Manufacturing and The Supply Chain

Britain’s manufacturing sector is a key contributor to the UK economy, but like many other industries it is facing challenges on a range of fronts, including Brexit and the global COVID-19 pandemic.

Some businesses in the sector have thrived throughout 2020 and into 2021 as demand has shifted and businesses have diversified, but others have been left exposed.

What is apparent is that when the pandemic subsides, the world is going to look markedly different. 

A UK survey of over 60 large-scale UK manufacturing businesses cited the supply-chain as one of the most pertinent issues.

During the pandemic, supply chains virtually ground to a halt, meaning forecasting and risk management often failed. Predicting the future became nigh on impossible when nobody knew with any certainty when trading would resume, particularly for those businesses which traded internationally. 

The challenge for businesses will be to make their supply chains more resilient without becoming less competitive. Vulnerabilities will need to be considered, as will the steps that are necessary to address them, including the following:

The hidden risks

Modern products often incorporate key components and materials that require technological skills to make.

It is very difficult for a single business to possess the breadth of skills and capabilities necessary to produce everything by itself. But if you depend on a single supplier for a crucial component or material, disruption risks are high if they fail.

Identify vulnerabilities

Understanding where the risks lie so that you can protect your business may require a lot of research. It necessitates a mapping of your entire supply chain which goes beyond the first and second tiers, to include distribution facilities and transport hubs, for example.

Diversify your supplier base

The obvious way to address heavy dependence on one supplier is to add more suppliers in locations not vulnerable to the same risks. 

Hold safety stock

A business should determine how much extra stock it holds in the interim, in what form, and where along the value chain, so as to protect against the risk of supplier failure.

Holding buffer stock carries with it the risk of obsolescence and also ties up cash, but this has to be weighed up against the costs of disruption, including lost revenues and increased price for supplies which may now be in short supply.

Supply chains are experiencing a once in a generation challenge as a result of the pandemic, which will continue to expose vulnerabilities, but businesses can become more resilient if they assess and mitigate against supply chain risk. 

Further help available

If your business requires a review and some possible restructuring in order to be more effective and efficient, please contact our Restructuring Team for a conversation. You can also check out our articles and guides in our Restructuring Knowledge Hub.