Ultimate proof

Posted on 6 Sep 2012 by The Manufacturer

We may not be able to label home-shoring as fully developed trend, but it is a reality for some. TM takes a look at the reasons behind Ecoegg’s ultimate proof of the revitalised value of ‘Made in GB’.

There has been mounting chat over the last couple year’s about a resurgence in the value of ‘Made in GB’ and an emerging trend in the ‘home-shoring’ of previously off-shored  manufacturing operations.

While industry analysts and academics studying supply chain dynamics generally agree that there is little substantive evidence to support the idea that home-shoring has reached the stage of being a definable trend as such, it is a subject which seizes the imagination of UK manufacturing advocates and the general public alike.

Data from TM’s Annual Manufacturing Report shows that while 12% of respondents said theya re likely to bring off-shored operations back to the UK in the next 12 months, 27% said they are likely to move operations away from the UK in the same timeframe.

TM’S AMR 2012 will be available in October.

Rob Knight, Founder and Director of Ecoegg

Market research carried out by domestic appliance manufacturer Stoves in 2011 revealed that 52% of UK consumers think British brands should bring manufacturing back to the UK.

For large organisations whose long off-shored operations are now unwieldy in size and too well established to move this may be an unrealistic expectation – but it is possible for smaller firms to switch locations – as SME manufacturer Ecoegg recently demonstrated.

TM talks to Ecoegg managing director Rob Knight about his decision to repatriate manufacturing operations.

TM: What business is it that you have brought back to the UK?

RK: The business is production of our Ecoegg product – an ecofriendly device for use in domestic washing machines which elimates the need for detergent.

Previously we had been manufacturing this product in Shenzhen province, China. We have sold around 100,000 of the eggs since 2010 and were ordering batches of 10,000 a time from the Chinese factory.

We will now be using eight UK suppliers to provide all the component parts of the Ecoegg and undertaking final assembly at our on facility in Kent. The company is targeting £1.2 million turnover this year.

TM: Why did you make the decision to bring production back?

RK: There were three key reasons.

The first was lead time. Having manufacturing based in China was proving to be exceptionally unresponsive to customer demand. Being based in the UK will allow us to service both the domestic maret and our growing European export markets much more rapidly.

The second was for cash flow reasons. Rather than having to pay the Chinese factory a deposit when we order the good and the balance when they get on the boat, we have secured credit terms with UK suppliers which mean we get the goods a month before we pay. This has effectively given us four months better cash flow.

The third reason was that it simply felt like the right thing to do for our product – which has eco friendly credentials.

In addition we have found that the initial cost benefits of manufacturing in China – in terms of labour cost – had become much less convincing. When we first took production out there, the price disparity between what we worked out it would cost to manufacture in the UK and what it would cost out there was around forty per cent. Now it is about fifteen per cent and the added value that bringing production back really makes that insignificant.

I think there are two forces at play in this change. Firstly, labour costs in China are constantly increasing. Our suppliers out there complained that there was a shortage of labour  – hard to believe in a nation of a billion people.

Secondly I feel that UK manufacturers are hungrier for our business now than they were in 2010 – perhaps we are more experienced and better at negotiating too, but I genuinely think there is more willingness to be flexible now.

TM: Are there any down sides?

RK: The only down side is some added complexity for us in terms of having to manage a supply chain. None of that used to be in our hands before and we have had to take someone on to coordinate all our dealings with our new UK suppliers.

TM: Can you ever see a situation where you would off-shore again. For instance if demand outstripped you capacity here?

RK: I can’t see us going back now – whatever volumes we reach. If we ever reach a stage where our suppliers cannot keep up with demand then I suppose we might source overseas – there are some components which we had trouble finding UK suppliers for in the first place, such as the cleaning pellets which go inside the Ecoegg. There are only two or three people in the UK who can make these. If we maxed out their supply we would have to look abroad. It would be a nice problem to have.

Find out more about Ecoegg at: www.ecoegg.com