Action needed to boost manufacturing supply chain

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The UK’s manufacturing sector, which is responsible for over 2.4m jobs, could see a significant boost and renewed growth if original equipment manufacturers (OEMs) became better stewards of their supply base, and government policy changed to facilitate this development.

A report by Cranfield School of Management on behalf of the ERA Foundation, Rebuilding the UK Manufacturing Supply Base, sets out two fundamental requirements:

* The UK government must actively support the sector with policies to develop the correct tax and regulatory frameworks, encourage R&D, and improve access to finance, skills and knowledge.

* Large companies (OEMs) at the head of supply chains need to consider switching to indigenous supply as this leads to a competitive advantage because of reduced risks and increased responsiveness.
Notwithstanding research published in August that found a quarter of companies have increased their use of local suppliers because of supply risks, this report points to the sector being unprepared for such a shift with potential skills and capacity bottlenecks.

“We are not arguing that uncompetitive suppliers should be propped up, rather they should be actively encouraged to improve,” said Professor Alan Braithwaite, director of the Supply Chain Research Centre at Cranfield School of Management, and chairman of LCP Consulting.

“The strategy of large UK manufacturing enterprises to seek low-cost suppliers around the globe is at direct odds with the approach taken in developed countries such as Japan and Germany.”

The report’s recommendations include:

* The UK government must select manufacturing as a future winner – the government needs to step away from the previous policy of not selecting winners and acknowledge the importance of the sector for the economy.

* There is the need to overcome the growth versus productivity dilemma by recognising that innovation is a proxy for growth – this requires that the right conditions are put in place for innovation and development of manufacturing innovation alongside the emphasis on productivity.

* Future policies should acknowledge a supply chain rather than single firm perspective – the role of the larger companies in shaping their supply chains and developing their suppliers is crucial and should be incentivised.

“Many of the measures proposed in this report can be found in initiatives from the TSB and the HM Treasury but the scale of the potential from providing co-ordinated support to SMEs is truly apparent from this research. The Government should actively integrate initiatives and drive measures to make UK manufacturing a winner again,” said Braithwaite.

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