Make UK’s CEO, Stephen Phipson, explains why manufacturers are being urged to step up their adoption of digital technologies to monitor supply chains as part of efforts to build resilience in the face of permanent volatility in their markets.
The UK’s manufacturing base has enjoyed little respite since it came under siege at the start of the pandemic. Business conditions have evolved since that time, but often not favourably. While the end of the UK’s, and other nations’, pandemic lockdowns opened markets back up to trade, few predicted that global demand would exceed supply in such fashion as to hamstring the sector’s recovery.
With volatile pricing, unknown or unacceptable lead times and geopolitical sourcing implications, it’s little surprise that UK manufacturers have needed to place their supply chains under the microscope at extraordinarily short intervals. As manufacturers adapt at pace, supply chain uncertainty is growing.
Our most recent research with Infor finds that supply chain pressures will continue into the year ahead, with the overwhelming majority of companies reporting supply chain pressures in 2023 and looking ahead to 2024.
Resilience in supply chains is growing and driving new behaviours as recent pandemics and global trade disruption have taken their toll on confidence. Companies are focusing on building a resilient supply chain that can withstand these disruptions, manage the risk of further instability, and continue to function.
There is no one size fits all strategy that manufacturers are exploring, and each company will take account of several factors, including the complexity of supply chains as well as the distance from disruption. The most common trends include the diversification of supply, increasing stocking levels as well as shortening of supply chains, with a trend towards reshoring and near-shoring.
In research published in a paper titled ‘No weak links: Building supply chain resilience’, which we carried out with Infor and launched at the Make UK National Manufacturing Conference, 40% of manufacturers surveyed said that they had increased their supply from the UK. With a similar number saying they will do so in the coming year, the concept of reshoring is fast becoming a reality, and the intention is there in the year ahead.
While not fully defined, the concept of “friend-shoring” is also gaining international interest as rather than just focusing on bringing suppliers closer to home, companies focus on growing suppliers in markets which are considered stable, reliable and have shared objectives; in order words “, friendly”.
While it is likely to be a growing trend in the future as markets continue to be volatile and manufacturers are incentivised to look at their supply chains in more detail, there is currently limited evidence that this is leading to change today. However, given the pace at which the geopolitical situation is changing, especially with regard to countries such as China, it’s not too much of a stretch to imagine a scenario when sourcing components might become very difficult.
Supply chain monitoring is also firmly on manufacturers’ agendas, with 82% of manufacturers reporting that monitoring their supply chain is critical to their business.
However, there is a lag between citing its importance and using digital technologies that can help enhance supply chain monitoring. While manufacturers are dipping their toes in the water by using data analytics and dashboards, more sophisticated technologies such as AI and machine learning, which could be even more impactful, are yet to be considered overall. There is a real missed opportunity here, and it’s vital that all stakeholders work together to help businesses understand the benefits.
And it’s not just the use of technology that is hampering the industry’s ability to truly unlock supply chain transformation. Age-old challenges such as lack of skills dominate, as well as companies’ inability to gain timely data.
The energy crisis, access to raw materials, labour shortages, input costs and wider supply chain disruption has created unprecedented times for businesses across the globe. UK manufacturers have prioritised keeping their heads above the water and continue to meet demand when supply-side constraints are making this challenging. However, with supply challenges set to continue, it is clear that companies are going to have to be adaptable, responsive and agile to keep their supply chain risk free.