Report calls for supply chain industry to invest in R&D

By Rod Addy contact

- Last updated on GMT

Hall: 'We need policies which focus on long-term value'
Hall: 'We need policies which focus on long-term value'

Related tags: Supply chains, Industry

The UK supply chain is threatened by under-investment in research and development (R&D) and firms must work more closely together to strengthen it, according to an industry report published today (October 20).

The Confederation of British Industry (CBI) study ‘Pulling together’​, based on global management consultancy AT Kearney’s analysis, argues revitalising UK supply chains could inject £30bn into the economy by 2025. That would, in turn, create more than half a million jobs.

The report also highlights the growing skills crisis threatening the future of supply chain businesses. Its recommendations include setting a target for public and private sector spend on R&D to rise to 3% of gross domestic product (GDP) and widening the R&D tax credit to support innovation.

Other proposals include: doubling investment in the UK’s innovation agency, Innovate UK; financial incentives for science, technology engineering and mathematics (STEM) degrees and creating a national materials strategy to guarantee vital industry supplies.

Alongside boosting R&D investment, the report urges companies to work more closely together to make best use of existing resources and highlights key food industry examples.

Meat processor Tulip

It points to meat processor Tulip working with packaging firm Smurfit Kappa. The two companies have invested in a dedicated person that works for both their businesses. The move has ensured new packaging is designed optimally to run through Tulip’s factories with few teething problems.

Elsewhere, United Biscuits was commended for building a more sustainable supply base. A farming co-operative of 12 farmers was formed to supply local potatoes for its Teesside plant. The firm has taken a similar approach with wheat, dairy ingredients and oilseed rape. As a result of the strategy, there were no problems with wheat supply even during the catastrophic 2012 harvests.

“We need to see a bold strategy that breathes new life into our supply chains, and makes the UK the destination of choice for manufacturing high value products,” ​said Katja Hall, CBI director general. “This could provide a £30bn boost to the economy, and create half a million extra jobs.

“The scale of the challenge is sizeable – our competitors are powering ahead, with France outstripping our research & development (R&D) investment by 40%. At the same time, only 3% of our graduates end up in engineering or technology jobs.

Long-term value

“We need policies which focus on creating long-term value – from increasing R&D spending to establishing a UK-wide materials strategy – to enable industry to play to its strengths and compete effectively on the world stage.”

Charles Davis, strategic operations partner at AT Kearney, said: “After years of decline the UK industrial base has stabilised and, with the correct industrial strategy, we can and should look for growth. This will be vital to the long term health of the UK.

“As the challenges of global supply chains become better understood, companies are beginning to look beyond the headline cost to the true value. Winning will be through supply chains that drive revenue, not just striving to be the lowest cost.

“This report shows that the most important factor in supply chain location decisions was service/innovation scoring 36%, with total cost next at 30%. While innovation should be the catalyst, at the same time we also need to ensure the skilled resources and correct environment are in place.”

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