Reducing Supplier Risk in the Manufacturing Sector

As the ninth largest manufacturing nation in the world, employing 2.7 million workers, there are many complex and integral factors contributing to the success of UK manufacturing.

While success in any business can fluctuate, actively achieving growth in recent years has been hampered by having to deal with the implications of Brexit, swiftly followed by COVID-19 disruptions and the current geo-conflicts. It’s fair to say that manufacturers are far from immune to the many hurdles and challenges that continue to impact businesses worldwide.

With the industry set to see profit margins continuing to shrink and a stark forecast that the UK is expected to be the slowest growing G7 economy in 2023, manufacturers need to make sure they can manage these headwinds both operationally and with suppliers.

The Current Environment Facing Manufacturers

• Manufacturing continues to see activity slow down while prices rise at record rates.
• For the third quarter in a row, the growth of output and orders has slowed down.
• Business and economic confidence has fallen for three quarters in a row.
• Manufacturers are facing significant cost increases in energy and raw materials, a shrinking labour market, and the highest tax burden in 70 years.
• Businesses are finding it hard to make efficiency gains, and higher prices are putting customers off buying. (Make UK’s Q2 2022 Manufacturing Outlook)

Preparing For Ongoing Supply Chain Disruption

With many organisations across the manufacturing sector managing global operations, the supply chains they operate have evolved, diversified, and grown.

Clearly starting to feel the impacts of multiple industry challenges, manufacturers are also struggling with supply chain disruptions, which have risen 88% year-on-year.

The most common supply chain issues and the percentage of businesses affected are:

• Delayed deliveries (52%)
• Unavailability of services (28%)
• Unavailability of products/parts (27%)

(Alcumus/CIPS)

Manufacturers have increased the number of suppliers in the last two years by 38%, and 42% have increased their UK supply base (Make UK’s Q2 2022 Manufacturing Outlook). Hence, managing supply chain risk more effectively involves becoming more flexible and scalable to respond to the ongoing disruption that lies ahead.

Resilience has overtaken efficiency as businesses’ primary agenda. New risks have combined to make real-time visibility that proves suppliers’ credibility and sustainable business practices more important than ever.

Consistently monitoring supplier risk is essential to business performance and resilience. This is why manufacturers need to adopt a more comprehensive approach to who they work with to comply with regulations, protect business continuity, avoid unethical practices, maintain a safe and healthy working environment, and manage disruptions more effectively.

Insight into the Supply Chain

With supply chain disruption the key business risk in 2022, cited by 84% of organisations (BDO survey), and increasing dependence on working with multiple suppliers, the pressure to mitigate the risks in the supply chain has intensified.

The increases in legal requirements and public expectations have elevated social value and Environmental, Social, and Governance (ESG) management to the same level as Health, Safety, and Quality.

A proactive risk approach to understanding where supply chain risks can occur should be more holistic and factor in such elements as:

• Health and Safety
• Financial stability
• Modern slavery
• Quality management
• Anti-bribery
• Right to work
• Equality and diversity
• Environment
• Data protection (GDPR)
• Insurances
• Risk assessments
• References
• Building information modelling (BIM)
• Sector/trade-specific requirements

Technology to Reduce Risk

As the manufacturing sector adapts to the ongoing challenges and potential risks, tech-driven data, and data visibility are key to understanding how suppliers operate and identifying risks before they occur.

Through technology, businesses can evolve faster and become more resilient, recognising that data visibility is the key to intelligent analysis and timely, accurate decision-making. This approach helps companies:

• Comply with relevant regulations and obligations
• Make informed decisions
• Demonstrate due diligence
• Promote a sustainable culture
• Reduce costs
• Prevent direct and indirect costs of quality failures
• Demonstrate credibility
• Reduce risks associated with health and safety, environment, modern slavery, diversity, equality, workplace well-being, and financial stability
• Manage reputation
• Audit continuous improvement
• Reduce administrative time

Alcumus SafeContractor works with global organisations, supporting them with our technology, people, and expertise to provide insight into the resilience of their supply chain and create sustainable networks.

• This allows businesses to:
• Improve the visibility of contractors and suppliers
• Meet compliance requirements
• Build strong health and safety cultures
• Demonstrate ethical practices
• Deliver consistent processes
• Adapt faster to changing business requirements