2. Biz Network June 2021 39-80.qxp_Chamberlink 01/06/2021 09:09 Page 44
POLITICS
Can the region’s manufacturers work as one? Supply chains have faced huge disruption since the first lockdown, forcing OEMs to contemplate where they will source goods and materials in the future, and SMEs further down the line to become more agile. Now experts believe there’s an opportunity to create a “Midlands as a factory” concept in which the region’s manufacturers compete as one, rather than against each other. Dan Robinson reports from a discussion at a recent Midlands Engine Economic Observatory event. he aerospace industry, once booming thanks to globalisation but ravaged by the pandemic-induced collapse of international travel, should be strapped in for a long-haul journey towards something resembling normality. As Andrew Mair, chief executive of the Midlands Aerospace Alliance, says: “Aerospace supply chains are going to be what I’d call a ‘long Covid’ industry, as we’re not going to get the recovery for three or four years.” Fault lines in an unco-ordinated supply chain were already exposed last summer when the lack of certainty in the economy meant aircraftbuilding plans were halted but middle-tier companies continued ordering parts. Although Andrew calls it a “car crash” scenario for the industry that highlighted why greater collaboration was needed, many in the industry are searching for opportunities in line with the old adage of never letting a crisis go to waste.
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WHILE THE MIDLANDS seeks to bring together the region into a single living, breathing and making entity that acts in unison, research by the Warwick Manufacturing Group (WMG) illustrates the stark variations that exist across its geography at the Midlands Engine Observatory’s latest quarterly economic briefing. For example, manufacturers in the West Midlands lost 89% of orders when Covid-19 struck – making it the second-hardest hit region – yet the East Midlands fared better than any other location with a 67% loss of custom between April and May 2020. Janet Godsell, a professor in operations and supply chain strategy at WMG, which sits within the University of Warwick, says: “The impact on the West Midlands is potentially because of the industry’s reliance on the aerospace and automotive industries, which have helped to make the region slightly more productive than the East Midlands. “They’re critical to the economy but not to life. So when a shock like Covid happens and demand for them is essentially switched off overnight, it’s not just the OEMs that are hit but also the supply chains that are very dependent on those sectors. 44
business network June 2021
Andrew Mair
“But the East Midlands has a much more diverse manufacturing portfolio, which may have provided some natural resilience for its order book when Covid hit, but at the same time it’s one of the least well-performing regions within the UK in terms of productivity. “So what we can’t get away from is this link between productivity and resilience, which are incredibly important to our region – but even within the region there’s some disparities that require further investigation. “One idea to address this could be to compete through economies of scope, not scale, and having a manufacturing capability that responds to changes in either demand or supply, rather than being locked in.” IF THE AEROSPACE industry is suffering from the effects of “long Covid”, then the 2020/21 experience for supply chains across manufacturing has been akin to a bad night in the ballroom. “The stop-start nature of lockdowns created a hiatus in the supply chain and it’s bit like knocking someone out of a waltz then asking them to jump back in,” says Charlotte Horobin, Midlands and East of England membership director at the manufacturers’ representation group Make UK. “It’s really not easy to turn a production line back on – you’ve got to have that critical demand in order to run.”
With 95% of British manufacturers exporting to some degree – and the industry accounting for half of UK total exports – the disruption to international trade from Covid, and exacerbated by Brexit, has been monumental. Three-quarters of firms in the industry have reported delays in the first three months of 2021, leading to rising costs for half of those and lost revenue for a third.
‘We have to understand our regional and national supply chains much better’ Make UK is not about to condemn global supply chains due to the complex integration already deeply rooted, but is calling for a review of UK supply chains. “For some products, it’ll never make economic sense to manufacture in the UK,” says Charlotte. “But we’ve got to establish what is strategically important for our country so companies know where to invest in R&D. “We have to understand our regional and national supply chains much better, boost their competitiveness so they play a bigger part on the global stage, and think more about quality and environmental values. “There’s a tremendous opportunity to transform our traditional industries to go from making a widget for a certain sector to talking about the capabilities and clusters we’ve got in the Midlands’ supply chains that can be beneficial for different sectors.”
