Manufacturing a revival of the UK supply chain

18 September 2012
There has been convergence of commentary about industrial policy from different sources in the past few months, against the backdrop of economic stagnation requiring positive action to drive growth. Among these, there are initiatives to promote apprenticeships; research showing that a quarter of companies have increased their use of local suppliers because of supply risks; and Technology Strategy Board (TSB) competitions for funding to build better connections between original equipment manufacturers (OEMs) and the lower tiers in the supply chain. In this context, in my role as director of the supply chain research centre at Cranfield University, I was presented with a report entitled Rebuilding the UK Manufacturing Supply Base by Dr Mark Johnson and Dr Silvia Rossi prepared for the ERA Foundation. This report is a thorough review of the barriers to growth in UK manufacturing and is a powerful summary of those barriers. First, it shows the emphasis in policy on productivity has been a contributor to UK manufacturing losing nearly one million jobs and 30,000 enterprises in the past decade due to the attrition of supposedly uncompetitive firms. Second, it shows the training and development capacity for supply chain expertise is constrained in comparison to that for engineers. If we are to build relationships between SMEs and OEMs based on service rather than just price, we need to add these skills to the workforce. Third, and among a number of forensically justified points, the financial approach to innovation and growth is more short-term than in other countries such as Germany and Japan. The conclusions are that the government needs to back manufacturing as an economic winner and put in place the conditions for the sector to flourish. These would include tax incentives for investment, along with improved access to finance and skills. Otherwise the trend observed to re-shoring will be left unfulfilled as capacity bottlenecks and financial constraints are exposed. But this is not just the domain of government. The responsibility also falls on OEMs to actively engage with their suppliers to encourage and develop their capabilities, secure their cash flow and incentivise their innovation. Aggressive purchasing and procurement practices are a barrier to this engagement and should be moderated with better skills and vision. These measures have the potential to reverse the decline of UK manufacturing in terms of employment and address the risk issues that are now seen in global chains. At present, there is a mélange of initiatives and bodies available to SMEs to foster their development, including universities, local enterprise partnerships and the TSB. This maze is difficult for hard-pressed SMEs to navigate. It needs simplifying and greater ease of access to highly skilled advice on the real prospects and strategies that will work for each business. From my perspective, the government penny has dropped that there is great economic potential in manufacturing and that it needs to actively engage. The challenge is now for it to formulate a ‘joined-up’ execution of the policy of greater engagement. ☛ Alan Braithwaite is director of the supply chain research centre at Cranfield University and chairman of LCP Consulting  
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