Make UK/Infor Survey: Industry Calls for Supply Chain Task Force

United Kingdom-May 16, 2022, 01:00 PM

‘Just in time’ being replaced by ‘just in case’ as volatility becomes the norm and companies increase suppliers close to home

Key survey findings:

Pandemic (93%) and Brexit (87%) have caused disruption to supply chains
80% of companies say increased energy costs have caused disruption to supply chains
Increased raw material (79%), transport costs (74%) and transport availability (54%) major supply chain challenges
Almost a quarter of companies have between 51 and 100 suppliers, 14% have more than 200
Over a third of companies have increased the total number of suppliers in the past two years, almost half of companies increased their UK suppliers
In the next two years, almost half of companies intend to increase UK suppliers, a quarter to increase suppliers from Western Europe, including Turkey
Almost three-quarters of companies have an intermediate or advanced supply chain strategy
One in five companies have digital supply chain monitoring but concerns over smaller companies only having a more basic approach

Britain’s manufacturers are calling for a cross-industry and government taskforce to assess the UK’s current and future supply chain resilience and capabilities, as well as establishing an action plan to protect the economy from any future significant disruptive event.

The call was made on the back of a major report by Make UK and Infor, ‘Operating without Borders – Building Global Resilient Supply Chains,’ which shows the stark impact on UK manufacturers from the economic shocks of the past two years and the knock-on effects to supply chains from increased energy, transport and raw material costs, as well as transport availability.

The findings also indicate that the longstanding strategies manufacturers have adopted to off-shore in response to globalisation, operating a ‘just in time’ process with virtually guaranteed transport links and low-cost production, have been turned upside down with disruption and increased volatility fast becoming normal.

This has led to companies significantly increasing the number of suppliers so they have more options in the event of disruption, with these suppliers increasingly sourced in the UK or Western Europe. Looking forward, the report shows these trends were already accelerating in the next two years, to which the invasion of Ukraine and continuing disruption in China are likely to have given further impetus.

Commenting, Verity Davidge, director of policy at Make UK, said: “For decades manufacturers have used increased globalisation and supply chains to drive efficiency and create lean manufacturing processes, which have helped them grow and remain competitive. However, the economic shocks of the last few years have created a perfect storm, which has turned these models upside down and forced companies to re-evaluate their business strategies and seek suppliers much closer to home.

“As a result, we may now be seeing the era of globalisation passing its peak, with disruption and volatility for global trade fast becoming normal. For many companies, this will mean leaving ‘just in time’ behind and embracing ‘just in case.’”

Andrew Kinder, Infor SVP international strategy & sales support, added: “Following a succession of shockwaves — Brexit, Covid and instabilities in Europe — supply chain strategists are examining the vulnerabilities of their supply chains. Long-held beliefs in lean, just-in-time and off-shoring are being questioned, as volatility and uncertainty replaces predictability and reliability. The rules of supply chain are being redrawn. Resilience trumps efficiency with winners being those who have been able to rapidly adjust their supply chain strategies to accommodate the succession of shocks.

“Digital technologies play a part in building resilient supply chains, and this survey by Make UK provides much-needed insights from manufacturers on their response to this new norm and their use of digital to navigate the storm. As a sponsor of this research, we support the recommendation that: Supply chain software management should be included in the UK’s Help to Grow: Digital scheme.”

According to the survey, the biggest disruptor in the past two years was the pandemic with 93% of companies saying it had caused some form of disruption (for 47%, the impact was catastrophic or major) followed by exiting the EU for 87% (for 32%, it was catastrophic or major). Over half of companies also said the Suez Canal incident had caused disruption, even though it was blocked for only a week, highlighting the dependence on Far East supply chains.

In response, almost two-fifths of companies (38%) said they have increased the number of suppliers in the past two years. Over two-fifths of companies (42%) have increased their UK supply base (for almost a fifth, it is a significant rerouting) with over a quarter increasing supply from Western Europe, including Turkey.

This trend is set to accelerate with over two-fifths of companies (43%) saying they expect to increase UK suppliers in the next two years, with a quarter predicting an increase in suppliers from Western Europe and Turkey. By contrast, over the same period, 12% of companies say they intend to reduce suppliers from the Far East.

