Home Logistics Global Trade BREXIT. Are you ready? Is your supply chain ready?

BREXIT. Are you ready? Is your supply chain ready?

BREXIT. Are you ready? Is your supply chain ready?

I like to define End to End Supply chain the heart of each business as an aggregation of skills, relationship, processes, procedures and actions that answer to market’s requirements.

That said, as soon as Brexit will be in place, the UK and external market’s needs will change. And if market requirements change, supply chains have to be ready to answer to the new scenario.

For this reason, Brexit will have a big impact on Supply Chain Management.

Elena Marangon, Senior Supply Chain Consultant

First of all, you need to recognise to yourself that you can only manage a specific group of “potential” issues/changes.
An to deal with this issues, if not already done, Mapping the Supply Chain can help companies understand risks, opportunities, critical points and areas of intervention: the purpose of the map is to give an end-to-end visibility of your supply chain’s complexity and prioritise areas that need to be revised.
The supply chain map will tell you how you are managing activities today, how things are running and also how they could be done differently, especially considering Brexit impacts.
It is crucial to identify the stakeholders: suppliers, customers, financial, production, IT and try to understand how the processes need to be redesigned or re-negotiate some key elements (contract terms, lead time, delivery time, etc.).

Let’s check together some example of process element’s that will be impacted and for which an analysis needs to be put in place:

  • One of most critical point is related to Mapping will help you to identify how to organize your new supply: splitting contracts with different suppliers around Europe/world could help business to split their risk in unexpected tariffs increase, delays, new regulations, stock out etc.. Also multiple sourcing could be a simple way to mitigate unpredictable issues in raw materials availability.
  • Another critical point is related to your logistics network: where are located your hubs/distribution points today vs the UK market requests? Where do your business today source raw materials, stock, intermediate products?
    These changes will require redesigning of your logistics network, in terms of warehousing and distribution.

After having mapped your supply chain, have a look on all the aspects that will be impacted.
Costs: costs will increase due to duties, VAT levels, tariffs, documentation requirements, volatility in sterling exchange rate with Euro and other currencies, etc.
If we focus on logistics costs, we need to take into consideration internal costs in managing logistics, external costs relative to forwarders, insurance costs relevant to goods and warehouses, lawyers experts to sign functional contracts, cost of the stock due to increase of stock level in order to avoid stock out, cost of obsolescence … and many others.
Timing: We need to clear have in mind that EU will be one market, UK another one.
Since time is money and moving goods after Brexit will take longer, it will cost more.
Lead time will increase if logistics network is not well organized.
In fact, customs bottlenecks as delay in crossing UK/EU border, import and export controls will have impact on longer lead time.

And all of these elements will cause the need to reconfigure systems.
Brexit will require business to handle more complexity in terms of information to be managed and re-defined. New data systems are required: master data in ERP systems with information as routings or sourcing information, BOM, financial information, supplier’s information, lead time, safety stock, minimum lot size, tax reporting, tariffs, customs duty, incoterms, shipping costs, VAT etc…

Risk vs Opportunity

We can see each risk as a new opportunity. If you put your efforts on time, you can analyse the situation and try to turn risk into a new opportunity for your business.

For example, back to the supplier’s aspect, you could identify new opportunities for new business deals, M&A, produce internally in UK, etc… From a logistics perspective, you can decide to build new warehouses in UK and avoid too many risks and costs due to stock out or delivery delay.
Brexit will shake up your supply chain: please take care of it and be prepared!