Will reshoring help tackle supply chain woes?

WHILE PRIOR to the pandemic, manufacturing was offshored to different countries worldwide, reshoring back to the UK has become an increasingly common talking point.

This shouldn’t come as a surprise. A 2023 report by Make UK, 'No Weak Links - Building Supply Chain Resilience’, found supply chain pressure due to increased costs, together with geo-political uncertainty has given rise to unacceptable lead times.

This has led many UK manufacturers to take a fresh look at their supply chains. "While there is no one size fits all strategy that companies are exploring, the trend towards reshoring and nearshoring is an increasing trend that can only benefit the industrial supply base in the UK in the long term," said Verity Davidge, director of policy at Make UK. 

Make UK's survey indicated the biggest drivers of supply chain disruption all related to increased costs. Almost three quarters of companies identified higher raw material prices as the biggest challenge (71%), followed by higher transportation and energy costs (69% and 68% respectively).

The extent of these issues is underlined by the fact seven out of ten companies said they were facing all three of these challenges in their supply chains. Just 3% of companies said 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 their business over the next two years, highlighting the prevailing sentiment that supply chain pressures look set to continue.

However, moving manufacturing back to the UK will not necessarily be a straightforward process. Shifting long standing supply chain networks to a new location will be both challenging and costly. In fact, a whitepaper by Birmingham Specialities identified the associated cost as the biggest obstacle when it comes to reshoring, observing this is the "factor that deters most businesses". Given this, for many firms, it may still be premature to think about reshoring. 

There have also been questions regarding its economic benefits. Last year, a report from the International Monetary Fund argued that "policy proposals to reduce dependence on foreign suppliers ...are likely misguided". “Supply chain resilience to shocks is better built by increasing diversification away from domestic sourcing of inputs”, ideally with diverse supply chains running through a large number of countries, IMF economists wrote. 

Reducing supplier risk 

As the ninth largest manufacturing nation in the world, employing 2.7 million workers, there are many complex and integral factors contributing to the success of UK manufacturing.

While success in any business can fluctuate, actively achieving growth in recent years has been hampered by having to deal with the implications of Brexit, swiftly followed by COVID-19 disruptions and the current geo-conflicts. 

In this context, while reshoring might not be the solution for every business, managing supplier risk is essential. Manufacturers need to look at how they can best navigate these headwinds, both operationally and with suppliers. Managing supply chain risk more effectively involves becoming more flexible and scalable to respond to the ongoing disruption. 

Resilience has overtaken efficiency as businesses’ primary agenda. New risks have combined to make real-time visibility that proves suppliers’ credibility and sustainable business practices more important than ever.

Consistently monitoring supplier risk is essential to business performance and resilience. This is why manufacturers need to adopt a more comprehensive approach to who they work with to comply with regulations, protect business continuity, avoid unethical practices, maintain a safe and healthy working environment, and manage disruptions more effectively.

Insight into the supply chain

With supply chain disruption and an increasing dependence on working with multiple suppliers, the pressure to mitigate the risks in the supply chain has intensified.

The increases in legal requirements and public expectations have elevated social value and Environmental, Social and Governance (ESG) management to the same level as Health, Safety, and Quality.

Given this, a proactive risk approach to understanding where supply chain risks can occur should be more holistic and factor in such elements as:

Health and Safety; Financial stability; Modern slavery; Quality management; Anti-bribery; Right to work; Equality and diversity; Environment; Data protection (GDPR); Insurances; Risk assessments; References; Building information modelling (BIM); Sector/trade-specific requirements.

Technology to reduce risk

Digitalisation has an important role to play in helping manufacturers become more resilient, agile and responsive. As the manufacturing sector adapts to the ongoing challenges and potential risks, tech-driven data and data visibility are key to understanding how suppliers operate, and identifying risks before they occur.

Through technology, businesses can evolve faster and become more resilient, recognising that data visibility is the key to intelligent analysis and timely, accurate decision-making. This approach helps companies:

• Comply with relevant regulations and obligations
• Make informed decisions
• Demonstrate due diligence
• Promote a sustainable culture
• Reduce costs
• Prevent direct and indirect costs of quality failures
• Demonstrate credibility
• Reduce risks associated with health and safety, environment, modern slavery, diversity, equality, workplace wellbeing and financial stability
• Manage reputation
• Audit continuous improvement
• Reduce administrative time

Alcumus works with global organisations, supporting them with our technology, people and expertise to provide insight into the resilience of their supply chain and create sustainable networks. This allows businesses to improve the visibility of contractors and suppliers and to meet compliance requirements. At the same time, it also helps companies to build strong health and safety cultures, demonstrate ethical practices, deliver consistent processes, and, particularly relevant given the current trading climate, adapt faster to changing business needs. 

For more information: 

alcumus.com/en-gb/supply-chain-compliance

Tel: 0330 127 1723