Supply chain risks bring production home
The UK's manufacturing supply chain has attracted considerable attention in recent years, especially as a factor in major decisions over where to locate inward investment. As many manufacturers across the West Midlands will be the first to admit, especially the larger ones, the supply chain is one of the most critical areas of their business.
For most this is vital to delivering production just in time to their customers, especially of high value components and products. Over the last decade we have seen an increasing trend towards global supply chains, with manufacturers sourcing their components from all over the world. Whilst this brings opportunities to reduce costs it also brings considerable risks for when it goes wrong.
This week EEF published a survey which asked exactly that and the results were quite striking. In recent years over eighty per cent of companies had seen their supply chain disrupted by the recession, whilst 60% had seen it disrupted by other factors, in particular events such as the tsunami. Almost half the companies we asked had seen a major supplier fail. For many, especially smaller companies, this became a very damaging issue very quickly and resulted in loss of productivity and in some cases both orders and revenue.
Our survey also showed the response to this has been equally striking. One third of companies are now treating this seriously enough to make managing their supply chains a Board level issue. But, most encouragingly for West Midlands manufacturers where we have a large number of companies in the supply chain, forty per cent of companies have brought some of their production back in-house, whilst a quarter have increased their use of local suppliers.
This is very positive news as the hollowing out of the UK's supply chain has been a concern for some time. Looking forward, if this trend continues not only will companies be less at risk both from economic recession and natural disasters, but they will hopefully benefit from more inward investment and decsions by major customers to use local rather than overseas suppliers.