Supply chain demand reassured by re-shoring

Posted on 15 Apr 2014 by The Manufacturer

Adam Franklin, managing director, Industrial UK at DHL Supply Chain identifies what the trend for re-shoring means for the UK manufacturing industry and its supply chain.

Supply chain demand reassured by re-shoring
Adam Franklin, managing director, Industrial UK at DHL Supply Chain.

As an increasing proportion of manufacturing is returning to a company’s domestic market or region, Britain is experiencing something of a manufacturing resurrection.

Data from the most recent EEF report, ‘Backing Britain – a manufacturing base for the future’ highlights that more companies are returning to the UK. It is a slow and steady change but a positive change nonetheless, with one in six companies re-shoring production in the past three years – up from one in seven when the report was last carried out in 2009.

It seems this trend is set to continue, as highlighted by the UK Government’s recent Restore UK initiative, designed to support more businesses re-shore. So, why are companies returning and what are the benefits of manufacturing in the UK?

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The EEF data revealed that companies cited ‘better quality products’ and ‘more certainty on delivery times’ as two of the main reasons for changing location. But there are plenty of benefits for manufacturers. Lead times can be reduced, resulting in a better service for customers and when something unavoidable does cause a supply chain disruption, the recovery time is often faster than it would have been in a country far from the point of consumption.

Financial benefits

Although cost is not always the primary driver for a manufacturer choosing to re-shore there can be significant financial benefits. For instance, re-shoring can result in lower inventory costs, as well as reduce risk relating to currency and exchange rate fluctuations.

Additionally, the 24 Government Enterprise Zones in the UK offer companies a number of financial benefits such as business discount rates and government grants for superfast broadband. These Enterprise Zones have even instigated the emergence of sector hubs such as the automotive industry in the North West.

Re-shoring can also have environmental implications. By moving manufacturing back to the UK, British-based businesses reduce their carbon footprint, which might help a business meet its sustainability objectives, and ensure it is eligible for tax rebates.

Making the right decisions

However, locating facilities closer to manufacturers alone is not going to guarantee a smooth-running and efficient supply chain. In a global economy it’s inevitable that despite re-shoring, parts, and the components used to make parts, will still be sourced from multiple countries. Businesses have to account for this when choosing new manufacturing locations and it’s just one example of why some manufacturers are choosing to partner with third party logistics companies – to help evaluate and implement the right decisions when it comes to re-shoring.

Supply chain companies, often operate in a number of countries and can easily facilitate the move of manufacturing from one country to another, which usually takes place in phases to ensure minimal disruption to the supply chain. Meanwhile, manufacturers can also take advantage of the existing local relationships and partnerships that a logistics company has in the area to help streamline the transition.

Logistics partners will also have existing infrastructure, such as warehousing, which can help save money in fixed up-front costs as well as provide on-the-ground expertise to uncover any hidden costs and ensure accurate evaluation of total costs.

Ultimately, businesses are re-shoring to better their products and services through improved quality, efficiencies and margins, with the benefits rippling throughout the UK economy. Customers benefit from better quality products, faster delivery times, while whole regions are benefiting from healthier local economies.

As such, we as supply chain businesses, have a vital role to play in supporting companies in the re-shoring process. By doing so we will help enable agility and efficiency in the UK supply chain, that will fuel the growth of the manufacturing industry in Britain.