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Supply Chains Under Pressure: How Can UK Manufacturers Find Stability in an Unstable World?

We have written about supply chains before here at ENL Group. In recent years there have been a series of highly disruptive events which have forced UK businesses to think differently about the resilience of how they source their materials and components.

Firstly, there was Brexit, which fundamentally reshaped the relationship that the UK has with our European partners. All sorts of complex rules followed, for instance about where components had to be sourced from for goods manufactured in the UK to meet new ‘rules of origin’ requirements.

Then there was Covid. This closed down ports and manufacturing facilities around the world, impacted on shipping, and created significant delays in moving goods around the globe.

Now there is a new disruptive event – the distressing and still unfolding situation in Ukraine, which has changed the trading relationship between the UK and Russia. This conflict has, once again, reminded businesses of the importance of having strong and resilient supply chains.

Do Russian Supply Chains Matter?

On the face of it, Russia is not as critical to UK manufacturing businesses as a country like China is. However, it would be a mistake to believe that the supply chains between Russia that the UK are not critically important.

The most obvious of these is natural gas. Restrictions on the flow of Russian gas to Western Europe are one of the reasons that energy costs in the UK are set to continue to rise so rapidly. However, there are also massive implications for food and agriculture. Russia and Ukraine are responsible for 25% of the global wheat trade, 60% of the world’s sunflower oil, and 30% of global barley. These are big numbers that will ultimately make a real difference to the price of food that we find on the nation’s shelves.

Implications for Manufacturing

But does it matter for manufacturing?

Many UK manufacturers may think “we don’t buy goods or materials from Russia, so we will be fine.” However, it turns out that things are a little more complicated than that.

This is because, even if manufacturers have supply chains with other countries such as China, the raw materials that feed the Chinese economy will often come from Russia.

Russia is a major exporter of some of the world’s most important commodities.

Take palladium as an example. This is a critical component in the catalytic converters that the automotive industry relies on. Russia accounts for 30% of the globe’s supply of platinum-group elements which include palladium. As a result, the global price of palladium has sky-rocketed by 80% since the start of the conflict.

Ultimately this will impact on the UK automotive sector. That in turn means that businesses like ENL Group, which supplies that sector, will also be impacted. This is a good example of the way that disruptions in one industry can ripple out much further and affect other businesses.

What Can Businesses Do?

The first thing businesses should do is really understand the risks that exist in their supply chains. This needs to start with a clear understanding of where your supply chains are that goes beyond the simple headline of who your supplier is. Think too about who supplies them, and ask them what their contingency plans are if their own supply chain is disrupted.

Ultimately, this is about having a robust system to identify and manage risk. Unless you properly understand that risk in the first instance, this is simply not possible.

Secondly, make sure you have a plan B – ideally before you actually need it. This may involve moving your supply chains closer to home.

We have written before about the trend towards “onshoring” suppliers, which is something that we at ENL have done wherever possible. This trend accelerated during the Covid pandemic, which highlighted the benefits of reducing potential risks by shortening supply chains and bringing them closer to home.

However, for some goods and materials, onshoring is simply not an option. Instead, some analysts are detecting a trend toward what is being dubbed “friend-shoring”. This involves remodelling supply chains to move away from more volatile nations and instead focusing on the more stable locations of allies or partners.

This trend is likely to continue to grow as the implications of the current conflict grow, and as businesses nervously watch to see whether other major economies such as China are impacted by economic sanctions.

Finally, all businesses, including ENL Group should communicate openly and honestly with both suppliers and customers. The domestic and global challenges that currently exist are impacting different businesses in different ways. Just as we face challenges, so too will our supply chains and our customers. Sometimes finding solutions is not something that we can do on our own. Instead, we will make sure that we will collaborate with others to find ways forward that work for all parties.

About ENL Group

ENL Group is based in Portsmouth, UK and Veľké Kostoľany, Slovakia. Established in 1958, we have been servicing UK-based and European companies for decades. Working with a secure supply chain, ENL provides quality components for quality-driven customers – with full certification for all of our products and quality checking at every stage.

Operating 24/7, we design, manufacture and deliver critical components for our customers across the UK and Europe.

Contact Us for more information about ENL and how we can help your business.