The “recent events” have highlighted a severe UK supply-chain risk, for example

forced import of 100’s millions of PPE from Turkey and China
unavailability of virus testing reagents
lack of UK vaccine production capacity
Germany’s highly developed biotech industry by comparison to the UK

Manufacture of these and many other products have been off-shored to these and other countries. Now the tide is turning. Isn’t it time to re-shore some of our lost manufacturing base to UK shores?

How and when did all this happen in the first place? Manufacturing was over 20% of GDP in the 70s and employed approximately 25% of the workforce. Many lost their jobs as an outcome of the 3-day week. Then “off-shoring” or Globalisation began in the 80s because labour was so cheap in China and the Far East. It continued for the next 20 years while much of the manufacturing workforce was re-employed in the lower payed service sector. Some of their loss of buying power was fortunately supplemented by cheap imports from those low labour-cost countries to which they’d unfortunately lost their jobs.

Meanwhile the City of London boomed. Being ideally situated between the Tokyo and New York time zones London trades with both on the same day. The “big bang” of deregulation in 1986 furthered this advantage as a high finance hub, substituting for much of the loss to GDP of British manufacturing. London’s ex-Imperial status also served it well as a global trade centre supported by a deep and extensive legal and accounting infrastructure. Lloyds of London is still the world’s leading insurance and re-insurance underwriter. More Euros and Renminbi are traded every day in London than anywhere else in the world, quite apart from US$ and Sterling.

Global trade became the name of the game. This included many British manufacturing companies, which they happily traded in London for cash investment from the US, Far East and Europe. The off-shoring trade was fast and furious. We can see the carnage around us in the form of empty, demolished or re-purposed factories which were replaced by warehouses of imported goods. But we don’t get to experience the supply-chain risk until we really need what only others produce – as in the Pandemic that everyone thought would never happen here.

#Covid19 will be seen as the tipping-point of the reverse-off-shoring phenomenon i.e. re-shoring that began a few years ago.

Tipping the original logic back in our direction were:

rising costs of foreign labour, shipping and insurance
more volatile demand for a constantly diversifying product range “mass customisation”
lengthy supply-chains being less responsive to such fluctuations in demand
more cash being embedded in Working Capital here as inventory to compensate
growing intellectual property risk where Patent law is less well enforced

Since direct labour is roughly 10% to 15% of most manufactured products, after materials and factory/business overhead, the logic of off-shoring was probably flawed from the outset. But who could buck the trend of de-industrialisation, especially when the City was doing so well out of it?

The re-shoring of manufacturing back to the UK began a few years ago but stalled on its way through Eastern Europe, being closer than China and almost as competitive. But, #Covid19 driven questions are being asked and the dreaded Brexit hasn’t gone away.

Maestro’s heritage goes back to the “Father of flow” who was nominated for a Nobel Prize in Economics for Working Capital Management. See Wikipedia.

I have taught and implemented these principles of flow in over 20 industries over the past 20 years in almost as many countries. For more information check Case Studies.

For more information on what this might do for you Contact Us

Michael Morris. UK Operations Director. See LinkedIn