Bill Bacon, managing director, Automotive UK at DHL Supply Chain, discusses the impact of this trend on the UK economy and provides advice for manufacturers looking to bring their business back to Britain.
In December last year, it was announced that British car manufacturers could create around 50,000 jobs in the UK over the next two years as manufacturing is brought back to Britain.
This reshoring trend is set to create increasingly reliable supply chains, provide financial and environmental benefits to manufacturers and support local communities. While the benefits of reshoring are clear, it remains paramount that manufacturers consider the challenges that could arise during this transition to ensure they are prepared for any operational impact.
The benefits of reshoring in the automotive industry are threefold: financial benefits, the opportunity to simplify supply chain operations, and the creation of employment in local communities.
Firstly, reviewing the financial benefits, inventory costs can be lowered, saving money and increasing profit. Additionally, any risks that may arise from the fluctuating exchange rates and unstable currencies are reduced.
Manufacturers looking to reshore should also consider that 24 Government Enterprise Zones in the UK, offer business discount rates and government grants to encourage and support manufacturers and they could therefore benefit from the incentives in place supporting this transition.
According to a recent study, discussed in the Financial Times, the UK has become a more cost-efficient country for manufacturing, now lower than European rivals, such as France and Germany.
The difference in cost between the UK and ‘cheaper’ Eastern European countries has also narrowed. Combined with government incentives, reshoring can deliver multiple financial benefits for manufacturers and is now a realistic business decision.
The second benefit can see manufacturers shorten and simplify their supply chains. An EEF report suggested that manufacturers often changed location because of ‘better quality products’ and ‘more certainty on delivery time’; by shortening your supply chain this can also be achieved.
With the product closer to its final destination, lead times can be reduced, resulting in a better service. Not only this, when unavoidable disruption occurs, recovery times are often faster for this reason.
Finally, reshoring is likely to create more employment opportunities in the UK, supporting local communities and bringing economic benefits.
A PWC report in 2014, suggested that, overall, reshoring could boost annual national output in the UK by approximately £6bn – £12bn by the mid-2020s, demonstrating its significance. Reshoring in the automotive industry specifically is set to create 50,000 jobs in the next two years, reported widely in the media during December 2014.
Additionally the EEF’s chief executive, Terry Scuoler commented that: “We are starting to hear the type of positive language about British manufacturing that has not been heard for two or three decades”
However, despite the benefits, it is important that manufacturers are cautious of the challenges and plans should be put in place to overcome these.
Globalisation means that even reshoring the manufacturing of parts and assembly to the UK, components used to make these parts may still be produced in, and sourced from a variety of countries.
As businesses take this into account, many manufacturers are now partnering with a third party logistics provider (3PL), such as DHL Supply Chain, to help evaluate and implement the right processes, keeping cost efficiencies.
Many supply chain companies operate globally with an expert knowledge of different countries’ industries. This means that 3PLs can easily advise and assist in the movement of a manufacturer’s operations as well as enabling manufacturers to take advantage of the relationships the supply chain company has in any given region. This helps to streamline the transition and ensures the process runs smoothly.
Manufacturers are reshoring to improve the products and services they offer. Currently it is able to deliver better quality, cost efficiencies and improve delivery times for customers.
Supply Chain companies play a vital role in ensuring that businesses are supported during their re-shoring process and these partnerships, between 3PLs and manufacturers, are enabling the UK economy to grow, re-establishing Britain as a global centre of the manufacturing industry.