EVERY Thursday at 1pm Made in Britain hosts #madeinbritainhour on Twitter. During that hour Made in Britain asks questions of its 19,500 followers and the results are fascinating. Previously this information was enjoyed by the audience at the time and then left to drift away in the Twittersphere, rarely read again. So, we have decided to capture some of the best comments and re-present them for a new audience and easy reference. Some of the responses have been edited.
This week we look at reshoring and shortening supply chains.
Question one: Do the benefits of reshoring manufacturing outweigh the perceived increased costs? Is it more expensive to reshore?
Response from Made in Britain member Linian: We've always believed in supporting UK manufacturing and maintaining a robust UK supply chain. It may not be the cheapest option, but offers reliable quality, and we can develop great relationships with suppliers who understand our needs.
Response: If you look at the sustainability aspect of shorter supply chains i.e. reduced transport then this is a major benefit that outweighs increased costs!
Response: There is also the question of known quality that is a benefit for the customer, and therefore an accepted perceived increase in costs
Response: They are perceived costs. We try to show the value of Total Cost of Ownership of the project over time. The upfront cost may be more, but they are cutting out so many costs on the back end that are not taken into account.
Response: It depends. What were the reasons for offshoring? If it was primarily labour costs then erosion of advantage was inevitable. If it was for skills/materials: different. Reshoring reduces SC vulnerability but, in order to make it work, I think #automation is essential.
Response: We have always manufactured here in #Hayes. Offshoring was considered to reduce costs but we wanted to be able maintain standards & quality so instead invested in skills and automation
Response: How far down the route of offshoring did you go?
Response: It was a costing exercise, however some of the samples just didn't meet our exacting standards so it was at that point we decided to stay as is and invest in training and additional kit.
Response: Some of the factors could be mitigated by owning the manufacturing facility rather than contract type manufacture? Would some of Nigel Packers list be mitigated by this?
Response: Yes you can be in a lot more control however a lot of the items we use still come from mainland Europe as the UK simply doesn't manufacture them so not able to tick everything off that list!
Response: This is a great example of a balanced decision. You also don't know how long the offshore costs will stay lower, as wage inflation will pick up as everyone chases the same strategy.
Response: Automation is a major consideration here.
Made in Britain: that's something that has come up a few times over the weeks. "Britain doesn't make it" or "Britain no longer makes it". Is that something we need to learn from and re-explore our own market?
Response: Yes, however producing cable and connectors would have a high barrier to entry.
Response: The greatest advantage to our clients of reshoring manufacturing is the distance so if there is a problem they/we can be onsite within a few hours.
Response: Great subject today. Short supply chains reduces: Time lag Unnecessary travel Delivery cost Minimum order size Paperwork Exchange rates Tariffs Translation and more If there is an issue, you can be at the suppliers office in a few hours by car.
Response from Made in Britain member Peerless Plastics: Couldn’t agree more
Made in Britain: Is there also an aspect as to which markets/countries you are supplying? it may be beneficial to manufacture in more than one place to reduce some of the risk?
Response: If the market in the destination country is big enough then setting up there can be an option.
Peerless Plastics: Good response, we have found that some of our overseas customers like the fact that they can trade off the knowledge that our products are made in Britain so it's a win win for us. We keep the manufacturing in-house and they gain quality products that over suppliers don't offer.
Response: The following factors will encourage #reshoring: Expensive container shipping rates from China rising, Rising Chinese labour costs. Move to short delivery lead times. increased investment in innovative technology.
Response: It can often be the case that manufacturing onshore can have benefits that justify the costs. The challenge is to make sure all of the benefits and all of the costs are considered - including the externalities.
Made in Britain: How easy is it to balance/compare what appear to be non-financial benefits with financial costs?
Response: It's tricky, it needs a lot of experience and judgement. There are non-financial elements on the cost side too, such as environmental factors and employment impacts. It should always be an exercise in getting everything you can think of down on paper first. It's also crucial to think about the future costs and benefits, not just the immediate ones - as this is a long-term decision. The benefits will compound over time and deliver indirect benefits you might not have thought of.
