Strengthening UK Supply Chains. 2 Strengthening UK Supply Chains: Context Challenge of Globalisation UK trade deficit since 1998 Driven by a high deficit.

Strengthening UK Supply Chains

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Strengthening UK Supply Chains: ContextChallenge of Globalisation• UK trade deficit since 1998• Driven by a high deficit in

manufactured goods.• Manufacturing accounted for 39

per cent of all offshoring job losses in the period 2003 to 2013

• Offshoring decisions have been driven by lower costs of business overseas

• Main offshoring locations – China & India

• But higher wages and ‘hidden’ costs of offshoring may provide an opportunity for the UK

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Strengthening UK Supply Chains: Impact on manufacturing supply chainsHeadline findings from ONS data on sourcing of intermediate inputs.• Value of UK content rising but imported

content rising more quickly, so proportion of UK content is falling

• Fall in share of UK content more marked in manufacturing than services or other sectors

• Almost 50% of manufactured components in the UK now sourced from overseas

• Comparisons of data with EU competitors suggest in 2010 UK had lower proportion of domestic manufactured content than Germany, Italy and France.

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Strengthening UK Supply Chains:Why should we care?

• Reduced risk and improved supply chain transparency

• Quality • Collaborative innovation• Agile design and production

–responsiveness to changing customer demands.

• Reducing lead times and logistic costs

Stronger UK Supply Chains Benefit Businesses

Stronger UK Supply Chains Benefit Individuals

• Safeguarding UK jobs in all regions and at all skill levels.

• Creating skilled jobs

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Strengthening UK Supply Chains:Why should we care?Stronger UK Supply Chains Benefit the UK• £5bn of extra automotive

sourcing opportunities• Offshore wind supply chain:

30,000 jobs by 2020• Shale gas supply chain could be

worth £33bn in 15 years• Nuclear supply chain could add

£4bn to UK.• CBI report, Pulling Together (Oct

2014), suggests a total £30bn opportunity

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Strengthening UK Supply Chains:Why should Government act?• A critical mass of effective supply chain companies underpins the

competitiveness of our high value manufacturing sectors.• Loss of UK supply chains can lead to a vicious circle – loss of key

skills & know-how results in more companies sourcing overseas• No single company has the incentive to act alone to solve this –

Government has a role to co-ordinate and kick-start action• Action will have wider economic benefits

– UK less reliant on imports– boosts the potential for exports– encourages more inward investment– reduced trade deficit– regional rebalancing

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Strengthening UK Supply Chains:What should our ambition be?• Limited data on current picture, and hard to know what might be

possible to achieve• But if this strategy is successful, might hope to see:

– A reduction in the rate at which UK companies are turning to overseas suppliers

– The UK maintaining a significant market share in the supply chains of mature sectors and sub-sectors

– The UK establishing a strong long-term presence in the supply chains of key new and emerging sectors (e.g. Offshore Wind, Nuclear new build, Composites)

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Strengthening UK Supply Chains:Underlying issuesKey issues that affect all businesses naturally impact on supply chains:• Innovation and technology• Skills• Access to Finance• Need to grow SME

capability• UK Business environment

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Strengthening UK Supply Chains:Underlying issuesAdditionally, there are a number of specific supply chain issues:• Supply chain information

and communication failures• Fragility of supply chains• Lack of standards for

newer sectors like advanced materials

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Strengthening UK Supply Chains:What are we already doing?

Government & Industry already doing a lot• Industrial Strategy – sector strategies• Advanced Manufacturing Supply Chain

Initiative• Manufacturing Advisory Service• Reshore UK• Sector specific programmes• Industry good practice e.g. Crossrail

achieved 97 % UK content in some parts of their supply chain

• But all this not enough.• The Action Plan will aim to build on and

support existing Industrial Strategy activity

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Strengthening UK Supply Chains:InnovationExisting action includes:• Catapult centres• Innovate UK programmes• Sector programmes like NATEP

Key supply chain issues:• Lack of investment in manufacturing technology by UK suppliers • How can we incentivise more collaborative R&D• Fostering greater communication so primes understand supply

chain innovation and suppliers understand likely future sector tech developments

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Strengthening UK Supply Chains:SkillsExisting action includes:• Apprenticeships programme, national colleges, • Sector programmes like Aero masters programme• Primes like Rolls Royce using their brand power to

over-recruit and over-train, to cascade through their supply chain

Key supply chain issues:• How can we encourage more ‘over-recruitment’ and ‘over-

training’ by UK primes, or other bodies like Catapult Centres, to support the skills needs of manufacturing supply chains?

• Can we encourage suppliers to come together to recruit or train?

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Strengthening UK Supply Chains:Access to FinanceExisting action includes:• RGF funded tooling finance programme• Engagement with banks through sector finance forums in some

sectors• Many primes providing supply chain finance to unlock working

capital• Prompt payment charter and codes of practice in some sectors

Key supply chain issues:• On working capital: Is there more we can do to tackle late

payment, and to release funds through greater use of supply chain finance programmes?

• Financial strength: Performance bonds or other financial assessments of strength may prevent capable UK companies winning work. How do we tackle this?

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Strengthening UK Supply Chains:SME CapabilityExisting action includes:• MAS national offer• Sector specific SME mentoring and support programmes like

‘Sharing in Growth’ & SC21 in Aero, NW Automotive Business Excellence programme

• Local business mentoring programmes• Benchmarking, or best practice clubs

Key supply chain issues:• These programmes are often small in scale and are not

widespread in every sector. How can we encourage and spread use of such programmes to build UK capability?

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Strengthening UK Supply Chains:Supply Chain CommunicationExisting action includes:• Some sectors, like Auto, promoting ‘meet the buyer’ events• Some excellent good practice in some procurements e.g.

CrossRail undertook significant pre-procurement communications and achieved very high UK content

• In some sectors, publication of forward planning roadmaps e.g. Renewable UK now publishes Offshore Wind Project Timelines

Key supply chain issues:• Such actions are not widespread in every sector. How can we

encourage and spread such practice to build a culture of greater supply chain collaboration and more open communication?

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Strengthening UK Supply Chains:Supply Chain ResilienceExisting action includes:• Inward Investment Orgs in some sectors are bringing investment

in to tackle gaps in UK capability• UKTI export support to SMEs boost supply chain resilience• Some LEPs also active in this area• In some sectors, action is in place to help companies diversify

into a new sector e.g. NAMRC is supporting suppliers from other sectors to diversify into the nuclear supply.

Key supply chain issues:• Should UKTI be working to target export support at sectors with

more fragile supply chains?• Are there gaps in IO work?• Can we encourage further diversification across sectors?

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Strengthening UK Supply Chains:Producing an action plan• Deputy Prime Minister announced a Supply Chain

Action Plan will be published in the New Year

• Suggested approach: – Discussion of policy issues/ idea generation over

next 4-6 weeks– Write up / clearance – late January/ Feb– Launch ‘Action Plan’ in Feb