In a previous post we reported on the trend towards some UK companies, who had formerly manufactured their products in China and the Far East, bringing their manufacturing operations back to the UK.
This development, known as ‘reshoring’, is widespread with a survey from the manufacturing lobby group EEF showing that up to one in six of UK manufacturers has brought back at least part of their manufacturing activity in the past three years.
But just why are firms turning their back on China and other traditionally low-cost destinations in favour of Old Blighty? Here we can only talk from own experiences.
Our customers say that if they were to move operations to China they would lose control of vital parts of their business. They love being able to visit us at short notice to discuss things or to see their products in production. By staying at home they can develop a close relationship with their producer and know that there is unlikely to be any cultural misunderstandings or language problems.
For many years China benefited from the low wages of its workers, which manufacturers in the UK have struggled to compete with. But wages in China are not as low as they used to be while manufacturing in the UK has had to strive for efficiency and has become increasingly automated, reducing the need for manual labour and bringing down costs. Rising energy costs have also made shipping products half-way around the world more expensive and hit company’s bottom lines. All these are key factors in narrowing the gap in costs between using China and the UK.
High volume manufacturing in the Far East, on paper, has looked to be more competitive than UK, but in practice the hidden costs and risks involved with high stock holding and storage together with trying to manage fluxuations in demand and the inability to implement design changes and product development has made this inflexible form of supply far less attractive.
Because we are geographically close to many of our customers we are also able to turn things around much quicker compared with our Chinese counterparts. Using us means clients don’t have wait many weeks, months even, for their products to be shipped to them. Deliveries can be flexible and tailored to suit our customers needs to help them reduce storage space and cash tied up in stock. Should there be any product design changes we can implement these almost immediately.
A lot of UK firms are also concerned about China’s patchy record on intellectual property protection. We’ve all heard of cases where new ideas that are shipped to China end up being copied – leading to the market being swamped with sub-standard fakes that demean the original. While we are told the Chinese are getting to grips with this predicament, concerns still abide. In the UK this is not a problem as any reputable manufacturer would be happy to sign and adhere to a non disclosure agreement and handle all confidential information with extreme care.
Finally, we have noticed a growing feeling from many UK firms that they want to keep as much of their sourcing and production in the UK as possible. It’s about supporting UK PLC and it’s about the quality status the Made in Britain still carries.
Of course, the price has to be right and business case sound, and for the reasons listed above an increasing number of UK firms are choosing their home shores.