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3 August 2023

Strengthening the Links in the Manufacturing Chain


Written by:

Frank Holmes
Founder Chairman
Manufacturing Wales

 

 

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Manufacturing Wales, an independent industry led network, recently asked its members the question “What are the pressing challenges facing your business today and your current strategies to support sustainable growth?” 

We distilled the top ten challenges they are wrestling with which highlight skills and labour shortages, supply chain blockages, rising energy and materials costs, digitisation and automation, net zero targets, logistics and transportation constraints, planning delays, public sector price dominated procurement, geopolitical impact on international trade, and rising interest rates.

Most of these impediments cannot be looked at in isolation, as they are threateningly and opportunistically intertwined.

At the very top of the members’ list sit skills and supply chain constraints.

Rectifying and remedying this will require targeting people with the right skills, if they can be found, but also attracting new staff into the sector and retaining and retraining them; demonstrating that manufacturing is a rewarding career of choice.

Many of the members have recruitment gaps that they are struggling to close. This is why, working closely with Higher Education and Further Education institutions, we seek to establish and train for the right skills today and in future.

Putting this in perspective, UK wide, the sector is seeking to fill around 250,000 vacancies with the food and beverage sub-sector accounting for c.30 %; whilst electronics, steel and chemicals combined approximate to a similar level of requirement.

So even if companies can find the right candidates, soaring labour costs and enhanced benefit packages are eroding businesses’ margins and bottom lines.

The next biggest challenges identified by the survey are the compounding effects of soaring energy prices, raw materials availability and transport infrastructure.

However, it is not just incessant price hikes but the added unpredictability of securing supply that is the bigger concern.

The value of products awaiting completion in the UK is predominant in the sub-sectors of steel, food and beverage, plastics and electronics and recent estimates equate this to c 40% of industry turnover.

As high-power users, manufacturers are concerned with the long-term supply of energy, with national grid limitations the long-term secure supply of energy is a concern.

Structural issues are amongst the root causes of global supply disruption, with post pandemic recovery constraints, cross-border complications arising from the UK’s exit from the EU, semiconductor shortages and the Ukrainian war, particularly impacting the food sector, inhibiting the delivery of finished products.

Supply chain blockages have far-reaching  consequences including extending fulfilment timelines, squeezing cashflow and threatening relationships with longstanding and newly acquired customers.

Members are moving away from “just in time” to “just in case” putting demands on warehousing space at premium rentals whilst increasing stock levels to compensate at the expense of tying up precious capital for organic expansion and innovation led investment.

So, gaps in the workforce directly impact production as do supply chain blockages, as do rising costs whilst customers loyalty is tested as they are forced to seek alternative sources, buying for stock outs and insisting on fixing prices or in some cases taking supply inhouse.

Thankfully and against the backdrop of this turbulence and instability the manufacturing community is steeped in resilience, proactive and solution focussed. It is in their DNA.

This may require inventing new production methods, seeking alternative materials, switching energy sources for renewables, investing in extending automation capabilities, forging new supplier relationships with fixed price agreements and clear credit terms and, in some cases, reducing product lines.

Unfortunately, some constraints remain beyond manufacturers’ control and influence.

This is where Manufacturing Wales believes Government at all levels has a role to support the sector, by facilitating the legislation and infrastructure conditions which will enable our manufacturing industry to survive and flourish in an era of onshoring and self-sufficiency.  The geopolitical factors affecting the sector today, will require a response that drives a contemporary and fit for purpose Industrial Strategy that can help boost and secure Wales’ industrial future.

Such an approach to ‘home-grown’ industrial policy, in support of the manufacturing sector, requires assistance through investment in energy transformation and supporting pricing pressures, ensuring relevant skills development, continued overseas trade support, removing planning constraints for expanding new or existing facilities and ensuring that there is a transport system that gets our products and people to their destinations, inside or outside of Wales, safely and on time.

The Welsh Government recently released its Manufacturing Action Plan or “MAP” so it is time for demonstrable delivery which Manufacturing Wales and the wider sector wholly support so that businesses and academic institutions can showcase their world class capabilities on the global map.

 



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