Supply chain risks are bringing production back home

Posted on 13 Aug 2012 by The Manufacturer

Business continuity concerns are prompting manufacturers to ‘in-source’ production processes and seek local suppliers, says an EEF survey.

The survey, released today (August 13), links a trend for bringing outsourced production processes back in-house with economic concerns and the fear of supply chain disruption following potential natural disasters.

Eighty-two per cent of respondents said that the recession had caused disruption to their supply chain with two fifths also saying that they had seen key suppliers go to the wall.

The most significant effects on companies from disruptions were loss of orders and loss of revenue.

For 60% of respondents concern about supplier resilience was a local issue rather than international. But a quarter of companies taking part in the survey also said they are now looking to increase their use of local suppliers and 40% said they were looking to bring outsourced processes back in-house.

Concerns not backed with action

Given the high levels of supply chain disruption being experienced during recession however, just one third of companies saw supply chain risk as a Board-level, critical issue.

Furthermore, while 60% of respondents said that they monitor the resilience of immediate suppliers to mitigate risk, just 11% try to monitor their entire supply chain and 16% do not monitor their supply chain at all.

Increased capacity needed

EEF said today that the survey results highlight a major opportunity, and imperative, to build manufacturing capacity in the UK.

The manufacturer’s organisation said that the ‘hollowing out’ of UK supply chains thanks to a decade long trend to outsource internationally, needs to be reversed if local supply chains are to be able to support economic rebalancing and growth.

EEF sees increasing interest in ‘in-sourcing’ and localised supply chains as a win-win for companies looking to increase control and visibility in key elements of production as well as for the UK economy.

EEF Chief Economist, Ms Lee Hopley, said that while globalisation had brought a range of benefits to UK manufacturers, awareness of the high level of risk attached to globalised supply chains has increased.

“In recent years manufacturers have been hit by a host of unforeseen events, which have seriously tested their supply chain monitoring and business continuity planning,” she observed.

T o capitalise on a rising interest in localised supply chains and in-sourced production Ms Lee stated that obstacles for UK manufacturers looking to expand capacity or diversify into new areas need to be removed.

Ms Lee also called for, a business environment that pulls in every pound of vital investment to our economy.”

Actions which companies can take the initiative on to improve supply chain initiative on include improving inventory management, increasing collaboration and forward planning with suppliers and investing in IT to improve supplier management.

Homeshoring ‘trend’ not conclusively proven

But although the EEF survey shows increasing interest in bringing production back in house and seeking local suppliers, it does not conclusively suggest that extended, globalised, supply chains are on the decline in manufacturing.

According to the survey, the average UK manufacturer has 190 suppliers, with one in five saying half their suppliers were located outside the UK.

Furthermore,  around a quarter of manufacturers have seen an increase in the use of suppliers outside the UK in the past two years.

Related stories:

A return to British soil for laundry egg company

Onshoring: Are we ready for the return of UK manufacturing?

Top of the food chain

Also see the September issue of TM for an interview with Dragon’s Den winner Ian Helmore on his decision to base manufacturing in the UK for Steri-Spray, his life saving water treatment product.

Ian Helmore will speak at TM’s Innovate to Grow Conference on October 16. Click here for more information.