The pressure on global supply chains has increased enormously over the past few years. Many manufacturers have learned, to their cost, the dangers of losing control of their supply chains and being powerless to do anything about it. That’s why reshoring—the process of bringing back manufacturing to the country where the OEM is based—is becoming such a trend. It gives manufacturers back the supply chain control that is missing when they rely on suppliers further afield. A recent Retail Think Tank study revealed that its members believe a localised supply chain could help stimulate manufacturing.
How can this happen in practice, though, and what should OEMs consider when approaching reshoring?
Ongoing supply chain uncertainty
Anyone who works in manufacturing will be only too aware of the deep-rooted supply chain issues that show no signs of subsiding any time soon. This applies just as much to retailing and distributors too. Make UK research has shown that 79% of companies believe supply chain vulnerability will be a risk to their business over the next two years. These issues can affect mid-market manufacturers more than larger global players that have the resources and infrastructure to absorb any impact.
The emergence of COVID-19 was a major contributor to manufacturers’ loss of supply chain control. Relying on supplies from the Far East had been cost-effective, but when components cannot reach you or are hugely slowed down, those benefits are swiftly negated. Component and material shortages lead to fluctuating prices, making imports less cost-effective.
That was a once-in-a-generation occurrence but highlighted that dependency on a handful of key suppliers or countries can lead to critical shortages. Following the pandemic came the conflict in Ukraine and other geopolitical turbulence, which increased shipping costs, lead times, returns, and import duties, making shipping to the UK prohibitive.
This supply chain uncertainty occurred alongside an increased need to reduce air and shipping miles to meet ESG requirements and a growing consumer preference to ‘buy local’. Local manufacturing offers improved quality, reduced environmental impact, and regional economic benefits, all of which are important to customers. It also enhances transparency, aligning with this consumer interest in product origin.
How to approach reshoring
Given all of the above, it’s little surprise that companies recognise the value of localised supply chains to drive up quality standards, develop skills, support their local economy, and reduce mileage and lead times. Reshoring can be done by moving operations back to the OEM’s country, building new local production facilities, or strategically building a network of local suppliers. But central to each is the use of technology.
The right ERP solution can give mid-market manufacturers the control and understanding of their supply chain that they require to facilitate reshoring. Furthermore, the accessibility of productive ERP and automation solutions for smaller manufacturers is improving as local, focused providers improve their cloud offerings and make them easier to adopt.
It’s also true that suppliers are embracing automation. The tight job market post-COVID and the demand for specialist skills have raised wages and created a skills gap, hampering reshoring efforts. Many SME manufacturers are automating routine processes to improve efficiency, provide business intelligence, address labour shortages, and cut costs. If suppliers adopt these strategies, a manufacturer can benefit from their efficiencies instead of seeking solutions from overseas.
Future-proofing the business
The last few years have clearly demonstrated that we live in an increasingly turbulent world. Manufacturers that rely on geographically dispersed suppliers are exposing themselves to a level of risk that’s hard to justify.
Reshoring is a way of gaining much greater control of your supply chain. It also supports local innovation and skills development, develops shared resources and expertise, and ensures products and components meet quality standards more closely. In short, it’s a way to improve supplier performance and relationships and to help future-proof the manufacturer itself.
In a time when control has never been more important for manufacturers, reshoring provides that control and much more.
Jon Roberts is a Director at Orderwise, Forterro’s mid-market industrial ERP solution.
