Reshoring Manufacturing to the UK

Business Insights

Reshoring, or bringing goods previously manufactured overseas back to be made in the UK, has accelerated due to the challenges presented by the pandemic and concerns over the impact of Brexit.

Reshoring is now seen as an increasingly important part of boosting UK manufacturing resilience and ensuring that its manufacturing supply chains are fit for an uncertain future.

Writing in The Engineer, Julia Moore – Chief Executive of trade body, the GTMA and head of Reshoring UK, an initiative which is helping manufacturers tap into the UK existing supply chain, said:

“Ever since manufacturers began outsourcing production to more competitively priced overseas economies such as China and India there has been a race to the bottom based on price. However, the overseas price advantage that enticed many businesses just a decade ago has been progressively eroded, but it is the combined business reality that the flexibility of local supply, quality issues, lead times, volume demands and easier face-to-face personal contact that is driving the need to return to UK suppliers.”

Reshoring has been happening to some extent over recent times as rising wage costs in China and elsewhere in Asia erodes the previous perceived benefits of offshoring. Some companies were also experiencing difficulties with quality, intellectual property theft and long, vulnerable supply chains.

Julia Moore said,

“There is an intrinsic value attached to making things here in the UK, not least being the opportunities to innovate. Reshoring UK highlights the skills and resources of the UK supply chains and aids manufacturers when considering domestic production for new projects or for the relocation ‘onshore’ of existing work programmes.

“Of course, we do not expect that everything is going to come back to the UK, we are not so naive, but we are saying to those manufacturers, do consider dual sourcing. Something like this pandemic is likely to happen again. They need to consider how we mitigate our risk against being exposed to this situation in the future.

“With so much to be gained for both sides, manufacturers only need to look at the advantages of right-shoring, near-shoring, whatever we call it, to see the benefits of shortening the supply chains to gain the benefit of reducing costs, innovation and convenience of a supply chain to manufacturing in the UK.”

Janet Godsell, Professor of Operations and Supply chain Strategy, at Warwick University argues that ‘rightshoring’ is even more important than comprehensive reshoring, saying that the numbers depend partly on definition.

“What we should be focusing on is not reshoring but ‘rightshoring’, making sure we put things in the right place,”
says Professor Godsell, who adds that the emerging trend is for “distributed manufacturing” or having a number of plants around the world, which reduces disruption risk.

Professor Godsell says that for multinational companies the question is what makes sense in terms of supply chain design. Some have a system that is global for raw materials, regional for manufacturing and local for distribution. Companies should look at total cost, including transport and inventory, rather than simply labour costs, as tended to happen in the 1990s’ offshoring wave. The need to reduce lead times and customise products for local consumers are further factors.

A survey by the University of Warwick’s Manufacturing Group, conducted for Reshoring UK, found that only 13 per cent of companies had directly reshored. But that 52 per cent had indirectly reshored, meaning they had decided to increase capacity at home instead of abroad.

MakeUK Senior Campaigns and Skills Policy Manager Bhavina Bharkada, also in an article in The Engineer, said

“For manufacturers, reshoring is a form of diversification and this comes through our latest survey of manufacturers carried out over the summer. The results showed that manufacturers are diversifying their supply chains, with 15% using multiple suppliers, and a further 15% also reporting that they are increasing their use of local suppliers. Being able to draw on multiple suppliers, home or abroad, in different locations helps to reduce disruptions by spreading the risk. It can also increase agility as there are more supplier options to draw from.

“As we look ahead to the challenges manufacturers may face in the longer term, it’s not a question of if another geopolitical event will occur, but when. It’s clear that manufacturers will have to prioritise connectivity and diversification as ways of reducing risk. With increased investment in technology, UK manufacturers can do that by building smart, resilient supply chains that can withstand these external shocks.”

The prime motive for reshoring manufacturing supply to the UK, cited by 71% of those with these plans, was to improve quality – a telling endorsement of the high standards that British manufacturers and workers uphold, which also has extremely positive implications for UK supply chains.