The Challenges of British Manufacturing
It's a good time to look at what challenges British manufacturers are facing now. Many of these hurdles are faced in multiple industries and at varying levels of obstruction.??
British manufacturers play an important role in the economy and its local societies. Often considered an important pillar of the economy, contributing to economic growth, innovation and employment. However, their integrity extends beyond just economic impact – they also contribute to national security, regional developments and sustainability.
The risk that the following challenges pose on British manufacturing businesses can impact more than just the industry, but potentially the whole of the UK.
The Top Three Challenges:??
1. Supply Chain??
2. Staffing??
3. Increased Costs?
Supply Chain Challenges
The global supply chain has faced continual issues. Starting with the disruptions caused by the global pause during the Coronavirus pandemic. Just as the industry appeared to be "levelling out", the supply chain was severely impacted again after Russia invaded Ukraine. 92% of people surveyed for the 2023 CommBank Manufacturing Insights Report reported difficulties for company growth and 86% said cash-flow was impacted.??
The impact of potential disruption can range from moderate to severe. Depending on the nature and scale of the event and can seriously affect the credibility of a company. Some consequences for British manufacturers may include the following:
How to overcome the supply chain disruption? Many manufacturers have sought alternative suppliers, negotiated better supply chain terms and seen increased prices.??
Though it may not be easy - it is possible to overcome, or at minimum build resilience to, the impact of supply chain challenges for British manufacturers. Start by monitoring threats to the business and focus on developing proactive contingencies instead of reactive ones.??
Adopt a multi-sourcing procedure and diversify your suppliers. This tactic will allow you to access materials regardless of issues rising with your main supplier. An adaptation of this would be to increase on-hand inventory. Although restricted by the capacity of the company plant and storage facilities, holding an increased inventory will allow a buffer to absorb any initial disruptions.?
We’d also recommend ensuring your business utilises a supplier approval process. This process is how organisations check and approve possible suppliers before working with them. It has a few steps. First, looking at what the supplier capabilities, including how good their products are and if they can make enough. Check if the supplier is financially stable and following the industry standards and legalities. Then, look at how well the supplier reputation, asking others about them. After getting all this information, you can decide if the supplier fits your needs and plans. If yes, the supplier can officially work with the organisation. This process helps businesses have good suppliers, which makes things safer and gives better products to customers.
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Staffing Struggles
The cost of a bad hire can be difficult to pinpoint. Unfortunately, with a staff turnover rate of 37%, it can't be ignored. In British manufacturing, it is becoming clear that the issue lies outside of just bad hires. There is an undeniable skills shortage for many reasons, including but not exclusively:?
The Demographic Shift - The manufacturing industry is one of many that has had difficulties attracting younger generations to pursue a manufacturing career. As the current population ages and retires, there is a significant gap in skilled labour. There has been a struggle to find suitable replacements.??
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Outdated Beliefs - Manufacturing often faces a more negative perception, with some still considering it an outdated and low-skilled sector. This belief has deterred many individuals from considering manufacturing as a workable and attractive career choice.??
Technical Advancements - The advancement of technology in manufacturing has outpaced the availability of skilled workers who can operate and maintain the increasingly complex systems. This technological shift demands a workforce with up-to-date technical ability.??
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How to overcome staffing struggles? Addressing the skills shortage requires collaboration between the government, educational institutions, and the industry. Implementing targeted training programs, promoting apprenticeships, enhancing the image of manufacturing careers, and aligning education with industry needs are crucial steps to attract and keep a skilled workforce in British manufacturing.
Cost Difficulties
The ongoing economic difficulties are affecting more than individuals and family homes. With more businesses disbanding each week, the manufacturing and engineering industries face the same struggles.
Reduced Investors - Recent political turbulence has shown that the UK has less competitive appeal. 43% of companies believe that the UK is less attractive to foreign investors. Manufacturers that are looking for investment may find it more difficult to find a suitable investor.??
Rising Logistical Costs - Due to the increased costs of fuel in 2022, transport costs for manufacturers have increased dramatically which makes exporting goods more expensive. Manufacturers are reviewing and optimising their transport costs. For example, ensuring that HGVs and shipping containers are full and incorporating more intense, multi-drop routes to make the most of the transport costs.??
Price Increases – Everyone has been affected by the energy crisis over the past year, meaning this will not be a surprise. In manufacturing alone, insolvencies have increased by more than 63% - a devastating result for the industry.
The heavy reliance on energy products in the manufacturing industry has made it particularly vulnerable to the ongoing energy shock. A notable consequence of this shock is seen in certain sub-sectors, where higher energy costs have been transferred to industrial production prices.??
Due to the encouraged transition to renewable energy from fossil fuels, and the ongoing global conflicts, energy costs are unstable, unprecedented and unpredictable.??
Energy costs are not the only increase. We are also seeing the rising cost of raw materials as a significant challenge to the UK manufacturing industry. The prices of essential raw materials such as steel, copper and aluminium have been increasing at a steady rate since the previously mentioned supply chain disruptions caused by the COVID-19 pandemic and increasing demand from emerging economies in India, China and Brazil.??
The UK manufacturing sector heavily relies on imported raw materials, making it susceptible to price fluctuations in the global market. The high cost of raw materials has resulted in increased production costs for manufacturers, leading to reduced profit margins or increased prices for consumers.
How to overcome cost difficulties? Many businesses will be looking for ways to reduce energy consumption – warehouses may reduce lighting or heating costs in line with health and safety requirements. To counteract the impact, it is unavoidable that businesses will pass on some of the increased costs to their customers.??
Regarding rising costs of raw materials, UK manufacturers must start prioritising sustainability by reducing waste and exploring alternative materials. They should also seek partnerships with suppliers who offer competitive prices without compromising on quality, with considerations still surrounding the implications of cost-effective overseas products and higher logistical costs, as opposed to higher UK supplier costs and more affordable logistics.???
Finally, through considered design and engineering at the start, cost reductions can be made via value analysis and value engineering (VAVE). These considerations and suggestions can be shared with the customer base and ultimately assist in attempts to overcome cost difficulties.
It’s clear that these challenges are making business more difficult than usual. However, they can be overcome with effective strategies and innovative ideas implemented by manufacturing businesses and government officials. The future of UK manufacturing is bright if we take proactive and preventative measures to a more sustainable industry in the future.?