Made in Britain: Is it is a case then of looking at the costs/cost savings over a longer period? That also introduces different variables into the forecasting?
Response: Yes - it's looking at both the costs and the benefits over a longer period, and factoring in how they may change over time. As I said, it is not easy but it can lead to much better decisions when done right.
Response: Is this something that smaller business may need support in doing do you think?
Response: Yes, I think it is always worth getting support from an expert or a fresh pair of eyes because the benefits of making a smart decision can be huge. That's not to say it can't be done without support if the basic principles are followed though.
Response: The advantage of an external is they do not have privileged knowledge within the company and are not constrained by the internal politics. They also have a wealth of insights from working in other companies providing solutions.
Response: Absolutely - not to mention the time and space to do it properly.
Response: And to do it properly you need to know what to look for, and that experience is often external
Response: One long term consideration: Employment cost. As outsourced manufacture improves standards of living, employees will want more. Demands for pay rises will increase labour cost. We have seen this with Japan in the late 20thC
Made in Britain: Does this mean that an alternative option to reshoring is looking for a new place to offshore? maybe developing countries in Africa?
Response: Possibly, the advantage would be to create employment and wealth in those countries. This is better than aid
Response: Carrying out a FMEA analysis on the supply chain will help to work this out.
Response: Over the last year, many of the benefits came to light due to the disruptions caused by the pandemic. I am sure there were costs incurred as the sectors sourced locally, and at the last-minute. Are these costs sustainable and will they be maintained, as the supply chain adapts?
Made in Britain: Some additional factors have also emerged, shipping costs and delays due to container shortages in part. Do you think this will make more companies think more about reshoring?
Response: We will face even more disruption as we are an emerging trading nation and many of the trade deals are not yet buttoned down. This will impact costs in the future, and will push more of the manufacturing towards reshoring, at least until the detail is known
Question two: What is the biggest barrier that stops companies reshoring manufacturing? How do companies overcome this?
Response: Specific components within the value chain that are tailor-made for their offer; negotiated contracts; higher costs for manufacture and delivery...
Response: The advantage of rebuilding is new production lines can have the most advanced equipment and processes. These will set the UK at the vanguard of modern manufacturing giving 15 / 20 years advantage. Innovation in production is needed to make this happen.
Response from Made in Britain member Linian: Sometimes it's purely a psychological barrier although there can be physical ones too in having to be innovative & how to go about it. Funding can play a part and securing the right team with the necessary skills
Response from Made in Britain member Excell Metal Spinning: Although British manufacturing hasn't been 'killed', it has significantly changed from producing full products to becoming an integrated supplier in supply chains
Response: I have a feeling this may change as the value chains adapt and the market looks locally. Having found alternatives, many will not go back...as long as the market responds positively to the new prices and the increased quality in the products
Excell Metal Spinning: I'm not so sure, UK gov have heavily focused on the services sector, and many organisations we know have shifted from manufacturing and selling a 'product' to opting for the services routes especially in the oil and gas industry
Response: Getting staff with skills and then skilled workers wanting to pass skills on to newer members of staff
Response: One challenge of reshoring for some companies is the availability of raw materials and facilities that manufacture specific products! UK Manufacturers need to review and invest in their own facilities which could cost more initially but reduce their supply chain in the long run!
Response: It's an obvious one but cost, or at least perceived cost.
Response: What we have seen here, it is cost to start the process over. They are already committed overseas and in some cases it is cost prohibitive to start the process over again.
Response: I would guess cost as the reduction in costs we found can be compelling to outsourcing certain aspects.
Made in Britain: It is interesting the word "costs" always comes out in these discussions. The word "risk" hasn't featured as much. Maybe that is the balance that is finally being realised?
Response: The cost is the risk and vice versa!
Response: Was this the same consideration back in the 1990's when UK Mfg started to offshore? The risk was high back then, hidden costs arose over time
Response: I think it was the same. The few early adopters saw a big enough cost saving opportunity to justify taking the risk, and once they had proved the concept and set a process it became a stampede for everyone else.
