Localise West Midlands welcomes a statement from Professor David Bailey (Coventry University Business School) that “repatriating activity – including some sourcing – to the UK is very much on the agenda”.
He recently summarised the impact of offshoring on British manufacturing over the last decade, and considered the tentative signs of “onshoring” in certain sectors due to a combination of factors, including:
- a more competitive exchange rate (despite the very recent appreciation of sterling),
- increased transport costs,
- rising wages in key areas of China,
- and a greater awareness of supply chain resilience, in the wake of disruption due to the Japanese earthquake and tsunami.
The UK could learn from policy initiatives taken by the US government
In the United States, Professor Bailey notes, this has been recognised as a major issue, leading to major policy changes. Last year President Obama launched a $500 million package aimed at boosting manufacturing employment, and earlier this year tax incentives were created, one offering a 20% income tax credit to allow for the expenses of shifting operations back to the US.
The debate in this country is just beginning
A recent Engineering Employers’ Federation (EEF) survey found that even during the 2008-2009 recession some 60% of British firms had concerns over the vulnerabilities of overseas suppliers, as against 20% being concerned over domestic suppliers. Around two thirds of firms had re-evaluated their supply chains to minimise such risks, with some bringing production back to the UK and other sourcing more components locally. Proximity matters in ‘just-in-time’ processes.
Rebuilding manufacturing capacity
Professor Bailey believes that the UK needs to consider how it can tailor an industrial policy focused on building manufacturing capacity, particularly in the supply chain. There is a ‘window of opportunity’ here.
More firms would ‘buy British’ if the components were available from local suppliers, and if end users and component suppliers could be ‘matched up’ in the UK, thereby offering the potential for some supply chain activity to be repatriated. Rebuilding supply chains locally can also offer customers greater flexibility in production as well as greater resilience.
A major policy effort is needed to make this happen on a significant scale
David Bailey appreciates the coalition government’s Advanced Manufacturing Supply Chain Initiative to help to develop local suppliers around the UK’s major manufacturers. The fund is aimed at supply chain companies and can be used for capital expenditure, skills and training, and R&D projects. However the amount of funding on offer, £125 million, is small, and due to the minimum project threshold value of £2 million, bids often need to be from several companies clustering together. The scheme should be extended so that smaller firms can directly access the support available.
Professor Bailey concludes that though “overall, there appears to be a real opportunity to rebuild some of the UK’s fractured manufacturing supply chains . . . a more concerted effort is needed as part of a wider industrial policy that looks to build manufacturing capacity, strengthening the possibility of repatriating certain manufacturing activities and the sourcing of some components back to the UK.”
Many will hope to see a similar shortening and strengthening of the country’s food supply chains.
Professor Bailey’s two page article may be read here: http://www.birminghampost.net/birmingham-business/business-comment/2012/07/06/david-bailey-seizing-the-onshore-opportunities-65233-31349483/2/#ixzz20CIbs2rD