Cut supply chain costs carefully, report urges

But despite continued economic uncertainty, 78% of 100 UK manufacturers surveyed are more positive about the business outlook for the next 12 months compared with a year ago, according to the study from Zurich Insurance.

The firm’s new Hazard Warning Report surveyed senior managers from manufacturers within the £5m-£300m turnover range, where food and drink manufacture accounts for around 15% of UK manufacturing output by value, according to the Food and Drink Federation (FDF).

Supply chain risks​

With domestic demand at a standstill, 34% of managers said that economic uncertainty was the top challenge facing them, followed by the need to break into emerging markets and supply chain issues, although Zurich said it was surprised that only 2% of respondents said that a lack of available credit was a problem.

Urging manufacturers to identify key suppliers and the consequences of their potential failure, the report authors said that trimming supply chain costs could mean additional risk: “For example, a decision to source all products from one supplier in one country may look rational, but if that supplier is located in an area subject to either natural or man-made disruptions, there could be a significant business impact.”​

Managers identified Chinese, Indian, US and Brazilian export markets in particular as important, with 47% noting the need to direct their own energies into breaking into such lucrative markets, rather than relying on government or regulatory action.

39% of firms said employment and skills were important to growth, with 60% of £100m-£300m turnover firms identifying the issue as a business risk, while there was a high general demand for science, technology, maths and language skills.