Is reshoring manufacturing a long-term solution?

Figures released by the EEF manufacturers' organisation stating that one in six British companies has reshored its production within the past three years marks a positive outlook for the UK manufacturing sector. However, supply chain consultancy, Crimson & Co has urged businesses to tread carefully.

Dave Alberts, Director at Crimson & Co states, "The growing complexity of supply chains and the closing wage gaps in countries such as China are driving a need to look again at where to source products or situate manufacturing, and reshoring production is growing in importance, as shown in the EEF statistics. This is especially true for companies operating in countries that are seeing growth in internal demand and which therefore need to reduce total landed costs and improve speed-to-market – elements which are certainly coming to the forefront in the UK as we climb out of recession.

"However, regardless of whether you plan to outsource, repatriate, near source or reshore, organisations must ensure that they make the right decisions this time round and do it properly," Alberts added. "To achieve this, separate decisions need to be made on what to make, and from where it is made. This involves starting by understanding how vertically integrated supply chains need to be and to ignoring what is currently in place. Only once there is clarity on what your core competencies are in terms of processes and products, can you really decide what to make and where you should make it."

Alberts claims that the sourcing approach used in many organisations is often not robust and the motives driving the decisions are short term and have an unhealthy prioritisation around cost. "There needs to be entirely rational reasons for reshoring manufacturing, but these are rarely well thought through because the decision makers are often not supply chain experts, who fully understand the opportunities and many risks, including continuity of supply, product quality, and control of intellectual property. Sourcing decisions need to be linked to a strategic imperative and have full consideration for the risks associated with each sourcing option."

Alberts concludes: "Currently near sourcing and reshoring are 'in vogue', but hopefully they are not a knee jerk response to 'this is a mess so let's revert to the old way of doing things' and not an unstated omission that previous outsourcing decisions were either based on too short term a view, or at best a good idea poorly executed."

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