UK businesses should be prepared to make significant investment and fundamentally restructure their supply chains in order to survive a no-deal Brexit, warn supply chain experts SCALA.
The UK’s leading supply chain and logistics consultancy predicts that it could take five years for businesses to re-engineer and optimise their supply chains, and major investment could be needed to guarantee success.
Uncertainty surrounding currency exchange rates, possible new trade tariffs as well as the likelihood of major border delays, caused by additional customs processes and checks, could severely impact businesses that source products or components from the EU, and/or export to the EU.
As such, businesses are being urged to re-evaluate their requirements by undertaking a full assessment of their supply chain strategies. The assessment needs to be comprehensive as businesses will need to consider everything from sourcing, manufacturing, transportation, warehousing and inventory through to customer service.
John Perry, managing director of SCALA, said: “Over the years, company supply chains have been continuously improved and developed to meet the demands of the consumer as cost effectively as possible.
“As part of this, UK businesses have become increasingly reliant on sourcing from the EU, driven by the supply chain benefits of quick lead-times, manufacturing rationalisation and faster response times to changes in demand.
“However, in the event of a no-deal Brexit, this is all set to drastically change.
“Companies will need to determine the impact of new trading laws and tariffs, as well as the potential costs and duration of new supply chain routes. Borders will be more complicated, so supplier relationships will need to be revaluated, and alternative options considered such as stockpiling in UK warehousing.
“This is a complex process and these changes can’t be made over night. For some companies this will involve a major reset. The more complex the supply chain network, the more extensive and lengthier the process is likely to be.
“Even for proactive businesses that start preparing now, the ramifications of Brexit are major, and it is not a quick process for companies to re-optimise their supply chains. Some companies may just tweak elements or try and make-do for short term survival, but for long term competitiveness the supply chain needs to be properly re-assessed and optimised.”
SCALA is helping UK businesses prepare for Brexit, both by evaluating supply chain strategies and providing an end-to-end service to manage the AEO accreditation process.