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Re-shoring in practice

Re-shoring in practice
My name’s Tony Sartorius. I’m chairman of Alucast. Alucast is an aluminium die casting foundry based in Wednesbury, in the Black Country, in the UK. It was formed in 1967 and it’s a 7 and 1/2 million pound turnover. It has 100 employees and we make parts for automotive, vacuum, and hydraulics, as well as a number of other industries. We’re solely manufacturing aluminium castings. We can fully machine those castings as well, which means that we can send them in to car companies and to our customers ready for assembly trackside. Those sorts of castings are automotive components, that’s engine parts, certainly parts for the chassis, and also many other parts.
We’re doing vacuum pumps as well, sent all around the world, hydraulic parts for tractors, and yellow goods. The number of parts we make per year is probably around the several hundred thousand, mainly because we’ve got the three types of processes. We’ve got sand, gravity, and pressure die casting. Now in sand, it’s low volume parts. In gravity, it’s medium volume. Medium volume would be about 30,000 a year. And then pressure die casting, we can go up to 200,000 parts per annum. Reshoring is an important issue, really, to our company. Over the years, we’ve benefited from reshoring here at Alucast.
What that means is that parts that were previously manufactured abroad, perhaps even thousands of miles away, our customers have decided to pull them back for various reasons and given them to a local source such as us here in the Black Country. When I talk about local sourcing, it really means companies that are here, based in the UK, manufacturing within the UK, perhaps the West Midlands, but their customers might be based anywhere in the country. They’re tending to look now for local sources such as that which will secure their supplies. We saw a trend of reshoring really starting to commence just after the recession. Myself and my business partner, we’re looking at ways to increase our turnover.
And certainly, we had increased our turnover post-recession, but our strategy was to continue to grow. What we felt was that we needed to continue to train our employees. And we felt if we trained the employees, we could upgrade and upskill the personnel within the company and offer technical solutions to companies to provide them with a source of castings competitively. And also, we also had available capacity, so these were key issues that we were prepared to look at. For example, one important reshoring activity that we undertook was with a large diesel pump manufacturer. What they found was that over a period of years they were impacted adversely by exchange rate and that that had hit their costs.
Certainly, they had had quality issues as well. And sometimes because of the length of the supply chain, they had difficulties getting parts because of those long supply chains and delivery might be hit and miss. What they decided was to pull work back from South America, and we had the opportunity to quote that work. And at the same time, the customer felt that he could add value to this product by shaving the product in-house. And certainly, from that viewpoint, they felt that they were looking at a potential savings of 300,000 pounds a year. I think the critical drivers for reshoring certainly have to be competitive costs.
And clearly, any company that’s going to manufacture any reshored part has to retain a level of competitiveness, which is really important. But you’ve got to offer technical solutions as well. I think if you’ve got the engineering capability to offer those technical solutions and the drive and enthusiasm to get the capacity in place quickly, those three elements, together with quality custom delivery, you can come up with a winning formula. I think that people have seen a change in the way that they view costs over the years. Certainly, many years ago, cost was mainly looked at unit cost.
And a UK supplier perhaps would be compared with the lowest cost country, either Eastern Europe, China, or India, or perhaps South America just purely on the unit cost. I think the view is beginning to be changed now and that really extra costs such as transport, currency, and really the cost of quality is a quality issue. That all has to be added into the overall supplied cost trackside. And that’s an important feature, I think, that our customers need to look at. I think if there are three main areas that any potential supplier needs to look at, I would say that the three main elements are be competitive, that has to be a first.
It always will be top of the list on the buyer’s viewpoint. I think the second important point is that they’ve got to be able to offer technical solutions quickly and be able to be helpful to their customer, give them the knowledge and impart the knowledge in the product that they require. Additionally, the final point, certainly for us, was that we were able to react quickly with our cross-functional teams as a result of the training that we went through to provide capacity in dedicated cells to manufacture the customer’s parts. And I think those are the three probably key elements that I suggest should be looked at.

Offering technical solutions, responsiveness and price competitiveness are critical enablers to re-building local supply chain capability.

In January 2014 at the World Economic Forum in Davos, David Cameron, then prime minster of the UK pledged to make the UK the ‘re-shore nation’. With my interest in manufacturing I was keen to find out more about the phenomena but real life examples were limited. I first heard about Alucast when I was being interviewed for a BBC World Service programme on re-shoring and I was intrigued to find out more. An article in the Birmingham Post outlined some of the history of Alucast’s re-shoring journey but not the specific details of what had been the drivers and enablers to their success.

It was a great honour when Tony Sartorius (Chairman, Alucast) agreed to make a case study about how re-shoring actually worked in practice for Alucast. The issues faced by Alucast’s customers (e.g. exposure to exchange rate fluctuations, poor product quality, poor product availability, lack of responsiveness) were not uncommon for engineered components. Working with Alucast one particular customer for diesel pump casings, was able to save over £300k/annum by re-shoring manufacture back from South America to the UK. There was a competitive tendering process for Alucast to win the business. As Tony explains, he believes that Alucast’s continued investment in people, in the volatile period post global economic downturn that was critical. It enabled them to be to ‘move up’ the value chain, and offer a technical solution in a short time period (as they had available capacity) whilst being price competitive.

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