Making Scotland's future - a recovery plan for manufacturing: June 2021 - final

2 Supply chains and competitiveness

When global supply chains were disrupted in March 2020, businesses and governments realised the risks of decades of increasing supply chain complexity and disaggregation. Disruption of international trade flows, combined with the availability of low-cost digital technology, the low carbon agenda and the fact that highly productive manufacturing sectors drive economic productivity, have created a compelling rationale to revitalise Scottish supply chains.

'Industry 4.0' – the utilisation of automated processes – is revolutionising manufacturing and location decisions. The traditional wisdom of moving production to low-cost economies as a way of improving productivity is becoming less valid and the use of adaptable, affordable, automated solutions
is reversing years of horizontal integration. The price of labour continues to increase as the living standards in these low-cost economies rise. In addition to this, larger inventories, unresponsive lead times and the environmental impacts from transportation emissions, are also diminishing the perceived productivity gains from 'offshoring'.

In the last decade, manufacturing has transformed from a business model of low cost and low value. Through the application of leading-edge technical knowledge and expertise to create products, production processes and associated services, manufacturing is now considered a strong contributor to sustainable growth and of high economic value.

During this time many advanced economies shifted their focus to developing high-value manufacturing sectors to create the products of the future in areas such as: low carbon transport; health and extended living; the circular economy; and smart data-driven products. As demand for these products in global markets grows, Scotland could be well placed to compete as well as attract inward investment – a priority in the Inward Investment Plan.

As supply chains regroup and businesses 'build back better', putting in place a resilient business model will be key to recovery. Evidence suggests that, broadly speaking, businesses that prior to COVID-19 adopted digital technology or invested in new machinery and in their people, have weathered the storm comparatively better. By innovating and collaborating with supply chain partners they are better placed to take advantage of this new future, particularly given the expected adverse consequences of the UK's exit from the EU.

For businesses that have yet to make the adoption leap, the time is now.
Scotland has a network of technology and innovation centres, including the National Manufacturing Institute Scotland (NMIS), that can de-risk the next
vital investment decision in productive technology.

This is the moment for businesses to reassess their supply chain proposition
and to plan for the new orthodoxy.

Actions

• Deliver an engagement programme for manufacturing companies to maximise opportunities and increase Scottish content, helping businesses boost resilience and access new or existing supply chains in priority sectors.

• Increase the economic impact of public sector procurement, by combining our knowledge and understanding of the market. Identify and help equip new and existing Scottish supply chains to anticipate and respond to public sector demand.

• Support inward investors to identify opportunities for Scottish manufacturers that are created by new and emerging supply chains to bring more business to Scotland.

• Deliver webinars and provide remote support tools to ensure manufacturers stay competitive using recognised business improvement tools such as Lean through to supply chain excellence models.

James Withers, Chief Executive of Scotland Food and Drink

"Scotland’s entrepreneurial and innovative food and drink manufacturers are the lifeblood of our industry and make our sector truly world-leading.

"Our industry has been hit hard by Covid-19, with around £3 billion of sales lost. However, the pandemic has also shown the importance of resilience, innovation and collaboration. Our manufacturers have worked tirelessly to ensure the food and drink supply chain has kept moving, whilst at the same time protecting their workforce and changing their routes to market.

"We are at a crucial juncture for Scotland’s economy. We have to chart a recovery from a pandemic and navigate Brexit. The themes of innovation and collaboration have never been more important. They lie at the heart of the manufacturing recovery plan and define how our sector will move forward in playing a central role in driving a smart recovery for Scotland’s economy and communities."

Case Study

How Scottish manufacturers responded to PPE demand

COVID-19 created opportunities to develop new supply chains as a result of increased global demand for vital personal protective equipment (PPE).

Contracts between NHS Scotland and several companies located in Scotland helped strengthen and expand the supply of protective gowns, securing long-term stock levels. NHS Scotland established an entirely new supply chain, from start to finish, within the space of a month during the spring of 2020.

Forfar-based Don & Low played an essential role in a collaboration to manufacture gowns. This was made possible by the strong partnership the company has with its workforce and employee representatives, underlining the benefits of fair work practices, which have never been more important than during these challenging times.

Don & Low supplied around 2.8 million square metres of the base material which was then converted into around one million non-sterile gowns by Keela and Redwood TTM, based in Glenrothes and Wigan respectively. Keela also worked with manufacturers Transcal and Endura, both based in Livingston, to deliver these Scottish supplies.

Keela and Redwood each ramped up production to a combined output of 40,000 gowns per week which represented over 50% of NHS Scotland's weekly requirement of 70,000 gowns during summer 2020.

Collaborative working between NHS Scotland, Scottish Enterprise and the Scottish Government made possible this new supply chain for gowns. In particular, Scottish Enterprise's Scottish Manufacturing Advisory Service (SMAS) worked closely with both Don & Low, and the converters, to establish garment specification requirements and required production schedules.

The new supply chain formed part of the Scottish Government's two-pronged 'make and buy' strategy, fulfilling the priority of establishing a supply chain for gown production in Scotland. Gowns for NHS Scotland can now be produced and supplied in Scotland through this established chain, with the potential to add more Scottish suppliers if required.

Prior to COVID-19, all PPE sourced by NHS Scotland came from manufacturers outside of Scotland. Between March and August 2020, this began to shift as production was established in Scotland and the rest of the UK, and existing capabilities increased capacity. Between October 2020 and March 2021, the balance will shift again, with nearly half of all PPE being supplied from Scotland. When gloves are removed from the count, over 90% of PPE required by NHS Scotland is manufactured in Scotland.