Made in Britain: We haven't discussed this and I'm not sure if it is on Nigel Packer’s list but is IP protection a risk of offshoring? A reason to keep manufacturing in the UK?
Response: This is a very important issue. Many counterfeit products are manufactured in the same factories as the original branded ones. Another issue is confidentiality and industrial espionage from competitors.
Response: Does that mean the early adopters should now be looking to lead the way somewhere else to stay ahead?
Response: I am sure that is exactly what they are doing - and that somewhere else may well be back in the UK. I have already witnessed a few waves of chasing the opportunity around the world - whether it be India, China, South America, Poland, the next big thing..
Question three: What would help manufacturers to shorten and localise their supply chain? What prevents them doing it?
Response: There are more out there that do not know you exist than do. The problem lies in the perception that there is no manufacturing in the UK. Ultimately customers don't look locally.
Response: Like mentioned previously raw material and facility availability are big preventitives of reducing supply chains, but this is where research & development comes in to analyse whether other materials could be used that are local or other ways in producing your product? And like Muggi pointed out, using recycled or sustainable materials could make companies supply chains shorter whilst also improving their impact on the environment eg. recycled materials + reduced transport!
Response: Infrastructure and a deskilled workforce are two of the main barriers it but if you're investing for the future it's worth investing in these
Response: Getting young people into the sector is another issue that needs to be addressed. Skills development has been limited for over 40 years. It is one of the most important investment areas.
Response: Offshore co's may have scaled sufficiently to achieve economies that are not accessible to local businesses who want to integrate similar operations into their own.
Response: Having all the raw materials we need locally, available and priced competitively!
Response: 'Black Swan Events' like Covid19 & Fukushima certainly focus minds! I would think that currently skyrocketing freight charges would, also. The rumoured level of losses of containers, every day, should, too. All SC vulnerability. Prevents? Prices, quality, OTIF.
Response: Companies need to be willing to make this change. It won't just happen overnight. Incentives to reshore maybe?
Question four: How do British manufacturers adapt to overcome the perception of being more expensive than overseas competitors?
Response: The "quality" message is really important. Many of our clients who have opted for reshoring manufacturing has been due to this and also the level of expertise.
Response: Just reiterating what's already been said, being completely transparent with the increase in cost and showing it through better quality products, shorter lead times etc.!
Response: Show the quality, skills and knowledge of our products and workforce as price isn't everything
Response: Our products include fire-rated cable clips. For fire-safety, customers need to know that the product that won't let them down. Cheap competitor products are often completely untested. We push our testing/certification info & ask - is it really worth it to use anything less? We're so good at buying that our products aren't necessarily more expensive than an imported product anyway so it's a no-brainer really
Response: I'm generalising, but IMHO smaller co's often seem to be more accessible & to offer better support & service than large co's; s'thing I have noticed across the board (not just UK), but for any co trying to grow its presence in a mkt w. established players.
Response: Open comparisons, with similar products, and push the good quality aspect (how it's made, top quality materials etc), just a thought.
Response: By understanding how other countries are able to produce the same product cheaper with similar levels of quality. Investing in better value for money equipment, processes and people to improve efficiency and sustainability will go a long way!
Response: Agreed! Although 'similar levels of quality' is a key point here, not all products are created equal and it can help some companied to trade of this perceived quality improvement as their USP.
Response: That also depends on the equipment and supply of raw materials! Why should UKmfg's pay extortionate prices for specific machinery when cheaper more powerful alternatives are available elsewhere! Then admittedly, its that level of thinking that the consumer will no doubt have. You can win customers by building stronger relationships, making processes easier etc. You can then win custom through convenience which includes many elements under that umbrella
Response: Very true and you're right it doesn't always come down to quality but it does have to be high up the list.
Response: Robotic and automated production lines reduce cost. Polish farmers lost many farmworkers as they came to the UK. They developed fruit and root vegetable picking machines to bring their harvests in. They are now selling them in the UK.
Response: This is a great point and something we should come back to in a future week - some topic around "automation"?
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