Brexit: A call to Action for Supply Chain Professionals
A time for change
Now the United Kingdom has voted for Brexit what will be the impact on UK-Europe supply chains? Right now, across the UK—and across Europe, too—businesses are asking that very question.
And one thing is certain: those supply chains will not be unaffected. There will be changes. The good news unlike many Supply Chain events like a volcano disrupting air traffic or an earth quake destroying infrastructure we have over 2 years notice of the change so for Supply Chain Professionals a call to action is required and the application of the Five P's (Perfect Planning Prevent's Poor Performance) can enable competitive advantage.
What will those changes be? Even now, with the implications of Brexit still uncertain, their broad thrust can be predicted. That’s because the UK-Europe supply chains that are presently in place largely conform to the imperatives of supply chain network design principles, and known best practices in terms of supply chain strategy.
And if the underlying logic of a supply chain network changes, then the network itself will change so as to reflect the new reality. Likewise, a supply chain strategy predicated upon the UK being within the European Union can hardly be unaffected if the UK is suddenly not a part of the European Union.
Any supply chain strategy exercise begins with a consideration of customer-supplier trading relationships. And here, the logic of many existing UK-Europe supply chains is predicated upon the UK being part of the European Union’s free trade area.
Put another way, the single market has worked to harmonise standards, and eliminate tariffs on cross-border trade. Going forward, these assumptions will no longer hold. UK businesses may find suppliers outside the European Union to be a viable and attractive proposition—and likewise, their existing European Union customers may prefer to engage with suppliers who are still a part of the European Union. And supply chain networks will evolve so as to reflect those new preferences.
These changes won’t come in overnight, of course. Consider the UK’s automotive industry, which accounts for 8% of economic output as measured by gross value added. Or the UK’s aerospace industry, which makes up 5% of the manufacturing sector’s sales revenues, contributing £6.8 billion in gross value added to the UK economy.
Sourcing Decisions
In each case, sourcing decisions are based around model lifecycles, and changes will take years to filter through. Will components be manufactured in Birmingham—or Barcelona, or Bremen? Likewise, the world’s vehicle manufacturers have some interesting choices ahead regarding plant location and where specific models will be manufactured. But the risks and opportunities are obvious—and with the UK’s automotive industry employing 140,000 people, and exporting over 80% of the vehicles it manufactures, the stakes are high.
That said, for other supply chains, geography will act as a natural counterweight. Europe has always been an important trading partner of the UK, even at the height of the British Empire. So British supermarkets will continue to import French cheese, German yogurt, Spanish red wine, Belgian chocolate, Greek olive oil, and much else besides.
Changing Supply Chain Processes
But even if these supply chains are unchanged, the supply chain processes managing the flow of goods will have to change. Because the Brexit vote to leave the European Union is a vote to leave Europe’s free trade area, and also Europe’s Schengen passport‑free travel zone.
Put another way, the vote to leave the European Union was a vote for border controls, customs clearances, more extensive passport checks, and—taken together—border crossings that not only take longer than now, but which may be more uncertain and unpredictable than now. However the opportunity to stream-line processes in these areas may result in more efficient and effective trade. Technology platforms enabling automated pre-notification of where goods are moving are already available and being utilised they just need to be applied to the new processes we require.
All of which will impact businesses—both here and in Europe—that rely on quick and predictable border crossings to feed Just-in-Time manufacturing processes, or low-inventory distribution systems. Businesses such as Jaguar Land Rover, for instance, which has an extensive European supply chain, making around 1,100 collections a week from almost 500 suppliers in 17 countries, delivering them to UK assembly plants via a system of crossdocks.
Almost inevitably in such businesses, inventory holdings will adjust, and lead times change, thereby potentially raising costs and sapping competitiveness if appropriate action is not taken.
Brexit: Good News
So what to do? businesses and boardrooms don’t have a vote, of course. But, as ever, they will be in the front line of those called upon to deal with the consequences of the United Kingdoms vote to leave the European Union.
The good news is Supply Chain Professionals and Boardrooms have two years to plan for Brexit. We may not at this point know the outcome of the political negotiations but we can review the scenarios. The extremes are a "known known", one scenario is nothing will change the other is that U.K and Europe revert to World Trade Organisation rules. So firstly understand the physical structure of your supply chain, where your suppliers are located and what regulations they currently operate under. Do your scenario planning and understand how susceptible to impact your supply chain is, you may be pleasantly surprised. Use Brexit as a “burning platform” to re-design processes, networks, information flows and organisations. I would argue Brexit is a fantastic opportunity for the United Kingdom to increase competitiveness through leveraging the digital revolution. After all Competition is not between individual companies but they supply chains they are part of. So give some thought to post-Brexit supply chains.
Free Video
Short Free Video giving information on what Supply Chain Professionals need to consider about Brexit linked to the Cranfield one week "Supply chain management programme"
Free Webinar Recording
Free Webinar Recording – Brexit: The Supply Chain Professionals Perspective
Sean Culey Consultant Aligned Integration Jeffrey LeClair Vice President of Manufacturing and Supply Chain Basin Industries & myself Richard Wilding OBE, PhD Full Professor and Chair of Supply Chain Strategy Cranfield School of Management
Now the United Kingdom has voted for Brexit what will be the impact on UK-Europe supply chains? Right now, across the UK—and across Europe, too—businesses are asking that very question.
