Thinking of reshoring? No? Maybe you should!

Posted on 26 Nov 2019 by Jonny Williamson

A fundamental realignment of manufacturing in the UK is on the cards, now the shape of a post-Brexit trading arrangement with the EU is becoming clearer. A key part of that will be the reshoring of production back to the UK from what were once cheaper overseas factories.

Nick Peters reports on one Walsall company that is already ahead of the game.

With the UK soon to be outside the EU’s customs union and single market (assuming Brexit continues in its current form), the level of tariffs levied by trading partners on British goods will be determined by whether they are really British.

The thresholds for these rules of origin under WTO rules vary, but in the automotive sector, for example, 55% of a ‘British’ car must be made from parts sourced in the UK.

Automotive Conveyer in factory Production Line - image courtesy of Depositphotos.

Image courtesy of Depositphotos.

The current average in the UK sector is 40%, so there will be pressure – as Mike Hawes of the SMMT told us in our recent interview with him – to seek out UK suppliers rather than buy them in from overseas.

For as long as large-volume carmakers remain in the UK, this could be a major boost for UK-based component manufacturers. Albert Jagger Engineering is a classic example of such a company.

Founded in 1953, the company has enjoyed a long and stable history of serving commercial vehicle bodybuilders, boatbuilders and the agricultural and engineering sectors with components.

“We, like many businesses, jumped on the bandwagon pre-2000, sending a lot of this inventory over to China for price benefits,” operations director Mark Hilton says.

“It was 2008 when alarm bells started to ring. An awful lot of our customers went through the credit crunch, and they de-stocked significantly, and that passed the burden onto us to hold inventory for them.”

This article first appeared in the November issue of The Manufacturer magazine. Click here to subscribe

It was an unexpected downside to offshoring that made the company realise there were other unfavourable aspects.

“There were huge lead times, plus the amount of time the product is on the water,” Hilton added. “There were also the unfavourable payment terms which you tend to get from Asia – 50% was the best we got.

“When you’re purchasing £500,000 worth of inventory, that’s £250,000 out of your bank account for product that you cannot sell to your customer for 16 weeks.

“When you start factoring in all of these costs and the pressure that’s on UK customers for their end product to be competitive, it made absolute sense to do the maths on investing in our manufacturing facilities here in the UK, to shorten that supply chain, to take the cost out for us and to protect our customers from any potential price increases.

“It also makes us a lot more efficient as a short-batch manufacturer, as well as keeping our stock levels lean and keen on the shelves here.”

Albert Jagger has invested in advanced machine tools to bolster their engineering capacity.

Albert Jagger has invested in advanced machine tools to bolster their engineering capacity.

Quality, cash flow

The production line that is being reshored over the next six months is Antiluce fasteners, which Albert Jagger Engineering supplies to commercial vehicle bodybuilders. Anybody who has dropped the tail board from a pickup truck or dropped the side of a panel van will know what these are.

They produce about one million a year, and at £1.5m of sales it represents about 5% of the company’s annual turnover.

The company prepared for the transition by investing in two CNC machines – a Citizen Cincom L220 and AN IMECA Boss 338 HD bar feeder – to bolster their engineering capacity.

It also teamed up with the Manufacturing Technology Centre (MTC) to deploy 5S, lean and Six Sigma, on top of which they used digital technologies such as VR to reconfigure and remap their shop floor.

If that sounds like a bit of overkill for a line that generates just £1.5m, this is not the end of the story. As Mark Hilton says, it’s just the beginning.

“Our overseas spend as a company is now in the region of about £3.5m. We are currently looking at reshoring a further £1.5m of business.”

Made in the UK – again. Over the next six months, Albert Jagger is reshoring production of its Antiluce fasteners range.

Made in the UK – again. Over the next six months, Albert Jagger is reshoring production of its Antiluce fasteners range.

As we reported in The Manufacturer earlier this year, the superficial attraction of cheaper prices available from manufacturing offshore is not only eroding as increased prosperity raises labour costs in countries like China, but customers can be wooed by the shorter lead-times, quicker delivery and more versatile manufacturing systems that bringing it all in-house can offer.

On that occasion, it was the much larger Siemens factory at Congleton that exploited digital technologies to give customers much more control of their orders. With only 125 employees, Albert Jagger may be, comparatively, a minnow but the same mind-set applies.

“Returning the business’ manufacturing process to British shores means we are able to produce bespoke parts for our customers more efficiently,” Hilton says.

“We have done it, ultimately, to take back control, and as a result we are now able to take something from sheet metal, manufacture our product and sell to our customers without concerning ourselves with the added complexities of the supply chain.

Team Jagger – ready for reshoring and boosting ‘Made in the UK’ production.
Team Jagger – ready for reshoring and boosting ‘Made in the UK’ production.

“Equally, this gives us the ability to adapt what we offer to suit our customer’s product rather than the customer being forced to work within our constraints.

“By reshoring our Antiluce product range we estimate that more than £2m of business will be brought back into Britain over the next three years.”

This would have happened whether Brexit had happened or not, but leaving the EU adds a particular energy to what they have done.

“This is Brand UK, and there’s an awful lot of marketing to be done around the fact that this is a product that’s manufactured again in the UK,” Hilton says. “The EU referendum has, if anything, accelerated our thinking.

“Our supply chain team are now forensically going through our overseas spend, working alongside our sales team, looking at new products, with the design team examining rapid prototyping of products that we can manufacturer again in the UK.”

Reshoring – Should you do it?

There is clearly food for thought here for any UK manufacturer who has moved production offshore. Reshoring is not exactly news, but it takes investment in time and money – and attention away from the demands of daily business – to follow Albert Jagger’s example.

But, as the company’s director Andrew Cooper says, it really is worth analysing the true cost of offshoring.

“I just think people don’t cost things correctly,” he says. “What is the cost implication of that cash (50% up-front payment) not sitting in your bank account? What’s the cash implication of storage, not flipping your stock six times a year?

“Then when you add in all the things such as currency, it’s probably more expensive. Hence, we’ve really tried to reshore everything we can, starting with Antiluce.”

The ability of the UK to make its way in the world post-Brexit will not, as some have suggested, be measured by the amount of foreign investment we can attract, but by the value we can create from goods we make and the value we can add to – and keep in – our national bank account.

Companies like Albert Jagger Engineering demonstrate it can be done, very successfully, and make a difference to their own fortunes – and the country’s.