Magmatic’s managing director Rob Law says: “We’ve been trading for just over six years. Back when I started the business, it just wasn’t economically viable to make it in the UK. It’s something that I have always wanted to do.”
Things changed just over a year ago, he says, when sterling was devalued against the US dollar. As the company bought the product in dollars from China, this devaluation prompted a rethink of the sums. Magmatic has seen constant rises in the cost of production in China, too.
“In the six years that we have been going, the cost of labour has trebled. Inflation costs are on the up and the Chinese currency is appreciating against the US dollar. Lots of the trend graphs are pointing to constant price rises,” says Law.
Several strong business factors favour the reshoring of Trunki manufacturing, he adds. The lead time from placing an order to receiving the product at the warehouse has fallen from 120 to 30 days. This means the business does not have to buy as much stock, which frees up cash flow and allows reaction to market demands. The risk posed by fluctuating exchange rates and import duty taxes is also reduced, he says.
But bringing manufacturing to the UK has not come cheap. The British-made tooling for the factory was six times more expensive than it would have been in China. But in return the company has a more efficient set-up that can work faster than those in China.
The design of the Trunki also had to change. The Chinese-made product had 25 metal parts that workers screwed into place. With these parts, it was not cost-effective to make the product in the UK, so a senior designer spent six months re-engineering the product to do away with the metal.
“It is still more expensive to make the Trunki in the UK, but the gap isn’t that big when you weigh up all the other business benefits – it actually stacks up in the UK’s favour,” says Law.
Reshoring manufacturing may not always be the more costly option. For Surgical Innovations, a company that makes medical devices for use in keyhole surgery, it is cheaper to manufacture products in the UK than abroad.
Previously the company developed the instruments but licensed the sales and production to others. The products were made in the Far East, Eastern Europe, Scandinavia, Germany, and Morocco. But in 2008, as part of an overhaul of its business strategy, Surgical Innovations brought manufacturing home to the UK.
The company’s chief executive, Graham Bowland, says making products abroad involved hidden costs. These included the margins taken by the companies manufacturing the products, and the premiums paid for low-volume production runs. There were also the costs of transport, quality and regulatory controls, and the auditing that is required in medical device manufacture.
“We make medical devices that go into people’s bodies during surgery, and the most important thing is quality,” says Bowland. “It is important for me that I can walk out onto the factory floor every day and see the things being made – it’s that ability to maintain those quality standards.”
Under the new business strategy, 25% of revenue is now spent on research and development. This R&D input, coupled with the in-house manufacturing, means products can come to market a year from concept. “To compete against billion-dollar companies in the US, you have to have speed to market,” says Bowland.