The Brexit-themed political Game of Thrones has entered another season and an exit from the EU without an agreed deal is now a looming possibility. Supply chain disruption can have real and near immediate impacts on trade. Just over a third of UK traders rely on just-in-time delivery. Frictionless trade and the efficient movement of materials, components and finished goods are thus crucial key business factors. How then do we make sure we are prepared for a Brexit with no transition period?
The ‘stack ‘em high’ approach
Inventory and buffer stock, concepts seemingly consigned to history by just-in-time logistics, are making a comeback. This is thanks to contingency planning due to uncertainty around whether and how Brexit will happen.
The multiple layers of sourcing in manufacturing and distribution mean that even the most ‘Scottish’ of products sold locally often rely, to a surprisingly high degree, on things imported from elsewhere in Europe - for example bottles for whisky.
Although the draft Withdrawal Agreement would (for the transition period at least) appear to address concerns about frictionless movement of goods, the possibility of a ‘no deal’ Brexit is forcing many prudent businesses to plan for possible disruption to their supply chains.
Even if your business isn’t one which needs large volumes of raw materials, components or stock in trade, take a moment to consider (even in an office based environment) your reliance on:
- Items being available immediately
- Items with a short lead time
- How would an extended delay (or significant price increase) of any of these adversely impact on the operation of your business?
Do you have a buffer stock?
Do you have a buffer stock of key consumables and equipment components? If you are a processor, manufacturer, distributor or retailer, how long could you continue operating at normal (or reduced) levels of activity if there are supply chain issues?
Don’t forget about packaging materials!
Contingency supplies need to be obtained and appropriately stored. There are reports of very significant stockpiles of materials across a number of sectors being created. That is leading to an increased demand for suitable warehousing, as well as logistics services to position the materials.
Space and cash
Lean ‘just in time’ supply chains have evolved to free up capital which would otherwise be tied up in inventory costs. So as well as physical space requirements, there will be cash flow and banking questions to consider.
The value of the Pound
A ‘no deal’ Brexit is likely, according to many reports, to lead to adverse impacts on the exchange rate value of the Pound. As we’ve already seen during the last couple of years, this may well make manufactured goods more attractive for export. However, it also leads to increased demand on locally produced raw materials as well increasing the cost of imported materials and components. This again can create issues for financial models.
Whilst there remains the possibility that a ‘no deal’ Brexit could be avoided, and so contingencies may not be needed, prudence would suggest that it would be wise to plan ahead just in case. Action taken at the last minute may very be more expensive and less certain to succeed.
It’s also worth reviewing your terms for both inbound and outbound transactions, including logistics and insurance, to manage ‘no deal’ Brexit contractual risks.
Our team can assist with your practical preparations for Brexit. Contact us, whether you need to secure additional storage space, adjust your banking facilities, review your supply chain contractual rights and obligations, prepare for trading on an international basis or address employment law concerns.