Is ‘homeshoring’ really happening? EEF has suggested that there is a trickle back of companies who have become disenchanted with off shored operations in addition to a broader trend for ‘in-sourcing’. Alistair Sorbie, CEO of enterprise applications company IFS responds to EEF’s findings with some thoughts on the role of technology in supporting the return of manufacturing to the UK.
The West’s traditional manufacturing base has been in gradual decline for decades, driven even further in the past five to 10 years by the industry’s rapid expansion in the East. A label reading ‘Made in the UK’ may be hard to come by now, but all of this is set for radical change.
Collaboration: the shrinking of the global supply chain in the new industrial revolution
A recent survey by trade body EEF found that about 40% of British companies have brought production operations back home, with the UK seen as economically and physically the safest place to do business. The EEF also found that a quarter of the firms they spoke to have increased their use of local suppliers.
This is obviously good news in the current economic climate, especially following further reports this month that the UK order books are shrinking for the first time since the end of the last recession, almost three years ago.
But what is driving this change, and what’s in it for British companies?
UK a ‘safer’ place to manufacture
Once, there were savings to be made by closing factories in Europe and sending activity to China, but those cost differences are noticeably smaller now.
Troubles also arise in countries like India, where although the cost base is low, wage inflation and staff turnover is high. When financial benefits lessen, shrinking your supply chain and enjoying more control becomes more attractive. It’s no secret that everything in business has a monetary value, and if the disrupted supply chain is simply not worth it, the tide begins to turn.
The UK also represents a safer place for manufacturing operations, with many companies increasingly aware of the devastating impact natural disasters, like Japan’s 8.9-magnitude earthquake last year, can have on their supply chain.
Firms are also wary of being tarred with the ‘sweatshop’ brush by setting up their manufacturing base in countries with weaker worker rights while outsourcing to other areas can raise the spectre of potential corporate espionage and patent infringement.
Breaking down barriers
The shift from East back to West has in part been caused by organisations thinking locally to grow and maintain specialist skills, by building collaborative networks.
Something that is enabling collaboration in a big way is technology, which is helping break down barriers for UK-based manufacturing and playing a key role in reviving the sector.
For many years it has been hard for very small organisations and very large ones to see the benefits of doing business together. For the smaller companies, there is too much administration to contend with, while larger ones can find the partnership time-consuming and unprofitable.
But, through the use of technology, we are beginning to see large business and small local firms becoming more interested in forging a working relationship. This can especially be seen in service provision and maintenance contracts.
Enterprise software systems can help large businesses extend their virtual reach and collaborate with others to produce not just a supply chain, but a value chain. Not long ago it would have been unthinkable for a large and well-respected brand to put any of its front-line, public-facing activities in the hands of a small, local concern, but these days technology is supporting and encouraging these partnerships.
These developments are in no small part being driven by the emergence of smartphones, laptops and tablet computers, and the apps that sit on them. The excuse that you can only be 100% productive or effective in your regular place of work is no longer valid, with mobile devices able to connect you to your office IT system in seconds, regardless of where you are in the world.
Technology can cut through cost, complexity and administrative problems, and allow different sized business to work together effectively. By outsourcing internal processes and policies to subcontractors, larger organisations get all the benefits of having men on the ground without standards taking a hit.
Outsourcing means knowledge is lost
It appears that manufacturers are deliberately shrinking their supply chain in a bid to regain knowledge lost through many years of outsourcing.
For example, Ford is known to reuse common components across different models, to save time and money. But when you do too much of this you lose knowledge. This may never be recovered in full, but there are skills that manufacturers need to hold on to in supply chains and we are increasingly seeing this happen.
Of course, for this to work effectively, project management is crucial. Production runs and project lifecycles have become shorter and smaller, so tighter control on costs is vital – a single error can easily turn into an expensive mistake or disruption. It is here that technology is again redefining the rules of the supply chain, allowing us to track projects at any stage, and assess profitability in real time.
Collaboration tools are being used more widely, particularly by manufacturers, not just for social media but to actively engage and collaborate with supply chain partners and customers, too. Whether to gather feedback on product design, or to liaise on support and logistics, collaboration has become an important component in the global value chain for any business that hopes to be successful in the future.