposed to and hence, the greater the risk of the goods being damaged. While you will obviously invest a lot of money in insurance to guard your company against potential loses, there is still a chance of destroying or tarnishing your reputation once you miss a deadline. With tight schedules, any damaged components will result in a lengthy replacement process that more often than not results in lengthy delays that affect the entire supply chain.
When reshoring companies back to the UK, they benefit from exceptionally fast turnarounds. This eliminates the resources and time investments made to accommodate lengthy lead-times. Moreover, the size of our country means that getting next-day delivery is almost always possible no matter where you are. Mistakes can be dealt with in an expeditious manner. Finally, components will rarely be damaged while on transit.
#2. Improved Quality
The manufacturing industry is rife with stories of poor quality components sourced from foreign companies. There is a gentleman I spoke with who had a very horrific experience. He ordered machined parts from abroad only to receive very poor quality parts. Moreover, his Geiger counter flared up upon testing. The components were not of subpar standard, but they were also slightly radioactive.
While this is an extreme case, it is still indicative that quality is a problem that the foreign supply market is yet to solve. Whenever you outsource, you relinquish certain controls over the products. This is exacerbated given the long distances involved, you limited capability to fly overseas to the supplier, and the language barrier. This may negatively impact your project and on many occasions, it has affected many businesses’ projects.
Add the fact that foreign manufacturing is characterized by long lead times, any possibility of rectifying any quality or mistakes on time issues diminished quite fast. Rectifying any aspect of the components will take anywhere from a few weeks to several months. This undoubtedly affects your ability to meet the deadlines.
In this sense, the old adage – if you pay cheap, you pay twice – holds some truth. With this experience, many businesses now prefer working local suppliers with the aim of not sacrificing quality just save a few pennies per component. When you source within UK shores, you retain tighter control over the quality of the parts you are buying. You get components that meet your expectations. Importantly, you are able to meet deadlines with ease.
#3. Improved Reliability/Flexibility
Another element that you relinquish when you opt for overseas manufacturers is flexibility. For starters, there is the issue of very high minimum order quantities, which in itself affects your flexibility as you cannot order in low volumes. Moreover, the high minimum order quantities do away with possibility of ad hoc parts/components requests. Additionally, businesses with limited storage facilities will find storing all the components and parts to be daunting task and at times an expensive affair. Ordering in the UK obviously does not come with these limitations.
If you run a business, you must appreciate the importance of building a working relationship with suppliers. This is very difficult to do when oceans separate you and your supplier. On the other hand, boiling national relationships with a buyer or seller is much simpler as both parties inherently understand each other’s expectations. The buyer is in a position to visit the supplier in their factories and gauge their capabilities and capacities. The supplier is also better placed to receive insights as to what the buyer wants – fast turnarounds, capacity to hold parts in-stock, etc. There is also the benefit of the supplier feeling obliged to help their loyal customer when in a tight spot.
#4. What Do You Value More; Your Reputation Or Cheap Components?
The current trend among the OEMs indicate that they are finding value and benefits in sourcing within the borders. In many cases, there is also a financial benefit of sourcing within the UK as the cost may ultimately be lower when you factor in the cost fixing errors, the cost of delays, and lost business due to missed deadlines.
And given the fact that having a solid reputation is fundamental to the success and longevity of your business, you should not risk your reputation. You should strive for a reputation of being very dependable in your business. As such, do not place your reputation in the hands of unreliable suppliers. This is an unnecessary risk that can have dire consequences for your business.
When you control any third-party involvement, you also take control of your reputation, thereby ensuring your business flourishes.