Why Should You Outsource Manufacturing In The UK?
06 July 2010
There has been a trend for many years of outsourcing manufacture offshore because of cheap labour, giving a healthy bottom line saving.However, things change and now could be a good time to review this strategy and whether it is really working as an advantage for your company, as suggested below.
This offshore trend started with high volume commercial products previously made by UK Tier 1 billion pounds turnover CEMs (contract manufacturers). It then marched on to medium volume products made by UK Tier 2 multi million pounds turnover CEMs. Many of these companies no longer exist and the survivors are mostly Tier 3 CEMs, smaller, leaner, more responsive and growing to fill the gaps left behind.
The pound had been strong for a long period, way above the fledgling Euro, the Yen and also the Dollar and it became fashionable for ‘go ahead’ Purchasing Managers to suggest a new outsourcing strategy to their bosses.
The exchange rate advantage of offshoring has now been significantly reduced and fledgling products are appearing that need responsive manufacturing so the leaner UK CEMs are in prime postion to offer the service needed.
Indeed, there are those companies who took the offshore plunge only to find it was not all it was cracked up to be, financially or otherwise. Increasing numbers of companies outsourcing manufacture are looking again at UK CEMs with fresh eyes and finding that China, India, Eastern Europe etc may not be for them any more.
Other factors are equally significant. It is still a fact that the piece part price for manufacture offshore is most often lower than the UK, but various issues such as increasing fuel costs for transportation, customs, delays in dealing with even minor quality issues, engineering support, flexibility of schedules, time to market can tip the balance.
One CEM, which is finding that the trend is shifting is CT Production of Dorset. Managing Director Alan Trevarton explains. “We have already won back jobs from overseas where reality meant there was no advantage in the customer going offshore. We have won work back from China and have one customer at present considering giving us work from Eastern Europe. With this trend in focus we have taken on additional adjacent space, giving us 12,000 sq ft, 5500 of which is dedicated to final assembly and testing of finished product”.
One thing is for certain now, that the government values more highly the UK’s manufacturing base and expertise to lift us out of a hole after having its fingers burned with failed policies of encouraging banking, service and retail sectors at the expense of manufacturing.
Perhaps it is time to review your own company’s outsourcing strategy, to dip a toe into the modern UK CEM ocean?
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