UK Automotive Begins Backshoring

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In a post over at SpendMatters titled "Will a Return to Automotive OEM In-Country Sourcing in the UK Signal Something Larger?" the esteemed Jason Busch riffs on a study he found from across the pond that shows UK automotive OEMs are showing a renewed preference for local suppliers.

(The piece was cross-posted over at Enterprise Irregulars.)

Says Jason:

"Why do UK automotive companies want to source locally produced content? It all comes down to total cost (vs. unit cost) and reducing supply chain risk. To wit, the reasons they cited include: 'the benefit of favourable exchange rates, minimising the vulnerabilities and logistical costs associated with an extended supply chain, the UK's labour flexibility and positive industrial relations, and sourcing new technology for ultra-low carbon vehicles.' Labor flexibility? I'm not so sure on that one, but with an unemployment rate approaching 8% (still less than the US), perhaps UK labour is becoming more flexible than its collective-bargaining counterparts across the Atlantic."

Sound familiar? It should - sourcing professionals around the West are discovering that extended supply chains bring "hidden" costs along with the lower labor rates that motivated them in the first place:

"With organizations developing a better understanding of all of the risks inherent in a stretched global supply chain (e.g., currency, logistics, variable energy and commodity costs, supply availability, inventory, supplier financial/operational viability, etc.), I have no doubt that we'll see more and more of these headlines in the coming years. Moreover, the more China is taken to task for currency manipulation on the world export stage, the greater the fuel for local governments to add to the fire to rally around tax and other incentives for local suppliers in industrial markets. In certain cases and supply categories, however, it will take decades to rebuild industries that have already largely moved to low-cost countries."

Suppliers - whether members of or not -  that are nearer OEMs that have pursued low labor costs in the past would do well NOW to position their marketing and sales efforts to reconnect with these buyers and exclaim their values as indigenous partners.

Addendum: I found another good piece on the BBC's site titled "Firms Move Production Back To UK" that provides more evidence of backshoring practices by UK companies - automotive, and others. - AJ

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