How can companies navigate the supply chain challenges posed by Brexit?
As Britain sinks further into the Brexit quagmire, the question of how it will affect global supply chain management remains uncertain. As it stands, Prime Minister Theresa May’s recent resignation raises the likelihood of a no-deal Brexit.
Although PM May brought Brexit deals before Parliament three separate times, she wasn’t able to convince MPs, even many of those in her own party, to approve the deals. Many of the leading candidates to replace her are so-called hardline Brexiteers, who are unlikely to compromise in order to reach a deal with the EU. Therefore, unless her successor is able to pull a rabbit out of a hat and concoct a deal that will be acceptable both to the EU and the hardline Brexiteers, no-deal is the likely scenario for the new Brexit deadline on October 31, 2019.
What does a no-deal Brexit mean for supply chain management?
A no-deal Brexit presents a variety of challenges for the global supply chain, as it remains unclear what will happen at border crossings and what tariffs will be imposed on goods coming in and out of the UK. Plans are being drawn up in both the private and public sectors to prepare for the expected chaos, yet even the contingency plans seem to be suffering from the Brexit curse.
For example, the UK government contracted with two leading ferry companies for additional shipping services in the event of a no-deal Brexit.
This is in order to prevent shortages of key items such as medications, essential chemicals and parts for the energy sector. UK Transport Secretary Chris Grayling then canceled the contracts without presenting a viable alternative. Pharmaceutical companies apparently stockpiled vital medications like insulin in preparation for the original Brexit deadline in March of 2019, but now that the deadline has been pushed back to the end of October, the companies must continue to maintain their overstocked inventory, despite the costs incurred as a result.
Vital trade routes will be hardest hit by both Brexit scenarios
Vital trade routes through the English Channel, like the Eurotunnel or sea transport from Dover to Calais, are particularly vulnerable in both a no-deal and a hard Brexit scenario.
Calais is Britain’s gateway to continental Europe: 10 million passengers, 2 million trucks and 1.8 million cars pass through the French port each year by ferry.
An additional 1.7 million trucks carrying 22 million tons of goods are transported by train on the Eurotunnel Shuttle between Calais and the British port of Folkestone. In both no-deal or hard Brexit scenarios, the EU is expected to enforce full third-country controls on people and goods entering the EU from the UK.
Customs workers in Calais have staged several protests claiming that they simply do not have the infrastructure and capacity necessary to conduct customs inspections for that amount of traffic. While some of the customs documents can be completed online prior to departure to prevent delays, EU law requires physical inspections for all plant and animal products from outside the EU. Long waits for lorries/trucks are already common in Calais, and with added inspections, wait time can only be expected to increase. Eurotunnel is preparing a large parking lot where trucks can wait so as not to block traffic, but that will not solve customs-related delays for the goods that must undergo inspection which could impact sensitive goods or goods with a limited shelf-life.
Routes through Northern Ireland are also at risk, as it is still unclear if a hard border will be created between the Republic of Ireland and Northern Ireland, which is part of the UK. Raw ingredients or components often cross the border with Ireland several times before becoming a final food product. If a hard border is created, this will no longer be possible. Sea travel will also be impacted as shipping routes may be required to circumvent the UK to reach Europe.
Brexit isn’t only bad news for the shipping economy
Brexit is not all risk: the expected changes also open up new business opportunities. For example, companies in both the EU and the UK may prefer to use local suppliers rather than deal with supply chain problems and possible tariffs. Likewise, the congestion in traditional ports will increase demand in alternative ports-of-entry or for new transit methods, all of which provide fertile ground for creative entrepreneurs.
Smart supply chain management can mitigate the challenges posed by Brexit
Companies can prepare for the extreme uncertainty, opportunities and challenges of a no-deal or hard Brexit by developing effective risk-reduction strategies and agile logistics solutions in advance.
The first step is to conduct a full assessment of their supply chains and identify vulnerabilities, such as those on the English Channel, as well as opportunities.
Using a solution like Contguard, which offers predictive analytics and extensive data points, companies can create plans to best serve their customers in a variety of possible scenarios.
- If a specific port of entry becomes significantly backlogged, what alternative routes can be used?
- How should SLAs be modified to ensure product quality during long waits?
- How can suppliers ensure that they have enough goods stockpiled to handle delays and shortages without incurring unnecessary expenses or risking the quality of their product?
Supply chain providers will need extensive and accurate data, curated in accessible analytics to answer these questions and the many more that are sure to arise.
Preparation is key to overcoming the supply chain challenges posed by Brexit
Brexit is months away, but now is the time to prepare. Contguard’s predictive analytics, fed by a multitude of data points generated through the IoT along the supply chain, can help supply chain providers navigate the Brexit challenge and continue to provide dependable, efficient service to their clients.