If you had asked SME owners in October 2019 what the challenges to their supply chains were likely to be going into 2020, I suspect very few of them would have considered a global pandemic originating from the other side of the world.
Covid-19 has disrupted global supply chains in a hitherto unprecedented fashion. It has compounded the many concerns of UK businesses who use off-shore manufacture following Brexit and the US/China Trade war. Every business who uses overseas manufacture should now be reviewing their purchasing strategies and supply chain risk assessments.
‘Offshoring’ is the practice of outsourcing a service to a company overseas. ‘Reshoring’ is the reverse of this, bringing the manufacture of a product back from overseas to a UK sub-contractor.
Although the popular perception for several years has been that the most cost-effective option for electronics manufacture is to outsource to China, we are beginning to see an increasing number of companies re-shoring their manufacture in whole or in part, to the UK. According to a 2017 report by the university of Warwick, in the 9 years from 2008, of the companies who carried out off-shoring activity, 65% directly or indirectly re-shored versus 40% who offshored. This was prior to the disruption of Covid-19.
Is Re-shoring the right option for your company and what factors should be considered?
Let’s be honest, on a price per unit base, you are very unlikely to find a UK manufacturer who will better the price provided by a Chinese sub-con. However, the up-front price of an item is far from the true cost when all factors such as shipping, lead-times, reliability, service and client satisfaction have been factored in. As the old saying goes…..you get what you pay for.
Quality
Everybody in the Electronics Manufacture and Assembly sector has heard umpteen horror stories of poor-quality assemblies or components sourced overseas. Just last week I received an enquiry from a gentleman whose supplier had moved their manufacturing to the Far East, and although this has allowed them to lower the cost, he has been plagued with failures since.
Poor quality product from overseas raises the problems of rectifying the issues and receiving replacements, receiving satisfying assurances that the same or similar issues will not arise on the replacements, and the likely significant delay in meeting your own client’s deadlines.
Delivery
Domestic B2B delivery services are well-oiled machines with next or even same-day delivery nearly always being an available option. I’ve even driven halfway across the country myself to deliver a part-batch drop of an assembly to a client who found themselves in an unexpected urgent need of it. When your product is being assembled on the other side of the globe this is obviously not an option. The delivery and lead-times can be weeks or even months for a product that only takes a few days to manufacture. Added to this there is the risk of a Customs hold up which can add further days of delay and potentially significant extra costs.
The safely of your product should also be considered. Every minute your product is in transit is a minute it is at risk of being damaged, especially in air freight. Should it get damaged then we’re back to the logistical issues above. Whilst most companies have insurance to cover losses in transit, and the expensive couriers will provide better protection and service, these both add extra costs to the overall price.
Cooperation and Flexibility
Most of the Chinese assembly houses work almost exclusively on a build-to-print basis with high minimum order quantities. Combined with the cheap cost of labour this is how they can offer such competitive prices.
There are doubtless many products and situations where this is a perfect fit, however at the front end of product development and prototyping / pre-production / initial production run stages, there is a good chance that small volumes are required and that the design may be relatively fluid. Using a UK manufacturer facilitates a much more partnered approach with in-person design / production reviews, factory visits, speedier QA and a more partnered approach is possible. At 4e one of the things we pride ourselves upon is the ability to be flexible and work alongside our clients, adapting our proposals as their briefs change and develop.
Often the reshoring of a product’s manufacture is also the ideal time to review it for improvements, obsolescence risks, or updating and we’re always happy to apply our considerable electronic design engineering experience and make suggestions for updates or improvements should we see them.
We have continued to operate throughout Covid-19, maintaining regular contact with clients and uphold a strong and reliable supply chain as we navigate through the Covid pandemic.