Wednesday, 03 September 2014
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Bringing it all back home

The prospect of bringing overseas production back home - or re-shoring as it’s known - is  a long-held dream for many  British manufacturers. But despite plenty of talk over the last decade or so, the lure of low-labour cost economies has been too enticing, and there have been precious few examples of engineering firms reversing this powerful global trend. Until now.

Visitors to this week’s annual EEF National Manufacturing Conference - which is being held on Tuesday 4th March at London’s QEII Conference Centre - will hear from speakers including Business Secretary Vince Cable, Ken Clarke, and GKN CEO  Nigel Stein about the increasing number of firms that are now moving production back to Britain. During the conference, Cable is expected to announce that more funding will be provided to help firms bring manufacturing back to the UK.

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Best done locally

The conference coincides with a report - published  today by EEF and legal firm Squire Sanders - showing that 1 in 6 companies have re-shored production in-house in the last three years.

Also under the microscope this week is the no less emotive topic of flood defence - an issue that has dominated national discussions over the past few weeks.

MPs will meet today (Monday 3rd March ) to discuss  a report, published last July by the Environment, Food and Rural Affairs Select Committee, which recommended that flood management capital funding must rise year on year by £20m over the next 25 years to keep pace with increasing flood threat; and that adequate revenue funding be provided to enable the Environment Agency to conduct necessary dredging and maintenance of watercourses.

Finally, it’s national apprenticeship week - the annual effort to raise the profile of apprenticeships  - through a series of nationwide events aimed at both businesses, students, and teachers.

Few would dispute the organiser’s claim that apprenticeships are a good thing for business and apprentices alike, although given that apprenticeship schemes in the engineering sectors are regularly oversubscribed,  it is to be hoped that this week’s events play a role in encourage more businesses to offer apprenticeships.

With a report out today from the City & Guilds group arguing that men are more than twice as likely to be encouraged to take apprenticeships as women inititiative aimed at encouraging female apprentices would seem to be particularly important.

The report’s findings support recent research by the TUC and the National Apprenticeship Service which found that although more and more women are starting apprenticeships, gender stereotyping is dissuading young women from pursuing careers in traditionally male industries.


Readers' comments (9)

  • I work in Cornwall for an electronics company that is going to send the last few remaining products off shore and the plant will be downsized to do prototyping only (deign will still be in the UK ). I understand that the production workers in China get less than one fifth of the pay we do here in Cornwall. I would be nice to know for what reason the companies are “re-shoring” production as it does not seem to be one of cost.

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  • I fear that the electronics company in Cornwall may not have taken into account all the costs that are actually incurred when offshoring. Many companies have made this mistake and seen no increase in sales, profits or customer satisfaction from such a move. A few years ago many companies thought that offshoring was a golden bullet – it wasn’t. It worked for some but didn’t work for many others.
    My company is currently bringing back production of a key sub-assembly from the Far East, with an overall reduction in cost. The production of this sub- assembly should never have been sent offshore, but the people involved at the time made a very common mistake and concentrated on labour cost. Viewing labour cost as the only element is very misleading, even in a product with low added value. When you take into account logistics costs, management costs, cycle-time, quality costs, etc., then re-shoring can be a compelling case.

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  • I work for an instrumentation and sensing manufacturer which is based in Cambridgeshire. Our main production site has always been based in the UK, and there have never been any plans to relocate this. I think our company's growth over the past few years owes a lot to this: R and D, production and other functions can work together seamlessly.

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  • Presumably some years ago some clerks associated with Engineering firms decided that buying items from the other side of the world was viable -based upon the detailed costings that they calculated.
    [I can think of no other reason than overall cost to make such a dramatic change: let alone the hidden costs that, if my experience and a lot of (admittedly textile experiences indicate, they will probably) have either forgotten or ignored or mis-calculated.] Yes, its much more fun for a 'buyer' to fly to Bangkok or Beijing than to get on the train to Bradford... but a piece of textile technology is the same wherever the machinery is! Of course, if retailers keep-on NOT buying from trusted, local, suppliers small wonder that they go out of business. They appear to want their fellow population members to be their customers, but not their suppliers. A recipe for disaster.

    Presumably another lot of clerks have made another calculation and decided that the first lot were wrong after all.
    Lies, damn lies and statistics.

