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Manufacturers Bring Production In-House to Protect Against Natural Disasters

In an effort to protect themselves against natural disasters, climate change and economic downturns, two-fifths of manufacturing companies surveyed by EEF are bringing production back in-house, and a quarter have increased their use of local suppliers.

Two-thirds of the companies that brought production back in-house also increased their use of local suppliers, reports the UK-based manufacturers’ organization. And large companies, according to the survey, are more likely to bring production back in-house: 55 percent of large companies say they have done this compared with 39 percent of small companies.

As manufacturing and its supply chains have become increasingly globalized, business continuity risks have increased. Companies have reported damage to productivity, revenue and orders from a range of local, international and economic disruptions to their supply chains over the past two years.

For example, Bridgestone halted production for a time at five of its Tokyo-based plants in 2011 following the Japanese earthquake and tsunami.

As a result of recent disruptions, a third of companies sees supply chain management as a business critical issue worthy of board level attention and 60 percent of companies monitor their immediate suppliers, EEF says.

However, despite the potential risks, the survey also showed that only 11 percent of companies monitor their entire supply chains and 16 percent of companies do not monitor their suppliers at all.

Additional findings from the survey show:

  • The average manufacturer has 190 suppliers, with one in five saying half their suppliers were located outside the UK.
  • Around a quarter of manufacturers have seen an increase in the use of suppliers outside the UK in the past two years.
  • The most significant impacts on companies from disruptions were loss of orders and loss of revenue.
  • Actions to improve supply chain resilience have included better inventory management; increasing collaboration and forward planning with suppliers; and investment in IT to improve supplier management.
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