Cutting costs top operational challenge for manufacturers

Will Green is news editor of Supply Management
31 July 2020

The rising cost of raw materials and components is the main economic challenge for manufacturers in the UK, according to research.

A report by consultants Delaware said a survey showed a third of firms (33%) identified rising costs as the key challenge, followed by the rising cost of shipping goods (22%).

The survey found a quarter (26%) of firms said reducing operating costs was among the top operational challenges they faced in their supply chain, followed by getting products or services to market quicker (22%) and improving product quality (21%).

The research took place in January and February, ahead of the full coronavirus pandemic, but Delaware said spending cuts and tighter cost management “will be an inevitable and pragmatic response to the virus”.

The report said company-implemented or regulation-driven sustainability requirements had raised labour costs in the supply chain for 28% of firms, while 38% said rising costs would be one of the biggest impacts of Brexit.

Cost reduction was the key reason almost half (47%) of firms wanted to innovate or make changes to their organisation, followed by the desire to drive operational efficiencies and productivity (42%).

The research found 46% of firms believed components were “very easily traceable” across the supply chain, while the same proportion (46%) said they were “somewhat traceable”. For 7% they were “not very easily traceable” and for 1% “not traceable at all”. Just 15% of respondents said their data was completely accurate.

Richard Seel, managing director (UK & US) at Delaware, said: “Keeping costs down across their operations is an overriding concern for every manufacturer in these uncertain times.

“Spending cuts and much tighter cost management will be an inevitable and pragmatic response to the virus outbreak as manufacturers look at ways in which they can improve the bottom line. 

“Yet, the pandemic is set to have a far-reaching, long-term impact on the manufacturing sector, so manufacturers will also need to look at how digital transformation and the use of the latest advanced technologies can keep costs under control over the longer term.”

The survey involved 100 senior decision-makers at mid-market UK manufacturers.

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