Designing a local supply chain

Posted on 16 Mar 2022 by The Manufacturer

What is innovation? It’s a question I asked myself many years ago and one I discuss frequently with colleagues across the institution of manufacturing. Equitus’ definition is ‘any human endeavour or effort that helps us to survive, grow, prosper and be sustainable.

The journey of any innovation starts with an idea but that is just the beginning. 

Real innovation is how the idea is converted into products and solutions that reach and benefit your target users. 

To succeed in this quest there is an absolute requirement to have a robust supply chain. And a robust supply chain that has your back. 

Not only does the robust supply chain bring you parts so you can make what you have set out to, you also must focus on adding value to the lives of your customers. 

Value was a fundamental principle discussed in my last column; ‘Is now the time to redefine what the supply chain is’.

So, when we think of the supply chain, it’s not just trucks coming into your factory. 

It is about your core organisation and the people who are supplying skills to your endeavour, the raw material suppliers, those providing CAD and connectivity and anything connected to the robustness of your inbound supply chain. 

Surviving, growing, prospering … localising

To truly achieve this and become super reliable means designing a local supply chain. 

What do I do on Sunday at 5pm when I’ve no salt in the house? I know the supermarkets are closed so I knock on my neighbour’s door. 

Keeping it local means you get the provenance of service and easy access; two crucial components of innovation when building products and solutions. 

Now compare this with a supply chain halfway across the world, say China. If you suddenly have a shortage, or if there is a global pandemic or chaos like what’s going on right now, you simply cannot guarantee you’re going to get things delivered on time. 

The next advantage of why you must localise is providing opportunities for people who supply to you and the people who supply to them. 

And this takes an indirect shape. It could be an afternoon sandwich shop where employees go to eat and drink, local public transportation services and more. 

They all become part of the local supply chain. You are creating another network of micro-businesses, a micro-business community. 

Employment opportunities increase as does prosperity and dignity in general. It’s like you are creating a small nation as those people within your local community earn more money and pay taxes that subsequently benefit the entire population. Keeping as much as you can in the local proximity is a win-win. 

‘Masters of designing local supply chains’ – Airbus

Airbus is one of the world’s leading manufacturers of aircraft, helicopters, and defence and space equipment. 

It is also a major force when it comes to benefitting local regions across the UK. 

In 2015 Airbus contributed more than £1bn to the South West economy, stemming from its Filton site and regional supply chain, including major suppliers GKN, Cobham and Meggitt. 

A staggering 17,500 jobs were supported, an equivalent to a sixth of all employment in Bath and North East Somerset.

Painting a wider picture Airbus’ global operations supported a £7.8bn contribution to the UK economy in 2015, with much of this generated in its UK supply chain – Rolls Royce and BAE Systems to name just two.

This led to sustaining 117,400 jobs throughout the UK in a calendar year. Or to localise further, more than 100,000 people who did not work for Airbus had jobs linked to the company in some way. 

Airbus estimated that its operations raised more than £1.7bn in tax revenues in the same year, or put another way, £1 in every £400 collected by the UK government could be attributed to Airbus’ activity. 

It’s not just giants such as Rolls Royce though. Many SMEs in each locality benefit. Its UK supply chain is impressive to say the least. 

Many lessons can be learnt from Airbus and applied as we continue on our own innovation journeys. 

True sustainability requires a ‘leave no stone unturned’ approach

Designing then keeping your supply chain local has massive impacts for your company. To be able to survive, grow and prosper you need to be able to deliver the fruits of your labour to your customers. 

Sustainibility’s importance cannot be underestimated. And when I refer to sustainability I mean the truest sense of the word. True sustainability is allowing your community and fellow humans to survive, grow and prosper for generations to come.

We cannot ignore it or commit any shortcuts. It’s our responsibility as an institution to act and to make it known. The way we approach sustainability is becoming the core of many companies’ existence and future intentions. It’s a storytelling tool that is no longer ignored in boardrooms throughout the world.

Each time sustainability is raised or touched on in any common discussion forum, the conversation usually goes towards recycling and waste management, and clean energy provision.

Now, the problem with that is when you talk about recycling and waste management, you’re talking about the end of the product life cycle. It’s not enough.

When you’re talking about clean energy, too often all that is discussed is the source and where the energy is coming from.

Whether that be wind, hydro or solar. Sustainability is a bit more than that I’m afraid.

And this is where designing your local supply chain comes into play again. It has to be a  step-by-step process or a ‘leave no stone unturned’ approach to prevent the all too easy decisions that lead to shortcuts.

Ensuring the parts or what you need for your innovation doesn’t travel too far to reach you is an early step.

With this you are automatically starting to align your sustainability performance with multiple United Nations Sustainable Development Goals. This act of carbon footprint reduction isn’t CSR and ESG. It’s not a box ticking exercise. It’s not activism. It’s a responsibility carried out responsibly and has to be as normal as logging in to your devices in the morning.

Right here, we are talking about concrete, measurable action aligned with the framework provided by the United Nations. The Sustainable Development Goals are vital for a recovery that leads to greener, more inclusive economies, and stronger, more resilient societies.

Number 9 is Industries, Innovation and Infrastructure. You won’t be surprised that there’s a long way to go if change for the good is to be realised. 

Globally, investment in Research and Development (R&D) as a proportion of GDP increased from 1.5% in 2000 to 1.7% in 2015 and remained almost unchanged in 2017, but was only less than 1%  in developing regions.

As the United Nations say, ‘Innovation and technological progress are key to finding lasting solutions to both economic and environmental challenges, such as increased resource and energy-efficiency.’

Industrialisation doesn’t just have to be sustainable, it has to be inclusive. Coupled with innovation, we can together generate jobs and prosperity which all starts locally as a building block that contributes to the greater good. 

Manufacturing has been subjected to much disruption in global value chains over the past five years. And the tragic events unfolding in Ukraine heighten this. 

The least developed countries require assistance when it comes to bolstering their manufacturing sector. In some way this symbolises how far the world has to go to realise ambitious sustainability goals. 

And the designing of multiple robust local supply chains or local value chains will only help us all survive, grow and prosper. 

About the author

Raam Shankar, EquitusRaam Shankar, Founder and CEO, Equitus Design Engineering and Innovations