Now in its sixth year, the central topic for 2015's National Manufacturing Debate (NMD) held at Cranfield University is how do we develop the capability for effective reshoring to the UK?
Reshoring is increasing in UK Manufacturing, driven by shifting consumer preferences, a reduction of the wage gap with emerging economies, increasing quality concerns, volatile international transport costs, concern for the environmental impact and a desire by management to bettercontrol quality and supply chain risks.
There is a government incentive to support reshoring in the UK. NMD will debate the capabilities required to keep the reshored manufacturing within the UK for a long time.
Lord Alec Broers is chairing the event and the final debate will be presented by Nick Hussey, managing director of The Manufacturer.
Content is going to be updated throughout the day, so ensure you refresh your page.
The National Manufacturing Debate 2015: Panel Discussion
What is the definition of offshoring?
Paul Sloman: “Buying product from India isn’t traditional definition of offshoring, most companies have international suppliers. Jaguar’s decision to construct a factory in China probably is, with thier decision probably derided from being close to their customers, rather than cost.”
Cranfield University launched a white paper at the event – An analysis of the UK’s Capability to Reshore Production – produced by a group of MSc students and supervised by Professor Rajkumar Roy and Dr Patrick McLaughlin.
You can download a copy here: bit.ly/UKmfgReshoring
Harry Moser: “Building a factory in China to supply China isn’t offshoring, that is unless those products come back.”
David Kynaston: “The bigger issue is if an OEM decides to encourage its supply chain to offshore, rather than solely its own operations.”
Dick Elsy: “The critical factor boils down to where the actual engineering is being done.”
Should we stay in Europe?
Paul Sloman: “Take big enterprises in the UK the likes of Siemens, it has a huge operation in the UK. It makes sense for us to remain.”
Dick Elsy: “The Catapult supports a lot of aerospace, and Europe plays a huge role in that – accessing European funding, European equivalent counterparts, etc. It’s felt good to be a European for the past few years and that should continue.”
David Kynaston: “We should stay, but a lot of reform is required moving forward. Something the PM needs to start addressing.”
Iain Gray: “Business goes to where the market is and Europe is a very significant market for the UK. Why put that at risk.”
Clare Marett: “The CBI and EEF have made it clear to us that they want to remain.”
How far have the latest state aid rules affected our ability to access funding?
David Kynaston: “Going forward, I’d like to see far more initiative on guaranteed loans, whether from banks or government. It has been much debated, and so far not been delivered. It would go a long way towards helping businesses, particularly SMEs.”
Harry Moser: One of the most effective things the Government could do is put together a one-hour module on total cost and make it available to the country, possibly something Cranfield could help with.”
Iain Gray: “There is an issue that a number of the key decision makers don’t sit around the boardroom table. There is also a very big perception outside the UK that we see manufacturing as way down the agenda, when we know that is very much not the case. We need to start promoting that and ensure the message is being broadcast. There’s a big job still to be done in terms of our nation’s PR and industry.”
Is the assumption that manufacturing has to be done in the UK correct, once you consider the entire supply chain – i.e. materials, customers?
Paul Sloman: “Manufacturing in the UK is vital, but the supply chain has to go with it. There isn’t a one-size-fits-all, and we have to understand that some things simply will never be reshored.”
David Kynaston: “We all know that extended, global supply chains are here to stay. What we want is for that which is relevant to the UK to stay in the UK, but that has to make ecomomic sense in the long-term. We always beat ourselves up over productivity, we know we have to get better, but access to market is what’s killing the middle-scale firms in the UK at the moment.”
Iain Gray: “It’s more than just purely financial, there’s a community aspect to this as well.”
Clare Marett: “One of the things BIS is doing at the moment is understanding the whole value chain of manuacturing, understanding what the entire supply chain brings to communities, both locally and nationally. Understanding that will demonstate the true impact of industry and add weight to our arguement of its importance.”
Dick Elsy: “Uninformed decision making is a real problem. Do people need to be better informed about TCO and the things we’ve discussed today? Absolutely, and that’s a key message.”
We should less energy, isn’t that more future-poof than lowering the cost?
Paul Sloman: “This ties in with digitisation and Industry 4.0. As a developed nation, we should be doing all we can to reduce our use of energy.”
Dick Elsy: “More efficient manufacturing is the way we are behaving, looking at the circular economy, and all of the new technologies we are working on has using less energy from the outset. It just makes sense to do that nowadays, whether energy is cheap or not.”
