Navigating uncertainty 10 June 2019

By Sam Rothwell, team lead, HSO

In light of the current volatile and uncertain political and economic environment, manufacturers increasingly need to find efficient ways of running their operations in markets where the future is more and more difficult to predict. One of the biggest focuses of concern for many such businesses today is the supply chain. Manufacturers across many different sectors are either planning to, or already stockpiling, in a bid to ensure business as usual.

The fastener and fixing industry has not been invulnerable to this. As early as November 2018, Diploma, the engineering firm that supplies a range of products from hydraulic seals to engine repair gadgets for Formula 1 cars, said that it had started building inventory levels of parts ahead of the UK’s exit from the European Union.

The company said it was stockpiling some of its “faster moving product lines” in the UK. That includes wires and fasteners used by motor and aerospace clients. More recently, Hexstone, one of the UK’s largest suppliers of fasteners and fixings, put over GB£3 million of extra stock in place as a contingency for BREXIT difficulties in the supply chain.

Today though, we are seeing examples of stockpiling in a wide array of different manufacturing sectors across the UK. Indeed, the latest snapshot survey from IHS Markit and the Chartered Institute of Procurement and Supply, released at the beginning of April, found that UK manufacturing reported a surge in production and stockbuilding in March as companies prepared for BREXIT. The survey found that manufacturers were keen to build safety stocks of raw materials, with the Stocks of Purchases Index ‘hitting 66.2, far exceeding the prior survey records seen in the previous two months’.

Stockpiling is, however, getting harder as the amount of warehouse space available diminishes. Ian Wright, chief executive of the food and drink federation, told MPs towards the end of last year that warehouses around the UK for frozen and chilled food are “for all practical purposes booked out at the moment”.

Many manufacturers see the current political situation as an area of risk over which they have minimal control. In-line with this, a recent HSO commissioned survey asked decision makers in the manufacturing industry to name the main risk factors organisations face in running their supply chains. 39% of respondents referenced ‘risks associated with the broader political or economic environment (including BREXIT)’, while just 6% stated ‘there are no main risk factors faced’.

So, apart from stockpiling, what can manufacturers do to lessen the risk posed by political uncertainty to their extended supply chains? For some, particularly those in less regulated or globally integrated industries, the long-term answer might be to bring their supply chain closer to home.

That said, in the current environment, it is critical that manufacturers focus, above all, on best meeting short-term needs. That focus will certainly require enhanced supply chain visibility, especially regarding the location of product components and finished goods.

As they can’t directly influence the supply chain situation at a macro level, manufacturers must instead concentrate on ensuring information flows quickly from the supply chain to manufacturing decision makers, so they can make fast and accurate ‘flex-plans’ and best optimise operations to deal with any challenges arising.

Technology will of course be vital in delivering this operational flexibility and enhanced visibility. In-line with this, we may see some manufacturers redesigning the supply chain architecture, a process likely to include the implementation and integration of a range of new technologies from data analytics to the Internet of Things (IoT) to Enterprise Resource Planning (ERP). ERP can play a key role across this extended supply chain by offering manufacturers the opportunity to reduce overheads and operational costs through workflow automation. This is at the same time as giving them the flexibility to adapt to meet a changing market or customer circumstances, or future business growth and expansion. Moreover, there are likely to be fewer IT issues to manage as manufacturers will be operating a more controlled and connected environment.

At the same time, we are also seeing supplier collaboration portals rise up the agenda. These provide a single shared view of data, enabling manufacturers to collaborate more closely with supply chain partners and resolve problems faster and more efficiently.

Together with ERP and general business software, they will be especially important in keeping that crucial conduit of information flowing across the supply chain and providing enhanced supply chain visibility to key supply chain players.

Deputy Editor

Claire Aldridge Deputy Editor t: +44 (0) 1727 814 450

Biog

Having joined the magazine in 2012, Claire developed her knowledge of the industry through the numerous company visits, exhibitions and conferences she attended both in the UK and abroad.

Responsible for social media and the online platforms, Claire prides herself on keeping readers well informed and up to date with the latest industry news.