It's no secret that reshoring has very much gained traction within the UK subcontract engineering market in recent years. Brought about by an increased focus on quality and lead times over price, and then rapidly accelerated by the ramifications of Brexit and the COVID-19 pandemic, reshoring has become a common theme of late.
While this trend is a positive change for the UK engineering industry, which has long lost business to cheaper overseas markets during preceding years, it does have wider implications for both buyers and suppliers of engineering services. Reshoring will mean that expectations need to be better managed and adjusted and that the industry needs to be prepared for the changes that come with an influx of national activity. However, if handled correctly, this could spell an important turning point for the UK's engineering sector.
There's Always a Compromise:
Buyers are now benefiting from reduced lead times and improved quality; however, the trade-off is that UK suppliers often command a higher price for their services.
While every buyer has different priorities when it comes to outsourced manufacturing, the three factors that often top the list are price, quality and lead times. However, no matter which part of the world you're sourcing from, you are never likely to get all three boxes ticked.
The main appeal of overseas manufacture has been largely price-driven; although buyers were able to keep their costs down by utilising overseas services, the result was often that components took months to arrive and quality was not always up to scratch. By reshoring their subcontract manufacturing efforts, buyers are now benefiting from reduced lead times and improved quality; however, the trade-off is that UK suppliers often command a higher price for their services.
While price will always play an important role within the sourcing process, if reshoring is to continue, it is imperative that buyers remember that the higher price that comes with UK manufacture also spells added value. A higher degree of flexibility and the benefits of a better relationship with a supplier cannot be understated - if you find yourself in a jam, then a supplier you know personally is much more likely to help you out, especially as their own capacity becomes diminished as a result of reshoring.
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A little more planning may be required by purchasers in order to maximise the benefits of a UK subcontract solution.
The issue of capacity will also largely feature within the sudden demand for UK suppliers. Despite the reduced lead times afforded as a result of a national supply chain, buyers need to be aware that these may be longer than previously afforded when overseas manufacture was more prominent. Further impacted by the worldwide materials shortage, these factors will mean that a little more planning may be required by purchasers in order to maximise the benefits of a UK subcontract solution.
Furthermore, suppliers may be tempted to proverbially bite off more than they can chew in order to keep their customers happy. While this may help to increase cash flow in the short-term, making promises to clients that cannot be kept is a surefire way to damage your reputation in the long-term. Instead, transparency surrounding best prices and lead times is now more vital than ever if the transition to a UK-led subcontract solution is going to run smoothly for both parties.
Conversely, the influx of work may provide UK subcontract suppliers with the perfect springboard from which to expand or grow their business. Not only are the opportunities themselves there for the taking, but incoming subcontract enquiries will shed valuable light on the optimum business direction to take. Fabrication and sheet metal companies may decide that investment in a laser cutter is a wise decision, for instance, whilst machinists may consider adding multi-axis capabilities to their portfolio if this is heavily reflected in the business enquiries they receive.
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Closer Working Relationships:
Reshoring will undoubtedly shed the spotlight on the importance of closer, more personal working relationships between manufacturing buyers and subcontract suppliers.
National supply chains naturally lend themselves to closer working relationships, due to the fact that obstacles such as time zones are removed from the equation. The ability to perform in-person visits without too much planning will mean that buyers have better control over their projects; meanwhile, suppliers will be afforded the opportunity to invest time into the relationship and try to win more of the total potential business.
Despite the price benefits traditionally associated with international sourcing (though now diminished as a result of Brexit), the distance between buyer and supplier gave purchasers little control over the outcome of their projects. The quality of components was often not clear until shipment was made - sometimes months after the order had been placed. Furthermore, extended lead times left little room to manoeuvre when it came to rectifying errors, which potentially led to disastrous - and usually costly - consequences throughout the rest of the supply chain.
Reshoring will undoubtedly shed the spotlight on the importance of closer, more personal working relationships between manufacturing buyers and subcontract suppliers. Whilst prices per part may be higher than those found overseas, the value-adds offered by UK suppliers will mean that buyers will receive a lot more benefits for the price that they pay.
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Turning Negatives Into Positives:
It is crucial that the reshoring process is carefully managed so as to ensure its success.
Although the political climate presiding over the UK since 2016 - along with the eventual materialisation of Brexit earlier this year - has spelled a lot of disruption for our manufacturing industry, the return of subcontract engineering to home soil will hopefully go some way towards offsetting the upheaval in the long-term. Although reshoring has been gaining momentum for some time, these recent events will no doubt accelerate the growing need for national subcontract engineering services and help to solidify the UK's position as one of the world's top manufacturing nations.
However, it is crucial that this process is carefully managed so as to ensure its success. Whilst the influx of work will exponentially benefit both the economy and individual subcontract engineering firms - with manufacturing buyers also enjoying a range of benefits such as improved lead times and better quality - it also has the potential to overwhelm. Given the added challenges of the global materials shortage and the ongoing health crisis, it is essential that both buyers and suppliers are aware of what to expect and how to best manage this exciting transition.
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