12.06.2020

In the third instalment of Manufacturing Smart Supply Chains, in partnership with Oracle, we explore how the lessons learnt from previous geopolitical crises can be applied to the current pandemic, and how to ensure as we recover - our supply chains become more resilient to future challenges. This series of blogs is about helping manufacturing to #MakeitSmart, adapting to the ‘new normal’. 

Each of the geopolitical events we explored in our second blog emphasised the need firstly to understand your supply chains, and secondly to proactively review your supply chains. But exactly do we mean by this? 

As globalisation has opened the doors to new markets, cheaper raw materials, and shorter lead-in times, supply chains have grown in both complexity and length. As a country with relatively high costs of production, we have positioned ourselves towards the top of the ‘value chain’, concentrating on higher skilled, advanced manufacturing.  But of course this model can’t operate without strong, global supply chains, linking us with countries and markets both below and above us in the value chain. Not only now do parts and components come in from across the world, there are often many individual manufacturers feeding into these supply chains at various points in a product or components journey. 

Understanding your supply chain means knowing where you sit in this journey, and where all of the links fit.  It’s not just something that OEMs should do: everyone needs to know. 

Reviewing your supply chains means regularly monitoring your position: identifying possible causes of disruption and taking measures to mitigate these risks.

In a recent survey of manufacturers across all regions of the UK, an over half (53%) said they were already reviewing their supply chains as a direct result of the covid-19 pandemic, with a future 33% committing to review them in next 12 months [1]. This data shows manufacturers are actively seeking ways to improve, and build resilience into their supply chains. 

Manufacturing is a critical sector making critical components 

If you ask manufacturers directly, which sub-sectors are critical to the UK manufacturing scene, they’ll no doubt say “all of them”, however to try and take a deeper dive into the sector we’ve looked at this from the perspective of the Original Equipment Manufacturers (OEMs). Key sub-sectors to the UK are listed below and where loss of one or more major UK plants could jeopardise ‘critical mass’ in the UK supply chain. They include: 

• Automotive, Aerospace & Defence
• Construction & Building Products
• Packaging
• Green Technologies and Advanced materials
• Healthcare

As explained in blog one, supply chains are highly complex networks and any changes in production methods, delivery times and demand can all have knock on effects across the various tiers of suppliers as well as sectors. A solution posed is reshoring – actively looking to return manufacturing operations to the UK, having previously been sourced or made elsewhere. Whilst re-shoring in some cases, can bring reduced distribution costs, a lower carbon footprint and shortened delivery times, it is not the answer as many have claimed, to building resilient supply chains.  

If anything, the current pandemic has demonstrated that 21st century manufacturing is truly global. Cars assembled in the West Midlands are built from components that are sourced across the world, with electrical units assembled in Hubei, China to braking systems that are put together in Northern Italy.  It would be unrealistic and uneconomical to re-shore the manufacture of all of these components to the UK. Supply chains are complex, integrated, global networks so parts, components and people will still need to move across the world to produce what we buy today.

Instead, we are likely to see a change in how these vital parts and components move and combination of different places they will come from. This may mean a shift from thinking from ‘just in time’ to ‘just in case’. Diversifying your supply base – where possible – will be key.  Ensuring that you have a range of options available, rather than relying on a single supplier or a single location, will help improve resilience.  Combining local suppliers into your existing global supply chains, increasing stocks of critical components, and looking at different non-traditional transport and logistics options.

As the saying goes, you’re only as strong as your weakest link.

Make it smart, make it resilient

Building smart, diversified supply chains can be challenging. As Make UK have previously called for, mapping the supply chains of critical sectors like manufacturing will go some way in ensuring that the impact of geopolitical events are minimised as much as possible. Not only for companies, but policy makers, visibility will highlight pinch points, potential risks and flag any areas for improvement. We also need a national conversation about the extent to which we want to ramp up domestic capability in particular sectors or for particular products, taking care that we prioritise flexibility and responsiveness.  We don’t want to fall into the trap of fighting the last battle.  

And in this process, technology will be key.  We have already seen how industrial digital technologies (IDTs) such as 3D printing can add resilience: when critical components couldn’t be sourced from China, we substituted by ‘printing’ them in the UK instead.  The application of other IDTs (such as robotics) should also form part of any reshoring discussion: taking advantage of advances in technology to ensure new factories and production lines are as smart as possible.  And above all data – collected through the Industrial Internet of Things and analysed using the latest data science techniques – is the power that will help manufacturers understand, plan, and refine supply chains and production processes. 

To ensure they remain competitive for the challenging times ahead manufacturers need to be ready to analysis the data, crunch the numbers and invest in new technologies that will increase automation and productivity.

 Get involved in the conversation @MakeUKCampaigns @SCMOracle @OracleERPCloud #MakeitSmart

Sources

[1] Make UK, Regional Advisory Boards Polling, May 2020