The UK’s Automotive Council has released a new report that identifies £3 billion ($4.7 billion) worth of additional contractual opportunities for supply chain companies operating in the country, with the potential growth in volumes of direct benefit to logistics service providers.

In the report, called Growing the UK Automotive Supply Chain: the road forward, the Council, highlights “a significant appetite for new and more localised content”, something that logistics providers have already recognised following the £5.5 billion ($8.6 billion) that has been invested over the last 18 months.

Last year the UK produced 1.4m vehicles with more than 80% of current production exported to markets around the world, according to the report. Exports are up 10% in the year to date and, as reported in May, the value of vehicle exports exceeded the value of imports over a 12-month period for the first time since 1975.

DHL Supply Chain has seen significant growth in volumes in UK-based manufacturing according to Stewart Robertson, managing director of Automotive inbound to manufacturing at the company. “Consequently, the component supply base has expanded operations to keep up with demand,” he told Automotive Logistics News. “New model activities appear to be continuing to source heavily in the UK where capabilities and capacities exist,” he said.

However, there is a need for greater capacity to secure the full growth potential of the billions of investment promises and Robertson said that DHL was focused on supporting both OEMs and suppliers by providing efficient and flexible collaborative transport and in-plant material handling services.

DHL continues to support Jaguar Land Rover’s plans for investment, which include £2 billion in new products in the 2012/2013 fiscal year. It is the most ambitious investment programme in the carmaker’s history and has already generated 8,000 jobs across its five manufacturing sites in the UK over the last two years. JLR is to spend another £1 billion with UK suppliers in addition to the £2 billion of UK contracts it awarded in 2011 following continued demand for the Evoque (read more about JLR’s logistics strategy here).

“We are continuing to support strong growth, particularly with JLR, with the introduction of the third shift in Solhull and, more recently, Halewood, to keep pace with global sales demand,” said Robertson. “Any inward investment to help UK infrastructure and improve the capability and capacity of the automotive supply base should facilitate further localized sourcing and improve overall competitiveness.”

JLR’s Halewood plant has switched to 24-hour production this week for the first time in its history.

Build, repatriate and retain
The ‘sourcing roadmap’ published in last year’s Automotive Council report showed that there were significant opportunities “to build, repatriate and retain” supply chain capabilities in the UK. It indicates that there has been a change in industrial strategy that could be of benefit to those companies operating the UK that had lost out to a policy blinkered to the full logistics costs and impact on the supply chain of offshoring to cost competitive countries.

Robertson pointed out that inbound to manufacturing costs for OEMs is generally low in comparison with unit sales revenues (around 2.2% according to ICDP), so manufacturers and suppliers have focused on global sourcing to reduce huge tooling investment and to meet the diminishing product cycle times and remain competitive.

“Suppliers consolidated into larger global facilities to serve the needs of all customers [but] rising fuel and energy costs impacted this decision, making it much less attractive and often just wrong,” said Robinson.

According to the Automotive Council UK, suppliers in some regions lost business because logistics were not competitive. This has not generally been the case within the UK, but costs are added because of secondary and tertiary tier sourcing outside of the UK or Europe when cost factors such as demurrage, customs and storage are brought into the equation.

Robertson said that DHL does not get involved in the sourcing decisions of its customers but said that it has a role to play in providing robust cost assumptions and providing strategic support to ensure future decisions are based on a total logistics cost and not just on an ex-works piece part cost basis.

A separate report published recently by the Engineering Employers Federation (EEF) found that two-fifths of companies were bringing production back to the UK for fear of natural disasters and economic turmoil abroad.

The trade body said the trend could provide the opportunity for a resurgence in British manufacturing.

"As a result of economic events and natural disasters in recent years that have had tangible impacts on revenue, orders and meeting customer requirements, companies are reviewing their value chain and supplier strategies,” said the EEF. “This has led to two fifths of companies bringing production back in-house, whilst a quarter have increased their use of local suppliers."