Wednesday, 22 August 2012

UK manufacturers are reversing the trend towards globalisation in the light of the threat from natural disasters

The EEF, ‘The Manufacturers’ Organisation’ (previously known as the Engineering Employers' Federation) has released the results of a UK survey that found that companies are now very alive to future threats to supply chain management, with one third of companies viewing it as an issue of Board level attention.

The trend in recent year towards globalisation of supply chains (which has been a significant IT market driver) has brought with it the potential for disruption. Companies that responded to the survey reported that a range of local, international and economic disruptions to their supply chains have had tangible impacts on revenue, orders and meeting customer requirements.

This has led manufacturers to assess where potential vulnerabilities might lie and to take steps to shore up the resilience of their supply chain. Consequently, two fifths of companies are bringing production back in-house, whilst a quarter have increased their use of local suppliers.

Additional findings from the survey show:

  • The average manufacturer has 190 suppliers and 20% said that half are located outside the UK. A quarter have increased their use of overseas suppliers in the past two years.

  • Actions to improve supply chain resilience have included better inventory management, increasing collaboration and planning with suppliers and investment in IT to improve supplier management.

  • One third of companies see supply chain management as a business critical issue worthy of board level attention whilst 60% of companies monitor their immediate suppliers.

  • But, despite the potential risks, the survey showed that only 11% of companies monitor their entire supply chains and 16% of companies do not monitor their suppliers at all.


Review: The number of companies bringing production back in-house is an eye-opener and seems at odds with well publicised economic data for the UK. Also, while a quarter have increased their use of local suppliers, a quarter of manufacturers have also, apparently, seen an increase in the use of suppliers outside the UK in the past two years. So it’s not completely clear what this survey is saying. It will be interesting to see if this shortening of supply chains is confirmed by other sources.

Nevertheless, you would expect this to be the long-term trend. Supply chains are long and stretch globally, making them vulnerable to the disruption from the extreme weather events around the world that climate change brings. It’s too much of a risk to business to ignore. (Although it does appear that companies are only addressing part of the supply chain and could well get caught out by consequential disruption elsewhere).

The ironic aspect is that the IT sector has done well from the globalisation of business over the years and now looks like it may also benefit from a reverse trend. Bringing manufacturing back onshore and putting in place plans to minimise the risks to the remaining international supply chain will need IT input. So ensuring against the impact of climate change requires using more of the stuff that helps cause it …..

© The Green IT Review

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