Home advantage

1 Quality is key Cheap is not necessarily cheerful. Buying in an apparent bargain from Beijing can be riddled with quality issues, according to Michael McKenna, senior commodity buyer at Niftylift. "Quite often you will get samples of a given quality but after mass production you receive a container of poor quality goods." Simpson recalls an incident while working for an automotive firm, which outsourced manufacture of body panels to China. "The panels were perfect, however they had packed every panel individually in a plastic bag before the paint was dry." A subcontractor had to be drafted in to strip the congealed paint at an extra cost of thousands, McKenna added. Poor quality and broken promises were common in site managers' stories of going east. All commented that UK-sourced components were typically better quality and easier to rectify if standards fell short. 2 Safety and simplicity The prevalence of small and mid-sized manufacturers in the UK creates a bias towards local sourcing, site managers ruled. SME businesses prefer the safety and simplicity of buying in from a nearby geographical region. Even large scale manufacturers like Ford are seeing the benefits of going local, said Domingo Lapadula, manufacturing strategy supervisor at Ford. "In terms of engine design, we're constantly evolving and require our suppliers to work closely alongside us." 3 Environmental pressure Flying bearings in from Brazil can generate 160 times as much carbon as alternative transport modes, such as bringing them in by van from a neighbouring county. The social and legislative pressure to take greener supply routes is growing, said Richard Brown, operations director at Hi Tech Mouldings. "We're starting to be asked questions about carbon footprints by our customers and are now having to ask those of our suppliers. How much are we going to be impacted in the long term by the true cost to the environment of what we're moving around?" 4 Currency risk Currency fluctuation is a major concern for overseas buyers and one of the key deterrents preventing UK firms from sourcing overseas, according to the research. "It doesn't surprise me at all that it's a daunting area for people who have traditionally sourced in the UK because we've had so much volatility in recent years," commented Mimi El'orfa, Risk Solutions Group at Barclays. Manufacturers can protect themselves by doing something akin to value stream mapping. Identifying the risks and how different company divisions can work together to mitigate them is key, added El'orfa. "It's important to map out the exposures through the whole supply chain rather than accepting that the currency risk is too scary or, at worst, ignoring the risk and accepting the impact when it hits the bottom line." 5 Hidden costs The price tag only tells half the story when you're buying parts from perceived low-cost countries. Incorporating commonly associated costs such as the price of flying employees out to oversee quality control, shipping goods back and potentially elongated lead times, renders a less appealing business case. Strongholds like China are feeling the pinch of wage inflation, noted Mark Lee, head of manufacturing at Barclays. "The global supply chain is changing. We've discussed China extensively and a common theme identified is that wage price inflation in China is starting to impact competitiveness. It seems that the predominant reason for manufacturers to explore China is related to price. If price advantages are starting to erode, this will most likely tip the balance towards more local sourcing." N Key numbers from the survey 36% state that they simply prefer to source from the UK as a rule 61% source components/commodities from the UK 1 quality is the top factor when deciding on a preferred supply chain strategy 76% say transport and distribution costs impact decisions on where to supply (and from where)