Andrew Thompson, CEO of Cleveland Containers, discusses the challenges of supply chain disruptions and its effects on the manufacturing sector
With an average output of £224 billion per year and employing about 2.6 million people, the UK is currently the eighth largest manufacturing nation in the world.
Despite these resounding figures, the sector has faced a number of challenges over the past few years, which have been especially exacerbated by issues and disruptions at the supply chain level.
Almost three in five manufacturing firms across the country say they have been struggling with supply problems ever since the start of the pandemic. What’s more, 93% of UK manufacturing businesses expect the pressure on supply chains to persist throughout 2024, meaning this unideal situation is likely to cause a few more headaches.
But how exactly is the supply chain crisis affecting manufacturing organisations across the country?
Longer production times
One of the most prominent problems with supply chain disruptions is that they can lead to longer production times for manufacturers.
Andrew Thompson, CEO at Cleveland Containers , one of the UK’s leading providers of shipping containers, said: “If manufacturers are experiencing supply delays and can’t get hold of the raw materials they need, they have no choice but to slow down production and wait for the supplies to be delivered.”
“Of course, this can cause a wide range of issues, including missed deadlines, loss of revenue, order backlogs, and inventory shortages. It can also hinder manufacturers’ ability to predict their future operational needs, such as how many supplies they require and when they need them. “
“Overall, supply chain disruptions can significantly impact businesses’ production times, as manufacturers may have to halt their operations and carry out their activities at a slower pace.”
Increased costs
It has been found that supply chain disruptions caused companies to miss up to 11% of revenue growth opportunities, with the industrial equipment manufacturing sector taking the largest hit. There are several reasons for this, from delayed production operations to material shortages.
In terms of raw material shortage, a surge in demand for products that aren’t widely available – such as semiconductors – has fuelled a spike in material costs, squeezing businesses’ profit margins. Some manufacturers have had to increase the cost of their end products as a result, but adding extra expenses to the customer can actually outprice their target audience, in turn leading to possible customer retention issues.
The ongoing geopolitical tensions are putting manufacturers’ finances to the test, too. Whether because of higher fuel prices or longer routes to avoid conflictual zones, transport costs have been going up in recent years, meaning businesses are having to splash out more money at the end of each month.
Reduced efficiency
Supply chain disruptions and delays can cause great uncertainty, making it tricky for manufacturers to organise their operations and plan production schedules effectively.
Thompson said: “In the manufacturing world, production schedules and workforce allocation are essential steps to keep everything moving in the right direction.”
“However, supply chain issues can have a detrimental effect on a company’s operational flow, as they prevent manufacturers from planning their activities in an efficient, accurate fashion.”
“For example, in the case of essential missing parts, an entire production line can be brought to a standstill. If you are, say, a furniture manufacturer, you might rely on specific types of wood or hardware to assemble your products. However, if such products are not immediately available, you are likely to end up with unfinished items that will create a blocker in your operations.”
“This can lead to wasted resources, downtime for workers, and ultimately delays in shipping out products and fulfilling customer orders.”
Customer dissatisfaction
In recent years, more than half (57%) of global consumers say they have been personally impacted by the effects of supply chain shortages and delays. More strikingly, one-third of buyers admit that the items they have wanted to purchase have not been available at all.
Although manufacturers are rarely responsible for disruptions at the supply chain level, delays and unmet delivery problems can trigger customers’ frustration and dissatisfaction.
As well as affecting current sales, supply chain issues can damage both brand loyalty and customer relationships. In fact, the inability to provide people with the products they are looking for in a swift manner can cause customer retention problems, as clients are likely to browse and shop elsewhere.
The ongoing disruptions can negatively impact a business’s reputation and hinder its competitive edge, which—in such a fierce global market—is crucial to keeping revenues in check all year round.
From longer production times and increased costs to reduced efficiency and customer dissatisfaction, the existing supply chain problems are no doubt putting manufacturers’ resilience to the test.
But as we navigate this period of uncertainty, the hope is that things will gradually improve, allowing companies to work at the top of their abilities and focus on what they do best.