The exposure is real, but the base rate is moderate
Separate the fear from the numbers first.
Manufacturing accounted for around eight percent of England and Wales company insolvencies where industry was captured, at 1,965 cases in the twelve months to 30 September 2024, per the Insolvency Service. Total company insolvencies in 2024 were 23,872, about five percent below 2023, which had been the highest annual figure since 1993.
The insolvency rate sat at roughly 53 per 10,000 companies in 2024, well below the 2008 to 2009 peak of 113.1 per 10,000. Manufacturing insolvencies fell year on year.
So the fear is rational and the base rate is moderate. That argues for proportionate protection rather than blanket dual sourcing, which is expensive and dilutes your volume leverage at every shop you split.
The four risks that are not insolvency
Insolvency gets the attention. These are more common.
Key-man dependency. One setter or one programmer knows how your part is made. He retires, is off sick, or leaves. Your part becomes a new part again.
Acquisition or retirement. Owner-managed shops get sold or wound down. The new owner may not want your volume, your part mix or your price.
Capacity crowding out. A larger customer signs a big contract and your 50-off drops down the schedule. Nobody will tell you this is what happened. The lateness it produces is covered in the on-time delivery guide.
Hidden subcontracting. The shop you audited is not the shop making your parts. This is a genuine and reported UK problem. On a UK model engineering forum a buyer described receiving 200 unusable parts from a supplier who had subcontracted the work overseas without telling them, arriving wavy, dented and damaged.
Hidden subcontracting is the one that makes qualification meaningless. Everything you assessed applied to a business that never touched your part.
Four protection strategies, compared
| Strategy | Cost to you | Protection given | When it is right |
|---|---|---|---|
| Full dual sourcing | Two qualifications, split volume, weaker pricing at both | Highest. A live second route with proven parts | Line-stop parts, long lead-time parts, single-cast items |
| Qualified but dormant second source | One extra first article, no split volume | Good. Warm start rather than cold | Important parts where a few weeks of stock covers the transition |
| Managed supply through one accountable partner | A coordination margin | Good, provided that partner holds several qualified shops and tells you who they use | Multi-process parts, small buying teams, low volumes |
| Buffer stock only | Working capital tied up | Time, not continuity. Buys you weeks | Cheap parts with long qualification cycles |
Most SME buyers overuse row four and underuse row two.
How to choose
Classify every part by what happens when it does not arrive. If the answer is that the line stops, dual source it. If the answer is that a shipment slips a week, a dormant second source or a buffer is enough.
For multi-process parts, a managed supply partner with several qualified shops is usually more practical than you holding four supplier relationships. The condition is transparency. If they will not tell you which shop is machining your part, you have swapped one opacity for another. That is the exact criticism levelled at the large online platforms, where buyers report having no visibility of who makes their parts and no route to speak to them.
Ask that question directly. "Who is actually making this, and can I visit?" A supplier who answers openly is showing you their risk position, and hiding nothing.
Six practical protections, in order of value for money
- Own the tooling and fixtures in writing. If your PO terms say tooling created for your parts belongs to you, transfer is a collection, not a negotiation.
- Hold the programme or the right to it. Ask for the proven programme to be released to you on request, or held in escrow. Cheap now, priceless later.
- Require notification of subcontracting. Add a clause requiring written notice before any part of your work is subcontracted, including offshore.
- Run a financial check annually. Companies House filings are free. Look for late filings, a change of registered office, charges registered, or a shrinking balance sheet.
- Ask who else could make this. A supplier who names a peer is confident. One who insists nobody else can is signalling dependency.
- Keep drawings current and controlled. If the only current revision lives on the supplier's server, you are already dependent.
Number three is the cheapest insurance on this page.
What this looks like in practice
TrueNorth is an engineering-led intermediary rather than a machine shop. We coordinate machining, fabrication and finishing through a vetted UK supplier network, mostly across the North West, with dimensional inspection and material traceability as standard.
That structure is the second route. Where one shop is at capacity or has a quality issue, the work moves to another qualified shop without the customer starting a qualification cycle from scratch. On a recent conveyor assembly we split the award across two machining suppliers by line item, because each was better on different parts.
We are also explicit about who is making what. Non-circumvention terms exist to protect commercial relationships in both directions, and they are handled in writing rather than by keeping customers in the dark.
Supplier verification runs through Companies House checks before onboarding, and our purchase terms carry an 18-month defect warranty plus containment and corrective action obligations. Those terms are the risk transfer that makes a network usable rather than just wide.