Recovery and confidence in the UK’s economy are continuing to grow, national figures suggest. This week employers have reported an extra 241,000 staff added to payrolls – another indicator of economic recovery, following 2020’s challenges. And quarterly figures from the CBI show output remains strong across key sectors, with businesses finding ways to adapt and overcome. However, labour and materials shortages continue to create supply chain challenges and could now begin to hamper recovery. Many across the manufacturing and construction sectors are finding ways to diversify and overcome supply chain challenges.
While these challenges were largely created by the pandemic, they have been further exacerbated by the effects of the Brexit transition.
Last year, output slowed as factories and plants closed or streamlined during lockdowns worldwide, whether deemed ‘not essential’ or mitigating the forecast risk of others in their supply chain closing. Then came the knock-on effect on unfulfilled orders from suppliers temporarily not trading, or cancelled ones from clients, unable to source all materials required to complete a product.
Just as supply was challenged, so too was demand constricted. With consumers limited, economic uncertainty meant demand dropped for many products.
This year, as both business and government have moved into the Brexit transition period, border delays and duties have slowed lead times and hiked prices on incoming goods. And changes to immigration rules have contributed to the growing national shortage of HGV drivers, creating logistics challenges.
More recently, the so-called ‘pingdemic’ hit employers, slowing output as thousands of workers were forced to self-isolate.
The materials shortages and ensuing price rises these have created are impacting all sectors. Steel price rises are having an ongoing impact in manufacturing and construction, while microchips shortages have slowed lead times for new cars and limited new plants available for infrastructure projects.
Across the manufacturing industry, businesses have reported having to turn down work due to the increasing costs or shortages these are creating. In one survey, 94% of manufacturers said they were struggling to source raw materials while nearly 50% said they were struggling to fill vacancies.
Nevertheless, output across the manufacturing sector remains strong, growing at its fastest pace since records began.
There have been losses, opportunities and overhauls in all sectors in the last 18 months. Many have flourished by diversifying their offering, identifying new markets or meeting demand from booming sectors. Construction contractors once focused on city centre office developments switched to delivering the warehouses necessary to meet the boom in e-commerce sales, for example. Similarly, specialist manufacturers who had hoped to focus on new product development are now redesigning existing products to allow for the global microchip shortage.
In the construction sector, where industry commentators have said material shortages are creating a ‘crisis’, contractors are finding viable alternatives. To overcome the scarcity of pre-coated products, the use of mill-finish products – which can be powder coated without impacting safety, quality or costs – is being promoted, for example.
Alternatives are also key when it comes to supplier relationships, as contractors have sought to expand their supply chains. This mitigates the risks of problems arising in certain markets or locations as the pandemic continues globally.
According to Steel Market Update, around 64% of manufacturing and industrial companies have reviewed ‘nearshore or reshore’ since the outbreak of the pandemic. Bringing supply chains and processes back into domestic markets is contributing to output growth; overcoming the import and border challenges created by Brexit.
Managing risk isn’t new for businesses, particularly for supply chain management, it has just become widespread and complex.
From the start of any project, factoring risk management into all aspects of programme planning and pricing is key. Now, as new projects launch and progress, suppliers being clear around lead times or limitations on ‘bulk buying’, or clients requesting inventories or inflation clauses, will ensure harmony.
While it’s unlikely these supply chain challenges can be entirely overcome, certain steps will mitigate them.
Working closely with suppliers and contractors, engaging them early on in projects and ensuring open, timely communication throughout, is always beneficial. Two-way transparency between clients and suppliers, around issues and limitations or opportunities and alternatives, will help all to navigate the ongoing challenges.
When all parties are facing similar challenges, maintaining trust is key.
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