Why you should onshore your precision engineering requirements in 2022

The period immediately after 2008 – post the global economic crash – was one of uncertainty in terms of global business and the reshaping of a post-crash economy.

But those years now look like a time of relative calm compared to the turbulence in the UK, European and global supply chains since 2016.

As a quick reminder, the seismic shock of the Brexit vote was then followed by the election of Donald Trump as US president – heralding a reset of the US attitude to global free trade – and finally the chaos of a global pandemic.

Considering these shifts, the stability of supply chains has evaporated and – in turn – this has impacted the practice of offshoring precision engineering requirements.

For a while, as globalisation grew, it was taken for granted that most businesses based in the UK could easily and permanently access overseas engineering services at lower cost.

Today this is not always the case.

Now, bringing engineering services back onshore – ‘reshoring’ as it is known – is an increasingly popular and, even, necessary option for UK businesses.

Why is reshoring growing in popularity?

There are a number of reasons for this growing trend:

The cost of offshoring is rising

Some of the countries which used to offer attractive, low-cost offshoring options have themselves developed into major economic forces. China, for example, is now the second largest economy in the world and, as a consequence, the cheap labour costs, once such a driver of offshoring, have ceased to be as much of a factor.

In 1980, for example, the average annual wage in China was 2.6% of the average wage in the UK. By 2020 this figure had risen to 20.5% and the on-going growth of the Chinese middle class is bound to accelerate this process.

The same process is unfolding in other developing markets such as India and Pakistan, removing one of the main planks – cheap labour – upon which offshoring was based.

Reliability is faltering

The popularity of offshoring depended to a large degree on the reliability of global supply chains. This was first disrupted the threat or reality of various tariffs being introduced to safeguard US manufacturing.

Much more drastic was the COVID-19 pandemic which caused supply chains to grind to a halt as China, in particular, stopped manufacturing almost entirely. While the impact of the pandemic itself may fade, what won’t fade is the message that the global supply chains offshoring relies upon can’t be taken for granted.

Trade rules are changing

In the UK, Brexit has disrupted supply chains. Although the longer-term impact of Brexit will take years to become clear, any business which relies on importing and exporting goods has already had to deal with major supply chain disruptions.

Every purchasing or procurement professional is familiar with reports of long queues of lorries stretching back from the port of Dover, causing lengthy delays and adding to costs and time delays.

For businesses in the UK which might once have offshored their precision engineering requirements, the supply chain disruption is just another reason why reshoring is now more appealing. 

Benefits of onshoring your precision engineering requirements

The upsides of reshoring, and working with a UK based company are as follows:

Consistent quality
The kind of accreditations and quality control mechanisms in place in the UK are easily recognised by any UK based business, offering a degree of certainty in terms of the quality which is going to be delivered.

Easier communication
Clear lines of communication are one of the most vital parts of any successful procurement process, let alone an outsourcing one. It’s much easier to maintain clear and simple communication with a company which is based at least in the same time zone as opposed to thousands of miles away. Language differences are also not an issue.

Better access
It’s easier to visit the premises of any precision engineering company you’re considering using, to see for yourself the manufacturing processes and plant and to discuss business face to face.

Shorter lead times
Though offshoring precision engineering may still offer lower initial costs, it is also likely to increase the lead time of the work, particularly when supply chains are already disrupted for other reasons. For this reason, a longer lead time can ultimately eat into any initial cost savings.

Longer-term cost benefits
While offshoring may offer lower initial manufacturer costs, there are other additional costs to factor in compared to re-shored manufacturing. These can include costs arising from exchange rates, VAT, Custom Duty charges and costs linked to increased red tape.

Improved carbon footprint
Reshoring your precision engineering service will cut the carbon footprint of your business. As well as being good for the planet, reducing your carbon footprint will also boost the corporate social responsibility profile of your company. Working with local suppliers can be flagged as part of your commitment to UK-wide net zero policies. These issues are increasingly factoring into purchase decision making as consumers, suppliers and procurement professionals choose where to spend their money. 

Next steps

If you’d like to learn more about the benefits of reshoring your precision engineering requirements talk to F-Tech Precision Engineering. Our precision engineering facilities are detailed on our website, but a member of our team would be happy to discuss your requirements and explain exactly what we could do for you. Contact us by calling +44 (0)1763 269 600.