How Brexit is affecting your Supply Chain.
Businesses in Britain, as well as the UK operations of several multinationals, are heavily dependent on imports from the European Union (EU) through close integration with EU-based suppliers. 54% of all goods imported into the UK come from the EU.
At the same time, the EU is the UK’s largest market, comprising almost half of all British goods exports. Because of these reasons, Brexit poses a subject of deep concern for firms across the UK. However, the uncertainty that comes with Brexit will not be for the short-term; it is likely to extend for a decade or even more, adding to the already present instability and vulnerability in supply chains across many industries.
Whatever the ultimate conclusion of Brexit, companies in the UK (as well as the EU) must see this situation as a trigger to reconsider their supply chains to make them more robust and resilient. Many companies face a severe need to update their supply chain strategies to incorporate more flexibility in their operations and restructure their organisations for greater agility.
The Interconnectedness Between EU and UK Supply Chains
Since the EU is the UK’s largest trading partner, it accounts for almost half of both imports and exports of goods, to and from the UK. Most of these goods are in the form of intermediary products, which indicates the high level of interconnectivity between EU and UK supply chains.
The UK’s trading ties with the EU are of special note in the food and drink, chemicals and automotive sectors. The EU represents the majority share of the UK’s trade in the crucial commodities for these sectors’ supply chains. Because of Brexit, trade-in these input commodities is vulnerable to disruption.
The main causes of disruption include the relatively high duties and tariffs that would be incurred once trade between the UK and the EU reverts to the World Trade Organisation (WTO) most-favoured-nation status.
Future Uncertainty for Supply Chains
How Brexit will unfold is a mystery for everyone. Given the close integration between the UK and EU supply chains, your business must prepare for scenarios involving several different outcomes. Your team should also make a note of the larger geopolitical challenges and uncertainties that might come about if a future UK-EU trade agreement turns out to be difficult to negotiate and ratify.
Whatever the nature of the outcome, your company can make the most of this situation by taking it as a time to rethink your supply chain strategies and operations. You may need to accommodate higher degrees of flexibility into your transition and investment plans.
There are a few key points that business leaders in the UK can focus on at present, and some companies have already started making headway in this regard.
What Your Company Can Do
1. Explore a new sourcing strategy: You need to consider on-shoring opportunities and develop contacts with local suppliers – or local presences of international suppliers – to ensure a consistent and reliable supply at competitive costs.
2. Optimise manufacturing and logistics footprints: Your company will need to revisit your footprints for manufacturing and/or logistics by rethinking the timing and scope of investments and brainstorming new ways to reallocate production. In this regard, advanced analytic tools and digital technologies can help you go through a large amount of data to identify trade-offs and optimise end-to-end costs.
3. Adjust inventory build-up: There will be a need to adjust inventory tactics in the short-term for your business so that you can ensure business continuity and sustain service levels in any Brexit outcome. Safety-stock levels will also need to be reassessed in the medium-term to cater to new operating scenarios and this is where LogistCompare can help your business.
4. Forecast for shifts in demand: Your company must focus on forecasting to help predict and manage the impact of demand shifts on your stock volumes. For instance, outsourcing can be more heavily used to increase flexibility for coping with the volatility and uncertainty in demand.
5. Attract new talent to drive change: The strategies mentioned above will require new talent and capabilities to drive towards a more flexible and agile organisational structure. Your company may need to attract and retain new talent that can perform forecasting and analytical functions and make timely reactions to shifts in the market. Moreover, real-time data visibility should also be harnessed through digital technologies and inventory management, and this will require new talent for logistics as well.
Forward-thinking companies have already begun applying such steps to create more resilient supply chains in light of Brexit. Not to mention, there can be a substantial upturn in revenues because such measures reduce costs, write-downs, inventory and capital expenditure.
As you work through Brexit scenarios, take time to understand different outcomes and what changes, such as mentioned above, that you can make right now to adapt.
Our smart logistical solutions, along with our end-to-end logistical support, can provide you in-depth, friendly, and informative guide on how to deal with Brexit and its impact on your supply chains. Be sure to get in touch!