As well as changing the location of their supply base, manufacturers have also increased the number. Almost a quarter of manufacturers (22%) have between 51 and 100 suppliers, a further 15% have between 101 and 200, and 14% have more than 200. This highlights the complexity of supply chains, but also the need to ensure supply chain strategies are put in place along with technologies to monitor them.

Whilst an encouraging number (72%) describe their supply chain strategy as intermediate or advanced, those describing their strategy as basic tend to be SMEs, with a clear link between how the more advanced strategy companies operate and the number of suppliers. Furthermore, when it comes to implementing digital supply chain solutions, manufacturers, for the most part, have only a limited or basic focus (28% for both).

However, at the other end of the scale, a fifth of companies say they have an advanced digital strategy and a quarter (24%) have intermediate, with two-thirds of larger firms (64%) at the advanced stage. On a positive note, companies are planning to significantly increase their spend on digital supply chain technologies, with over two-fifths of companies (42%) planning to increase their investment by more than 10% in the next two years.

For those companies that do increase their investment in supply chain technologies, the benefits are clear in terms of faster response times (34%), lower inventory costs (28%), greater operational efficiency (28%), and greater cash flow (21%).

In response to the major shocks to the economy and the likelihood of increased volatility for trading networks being normal in the future, Make UK has made the following recommendations to government to help ensure the UK economy is in a much stronger position to respond to any future disruptive events. (Extra commentary on each in Notes to editors)

Government should establish a cross-industry and government resilience taskforce.
Supply chain software management should be included in the Help to Grow: Digital scheme.
Develop and publish public data that reports on lead times of raw materials to help businesses plan ahead.
Work with industry to explore how larger firms can provide greater visibility of supply chains at higher tiers to share information with SMEs with limited scope.
Introduce capital allowances or a form of tax break for businesses that adopt certain digital solutions such as blockchain.
Develop regional institutions and establish long-term initiatives to deliver supply chain support:

The survey of 132 companies was conducted between Feb 2 and 23.

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Notes to editors

This resilience taskforce would assess further risks of supply chain disruptions and establish an action plan for any future disruptive event. This includes a supply chain mapping exercise to understand the UK’s domestic capabilities as well as building an evidence base on opportunities and challenges associated with current and future supply chains.
The Help to Grow: Digital scheme was hoped to be a solution that would accelerate SME manufacturers’ push to digitalisation. However, manufacturers have highlighted its limitations in its current version, which covers CRM and accounting software from a few accredited vendors. The scheme should be expanded to include supply chain software management to make it more useful and accessible to manufacturers.
Clearly manufacturers have been hit with supply chain disruptions to raw materials. However, there is no information on current lead times. Government should work with industry on developing and publishing data to understand lead times and allow manufacturers to plan ahead.
Make UK research demonstrates a lack of visibility particularly among SMEs. Exploring how larger firms and OEMs can provide greater visibility to share more broadly will improve overall end-to-end visibility.
Highlight the conglomeration affect if business did this across a supply-chain resulting in greater end-to-end performance.
Manufacturers would welcome an organisation such as MAS (Manufacturing Advisory Service), which acted as a strong support service to companies. There is a strong case for a regional approach, but it must work alongside the existing regional network, e.g., LEPs.

About Make UK

Make UK, The Manufacturers’ Organisation, is the representative voice of UK manufacturing, with offices in London, Brussels, every English region and Wales. Collectively, we represent 20,000 companies of all sizes, from start-ups to multinationals, across engineering, manufacturing, technology and the wider industrial sector. We directly represent over 5,000 businesses that are members of Make UK. Everything we do — from providing essential business support and training to championing manufacturing industry in the UK and the EU — is designed to help British manufacturers compete, innovate and grow. From HR and employment law, health and safety to environmental and productivity improvement, our advice, expertise and influence enables businesses to remain safe, compliant and future-focused. Visit https://www.makeuk.org/

For more information

Mark Swift
Head of Communications
Make UK
07979 543710

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