The newspapers are full of stories about UK companies ’reshoring’ and bringing their manufacturing home. In so doing the UK economy is boosted and hundreds of thousands of new jobs are being created….but is this just simple economics at work..or are there other factors to consider?
A survey last year by EEF, the UK manufacturers’ organisation, and law firm Squire Sanders discovered that one in six UK manufacturing companies had relocated – or ‘reshored’ – production from the far east back to Europe and the UK.
One factor driving the reshoring trend is the need to be more agile – to shorten supply lines, get closer to UK customers, cut the lead time on expanded orders from four weeks to one, reduce the time needed to introduce new products and so on. A key enabler there is new manufacturing technologies, and of course robots and other new machinery, cost pretty much the same wherever in the world you install them.
For example making suitcases these days is far less about cutting and stitching and more about engineering. So luggage manufacturers are turning to the UK automotive component suppliers to establish new home grown supply chains. For these companies meeting the standards required to deliver high-quality products is the reason for reshoring production.
Not in every case, but an issue with the Far East has been quality control. If you want to buy from the Far East, you’ll need to go there and check the company out at first, and even then you can be assured that if there’s a problem, it’ll be easy to sort out. What happens if there’s a problem with batch that has just taken 3 months to arrive in your warehouse? This has been the case in particular for smaller businesses where reputation is all and losing a contract because a product did not come up to specification could see a company fail. Quality was the prime reason in 50pc of the cases of reshoring among smaller companies.
So why’s UK design and manufacturing important?
The UK’s manufacturing sector has undergone huge changes over the past few decades, with the relatively high domestic cost base meaning it has stopped focusing on price and now concentrates on offering quality and expertise.
The UK is also focussing on sustainable and ethically sourced products. From furniture to clothing, the country is currently tapping into Conscious Consumerism – promoting ethical manufacturing and building upon the current GDP contribution that design and manufacturing brings.
In simple economics the cost differential between manufacturing in the UK and Asia depends upon what is being manufactured where and how. Manufacturing costs are for example often comparable. However, while UK labour costs are higher, the absence of shipping and duty expenses, currency and stock holding risks makes British sourcing ever more attractive.
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