Supply chain is key to manufacturing success

Posted on 8 Dec 2014 by Victoria Fitzgerald

Manufacturers must focus on improving their supply chains if they want to reap part of a potential £30b economy boost, according to a recent report by the Confederation of British Industry (CBI).

In its latest report, Pulling Together, the CBI found that boosting growth in the manufacturing subsectors through innovation and growth could provide an economic boost by 2025 and create over 500,000 new jobs. In addition, 78% of companies said improving their supply chain was important or very important to their future growth.

But, while everyone is clear on the goal, it will be a difficult journey for manufacturers to improve their supply chains and begin to reap the rewards.

During 2014, UK manufacturers were hit by a series of supply chain disruptions, according to Achilles – a global supplier information management company. Independent research commissioned by the company found large manufacturers were affected by three main challenges – damage to reputation, poor supplier information and a lack of contingency planning.

Reputation is currency

Disruptions in the supply chain can quickly undo manufacturers’ hard work in building a good standing with customers and the community.

In the Achilles research study, one in 10 UK manufacturers admitted they had lost contracts because of suppliers delivering substandard goods or services.

A further nine per cent saw a fall in consumer confidence due to suppliers delivering substandard goods or services.

Tom Grand, Achilles regional director for the UK and Ireland, said: “From this data it is clear that suppliers can have a direct impact on the bottom line of buying organisations. Large companies must be able to easily track their suppliers in order to pre-empt and mitigate any potential issues. That sounds like a simple task, but in reality this involves collating and analysing thousands of pieces of supply chain data.

“In our experience of working with supply chains in high-risk industries, getting information on human resources, legal, civil, commercial sensitivities, politics and data security is difficult and time consuming and should not be done ‘one at a time’, or in isolation.”

Poor supplier information

One year on from the horsemeat scandal – which showed the risks hidden deep within supply chains, 91% of UK manufacturers said they had not taken any steps to improve information about their suppliers.

Mr Grand said: “We know that globally, businesses spend about $60b a year managing their supplier information. Yet sadly it seems the UK manufacturing industry might have to experience another supply chain crisis before they modernise their approach to managing supplier information.

“Using one system capable of managing all data on the one platform, allows companies to have a good overview of their suppliers, including audit results, financial assessments, corporate social responsibility information and details on ethics and sustainability.

“Once this information is gathered, companies can make educated decisions about their supply chains and make alternative arrangements if necessary.

“With robust data in place, UK manufacturers should also protect themselves by carrying out regular audits to ensure suppliers are compliant with the high safety, regulatory and ethical standards required by UK manufacturers. An audit process also provides assurances that suppliers are working ethically and in the best interest of society.”

To Re-shore or not to re-shore

After Reshore UK was established by the Manufacturing Advisory Service as a part of the UK Government’s long term economic recovery plan, many manufacturers pushed to take the plunge and move more of their supply chain closer to home.

Achilles’ research found more than a quarter of UK manufacturers have based between 75% and 99% of their supply chain in the United Kingdom.

Despite this, a number of large companies are planning to expand their supply chain outside of the UK. The research found 18% of manufacturers were planning to place suppliers in Europe and a further 18% planning to base part of their supply chain in China over the next two to three years.

Mr Grand warned that while some supply chains are becoming more global, those planning to move should tread carefully.

“The UK has some of the highest safety and quality legislation and regulations in the world,” he said.

“Manufactures who have overseas suppliers need to take steps to ensure quality, safety and human rights standards and met by their international partners.

“Unfortunately what a company claims in a pre-qualification questionnaire can be poles apart from what is actually happening on the ground.”

Plan for the future

With most UK manufacturing companies relying on global supply chains, it is not uncommon for an event on the opposite side of the globe to have a major impact on company’s ability to do business.

For example, automotive manufacturing giants Toyota and Honda both lost significant market share after thousands of made-in-Japan models and car parts were destroyed in the 2011 tsunami which hit Japan. The disaster left the car makers unable to keep up with consumer demand, causing some customers to turn to other automotive brands.

Yet in the Achilles survey, almost a fifth of UK manufacturers, 19%, admitted they do not have any contingency plans for any events that could affect their supply chains – including natural disasters.

Mr Grand said: “Manufacturers who take the above steps to protect themselves from supply chain disruption will ensure their business in the best position to take full advantage of t opportunities in the industry.

“The more information a business has on their suppliers in the lower tiers of the chain, the more proactive those businesses can be in taking steps to find alternative suppliers in case of an emergency.

“Mapping the supply chain allows UK manufacturers to understand where their parts and component products are produced meaning they can more adequately plan in the event of a major.”