Chinese exports may be slowing, but UK manufacturing can continue to flourish if more supply chains are brought back home, says Mark Anderson, national sales manager for Fascia Graphics.
According to a private survey, China’s factory sector shrank at its fastest pace in more than six years in August as domestic and export demand dwindled; and this has been the result of a number of factors. Between 2005 and 2010, the average Chinese factory worker’s wage increased by 19% per year, forcing factories to increase prices. Coupled with lead times extending to 120 days, sourcing from China is now less attractive.
Despite a small blip this summer, the Office of National Statistics (ONS) reports that manufacturing output has actually increased since 1978 despite a 60% fall in the total workforce. In short, UK manufacturing has becoming a leaner machine over the last 40 years – able to compete and pull ahead of what the likes of China can offer.
This ability to be more competitive on the national stage has led to many businesses reshoring their overseas manufacturing back to the UK. A recent EY study has found that reshoring supply chains could create 315,000 UK jobs and increase national output by over £15billion. Outside of boosting the local economy, there are many advantages to ‘making it in Britain’. Moving suppliers to the UK means you can have tighter controls on day-to-day aspects of the business and the production process.
Other benefits include:
• Improved communication – There are no language barriers when dealing with suppliers in the UK. This can remove any confusion and mean there is less risk of a product arriving not as specified. While there is no excuse for poor quality, if for any reason there is a problem it is a lot easier to call or visit the manufacturer. Being in the same time zone also means that sales and technical representatives are on hand to offer advice during UK business hours.
• More reliable chains – Supply chains where manufacturing is separated across the globe, so that each component is made wherever it is cheapest, makes them highly vulnerable. For example, extreme weather, natural disasters and geopolitical turbulence can halt the production of one or more of the components and bring the entire manufacturing chain to a halt. By having your manufacturing operations all in one place and your suppliers close, your supply chain is much less vulnerable to these disruptions, and in turn so are your manufacturing operations.
• Reduced transportation costs – With the cost of transporting goods rising, companies can no longer rely on the consistently cheap shipping they have been used to. Having your manufacturing operations close to your customer base, transportation costs will be minimal.
• Short lead times – A huge benefit stemming from shortened supply chains and low transportation costs is short lead times. You can respond to the latest trends and fashions and tailor production more closely to sales when there is only one week’s waiting time rather than four. As a result, you can offer a more customised product to your customers, enabling you to stay competitive.
There are naturally downsides with what is happening in China, particularly for large UK exporters. However, it is my view that reshoring can certainly counterbalance some of this. Sourcing from within the UK will also strengthen our economy, create job stability, and contribute to building the nation’s growth and prosperity.
If more companies bring production back home, they will be able to supply a better product to market, at a fraction of the time, and we’ll be able to continue pushing up our manufacturing output for another 40 years.