Manufacturing reshoring background information.
Many UK manufacturing companies took the approach of offshoring their manufacturing and production facilities a few years ago when the costs for manufacture appeared significantly lower than could be achieved on home soil. In a rapidly changing global economy the offshore manufacturing model may no longer be as viable.
Global numbers indicate that cost savings on manufacture may mean it is only 12% lower cost to build abroad. China is looking at becoming increasingly middle class with 13% salary increases predicted
Manufacturing reshoring the advantages
- In the majority of cases new products tend to evolve as opposed to being invented, its an evolution as opposed to a revolutionary approach. Evolution often comes about as a direct result of the process of manufacturing. Having the manufacturing facility on site means that efforts are constantly directed at seeking improvements and enhancements
- Keeping your eye on the manufacturing processes allows you to develop an optimum approach with the rationale of then rolling out to other plants or subsidiaries. The classic example of this is Bosch who make everything in Germany
- Its amazing but one of the areas that continues to be difficult to maintain when manufacturing is taking place overseas is quality. The very nature of having product on the water for so many weeks means that in the event of a quality issue, replacing components has significant implications
- Intellectual property if your developing a complex product its difficult to patent
Manufacturing reshoring examples
There have been several examples of reshoring in UK manufacturing in recent years. Here are a few:
- Dyson: In 2019, Dyson announced plans to move its headquarters from Singapore to the UK, citing Brexit as a key factor in the decision. The company also announced plans to build a new electric car manufacturing plant in Wiltshire, which will create around 2,000 jobs.
- Aston Martin: In 2018, luxury carmaker Aston Martin announced that it would move production of its Rapide sedan to its factory in St Athan, Wales. The move brought production of the car back to the UK from Austria.
- JLR: In 2018, Jaguar Land Rover announced plans to move production of its Discovery model from Slovakia to a plant in Nitra, UK. The move was seen as a significant boost to UK manufacturing, as it created around 1,200 jobs.
- Mulberry: In 2018, luxury fashion brand Mulberry announced plans to open a new factory in Somerset, UK, which would bring production of its leather goods back to the UK from China. The move was seen as a sign of growing interest in reshoring among UK manufacturers.
- Gtech: In 2016, Gtech, a UK-based vacuum cleaner manufacturer, announced plans to move production of its products from China to a new factory in Worcestershire, UK. The move was driven by a desire to improve quality control and reduce costs.
These are just a few examples of reshoring in UK manufacturing, and there are likely to be many more in the years to come as companies look to reduce their reliance on overseas production and take advantage of the benefits of manufacturing in the UK.
Reasons given for manufacturing reshoring
There are several reasons why manufacturing companies are reshoring their operations back to the UK:
- Cost: One of the primary reasons for reshoring is the increasing cost of manufacturing in overseas markets. Factors such as rising labor costs, transportation costs, and tariffs can make overseas production more expensive than producing in the UK.
- Quality control: By bringing manufacturing back to the UK, companies can have more control over the quality of their products. This can be especially important for companies that produce high-end or specialized products.
- Supply chain resilience: The COVID-19 pandemic highlighted the risks associated with global supply chains. By reshoring manufacturing, companies can reduce their dependence on overseas suppliers and increase the resilience of their supply chains.
- Brexit: The UK’s decision to leave the European Union has also played a role in reshoring. Some companies have cited concerns about trade barriers and uncertainty around the UK’s future relationship with the EU as reasons for bringing manufacturing back to the UK.
- Environmental considerations: The increasing awareness of the environmental impact of global transportation has also led some companies to consider reshoring. By producing goods in the UK, companies can reduce their carbon footprint and demonstrate their commitment to sustainability.
These are just a few of the reasons why companies are reshoring their manufacturing operations back to the UK. The specific reasons will vary depending on the company and industry involved.
Manufacturing Reshoring Advantages and Disadvantages
Reshoring manufacturing to the UK can have both advantages and disadvantages. Here are some of the key ones:
- Shorter supply chains: By bringing manufacturing back to the UK, companies can reduce their reliance on overseas suppliers and shorten their supply chains. This can reduce lead times and improve responsiveness to changing customer demand.
- Quality control: Having manufacturing operations located closer to the company’s headquarters can make it easier to oversee quality control and maintain consistent standards across different products.
- Reduced transportation costs: By producing goods in the UK, companies can avoid the high transportation costs associated with shipping goods from overseas. This can help to reduce overall production costs and improve profitability.
- Improved sustainability: Reshoring can help to reduce the carbon footprint of a company’s operations by reducing the distance that goods need to be transported.
- Higher labour costs: One of the main disadvantages of reshoring manufacturing to the UK is the higher labor costs compared to some overseas markets. This can make it harder to compete on price, particularly in industries where price is a key factor in purchasing decisions.
- Higher overhead costs: Operating a manufacturing plant in the UK can be more expensive than in some overseas markets due to higher taxes, energy costs, and other overhead expenses.
- Skills shortages: Some companies may struggle to find skilled workers with the necessary expertise to operate and maintain their manufacturing operations in the UK.
- Regulatory compliance: Operating a manufacturing plant in the UK can also be subject to stricter regulations than some overseas markets. This can increase compliance costs and add complexity to operations.
These are just a few of the advantages and disadvantages of reshoring manufacturing to the UK. The specific factors will vary depending on the company and industry involved, and each company will need to weigh up the costs and benefits before deciding whether to reshore.