Knowledge Hub
06/11/2023
Reshoring
What is Reshoring?
Reshoring is the process of returning product manufacturing back to its country of origin. It essentially involves bringing production activities back from overseas to wherever the company who owns the products is based.
In recent times, the UK manufacturing industry has seen a significant increase in the number of domestic companies who have brought production of their goods back to the UK.
Overseas manufacturing outlets have become a less attractive option in recent years due to several reasons.
Let’s explore some of the external forces that have put pressure on overseas manufacturers….
Key Reasons for Abandoning Overseas Manufacturers
Longer lead times – Some overseas manufacturers have traditionally operated on very short lead times, particularly those in Asian markets. This has made them very attractive to UK customers who need parts fast. However, in recent times, changes in the global political landscape have stifled international supply chains resulting in less timely – and in some cases, unreliable – means of delivering products to other parts of the world.
Price – supply chain pressures and economic volatility has meant that some overseas manufacturers are no longer as competitive. Some UK-based customers have seen their costs of doing business with Chinese manufacturers go up by over 25%.
Ukraine war – the political turmoil in Eastern Europe has led to supply chain disruptions, export challenges, rising costs, and uncertainty in global financial markets.
Energy crisis – rising costs have meant that Chinese manufacturers have had to increase their prices, the burden of which has been absorbed by the customer.
COVID-19 – delays and shortages related to the pandemic have prompted many customers to re-evaluate their reliance on China, and to look elsewhere for an alternative solution.
Geopolitical factors – China has found itself on the opposing side of the table during the current Russia/Ukraine situation, which has left it at odds with many European customers.
Environmental issues – British companies are under increasing pressure to ensure compliance with environmental and corporate social responsibility best practice. Countries with poor human rights records, or those who do not protect workers’ rights, are rapidly becoming less attractive partners.
Why UK Companies are Moving Their Manufacturing Back Home
- Greater certainty around delivery times
- Less potential for supply chain disruptions
- Easy, more flexible collaboration with domestic suppliers
- The language barrier is eliminated, and communication is more open
- Reduced supply chain complexity
- Greater confidence in the quality of the final components
- Cost advantages of overseas production are now less favourable (in China, for example, unit labour costs have risen sharply in the last few years)
- Reduced shipping costs – the price of shipping goods from Asia, South America, and mainland Europe has increased dramatically, with serious implications for UK SMEs.
Some studies suggest that up to 40% of small businesses are considering a switch from overseas manufacturers to UK manufacturers, so that they can remove import challenges post-Brexit and reduce rapidly rising freight costs. These costs, coupled with increased legislation and bureaucracy, have made overseas manufacturing a financial and logistical headache for many UK businesses, eroding profit margins and stifling growth.
Manufacturing in the UK
The UK is known across the world as a manufacturing power. We have a rich history of making products and exporting them to the rest of the world. We are skilled in innovation, with advanced technologies and infrastructure to support manufacturing of all kinds.
Despite changes in the recent socio-political environment, such as Brexit and COVID-19, we remain a highly competitive option for companies at home and abroad who have a requirement for British manufacturing.
Let’s look at what makes us so unique….
Skilled manufacturing professionals – for centuries, the UK has had a distinguished history of manufacturing. Through the generations, we have demonstrated a strong tradition of producing expert engineers and technical craftsmen and women, which sustains to this day.
Education – the UK has some of the best universities in the world, with some of the most talented young engineers graduating every year, many of whom go on to embark upon careers as design engineers, product designers, and manufacturing professionals.
Dynamic supply chain – there are a range of support services which are available to manufacturers, such as management consultants and financial experts.
Research and Development (R&D) – the UK Government has invested in many research and development facilities to support companies who are looking to manufacture products in the UK.
Infrastructure – the UK has a well-developed infrastructure, including excellent transport networks and strong access to raw materials.
Legislation – clear and robust legislative policies which have been passed into law to protect businesses and to support entrepreneurial endeavour, including intellectual property (IP), patent protection, and trademarking laws.
Pro-government business support – post-Brexit, the UK Government has introduced a range of measures to support British businesses, including regulatory reform and tax incentives.
Stable political environment – the UK is a stable democratic country which has one of the strongest legal systems in the world. This stability provides businesses looking to manufacture products in the UK with confidence and security that any capital investments will be protected under the right of law.
Are You Looking to Reshore?
If reshoring is something you’re considering, we’d be very interested in hearing from you.
We’ve taken on several new customers lately who have moved their manufacturing projects from overseas territories such as China back to the UK.
If this is something you’re considering, please contact us on +44 (0) 121 550 5868, or email info@rptechnologies.co.uk.
