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After two years of global supply-chain disruption, and with dark
clouds on the horizon, manufacturers around Britain's second
city of Birmingham say they are inundated with orders, helped by
new and old domestic clients bringing some production back home.
For decades, supplier decisions were based largely on price. But
the pandemic and mounting geopolitical tensions have undermined
the mass outsourcing model, prompting some buyers to build
alternative production lines nearer to home, despite it being a
lengthy process that can drive costs higher.
In Britain, this "reshoring" trend is also being driven by the
introduction of full border checks following the country's exit
from the European Union.
"It takes a bit of a seismic shock to make companies re-evaluate
strategy," manufacturing boss Tony Hague said. "But price
becomes fairly irrelevant if you can't get the stuff."
In the last two years, his PP Control & Automation, located just
north of Birmingham, has won more than 2 million pounds' ($2.4
million) worth of work that had previously been handled outside
Britain, and its order book is up 25% in that time.
A survey by industry group Make UK of 132 companies, conducted
just before Russia's invasion of Ukraine, showed that over
two-fifths had increased their British supply base, with almost
a fifth describing it as a "significant re-routing".
This shift could prove significant in Britain, where the
collapse of heavy manufacturing from the late 1970s onwards
eroded many skills among the workforce, a gap that's starting to
be filled by robotics, automation and 3D printing.
Such reshoring and nearshoring, or bringing production to
countries closer to home, is being replicated around the world -
though without the complexities of Brexit - in a burgeoning
trend that could impact local jobs and economies, as well as the
environment.
A survey of more than 1,500 global supply chain leaders by AI
group Interos, in the first quarter of 2022, found that more
than half said they planned to bring suppliers closer to their
operations.
Freight giant XPO Logistics told Reuters it was also seeing
clients in textiles and automotive move some production from
Asia to Morocco, and to Eastern Europe.
Nonetheless, while orders may be flowing into British factories,
many manufacturers face their own supply-chain disruptions of
varying degrees in their procurement of raw materials and parts
from abroad, slowing their production.
There are perils involved in the costly and time-consuming
process of investing in new machinery, finding new suppliers for
materials and building out logistics chains, all with a
potential recession on the horizon.
In an effort to mitigate some of these risks, and protect
against a reversal of fortunes should the global disruption
subside, some British manufacturers are locking clients into
multi-year contracts to justify hiring and investment costs.
NO PARTS? NO CARS
Rowan Crozier at precision-stamping group Brandauer in
Birmingham said new customers wanted to de-risk operations. With
his order books for tools having doubled over the past two
years, he has opened a second site and is getting his biggest
clients to agree to five-year to six-year contracts.
While in previous years he could not compete with Chinese
factories that could churn out products at speed, he says
investment in automation, robotics and staff training has
changed the dynamic.
He says he can now manufacture a high precision progression
stamping tool - used to produce electrical connectors which go
into printed circuit boards - in-house for around 5-15% above
the prices of quality Chinese toolmakers. Six years ago the
price gap was nearer to 30-50%.
Ten miles away, Tony Sartorius' Alucast is also receiving calls
from customers who moved their production to India, China and
Korea in the early 2000s, asking if he can help. He too insists
on long-term contracts.
"From the back end of the 90s and up until fairly recently,
price has been the driving force," he said. "But if you don't
get your parts, you don't make your cars, and that's damaging."
There are certain companies that have always sought to keep
their manufacturing in Britain, typically makers of premium and
niche products.
Pashley Cycles, which produces classic English bicycles that can
cost about 1,000 pounds, as well as cargo delivery bikes and
cycles for city share schemes such as in London, was less
affected than others during the pandemic as it sourced and
manufactured so many of its products at home.
Pashley's Managing Director Adrian Williams said he was met with
bemusement in years gone by when he tried to buy parts from
local factories, which would ask why he was coming to them and
didn't just buy abroad like everyone else.
Now, he adds, there is increasing collaboration in the region.
OPPORTUNITY KNOCKS
Pashley and several Birmingham factories work with non-profit
organisations such as WMG, an academic department of the
University of Warwick, and the Silverstone Technology Cluster,
which promotes advanced engineering.
Pashley sources parts developed in Britain's aerospace industry
and other high-end sectors.
Mark Godfrey-Vallance, principal engineer at WMG, which links
suppliers with customers and promotes innovation, said the
creation of new supply chains to build products like electric
vehicles was also driving a spirit of collaboration.
"The opportunities are there and if we don't grab them in the
UK, I can guarantee that people elsewhere will," he said.
John Glen at the Chartered Institute of Procurement & Supply, a
global industry body, said European manufacturers had a window
to prove they could compete with lower-cost rivals in Asia while
the global movement of goods remained fractured.
But, as a worldwide economic storm brews, and the prospect
remains that supply chains could recover, manufacturers in
Britain could be burnt if they don't secure long-term contracts.
For now, though, the mood remains buoyant.
UK order books surged between November last year and May this
year, before easing slightly in June and July, according to data
from the Confederation of British Industry.
Although the reshoring of some production is unlikely to
increase manufacturing's input to the British economy from its
current 10%, it could boost productivity in a country that has
badly lagged on that front since the financial crash of 2007-09.
As Hague of PP Control & Automation walked around the busy floor
of his factory, which employs 230 people, he said higher labour
costs in Britain did not preclude staying competitive. Wages are
only one component of the overall cost of a product, with other
factors including materials and energy, he added.
"If you invest in your people, invest in training, invest in
automation, invest in robotics, do all the right things,
basically as a UK manufacturer, you can be competitive," he
said.
($1 = 0.8241 pounds)
(Reporting by Kate Holton; Editing by Pravin Char)
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