What part has the skills shortage played in the offshore waves of the past?
Dick Elsy: “The apprentices we’ve seen who have spent time in industry as well as college outshine the purely acadmic graduates everytime. The stigma around apprenticeships is disappearing and that is a great thing, and something to be continued.”
Paul Sloman: “There’s been too much of a drive in the past towards A-level and universities, and we’ve felt – and are feeling – the negative impact of that.”
Is there a perception around quality that UK industry needs to address, in regards to bringing production back?
Dick Elsy: “There seems to be an endemic lack of meterological skills. We’ve been quite surpsied by that lack, and I think that has been a bit of an impediment.”
Iain Gray: “Perception is, sadly, reality in many respects. There are some superb examples of ultra-precision engineered products in the UK, unrivalled across the world. I think we need to address perceptions, rather than having any actual failings.”
What part do process inefficiencies play?
Dick Elsy: “Before you introduce radical technologies, academic research has to be completed.”
David Kynaston: “Never allow someone who hasn’t got control over the current process to define the direction of the next. There is an issue of leadership which has to be addressed.”
The National Manufacturing Debate 2015: Presentations
Dick Elsy, CEO, High Value Manufacturing (HVM) Catapult:
“Retaining production through significant productivity improvements might prove more effective than bringing production back to the UK.”
“We are now a country that is increasingly confident that we not only have the research and innovation capabilities, but the tecnical expertise to leverage them effectively.”
“It can be hard to reshore production, but it’s even harder to get R&D back.”
“We will only achieve step change improvements in UK productivity through technology innovations.”
“Manufacutring is enjoying a period of sunshine as a means of generating long-term economic growth, wealth and stability.”
John Cridland, director general, CBI:
“Until recently, the reshoring debate in the UK tended to be one of speculation, rather than being seen with your own eyes.”
“Firms will only return parts of thier supply chain back to the UK only if they are confident of a healthy landscape.”
“For me, reshoring is all about our capabilities, our indiginous strengths in people, ideas and materials. If we are strong here, there are strong, organic reasons why we should reshore our supply chains. Being able to help our own companies become more competitive.”
“Reshoring is a major part of the manufacturing renaissance.”
“The past government made a strong start regarding industrial sector strategy, and we need that to continue with the new Conservative Government.”
“Companies want to be nearer to their innovation centres and customers, and further from global risks.”
“In a world of choice, we can’t afford to stand still if we want firms to reshore in the long-term. Government and firms have to work together to make domestic supply chains in terms of people, skills and materials great.”
“To further reshoring, we need to create an innovation culture that is both competitive and world-leading.”
“In terms of research and developement [R&D], there is too much focus on the R and not enough on the D.”
“The current skills shortage, particularly in regards to STEM, is the equivalent of a car crash in slow motion.”
“I’m not so fond of the term STEM, I much prefer STEAM, ensuring that the importance of the arts and creativty is highlighted.”
“We have to enhance and protect the UK’s capabilities in regards to materials, strength we are at risk of losing in large part because of escalating energy costs.”
“Reshoring is not guaranteed, and we have to ensure that a trickle becomes a flood. The prize for strengthening our supply chains is enormous.”
Paul Sloman, partner, PriceWaterCoopers LLP:
“Should we reshore? Do we even have a choice, or are other countries simply too competitive?”
“30 years ago, 20% of the workforce was employed in manufacturing. Last year, that figure was just 7%. We’ve also slipped from 5th to 11th in GVA tables, and been outstripped by growth in services.”
“What made companies offshore originally – cheaper labour cost; closer to the market; lower productivity, and lower trade barriers.”
“So what has changed? Reshoring versus offshoring was 14% versus 11% last year. Manufacturing is vital, providing economic and social stability, as well as driving innovation and value added jobs.”
“Why is this happening? Total cost focus; operational costs (working capital); risks (political, operational, reputational); wage costs, and government incentives.”
“Changing industry forces include the fact that not all offshoring is detrimental. Other countries have vast economies of scale and it would be wrong to challenge too much on non-innovative products.”
“Major trends currently changing the landscape of manufacutring are digitisation, increased customer focus, and integrated services.”
“What still needs to change? Address skills shortage with more apprenticeships and graduates; innovation (currently just 1.7% of GDP); raise productivity; improved infrastructure and land use; increased capital and political investment; more specialised clusters, and lower industrial energy costs.”