And one thing is certain: those supply chains will not be unaffected. There will be changes. The good news unlike many Supply Chain events like a volcano disrupting air traffic or an earth quake destroying infrastructure we have over 2 years notice of the change so for Supply Chain Professionals a call to action is required and the application of the Five P's (Perfect Planning Prevent's Poor Performance) can enable competitive advantage.
What will those changes be? Even now, with the implications of Brexit still uncertain, their broad thrust can be predicted. That’s because the UK-Europe supply chains that are presently in place largely conform to the imperatives of supply chain network design principles, and known best practices in terms of supply chain strategy.
And if the underlying logic of a supply chain network changes, then the network itself will change so as to reflect the new reality. Likewise, a supply chain strategy predicated upon the UK being within the European Union can hardly be unaffected if the UK is suddenly not a part of the European Union.
Any supply chain strategy exercise begins with a consideration of customer-supplier trading relationships. And here, the logic of many existing UK-Europe supply chains is predicated upon the UK being part of the European Union’s free trade area.
Put another way, the single market has worked to harmonise standards, and eliminate tariffs on cross-border trade. Going forward, these assumptions will no longer hold. UK businesses may find suppliers outside the European Union to be a viable and attractive proposition—and likewise, their existing European Union customers may prefer to engage with suppliers who are still a part of the European Union. And supply chain networks will evolve so as to reflect those new preferences.
These changes won’t come in overnight, of course. Consider the UK’s automotive industry, which accounts for 8% of economic output as measured by gross value added. Or the UK’s aerospace industry, which makes up 5% of the manufacturing sector’s sales revenues, contributing £6.8 billion in gross value added to the UK economy.
Sourcing Decisions
In each case, sourcing decisions are based around model lifecycles, and changes will take years to filter through. Will components be manufactured in Birmingham—or Barcelona, or Bremen? Likewise, the world’s vehicle manufacturers have some interesting choices ahead regarding plant location and where specific models will be manufactured. But the risks and opportunities are obvious—and with the UK’s automotive industry employing 140,000 people, and exporting over 80% of the vehicles it manufactures, the stakes are high.
That said, for other supply chains, geography will act as a natural counterweight. Europe has always been an important trading partner of the UK, even at the height of the British Empire. So British supermarkets will continue to import French cheese, German yogurt, Spanish red wine, Belgian chocolate, Greek olive oil, and much else besides.
Changing Supply Chain Processes
But even if these supply chains are unchanged, the supply chain processes managing the flow of goods will have to change. Because the Brexit vote to leave the European Union is a vote to leave Europe’s free trade area, and also Europe’s Schengen passport‑free travel zone.
Put another way, the vote to leave the European Union was a vote for border controls, customs clearances, more extensive passport checks, and—taken together—border crossings that not only take longer than now, but which may be more uncertain and unpredictable than now. However the opportunity to stream-line processes in these areas may result in more efficient and effective trade. Technology platforms enabling automated pre-notification of where goods are moving are already available and being utilised they just need to be applied to the new processes we require.
All of which will impact businesses—both here and in Europe—that rely on quick and predictable border crossings to feed Just-in-Time manufacturing processes, or low-inventory distribution systems. Businesses such as Jaguar Land Rover, for instance, which has an extensive European supply chain, making around 1,100 collections a week from almost 500 suppliers in 17 countries, delivering them to UK assembly plants via a system of crossdocks.
Almost inevitably in such businesses, inventory holdings will adjust, and lead times change, thereby potentially raising costs and sapping competitiveness if appropriate action is not taken.
Brexit: Good News
So what to do? businesses and boardrooms don’t have a vote, of course. But, as ever, they will be in the front line of those called upon to deal with the consequences of the United Kingdoms vote to leave the European Union.
The good news is Supply Chain Professionals and Boardrooms have two years to plan for Brexit. We may not at this point know the outcome of the political negotiations but we can review the scenarios. The extremes are a "known known", one scenario is nothing will change the other is that U.K and Europe revert to World Trade Organisation rules. So firstly understand the physical structure of your supply chain, where your suppliers are located and what regulations they currently operate under. Do your scenario planning and understand how susceptible to impact your supply chain is, you may be pleasantly surprised. Use Brexit as a “burning platform” to re-design processes, networks, information flows and organisations. I would argue Brexit is a fantastic opportunity for the United Kingdom to increase competitiveness through leveraging the digital revolution. After all Competition is not between individual companies but they supply chains they are part of. So give some thought to post-Brexit supply chains.
Free Video
Short Free Video giving information on what Supply Chain Professionals need to consider about Brexit linked to the Cranfield one week "Supply chain management programme"
Free Webinar Recording
Free Webinar Recording – Brexit: The Supply Chain Professionals Perspective
Sean Culey Consultant Aligned Integration Jeffrey LeClair Vice President of Manufacturing and Supply Chain Basin Industries & myself Richard Wilding OBE, PhD Full Professor and Chair of Supply Chain Strategy Cranfield School of Management
Discussion Points:
1. Which of these knowledge insights are challenging and inspiring to you?
2. Which learnings from the past discussed in this action insight have future implications?
3. What action could be taken from utilising this knowledge by you personally or by an organisation to create value?