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9 December, 2022

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Manufacturers’ resilience is the key

01 August, 2022

Manufacturing industry has had to cope with a series of shocks in recent years, but most manufacturers have managed to survive – and, in some cases, to thrive. Nikesh Mistry*, Gambica’s sector head for automation, argues that a key element in this has been the resilience of UK manufacturers.

Once again, not only the UK, but the world as a whole, seems to be suffering from a series of crises. With the effects of Brexit still evident, waves of Covid-19 continuing, and ongoing worries about wars, inflation and political unrest, you might assume that manufacturing industry would be in a state of turmoil. But, from a trade association point-of-view, coupled with our knowledge of the industry, it would seem that all is not lost, and that resilience is prevailing.

The key to proving that global supply chains are “resilient” is output. Yes, there will be inevitable slowdowns as businesses adapt to geopolitical and pandemic shocks, but if industry can continue to maintain its output levels, then fewer questions will be asked about its resilience.

After the Covid lockdowns were eased, we discovered how resilient global supply chains can be, with the manufacturing sector bouncing back rapidly. By earlier this year, trade was almost 30% above pre-pandemic levels in some parts of the world. It has only been the more recent disruptions in output caused by the war in Ukraine and sanctions on Russia that have resulted in supply chains becoming disrupted once more.

But sometimes resilience is not the only answer. Yes, being resilient to shocks is essential, however the real challenge is whether industry has now rebuilt itself in a way that creates sustained growth and transforms the economy?

By investing in digitalisation and modifying the way that it conducts “business as usual”, much of the manufacturing sector has managed to maintain its output. However, when there are other influences – such as inflation, component supply problems and staff shortages – other methods of resilience need to come into play for UK manufacturers to maintain their competitive edge.

Higher costs mean higher prices. With the average cost of a shipping container rising by almost 500% since the pandemic began, severe disturbances have to be expected. This puts extra strain on manufacturers. To prevent further damage as a result of cost rises and extended lead times, manufacturers are starting to commit more capital further in advance. This unforeseen extra expenditure can disrupt companies’ profit and loss accounts. This is one area where resilience has been scarcer, especially for manufacturers relying on just-in-time delivery frameworks. Higher fuel costs and transportation capacity issues have exacerbated this problem.

The Manufacturing Commission’s Level Up Industry report set out several steps that the government should take to ensure that British manufacturing is “levelled up” across the regions. This must not be forgotten. In a post “shock” world – both in the past, and those yet to come – we need to ensure that the levelling up process is not forgotten. Both the government and manufacturers need to keep these ideas at the forefront to maintain momentum. We do not need pandemics or geopolitical shocks to be resilient; the resilience should come from the need to survive.

In summary then, dealing with shocks is certainly a multifaceted task. From improving global supply chains, to increasing output, maintaining efficiency while being sustainable, there are many different approaches. Just as there is not one single cause for these issues, there is also not one single answer. There are a series of difficult problems which must be tackled using appropriate solutions. But if addressed correctly, industry can continue to prosper and maintain the resilience that it has developed

 

* Gambica is the trade association for the automation, control, instrumentation and laboratory technology sectors in the UK.
For more information, please contact Nikesh Mistry on 020 7642 8094 or via nikesh.mistry@gambica.org.uk




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