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Home / Business & Management / Supply Chains in Practice: How Things Get to You / Importance of supply chains to industrial strategy

Importance of supply chains to industrial strategy

Importance of supply chains to industrial strategy
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Supply chains, you know, I’m not an economist. I’m a, I suppose I’d like to be a policy maker at some point, but I suppose all of us are policy makers, legislators. But I think of supply chains as being the blood that pumps the heart in our economic system because they are such an important part of the economy. And sometimes you have in political debate, we’re sitting here in Westminster, a juxtaposition of large and small businesses, as if somehow they’re different creatures and they have different interests.
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But the fact is a relationship between the two is symbiotic, and if you look at our large manufactories in our country, and people forget we’re still the eighth largest manufacturing nation in the world, they simply couldn’t do what they do without a healthy supply chain. And so that’s why I call the supply chain, of all our different sectors, it really is the blood that pumps the heart of the economic system. We’ve got a major problem with our economy right now. In the short time… in the short term, growth has returned, but we’ve still got major imbalances in the system. We have a model which is too based on consumption, too based on cheap money and house price inflation.
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And if we want to change that, both so that we have a better geographical spread of growth where traditionally, in recent times, our economy’s been dominated by output coming from London, the southeast. And we want to change that, too, so that we have a greater variety of sectors contributing to growth, and to ensure that we export more. We’ve got a terrible trade deficit at the moment. Then we have got to pump prime activity that will help us do that. And the development of our supply chains, for me, is an essential part of that.
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So if you take for example in manufacturing, our automotive sector, now the narrative and the consensus view around the automotive sector is it’s doing incredibly well, in spite of a downturn in its major export market in Europe. And that’s during some very turbulent times and headwinds for the economy. But whilst we’re very good at assembling cars and doing the innovation design side, when it actually comes to making the parts, we’re still importing a lot of that. And that, just in that successful sector, illustrates how much further we’ve got to go in developing and progressing the supply chain in automotive.
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And that’s why in the last parliament between 2010 and 2015, myself, when I was the Shadow Business Secretary and then Shadow Chancellor, Ed Balls, we commissioned Mike Wright, who is the executive director of Jaguar Land Rover, to look at the supply chain in advanced manufacturing. Well, I actually think there are four key parts to helping fix the problems we have in and around supply chains and developing them. One is skills. We have a chronic skills gap in our workforce. Too many companies of all different sizes complain that we have a problem there, in particular, people with a technical and vocational skills, but also technological, maths, engineering qualifications, too.
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So skills is a major issue that our system is simply not addressing properly. Secondly, we’ve got to make sure we’ve got the right infrastructure in place in all different respects, energy, transport, digital. Three, we’ve got to sort out the financing for our companies who find it hard, particularly if they’re a risky proposition for finance institutions. We’ve got to do more there. The government introduced the British Business Bank and the Green Investment Bank, but frankly, a lot more needs to be done there, and particularly stoking investment in R&D and innovation. Although manufacturing contributes, I think, 70% of all R&D spend in our country.
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If you look at what we spend as a country in R&D and innovation relative to competitors, it’s actually quite low. And then finally, we need to change our corporate culture so we have a much more long term approach to business decision making, which isn’t so focused on the next set of management accounts that you produce to your shareholders, but is looking much more to the long term. So have a culture which is a bit more akin to that which they would have in Germany. People often cite China, but of course, China I see as a bit of a special case because they have different, how could I put it, a different governance culture in China.

The supply chain is the blood that pumps the heart in our economic system. It is such an important part of our economy.

Chuka Umunna is a British Politician, from the Labour Party, who has been Member of Parliament (MP) for Streatham, London since 2010 and was Shadow Business Secretary from 2011 to 2015.

In the video Chuka recognises the importance of manufacturing and the broader supply chain to the UK economy. With an economy overly dependent on consumption, cheap money and house price inflation it is time for change. He calls for a more balanced economy with less reliance on the South East, and greater emphasis on exports.

Chuka highlights that the success of the automotive industry is a double-edged sword. The UK has focused on final assembly, we are assembling parts that have been supplied from all over the world. To build a more resilient UK automotive industry we need to focus on strengthening the UK supply base where appropriate. New ‘green’ and ‘autonomous’ vehicle technologies provide a natural opportunity to do so.

A reflection of Chuka’s commissioning of the Wright Review of advanced manufacturing in the UK and its supply chain is testimony to his understanding of the importance of the supply chain to the UK economy.

For an alternative perspective of the Automotive Supply Chain please watch the ‘Those Special Moments’ poem by Pangaea Poetry.

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Supply Chains in Practice: How Things Get to You
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