COVID-19 has shown us many things, including the instability of manufacturing goods overseas. During the pandemic many companies have struggled with their supply chains with their offshore suppliers being unable to export crucial components. As a result, many manufacturers have already moved their production back to the UK, and many more already have plans to do the same through reshoring.
It is also important to consider post Brexit, trading with the EU will now have further complexities and potentially cost implications, while exchange rates and accounting for dealing with suppliers overseas may also incur extra administration and translation costs.
Manufacturing in the UK is seeing a resurgence with many SMEs looking at bringing manufacturing operations back to the UK, according to the findings published by the Manufacturing Advisory Service. The research found that more than a quarter of the businesses questioned said that higher costs associated with overseas production were the principal reason, but 20% cited improving quality as the driver, while 18% were looking to reduce lead times.
Companies originally moved production overseas due to lower labour costs. However, a British manufacturing survey conducted by Lloyds Bank found that 71% of companies considering bringing their production lines back to the UK were doing so due to quality issues. This is a good indication of the high standards upheld by British manufacturers and is great news for the UK manufacturers and supply chains.
The challenges presented by the pandemic, coupled with Brexit, have highlighted the importance of reshoring thanks to the flexibility of local supply chains, reduced lead times, volume demands and easier face-to-face personal contact.
What are the Benefits of Reshoring?
Shorter Lead Times: Customers are consistently chasing shorter lead times and the ability to modify the production process to their needs. Establishing manufacturing closer to the customer shortens lead times and facilitates a more collaborative working relationship with suppliers.
Quality: Each customer is unique, but the need for a consistent supply of a quality product is universal. The medical device industry is of course highly regulated to ensure all manufacturers adhere to an approved standard. However, having a local manufacturing partner makes site visits and quality audits far easier and quicker than having to travel halfway round the world.
The UK is renowned for making high quality products. Products marketed as ‘Made in the UK’ or ‘Made in Great Britain’ carry worldwide prestige and could sell better in both domestic and foreign markets as it’s reported that ‘93% of consumers are willing to pay more for British-made products.’
Reduced Supply Chain Risk: By working with manufacturers who use local suppliers’ risks are reduced as you do not need to import finished goods and navigate the Brexit minefield. You may also benefit from smaller minimum order quantities and not have to commit to large order quantities to fill containers or trucks for shipping. This allows you the flexibility of placing small orders regularly and therefore improving your cash flow.
Reduced Transportation Costs: With products being manufactured in the UK transport times and costs will be reduced. What’s more this will also have a positive impact on your organisations carbon footprint and sustainability goals.
Improved Communication: Two-way, open communication are key to a successful partnership. Operating with a partner in the same time zone, being able to meet in person without the need for a long-haul flight and working alongside a supplier who understands your domestic market, are huge benefits.
What’s more regulatory changes can have a huge impact on a product. Working with a local partner allows processes and practices to be changed and streamlined more easily whilst channels of communication remain open.
Supporting the UK Economy: UK businesses that work with other UK businesses boost the UK economy and create employment.
The UK is a world leader in innovation and is a secure environment for the sharing of intellectual property as intellectual property rights are heavily defended by UK law.
The Move Towards Reshoring
In the UK and US, this trend has already begun. The Economist has suggested that the Globalisation of trade has begun to retract, as a direct result of the COVID-19 pandemic. This repatriation of manufacture is largely supported by Governments, especially in those more sensitive sectors of Technology and Medicine. The possibility for more control over the quality of products, as well as the stimulation of the manufacturing sector, make returning to the UK a potentially beneficial choice.
For more information on the benefits of working with a UK based contract manufacturing partner, please contact us.