Brexit has been on the lips of the world since the referendum was announced in 2016. While most focused on the political and diplomatic ramifications of the cessation of the United Kingdom (UK) from the European Union, others considered the many logistical issues it brings, affecting the flow of goods globally. With the official Brexit date of March 29, 2019, the disruptions it causes in global supply chain are just beginning and with the likely possibility of a ‘no deal’ vote, it could mean, “…new regulations, new registrations and new processes, meaning organizations must begin assessing their suppliers and supply chain to establish how this affects their operations and develop contingency plans,” according to Alex Saric, CMO at Ivalua and smart procurement expert.
Why Does Brexit Matter to the US?
With the rise of AI and do-it-all tech platforms, it’s easy to believe that supply chains are getting more simple and efficient every day. However, globalization and international trade have created a butterfly effect. Global supply chain is so interconnected that any disruption has reverberating effects to all stakeholders in it. For example, if the UK has to pay tariffs on raw materials from countries in the EU they were previously not subject to, it will impact the price of goods for US companies who rely on UK exports. The same goes for time; if it takes longer to get EU products through the new global channels to the UK, any exporting will also be held up. Of the major exports from the UK to the US, pharmaceutical products and cars are the top two, both of which rely on some measure of importing from EU countries. Any supply chain effects from Brexit will affect US companies as well as their consumers.
What Can We Expect to Change with Brexit This Year?
There are several probable changes we will see with the official date of Brexit looming. Johnathon Marshall, partner at PricewaterhouseCoopers, highlights the following as the most likely immediate impacts from Brexit, “Changes to customs and tariffs; legal implications regarding contracts, people, and intellectual property; VAT changes on imports/exports; supply chain hubs for pan-European business operations; lead times and the impact of longer waits at border control; and what EU-based grants and incentives may be lost when Brexit takes place.” In short, a lot could change March 29th.
How to Prepare for Brexit
Well, the absolute worst thing to do is to use the just wait and see what happens method before taking any action. All the experts agree on one specific strategy all businesses should be doing right now–getting to know their supply chain intimately. Do a full audit of all internal processes, networks, infrastructure, and financial flows. Conduct a close analysis of “what ifs” to prepare outcomes and strategies should the worst case scenario occur. This will help companies identify areas where bottlenecks may appear and also what any new costs will do to their profit margin. They then need to document and share the strategies with the appropriate partners, suppliers and vendors. Companies who have hubs in the UK will want to enact the same process, being sure to include all the possibilities Brexit could have on the local offices as well as the company back home.
Change always brings uncertainty. It’s how you prepare for and adapt to change that will preserve your business, if not help it flourish. Many businesses choose to work with partners who understand the ins-and-out of global supply chain and how to prepare for many possible outcomes. JIT Services, an award-winning supply chain management leader, is the perfect partner for companies looking to maximize their profits with an efficient, smart supply chain. Contact us to learn more.