Supply chains starting and/or ending in the UK were already wavering well before we even heard the word ‘coronavirus’. Now a day doesn’t go past without the news pointing to yet more evidence of supply chain fragility. We’re bumping along from one supply chain issue to another, showing the instability of a pinball being sent on a haphazard journey.
Yet, with things returning to some degree of normal in the UK, it’s possible to start to see what’s what. We can see that it’s not just the global pandemic which has and still is making things difficult, but also we are seeing the effects of Brexit with more clarity each day.
For example, many European workers in the UK returned to their country of origin during the pandemic, especially if remote work was possible, or production stopped, and many aren’t returning. Their micro-reasons for not returning are varied, but Brexit looms as the major barrier for many, along with plentiful work in their own countries.
There are multiple reasons why our supply chains are struggling, but one thing is certain: struggling they are. And looming large as a chicken or egg conundrum, is recruitment problems and skills shortages. In an industry so supply chain dependent like manufacturing and engineering, we need to face this situation head on and find the solutions we need.
Are the supply chain problems here to stay?
The general consensus in the mainstream media is that yes there are supply chain issues, but hey, we’ve been living through a pandemic, on the back of Brexit, and oh, a great huge ship got wedged in a crucial trade route. The message is repeatedly: this is temporary, when ‘this’ passes, things will return to normal.
The danger with this thinking is that it doesn’t reflect the very pertinent reality, and distracts us from finding solutions. THINK Economic and Financial Analysis at ING are drawing our attention to this, saying starkly:
“… we think supply chain problems are here to stay, making it difficult and expensive for firms to get hold of industrial inputs even as more countries recover from the pandemic, particularly in a policy environment increasingly geared towards reshoring and domestic production.”
We know that global trade’s recovery has now overtaken global GDP. But it’s uneven, and it’s not stable. We’ve seen, and are seeing, for example more shipping whilst air freight has taken a back seat. But it’s far from without problems. Capacity problems are evident, just for starters.
It’s volatile and it’s uncertain. All of the disruptions of lockdowns (and the tricky issue at the Suez Canal) have led to extreme backlogs, errors and losses. Shortages as well as price increases are very much the order of the day.
The juddering and varied pace of recoveries around the world means that stability is near impossible, before throwing in the Brexit changes.
The impact on manufacturing and engineering
It’s not surprising the manufacturing and engineering sector is particularly hard hit by the volatility in the supply chain. Lots and lots of materials are facing shortages. From electronic components to plastics, there are widespread problems.
Industrial metals are now 70% more expensive than they were before the pandemic hit. There’s no escaping the impact of these price rises, with the combined shortages, on our businesses. The issue here is that it’s not just Brexit, it’s not just the pandemic, but pre-pandemic mine closures are now being felt.
As with all of the supply chain issues, it’s a complex picture with multiple causes coming into the melting pot. Whilst the prices have dipped a little lately, it’s quite possible that notable rises are likely throughout the rest of this year and beyond.
Alongside this, shipping costs are likely going to remain high too. It’s going to take time to expand container capacity with experts warning that it’s going to be as late as 2023 until the increased capacity will be truly felt. The number of new container vessels ordered in 2021 has seen record highs, but they don’t appear overnight.
The talent that’s needed
With a backdrop of these issues, it highlights the need to address skills shortages but also draw on acquiring the right skills and expertise. Those operating within supply chains need to identify leaders that are capable of operating with the capacity difficulties they face.
They need to know how to be capacity leaders, managing what they have with the price difficulties they face. There is competition for capacity and those who can win that game will see bigger wins within their business.
Additionally, leadership talent needs to manage the drive for reshoring alongside these issues. The manufacturing and engineering businesses of the future are recognising that uncertain recovery and a post-Brexit world has increased the barriers to trade and means they need to consider and expand domestic capabilities. This is particularly relevant within the arena of technology, so that greater independence can be built into supply chains.
A unique brand of talent needs to emerge to weather this time.
Alongside this, the skills shortages need time and attention. If we are to be able to build greater resilience in our supply chains by increasing and improving domestic production, then we need to be honest with ourselves about the skills our businesses are lacking.
Reshoring is hard, even with available talent. So, with its absence, we need to be working quickly to reskill talent and promote loyalty and commitment within our businesses.
Short term and long term
In manufacturing and engineering particularly, this all means that we need to view our talent as an even more critical resource than ever before.
The talent that we work to recruit and develop today is essential for seeing us through the continued fragility of supply chains. It’s necessary to ensure that as this fragility continues throughout the final quarter of 2021 and into 2022, and even into 2023, we are primed to be the businesses that weather the change and actually thrive.
The right leadership talent is essential to manage the current supply chain fragility which is, most likely, here to stay for a good while yet.