'Just in time' is being replaced by ‘just in case’, as volatility in the supply chain continues and companies increase suppliers close to home, according to a survey of manufacturers.
The report, Operating without Borders – Building Global Resilient Supply Chains, published by this week by manufacturers' organisation Make UK and enterprise software firm Infor, shows that the strategy of operating a just in time process with virtually guaranteed transport links and low-cost production has been turned upside down, as disruption and increased volatility fast become normal.
On the back of the report the UK manufacturing industry is calling for a cross-industry and government supply chain taskforce to help protect the economy from any future supply chain shocks.
The report is based on the findings of a survey of 132 senior decision makers in the manufacturing sector, carried out in February this year, ahead of the Ukraine War.
It found that the biggest disruptor in the last two years was the pandemic, with 93% of companies saying it had caused some form of disruption and 47% saying the impact had been catastrophic or major.
Brexit was the second largest disruptor (87%) of which 32% said its impact was catastrophic or major. Over half of companies also said Suez Canal blockage had caused disruption, even though it was blocked for only a week, highlighting the dependence on Far East supply chains.
Transportation costs were cited as the second biggest external supply chain challenge (74%), after raw material price rises . The survey found transportation costs were a particular challenge for manufacturers who had between 26 and 50 suppliers (27%). However, where manufacturers had either more or fewer than this number of suppliers, the impact of increased transportation costs was far less.
The report says this suggests that there is a sweet spot in how many suppliers to have. Manufacturers at both extremes, having either less than 100 or more than 200 suppliers, were able to mitigate the impacts of increased transportation costs through either economies of scale or by having a very small pool of reliable logistical partners.
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The survey revealed that the disruption to just in time processes has led to companies significantly increasing the number of suppliers, to give them more options in the event of disruption, with these suppliers increasingly sourced back in the UK or Western Europe.
It found that 38% of respondents have increased the number of suppliers in the last two years. In addition, 42% have increased their UK supply base, which for almost a fifth was a significant re-routing. Over a quarter increased supply from Western Europe, including Turkey.
This trend is set to accelerate with 43% saying they expect to increase UK suppliers in the next two years, with a quarter predicting an increase in suppliers from Western Europe and Turkey. By contrast, over the same period 12% of companies say they intend to reduce suppliers from the Far East. The report says the impact of the Ukraine war and ongoing Covid restriction in China will add impetus to this trend.
Over half (54%) of respondents said greater visibility across the supply chain would help build greater supply chain resilience with over two-fifths (41%) believing greater digital connectively between all parties in the supply chain would strengthen it. This was closely followed by a third of companies citing the need for technologies, such as AI, that predict or anticipate supply chain changes.
Commenting, Verity Davidge, director of policy at Make UK, said: "We may now be seeing the era of globalisation passing its peak, with disruption and volatility for global trade fast becoming normal. For many companies this will mean leaving just in time behind and embracing just in case.
She added: "The rules of supply chain are being re-drawn. Resilience trumps efficiency with winners being those who have been able to rapidly adjust their supply chain strategies to accommodate the succession of shocks.
"Digital technologies play a part in building resilient supply chains and this survey by Make UK provides much needed insights from manufacturers on their response to this new norm and their use of digital to navigate the storm."