British Manufacturing - a new breath of life?
It's been a good week for news about manufacturing in the UK. For many years this sector has been thought of as a relic from a past era when compared to the high rolling city alternatives. Volumes have declined and is has been thought that making things no longer mattered to the economy. People are beginning to realise that this isn’t the case.
We need to add value to raw materials and then sell them in order to make profit. High profile news stories in companies such as Nissan help the general public better understand why manufacturing is so important and why the UK has a potentially rosy future.
Many businesses are however still trying to determine whether off shoring (moving manufacturing overseas) is still a viable option. In some cases it is a good move and in other cases it can hurt your business. Most people understand significantly the reduced labour costs involved with having things made overseas, but what about the other costs? Here is some food for thought.
When you manufacture in another continent the speed of response usually reduces. This can lead to an increase in products in transit in order to improve the impact on the cost of transport, or increased stockholding of finished goods near to their point of distribution / use. These costs need to be understood.
Weaknesses in the processes that aren't apparent in the UK may become critical when the various stages are stretched out over different countries. A process Failure Mode and Effect Analysis FMEA (Google the term if you are unsure) can help you to identify areas of your business that need to be overhauled and made stronger.
If the decision to off shore is based solely on the labour cost then it may be worth considering the total supply chain costs. We've already touched on the extra stock in transit, but you may need UK staff embedded in the process in the overseas factory and additional processes in the UK to finish the parts. When you add up all of the additional support and costs, then you will have a much more accurate view of the cost savings for the entire production.
The UK is renowned for its R&D and innovation capability, British design and engineering is still regarded as among the best in the world. In competitive markets when products change constantly the costs of changing production for relatively short runs may not be cost effective. There is a lot of experience in the UK that is not being utilised. The UK is also seen as a good platform by Far Eastern companies to springboard into European and US markets. There could be more ways to take advantage of manufacturing in the UK than are immediately obvious.
Finally, as the low cost economies are forced to comply with environmental legislation and as the gap in the labour cost reduces things are changing.
Offshoring can be an excellent option when the lead time, response to customer demand and maturity of a product is known and under control. Please reflect on these points if you are considering making things a long way from home, there is a lot of potential still here in the UK.