Offshoring: Still in control although at arm’s length

The exodus of manufacturing to countries where labour-intensive work costs less has long been a cause for concern for those who champion the UK’s relationship with making things.

However, for a small number of British comp­anies, outsourcing the physical manufacturing, far from being a national loss, is indicative of the progress the industry has made in the past 25 years.

The imbalance of labour and material costs between the developed and developing nations and advances in technology have fuelled a boom in “virtual manufacturing”. Producers of anything from pushchairs to car parts have taken advantage of the favourable economics of manufacturing abroad, while keeping the intellectual core of the business in the UK.

Andrew Hall, a director at Arup, the global engineering group, says it makes sense to work off a cost-base that is most effective but that it does not mean a loss for British industry.

“We have a great collective of intellectual horsepower in this country which is being put to good use in researching and designing a huge range of products, and there is nothing to suggest we won’t maintain that,” he adds.

Economics may be the main driving force behind outsourcing the supply chain but it is rapid advances in technology that have made it possible.

The ability to do three-dimensional modelling and to shuttle designs quickly around the globe mean companies can be more involved all the way along the process, irrespective of location.

Mamas and Papas, a push­chair maker, shares a similar philosophy to Arup with regard to the geographic diversity of its manufacturing process. The company, which operates 60 stores and had revenues of £121m ($179m) in 2009, says it is a misconception to think that the most important part of manufacturing is the physical building of goods.

“You could reverse the question and ask why we don’t do the building in the UK, with the designers in east Asia, or wherever the product is being put together,” says Gill Kingston-Warren at the Huddersfield-based company.

As well as reaping the benefits of lower labour and material costs, Mamas and Papas says the flexibility to outsource work beyond the UK means it is able to find the parts of the world best equipped to carry out different elements of the manufacturing process.

“We are not doing it for cost, we are doing it for premium. Otherwise, it makes sense to stick the whole operation in China. But we move around all over the world, depending on the capability of the people,” Ms Kingston-Warren says.

She adds: “The UK is known for design and intellectual property and other countries have skills we are not known for any more. Some countries have strong traditions of craftsmanship, while others are focused on technology”.

However, while outsourcing the supply chain has undoubtedly given many companies a competitive edge, there are some in the industry who believe that losing the skill-base so central to the process could sound the death knell for manufacturing in the UK.

If designers are separated from the manufacturing process, there are concerns that the two will become increasingly abstracted from one another.

George Kessler, joint chairman of Kesslers International, a manufacturer of point of sale displays, says that by moving manufacturing abroad, the UK risks ceding its industrial heritage to China and other developing nations.

“If we lose the manufacturing process, we won’t be able to produce designers who understand what to do, as they won’t have the manufacturers to work with,” Mr Kessler says.

“The question is whether we are in a position to keep developing new and better intellectual property and designs. Once the countries doing the manufacturing catch up on that front, the industry in the UK is lost.”

The issue of the manufacturing process being being taken abroad, wholesale, is not new, however.

Pure, the UK’s largest maker of digital radios, which has manufactured in China since 2002, says that most of its competitors were using the country to design and manufacture their products and were simply “buying and badging a radio which was made from scratch abroad”.

The company, which has 30 per cent of the UK’s market for digital radios, says it has a team of 450 engineers working with its designers in Kings Langley to ensure that the process was cohesive as possible.

Tim Lewis, director of manufacturing and purchasing at Pure, says: “For cost reasons, work has to be done in China but to get the best quality products, we want as much involvement in the manufacturing process as possible. We don’t want just to send across the drawings. We want to prescribe how it will work.”