Why growth is forcing manufacturers to rethink their supply chain strategy: what they make, what they buy and where they commit capital and capacity.
For many UK manufacturers, the outlook is beginning to improve. Orders and business confidence strengthened in the third quarter of 2026, according to Make UK, yet high employment, energy and input costs continue to put pressure on margins and make businesses cautious about recruitment and investment.
That creates an interesting challenge for leadership teams. The opportunity to grow may be there, but responding to it requires choices about where to commit cash, resources and capability at a time when few manufacturers can afford to make those commitments lightly.
The question has moved beyond simple capacity planning: Do we have enough capacity to meet demand? Increasingly it’s: What should we make ourselves, what should we buy, where do we need control and where do we need flexibility?
An operating model that’s ready for growth therefore needs to balance cost and control with the flexibility to adapt as demand, products and supply markets change. Those choices have always been part of manufacturing strategy; what’s changing is how frequently they may need to be revisited.
Every growth decision creates an operational commitment
An order rarely commits only production time. It may require inventory to be purchased months in advance, specialist people to be recruited, supplier capacity to be secured or equipment to be installed.
A new product variant may look commercially attractive but introduce additional tooling, materials, planning effort and inventory. Bringing a component in-house may improve control but commit capital and skills, while outsourcing it may reduce fixed cost but increase dependency on supplier performance.
Viewed individually, each decision can make perfect sense, but problems arise when the consequences are assessed in different parts of the business. Commercial teams focus on revenue, procurement weighs supplier cost and operations manages capacity planning, while finance tracks working capital and engineering prioritises product performance.
Meanwhile, the business needs to see the whole commitment. That becomes particularly important when the manufacturing model itself is changing.
The boundary between make and buy is moving
Aerospace and defence provides a useful example.
The sector has a substantial growth opportunity. ADS reported a record global backlog of 16,925 commercial aircraft at the end of June 2026, while defence manufacturers are responding to increased demand and the ambitions set out in the UK’s Defence Industrial Strategy.
But an order book of that scale doesn’t automatically translate into profitable growth. It creates a series of decisions about which capabilities manufacturers need to own and which can sit elsewhere in the aerospace supply chain. One way of thinking about the traditional make or buy decision is beginning to shift towards “buy when you can, make if necessary.”
That doesn’t mean outsourcing by default. There will always be capabilities that are strategically important to retain because of intellectual property, security, supply risk, quality, economics or the need to protect delivery. It does mean questioning whether adding permanent internal capacity is always the right response to growth. That decision becomes more complex as products themselves change.
In sectors such as aerospace and defence, product strategies increasingly need to accommodate upgrades and evolving requirements over long lifecycles. Modular or scalable architectures and spiral development can allow capability to evolve around a core product rather than waiting for occasional wholesale redesign.
But greater product flexibility needs to be matched by operating model design. If the product changes but the supply chain, manufacturing footprint and procurement model remain fixed, flexibility can disappear very quickly.
Product strategy and supply chain strategy are becoming harder to separate
This is where decisions traditionally made in different rooms begin to converge.
A product designed around common components or modular architecture may create opportunities to simplify sourcing, pool demand, delay final configuration or draw on external manufacturing capability. A highly bespoke product can do the opposite, embedding specialist suppliers, dedicated inventory and manufacturing processes into the cost base for years. Neither approach is inherently right or wrong. What’s key is understanding the operational commitment created by the product decision.
The same principle applies beyond aerospace and defence.
In FMCG, for example, product and packaging decisions increasingly have direct implications for cost as well as consumer appeal and production efficiency. From 2026-27, packaging rated red under the UK’s extended producer responsibility (EPR) packaging recyclability methodology attracts a fee 20% higher than the amber base rate. A material change that looks attractive to procurement therefore needs to be considered alongside recyclability, line performance, transport, shelf life and customer requirements.
In life sciences, the calculation is different again. An alternative supplier has limited value if switching requires lengthy qualification or regulatory approval. Resilience decisions therefore need to be considered against the time it would actually take to restore supply.
For automotive, batteries and other advanced manufacturing industries, rapid technological change raises another version of the same question: how much should the business commit today when products, processes and supply markets may look different over the lifetime of the investment?
The UK’s Advanced Manufacturing Sector Plan reflects the scale of that transition, with an ambition to nearly double annual business investment. For individual businesses, the harder question is where that investment creates lasting advantage and where it reduces their ability to adapt.
Flexibility has an economic value
Manufacturers have spent decades pursuing efficiency, and rightly so. But maximum utilisation, minimum inventory and highly specialised assets aren’t automatically the optimum answer in every part of the operation. Nor is the alternative simply to build expensive redundancy everywhere. The more useful question is whether flexibility and supply chain resilience have sufficient economic value to justify the investment.
This is particularly important when demand starts to strengthen. Make UK’s Q3 2026 Manufacturing Outlook found that orders and confidence were improving, but manufacturers remained cautious about recruitment and significant investment as employment, energy and input costs continued to weigh on decisions.
That caution needn’t prevent growth, but it makes the quality of the decisions behind it more important.
Test the assumptions behind growth
Leadership teams can start by looking beyond the headline order book and asking what their growth plans mean for operating model design.
Take one strategically important product family or growth opportunity and examine the commitments it creates across six areas:
Capital
What investment does this require, and how easily could that investment be redeployed if demand or the product changes?
Capacity
Which capabilities genuinely need to sit inside the business, and where could external capacity provide greater flexibility?
Suppliers
Which relationships are critical to delivery, and do those suppliers have the capability and incentive to support future requirements?
Inventory
Where are we holding stock because it genuinely protects delivery, and where is inventory compensating for problems elsewhere?
Skills
Which capabilities will remain strategically important as products and manufacturing methods evolve?
Cash
When does the growth opportunity begin generating cash, and how much working capital does the business have to commit before that happens?
The answers will rarely sit within one function. They require product, commercial, procurement, supply chain, operations and finance leaders to make decisions using a shared view of the consequences.
Building flexibility into growth
There’s no single approach to manufacturing operating model design that provides the right balance of cost, control and flexibility.
For some capabilities, ownership will remain critical. Others can increasingly be accessed through suppliers, partners or flexible manufacturing capacity. Product design can make those choices easier or harder, while procurement and supply chain decisions can preserve flexibility or quietly remove it.
The opportunity for manufacturers isn’t simply to add capacity as demand grows or drive more efficiency from the model they have today. It’s to be much more deliberate about what they make, what they buy, what they keep flexible and what each growth decision commits them to.
At FourCentric, we work across supply chain strategy, procurement, operations and analytics to help organisations understand those trade-offs and turn decisions into practical improvements. By bringing specialist capabilities together around the business outcome, we help clients connect strategy with what needs to change across the end-to-end supply chain and operations.
Sources
- Make UK, Manufacturing Outlook 2026 Q3, September 2026.
- ADS Group, Half-year aircraft deliveries hit 8-year high, ADS finds, July 2026.
- UK Government, Defence Industrial Strategy 2025: Making Defence an Engine for Growth.
- UK Government/PackUK, Illustrative waste disposal fees 2026: Extended producer responsibility for packaging.
- UK Government, Advanced Manufacturing Sector Plan.
Is your operating model ready for growth?
If demand is increasing, the answer isn’t always to add more capacity. We can help you assess where to invest, what to keep in-house, where to use external capability and how to build greater flexibility into your operating model.
Talk to our end-to-end supply chain and operations specialists.
Email: info@fourcentric.com