Britain’s manufacturers are continuing to re-shore suppliers as supply chain volatility becomes permanent and overseas companies turn their back on supplying the UK according to a major report.
The report, ‘No Weak Links – Building Supply Chain Resilience’ published this month, shows the unrelenting pressure on company supply chains from increased costs and geo-political uncertainty which are creating unacceptable lead times.
For many manufacturers this poses a strategic risk to their business and, as a result, they are placing their supply chains under the microscope and adopting a range of strategies to manage relationships with suppliers at home and overseas. This includes diversifying their supply chains by either increasing or reducing the number of suppliers, as well as investing in a range of technologies to monitor up and down their supply chains.
The survey also showed that companies from both the EU and, further afield, are now significantly more cautious about supplying into the UK. According to Make UK this could be for a range of reasons including the difficult political relationships affecting trade between the UK and EU, the trading landscape having become practically more difficult with the EU, the prospect of regulatory divergence and, the broader global challenge for competitiveness being played out between economic superpowers including the EU.
Earlier this year Make UK also published figures showing that over four in ten companies (43%) thought the political chaos of the last year has damaged the image of the UK as a place for foreign direct investment.
Verity Davidge, Director of Policy at Make UK, said:
“Supply chain disruption has created unprecedented times for businesses across the globe in recent years, a pattern of volatility which is fast approaching a permanent state. However, resilience in supply chains is growing and driving new behaviours as companies diversify and increasingly seek new ways of doing business and managing their processes.
“While there is no one size fits all strategy that companies are exploring the trend towards re-shoring and near-shoring is an increasing trend that can only benefit the industrial supply base in the UK in the long term.”
Andrew Kinder, SVP, International Strategy and Sales Support at Infor added:
“There is no escaping volatility, but use of the right supply chain technologies can dramatically mitigate the worst impacts of disruption. Whilst the report shows nearly half of manufacturers are taking advantage of analytics for improving visibility, the real value will come from increased use of Artificial Intelligence (AI) and Machine Learning (ML) to help identify and predict events, analyse the best alternatives, and automate responses, giving manufacturers a competitive edge.”
“Whilst nearly half (46%) of manufacturers are combating volatility through supply chain dashboards and analytics, less than 14% are taking advantage of the most advanced capabilities, including real-time sensors, automation, artificial intelligence and machine learning. These under deployed technologies hold massive potential in delivering real value to boost decision velocity, ultimately providing manufacturers with a competitive edge.”
According to the survey the biggest drivers of supply chain disruption are all related to increased costs with almost three quarters of companies saying higher raw material prices were the biggest challenge (71%). This was followed by higher transportation and energy costs (69% and 68% respectively).
The extent of these challenges is highlighted by the fact seven out of ten companies said they were facing all three of these challenges in their supply chains with only 3% of companies saying they don’t expect to face supply chain challenges this year or next. By contrast, almost four fifths of companies (79%) say that supply chain vulnerabilities are a strategic risk to the business over the next two years highlighting the extent to which supply chain pressures are likely to continue.
In response to this volatility manufacturers are re-thinking their supply chains and developing new processes to manage them. Over four fifths of companies (81%) have diversified their supply chains with almost a third of companies increasing the number of suppliers to reduce risk, while two in five companies have reduced the number, potentially through long term contracts to help guarantee supplies or critical components or materials.
While suppliers from the UK continue to dominate, with over 50% of suppliers based in the home market, over a fifth of suppliers are based in the EU. By adding non-EU countries this increased to a quarter. This means that a positive trading relationship with these overseas markets is vital to the success of manufacturers in the UK.
However, according to the survey almost half of EU suppliers (48%) are now more cautious about supplying the UK. This is also reflected in the changes to the supplier base, with almost a fifth of manufacturers reporting they have reduced the number of suppliers from the EU in the last twelve months.
Unfortunately, the damage to the UK’s image and trading relationship is not limited to partners in the EU, with a little over a third of companies (35%) also agreeing that suppliers from the rest of the world are cautious about supplying UK customers.
The survey shows that to mitigate risks of unacceptable lead times and increased costs companies are continuing to re-shore suppliers with 40% having done so in the last year with a similar number planning to do so in the next twelve months.
As a result of the increased volatility almost half of companies (47%) have increased investment in supply chain resilience over the last year and a further fifth (19%) are exploring ways of doing so.
However, while over four fifths of companies (82%) believe monitoring suppliers is critical to their business there is a lag between citing its importance and using digital technologies that can enhance their monitoring efforts.
In particular, while dashboard and analytics dominate the most popular digital tool for almost half of companies (46%) there is minimal take up of technologies such as AI and machine learning (8%), robotics and automation (7%) and augmented and virtual reality (4%). Furthermore, two in five companies don’t use technology to monitor their supply chains, while around a quarter of companies don’t monitor either up or down their supply chains.