Decline in manufacturing: the pressure is on
October 1st 2007 The decline in the UK's manufacturing industry has undoubtedly contributed to the
number of medium-sized transport and distribution companies going into liquidation.
Meachers Group Holdings commercial manager, Gary Whittle MILT, explores the
implications for hauliers in the future
Despite a recent mini resurgence,
the proportion of gross domestic
product provided by manufacturing
has been on a downward trend since the
1960s. In the 1960s it accounted for onethird
of the economy's total output, but by
the new millennium was less than one-fifth.
The removal of trade barriers and the
globalisation of companies and markets in
recent years have led to intensification of
international competition. This, combined
with a drive for greater efficiency and cost
savings, technological improvements and
new manufacturing techniques, has
contributed to large-scale production shifting
away from the UK to lower cost countries.
This momentum has undoubtedly affected
medium-sized hauliers geographically, as
companies close factories and transfer
production to the emerging markets of South
East Asia, the Far East and Latin America.
Together with the expansion of the leading
logistics companies, which are often
medium-sized companies' largest customers,
this has resulted in SMEs floundering and
desperately undercutting prices in the hope
of staying afloat.
Many medium-sized hauliers believe
manufacturing will reignite within two years
and are keeping their companies ticking over
until this happens. However, according to
Professor Joe Ellis, The Economics Group:
'Manufacturing in the UK will focus more and
more on knowledge-intensive activities such
as product design, while outsourcing physical
production to developing countries.' With
markets and skills lost, it is safe to say that
those hauliers waiting for the decline in
manufacturing to be reversed may well be
waiting for a very, very long time.
Changing mindset
Many medium-sized hauliers have accepted
the decline in manufacturing as a fact of life
and have taken measures to consolidate their
position. This has involved restructuring the
company and selling off commercial interests
that are not part of their core business. Other
companies, such as Meachers Group
Holdings, have decided to link up with
similarly minded enterprises to form
consortiums. In this way they are in a
position to offer 3PL services and are
therefore able to meet the large logistic
companies head on. Such a turnaround in
operating procedures has resulted in a total
change of mindset among many mediumsized
haulage companies.
Organisations such as LinQ Alliance
operate a local management team and are
able to pass on cost savings from reduced
administration overheads, as well as
providing efficient decision-making in an
appropriate reaction time. This approach also
allows synergies between multiple fleets and
services to be identified, offering a single,
integrated solution. Thus medium-sized
hauliers can provide customers with greater
geographical cover, specialist warehousing or
additional value-added services.
By integrating competencies successfully,
3PL companies are producing a unique and
holistic approach to supply chain
management that provides their customers
with many key benefits. One of the most
notable changes resulting from the setting up
of consortiums is the decision amongst
members to exchange information.
Previously this was totally unheard of within
the transport industry.
Medium-sized transport companies are
also diversifying by providing customers with
add-on services that incorporate freight
forwarding, bulk and break storage,
processing, stock management, labelling,
pick and pack and inventory control. In this
way, they can sign long-term contracts as
total outsourced solution providers.
Integrated supply chain solutions are
increasingly being sought by global
corporations savvy to the benefits of an endto-
end supply chain approach. Many logistics
companies are now specialising in a specific
industry, such as pharmaceutical or
technology. Such firms offer a wide range of
outsourced services to meet these specialist
industries needs. Services can range from
specialist warehousing to bulk pallet storage,
pick/pack, kitting and assembly to fulfilment.
According to global management
consulting firm A T Kearney's latest
Assessment of Excellence in Procurement,
the dramatic increase in the sourcing of
goods and services from low-cost supply
markets such as China has not, to date, been
matched by growth in the knowledge and
understanding of these markets. The study of
procurement practices at 275 international
companies, the largest and most
comprehensive global procurement study
conducted to date, found that only 53% had
implemented strategies that indicated a clear
understanding of the logistics supply chain
and costs associated with emerging market
alternatives. This lack of knowledge provides
an opening for entrepreneurial companies to
fulfil these needs.
In conclusion
The fact that an increasing level of
manufacturing is now sourced overseas
means that global transportation has to
undergo a revolution in technique, methods
and functions in a quest for lower costs and
increased profits to meet these changes. The
rather uncomplicated business of
transporting shipments from Point A to Point
B has been transformed into a complicated
network of logistics, supply chain
management, Just-in-Time delivery and
outsourcing. To meet these requirements
medium-sized transport companies have to
rethink their products totally to provide
companies with integrated freight solutions. More articles from Meachers Global Logistics: | 
