For UK businesses trading with the European Union, uncertainty over Brexit is causing major headaches over potential disruption of supply chains and the need for overstocking
As the UK’s exit from the EU is delayed until at least April 12, there is still no clear indication of what the future holds. This is proving to be a massive logistical issue for companies that need to make contingency plans for supply and stock delivery. But how can businesses prepare, even in the face of the unknown, to future-proof their supply chains?
Businesses need to be agile and able to react quickly, whatever the outcome of Brexit
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“Business leaders need to be bold and proactive in finding new strategic opportunities, rather than stalling operations, as we’ve unfortunately seen some begin to do,” says George Walker, managing director of Novotek, UK and Ireland, a Swedish automation company operating across the UK and EU territories.
“The reality is that Brexit, while it is certainly one of the more tumultuous times in recent history for UK businesses, should be treated the same as any other market uncertainty.”
One of the best ways to reduce the impact of Brexit on supply is to diversify the supply chain. This means involving numerous reliable suppliers to reduce a manufacturer’s reliance on specific companies and markets, he adds. This will help minimise the need to stockpile during difficult periods.
“No one can predict the future,” says Ian Stone, chief executive and founder of Vuealta, a consulting company that helps businesses across a range of industries. “Disruption can come at supply chains from every angle and at any time. So whether we’re talking about Brexit, an unexpected natural disaster or competitor action, organisations need to be prepared for whatever is around the corner.
“As uncertainty around Brexit increases, more and more organisations are choosing to move their operations outside of the UK. Take Nissan moving the planned X‑Trail production from Sunderland to Asia or similar Brexit-related announcements from Jaguar Land Rover and BMW; these have huge ramifications for the respective supply chains at a local and global level.”
He says that part of the issue with Brexit is the number of possibilities and the speed at which everything could change. Businesses need to be agile and able to react quickly, whatever the outcome of Brexit.
“Future-proofing your supply chain is about being able to continuously model and test what-if? scenarios: what if I move my manufacturing operations to a different country, what if I switch suppliers, what if I expand operations in this region, what if I have to scale production up or down? The list is endless.”
Review existing arrangements
Romulus Grigoras, chief executive at OneStock, says that while Brexit presents challenges, it also offers an opportunity to look more carefully at how your business operates on a micro level. This is particularly important for the retail sector, which OneStock serves.
“Tracing the supply chain back to identify and alleviate any bottlenecks will enable UK retailers to respond to various Brexit scenarios,” Mr Grigoras says. In practice, this means ramping up stocks locally, and looking to alter supply and distribution routes.
“The journey from manufacturer to customer is probably more complex than many brands realise and, importantly, they may not currently control it all,” he says.
Allow for delays inbound to the UK
For a UK brand working with a European supplier, the challenge is to accommodate longer lead times for goods to arrive in the UK, says Mr Grigoras. An alternative is to access the most locally available products to sell to customers as efficiently as possible.
“Brands should set up a local point of despatch in the UK to forward the parcel to a customer, to avoid unnecessary tariffs and delays in delivery,” he says. This distributor will also need to manage returns.
“The key is stock accuracy,” says Mr Grigoras. “Retailers need to make sure they have the right amount of stock available, have processes in place so they can fulfil quickly, and be able to track and surface the order availability of the product to manage customer expectations on delivery.”
What if you are selling to Europe? Some UK brands may be thinking of switching away from selling into the European mainland because it appears more complex. Any additional border will add a constraint, so it’s about locating stock as close to the customer as possible, he says.
“One solution would be to have a physical presence in these territories, one store may be enough, so they can opt to ship to the customer directly from a local hub. Essentially retailers should consider using store estate as mini-warehouses,” says Mr Grigoras.
He says retailers must identify every risk within the process, including IT challenges, people and workforce impacts, currency depreciation, additional administration costs and legal issues.
Opportunity or threat?
While a no-deal Brexit could make the cost of moving goods to or from the UK rise, as well as restrictions on the free movement of labour, this could be an opportunity, says Jonathan Plummer, general manager of Electronic Manufacturing Solutions.
“Many people will argue that offshore manufacturing is cheaper, but this isn’t always the case when you take the logistics costs into account,” he says “There are fewer hoops to jump through if all parts of the supply chain remain in the UK. Local manufacturing also offers added flexibility, improved communications, enhanced control and visibility, better lead times and often higher-quality end-results.”