What’s happened to offshoring?
Just a few years back, offshoring presented itself as a justifiable option for progression. To be competitive in their respective marketplaces, large numbers of manufacturers thought it wise to move to offshore production to take advantage of the considerably smaller overheads abroad.
This couldn’t last forever though, and, as expected, the cost of overseas production is significantly increasing, as high as an annual 20% in China for the cost of labour. Other unforeseen costs include the need for new management to control overseas activity and the adaptation required for local criteria.
A changing trend
This inflation is influencing many companies to move operations back to the UK. A 2014 Lloyds Bank forecast predicted that 50,000 UK car manufacturing jobs would be created by 2016, with as many as 70% of manufacturers planning to form shorter, more reliable supply chains through onshoring.
Manufacturing today has risen to a new complexity compared to that of yesteryear, and those who achieve success will be those able to create reactive infrastructures. Manufacturers need to be flexible to changes in technology as it quickly evolves and adapts to meet customer needs. This agility is not easy to achieve when manufacturing plants are situated across the world.
More value in the value chain
The Manufacturer report goes on to highlight a shift from purely physical production to value chain activities delivering greater value, innovation, and efficiency.
Whereas before the purpose of manufacturing was principally to convert raw materials into a physical product, manufacturers are increasingly using capabilities to generate revenues from complimenting a product or service with further support and benefits.
Soften the cost
These new ways to achieve finance will soften the blow of additional labour costs, expected to hit manufacturers who reshore production. However, significant advantages can be found in a system that many manufacturers are already benefitting from, ERP.
Up until this moment, successful ERP has mirrored its core purpose of process management and economising expenditure. Today, however, many rewards can be obtained from an ERP upgrade due to more intelligent business models and revenue streams. ERP systems can now cater for more ‘up-to-the-minute’ capabilities and be customised to mirror precise organisational activity.
The right partner, the right job
Selecting an effective ERP partner will help avoid implementing a ‘one size fits all’ solution and deliver something truly tailored to meet organisational needs. This is important given that companies looking to onshore must keep a sharp eye on the effects of behaviour across the entire organisation to enforce the smartest possible strategy and save costs where possible.
ERP solutions such as Microsoft Dynamics AX can offer significant benefits when implemented well. Fine-tuning it to meet today’s challenges will allow manufacturers to provide an agile and productive (and ultimately profitable) experience.
To explore HSO’s complete ERP solution visit https://www.hso.com/uk/solutions/microsoft-dynamics-ax/. Alternatively, contact us here for additional information or to book a demo.