“Reshoring will see winners and losers, it’s not a guarantee. The UK has great potential, but changes are certainly needed.”
Ian Pearce, managing director, Brinsea Products Ltd:
“We design and assembly our products in the UK, but we were bringing in plastic components from China. Each plastic part is injection moulded from an expensive steel tool – major assets to the business. The decision we had to make was should we bring that process back to the UK.”
“Our considerations included landed cost; product quality; delivery times; security of tools, and finance of tools. The outcome of our assessment concluded there would be no major difference in landed cost or quality; but much improved results in terms of lead times and security of tools.”
“Three years on, Brinsea benefits from lead times down from 16 weeks to just one; lower stock holding (reduced by 8% on average); full insurance cover for the high value tools; ability to raise lease finance of new tools, and create six new positions.”
David Kynaston, chairman, Advanced Manufacturing Supply Chain Initiative (AMSCI) Investment Board:
“I’ve seen a renaissance in product across Europe and supply chains coming back.”
“2014 saw the launch of a £100m England-wide fund with a reduced funding ask of £1m. A focus on reshoring was introduced for the first time.”
“Some key stats on AMSCI – 250+ bids recieved, 70 projects agreed with over 500 beneficiaries; £277m allocated via 86% grant and 14% loans. Total value will ultimately be upwards of £700m.”
“The sectors we support is heavily dominated by automotive (49%), with aerospace second (13%).
“Reshoring as a prime motivation for the bids was only 8.8% – so at the moment the trend is just a trickle.”
“For reshoring in particular, the activity and opportunities is happening in the Tier 1 or 2 arena. For OEM’s, a long-term strategy to reshore is real – but not on their penny.”
“AMSCI has played a crucial part in alleviating the financial pressure on SMEs looking to expand and reshore; but its not enough. There needs to be more funding, readily available and easy to access.”
Harry Moser, founder and president, Reshoring Initiative USA:
“China’s unit labout cost is now four-times what it was 15 years ago, whereas the US’ is generally the same. That is one of the key driver’s of reshoring.”
“Too many confuse reshoring with renaissance. Reshoring is a means to the renaissance, but is no means the whole story.”
“Industries tipped several years to be best positioned to reshore to the US include computers/electronics; machinery, and appliances.”
“A lot of the negative reasons regarding reshoring are proximity dependent, several of the others are culturally dependent.”
“Recommendations for the UK – document cases and trend; provide analytical tools; identify and target imports; focus as much on suppliers as OEMs; investment; skilled workforce, and think of the trade deficit as an asset to be mined for manufacturing growth.”
Dr Felipe Rubio Castillo, deputy director, CONAYCT R&D Mexico:
“Mexico and the UK have a shared common goal, to embrace and strengthen their domestic manufacturing.”
“Industry vision options to increase manufacturing volumes – actual market (same line of products), new markets (expansion of actual manufacturing capabilities), or new product lines (specialisation in different niches).”
“Automotive is the central pillar of Mexian industry, contributing 20% of the total manufacuring sector’s GDP and employing more than 16% of the total manufacturing workforce.”
Tomas Jaskelevičius, business development director, Arginta Group:
“In Lithuania, our manufacturing share of GVA is around 20% – pretty much the same as Germany8.”
“Starting 2008/09, our manufacturing and engineering industries understood that they couldn’t solely exist internally. The higher prices internally were detrimentally impacting both quality and lead times.”
“Arginta decided it needed to diversify the group’s markets and industries. Our target was to utilise our manufacturing capability above 90%.”
“We have a lot of talent available to us. Lithuania leading the EU for the number of students engaged in STEM subjects. Young professionals specialising in engineering, manufacturing and construction is 18% – twice that of the EU average.”
Proffesor Tom Stephenson – pro-vice-chancellor, Research and Innovation, Cranfield University:
“We graduate more post-graduates in engineering than any other university in the UK.”
Lord Alec Broers:
“Manufacturing is so essential to the UK, perhaps now more so than it ever has been.”
“Reshoring is a topic being discussed all over the world, and the potential job opportunities that it presents.”
“It is manufacturing that we can use to overcome our current defecit. Our current account is presently higher than it ever has been since records began in 1948, and that’s not a good place to be in.”
“The past low-labour cost of off-shoring is an advantage that is steadily being eroded all over the world, from China to Mexico and everywhere in between.”
“I’ve always observed that new products tend to evolve, rather than arrive totally new – evolution rather than revolution.”
