With the UK having already had a couple of trial runs at Brexit in recent years, most would have thought we would be prepared for the end of the year and that businesses would have this under control, however, the disruption caused by coronavirus has created additional challenges which may impact upon the supply chains for businesses in the UK.
Coronavirus has meant many businesses have already been looking at their supply chain to make sure they are flexible and sufficient to accommodate the impact of COVID-19; this will hold them in good stead ahead of Brexit. There are, however, still matters for businesses to consider in the supply chain which we summarise below.
Customs and tariffs
Understanding the impact of customs and tariffs being introduced will help understand the effect of these and how easy it is to absorb these additional costs into the current costing model of the business.
Lead times
Understanding the current lead time of goods and working out the impact of the changes on margins and lead time will help with maintaining service levels. Businesses will have seen COVID-19 impacting lead times with shortage of goods, so many will have experienced some of this already, but the extent of the impact on the lead time may provide some insight into decisions you may have to make. For example, how will your warehouse management system be impacted by delays in lead time for goods and products? Will you need to consider using a UK based supplier to improve lead time? Is there capacity within the UK market to accommodate your demand? For those who have an increased lead time, looking to hold stock in Europe might be an option, but will incur additional costs.
Inventory strategy
For those businesses with cash at their disposal, ensuring they have sufficient stock on hand in the short term may be a strategy to implement. In previous Brexit scenarios many businesses increased stock to accommodate for the short fall in availability of products and to maintain service to their customer base. Whilst this might be a short-term strategy, in the long-term businesses will need to consider how they manages their inventory to maintain working capital. There is also the cost impact of doing this to consider, with more stock on hand requiring additional insurance or storage costs.
Managing data
Understanding your product lines and having the data available to make critical business decisions will be important. Most systems have the capability to document both current trends and expected orders, so using this data to harvest your sales outlook will lead into the supply chain, what goods you need to fulfil orders, and when you need it. Linking this into the inventory strategy will lead to an efficient ordering system and can save both costs of holding stock and ordering goods which have a long lead time.
For those businesses who will see their supply chain impacted, early planning is recommend to ensure you go into 2021 in the best possible position with minimal disruption to business. Where alternative UK based suppliers are an option, weigh up the cost of working with these and whether it is beneficial to the business overall to make such changes.