    As I have posted elsewhere: it will take the UK economy 100 years to truly recover from Thatcher, if at all?!
    Mike B

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  • Unfortunately many companies are run by accountants who tend to focus on what is to my enginneering mind, the wrong things.
    One of my customers spent a long time getting their Chinese supplier to give them the quality they wanted. I had made all the prototypes for them....

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  • Mike, B.

    I do empathise with you but blaming Thatcher is a scapegoat. One only has to look at graphs of factory closures over the years and it quickly becomes obvious that the steepest curves and largest closures occurred whilst Labour was on the watch.

    The difference is Labour are given a free ride in this respect because they're supposed to be the party of the worker, like the conservatives are supposed to be the part of law and order and national defence - yet look at their funding arrangements.

    The down fall of Britain was socialism and the nationalisation of British industry that made us uncompetitive and inculcated a sense of innate right in the British people; thus when the pendulum swung the other way the equally strong opposing pole of privatisation and de-regulation came along we were left bereft and unable to hold our own against Japan and Germany.

    We ought to have avoided the opposing pulls of Continental socialism and American capitalism with the nascent British mutualism which was emerging.

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  • Accountants are the cause of much of the destruction of British industry. Because they control the money they seem to be able to get into Director and CEO level positions. They have no concept of value and will ship production out to the cheapest bidder without regard for quality. So the UK loses both the business and ultimately the skills.
    A visit long ago to a Japanese company surprised our CFO who was 'along for the ride' as this very large manufacturer of electronic products employed just one accountant. When our CFO asked him why the company did not give him more accountants he said... "we only need one". A well designed financial reporting system would allow UK businesses to also dramatically reduce the numbers of these parasitic creatures.
    I was at a 'JIT/Lean manufacturing' seminar held by Dell, also many years ago, and Dell showed us a large area freed up by their adoption of 'demand driven' shop floor loading. Their CFO quipped that we buyers would fill this area with additional stock. My riposte, that you accountants would fill the space with more accountants did not go down well with him, but did get a laugh from the rest of us buyers.

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  • So many of the comments echo my views entirely.

    We live in a media world where trends and fashions can quickly develop and in doing so they inevitably create an environment where everyone feels obliged to follow - a prime example being the stock market.

    I have no doubt that many companies relocated their manufacturing to the F.E. and/or Central Europe purely based on reduced labour costs but for larger corporations it was often the fear of what might happen to their share prices if they didn't; indeed share prices usually gained value when they did!

    Coupled with this, generous incentives could be offered by the future host country, in the form of reduced taxation, factory rents/rates etc.

    I share the view that too many decisions are based primarily on the grounds of cost and that accountants do have an unfair stronghold.

    But as individuals should we not share some of the blame - how many of us look at the label to see where a product is made before we make a purchase in our local Dept store or on the Internet. Is it because as a society we have had it relatively easy for so long that we don't care any more. I notice that my German colleagues always try to buy German products because they are proud of their country and they have a strong desire to maintain their manufacturing industry - is this such a bad thing!

    I am sure that Corporate leaders have realised for some time that there is much more to the equation than labour costs alone and are well aware of the issues of quality, currency fluctuations, culture etc; as well as the loss of flexibility in shipping product from the F.E., which are usually on the water for 4 to 6 weeks.

    Let's hope that the tide is turning because as a nation we have an incredible aptitude for engineering but it cannot function as effectively without it's long-term partner, a local manufacturing base.

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  • The comment about the grocer's daughter was not mine, but from JK Galbraith -one of the most trusted names in economics?
    His point was that having eaten/used all the seed corn, sold off the family silver, and removed or over-charged sensible training (at all levels from craft apprentice to PhD) there was little except 'retail' left to generate money. Of course it never generates wealth!

    Possibly time for my "clerks on one-legged stools" story again. Our Victorian ancestors kept them in the counting house, on one- legged stools so it they went to sleep over the sheer boredom of what they were doing, they fell over. The one place where they were never allowed was in the Board-Room.
    They crept out and got into the Board-room and have been there causing trouble ever since. Knowing the price of everything but the value of nothing! the list of silly remarks is almost endless.

    They and the other sham-professions (I usually call them sham-groups to avoid debasing a decent word -professional) manipulate man's laws to the benefit of the highest payer -we (and all technically trained persons) manipulate Nature's laws to the benefit of all. Am I right or am I right?

    Nothing to do with politics of left, right or centre -but a lot to do with taking a holloistic view of UK plc.

    Best
    Mike B

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