Long Lead Times on Plant and Machinery – What’s The Hold Up?

 

Long lead times on plant and machinery – What’s the hold up?

Following the announcement and activation of the new super deduction incentive by Rishi Sunak which started on April 1st  2021, it has provided a great boost to all industries with businesses looking to procure new and more efficient machinery in the hope to rebuild their businesses and in turn the UK economy. The one component required to support this is the timely supply of machinery – what could go wrong? This is the all-important question! In line with this new policy there have been several huge changes to the UK as we know it and below, we explore how they have had a knock-on effect with the supply chain.

 

BREXIT

When will this term be a distant memory? Not for a while unfortunately, BREXIT is causing several supply chain issues as expected. The new challenges relate to transport, trade in goods and customs. Following the departure from the EU last year, there have been changes to regulatory checks, customs formalities, rules of origin certifications all of which were not in place. As a result, with all of this being new to the whole supply chain, naturally there will be an increase in time in importing and exporting goods into and out of the UK. Coupled with this, there has been disruption to the global container shipping industry. With shortages of containers, shipping firms have struggled to cope with the fluctuations in demand caused by the pandemic in addition to the consequences from the blockage of the Suez Canal. Once the plant eventually arrives in the UK, it then has to go through the new regulatory checks which takes more time causing lengthy delays for the consumers.

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COVID

The COVID-19 pandemic has created a number of challenges for supply chains across the world. Countries have had to implement national lockdowns on several instances which has disrupted the production and transportation of materials and stopped the flow of finished goods. In addition, factories have closed and when they have reopened there has been a shortage of labour and a reduction in capacity which has meant output has declined. It is no surprise over 95% of businesses who were asked if they were prepared for the affects of a global pandemic they all categorically said ‘no.’ On the contrary, this was an awakening the global supply chain needed with many firms who have survived now focusing their attention on efficiency and cost optimization. More importantly, they will need to ensure they have more visibility on the performance of their stakeholders in order to prepare for events like this.

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As a result of the above, manufacturers are either no longer taking orders for 2021 due to backlog or are stating estimated delivery is next year. The only companies within the industry to benefit from the short supply of plant and machinery is the hire side who have seen a massive uptake in demand. Naturally, the shortage of machines and increasing costs means significant increases in rates for machines, plant hire, containers, and materials.

There are so many variables affecting the supply chain, which makes it difficult for businesses to have effective contingency plans not only in the mentioned sectors but all walks of life. Brexit and COVID combined are the main cause, however there are other factors such as the delays from the Suez Canal. With many companies only recently returning to manufacturing and non-essential domestic work, the surplus of stock prior to COVID has now gone and it will take time to rebuild the stock levels. Recovery is threatened with rising prices, disrupted supply chains and a shortage of labour following a no-deal Brexit and the impact of the pandemic. We have to pull together and utilise the technology and infrastructure we have in place across the world. It will take time but we now more than ever need to help each other and most of all be patient!

Jack Bridges

Buckingham Leasing