Reshoring UK Manufacturing Post Brexit

Reshoring UK Manufacturing Post Brexit

Find out about how reshoring options have evolved and how smart businesses are using technology and glocalisation as routes to a new supply chain solution.

March 3, 2021

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After the Global Economic Crisis in 2008, reshoring was a hot topic among the engineering and manufacturing communities. Twelve years on, similar conversations are commonplace, only this time the focus is on the global supply chain weaknesses highlighted during Covid, as well as shortages of materials and tariff concerns that have arisen thanks to Brexit. But the underlying concerns remain the same; flexibility and reactiveness of supply chains through reshoring versus cost reductions through offshoring. There are other options on the table now, though; nearshoring, direct or indirect reshoring, ‘glocalisation’ of manufacturing and emerging manufacturing technologies, all of which help to paint a more technicolour picture for manufacturers in their renewed quest for an improved UK supply chain.

Why is reshoring back on the agenda?

During the past decade, there has been a pressure on procurement teams to reduce supply chains and maximise profitability. Prior to Covid, the globalisation of our supply networks had become the norm, with a bias towards China and other low-cost labour countries for the supply of parts and assemblies. According to the University of Warwick’s 2017 study ‘Realities of Reshoring: A UK Perspective’, the most popular offshoring destinations were China (38%) and India (19%), with Vietnam, Poland and the USA all following with an 8% share each. However, with Covid restrictions in place, production all but stopped in China – followed closely by India and other nations – and the movement of goods and materials became extremely challenging. Those manufacturers with a solely offshore supply had very little control over production and often no local alternative as a back-up. Brexit, in turn, has resulted in concerns over the movement of goods and materials being hampered by onerous paperwork, border delays and tariffs, and has therefore reinforced the view that localisation is the way forward. According to Make UK’s Executive Survey, 47% of manufacturers cited delays at customs as a key risk to their business in 2021. But, once Covid is behind us, will the demand for profitability once again trump our fear of supply shortages or is it a more complicated picture?

How can reshoring benefit businesses?

The main motivation for offshoring since the 1970s has been the availability of cheap labour, enabling products to be manufactured at a fraction of the cost in developing countries. However, with labour costs in these regions rising, and the cost of shipping and air freight also on the increase, those savings are less significant. Added to that the common issues of quality control and long lead times, in a world where responsiveness and customer service is critical to success, manufacturers are questioning the benefits of offshore production when weighed up against the risks. Covid threw an unexpected spanner into the works of the reshoring/offshoring debate; never before had global supply chains simply halted and remained out of action for such a long time. This lack of supply and inability to respond to demand was crippling for engineering businesses who had no local options to fall back on.

What all of this adds up is growing support for the idea that a local supply – whether re-shored, near shored, dual sourced or a ‘glocalised’ solution – could provide businesses with peace of mind over quality of parts and lead times, and a fail-safe for unforeseen downtime on offshore production lines. And yes, this may be at an increased cost, but with the right model in place not only can some of those costs be mitigated, but they may prove to provide a better return in the long run.

What are the challenges of reshoring

According to Make UK’s submission to HM Treasury for Budget 2021, a quarter of companies are planning to reshore overseas manufacturing during the coming year, with a further 25% planning to identify new or additional suppliers in the UK to make their supply chains more robust. In terms of challenges and practical steps, UK industry does have some obstacles to overcome:

• Identifying suppliers: the first challenge will be in finding or creating suitable UK supply chains. Not necessarily because UK manufacturers don’t exist, but because, according to Reshoring UK, we have lost visibility of the UK suppliers that can meet or adapt to suit requirements, meaning that finding, assessing and then contracting those potential suppliers will be a challenge for those looking to re-shore.

• Lack of heavy industry: the UK does not have the raw materials or infrastructure required for some industrial processes. It may be that the solution for some manufacturing businesses will be near-shoring; moving the manufacture of goods closer to home to reduce lead times and logistics, without actually fully returning to the UK.

• Skills gap: it is no secret that the UK has an engineering skills gap – and whilst one of the proposed ways to counter the labour savings from offshore manufacture is through Industry 4.0 technologies within UK supply chains, the rolling out of the processes, systems and subsequent data analysis requires a particular skillset, of which we currently have only a limited pool available.

Does it have to be all-or-nothing?

There are some practical challenges, then, to reshoring UK manufacturing. However, it doesn’t necessarily have to be an all-or-nothing solution. The point of reshoring, after all, is to de-risk the supply chain and provide reassurances that goods of the right quality will be available to meet demand, on time, and still allow a profit margin. To resolve this rather complex requirement set, it is expected that many companies will opt for dual sourcing, with a UK manufacturer supplying lower volumes of a component which can be ramped up if required, and the remainder coming from overseas. Similarly, near-shoring is likely to prove a good solution; moving manufacturing services closer to enable easier control, less problematic logistics and allow production to happen in closer proximity to the market without having to come all the way home. An attractive solution also lies in the area of digital technology; with 3D printing now a realistic manufacturing method for many components, and businesses such as Geomiq offering the assurance of both quality and speed alongside a range of cost options, the world of manufacturing services has become much larger and the range of suppliers vast. As pointed out by Geomiq’s Co-founder and CCO William Hoyer Millar, glocalisation of manufacturing may be the ideal solution:

There has never been a better time than the present for transformative technologies within manufacturing in line with Industry 4.0. Covid-19 has pushed manufacturing companies over the technology tipping point – and transformed the industry forever. Now Brexit is further accelerating the significant shift to glocalisation as businesses focus on balancing localised and globalised supply chain options in order to stay competitive. A once in a generational opportunity for a digitally enabled UK manufacturing industry, platforms such as Geomiq and our manufacturing partners.

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Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Geomiq. Examples of analysis performed within this article are only examples. They should not be utilized in real-world analytic products as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of any Geomiq Employee.