As 2019 comes to an end, Brexit remains in the news, with the deadline pushed out once again to January 31, 2020. It’s been a roller coaster ride the past three years, but one thing has remained the same: supply chain leaders have had to deal with the ongoing risks and uncertainties caused by Brexit.
Where are we today with Brexit? What are some of those risks and uncertainties? How should supply chain leaders prepare for Brexit?
(Note: Arne and I spoke before the previous deadline of October 31, but his insights and advice regarding the implications of Brexit and what to do about it remain relevant today.)
No-Deal Brexit Implications
What are the implications if Britain does exit on January 31, 2020 without a formal agreement with the other 27-member countries — referred to as a No-Deal Brexit? Arne likens the situation to a divorce. A divorce agreement stipulates who gets the house, who gets the cat and all the other joint possessions. An exit agreement would unwind all of the common trading system borders and wholly-harmonized customs procedures developed over the past four decades. A No-Deal Brexit would mean suddenly all of the carefully crafted laws and procedures for IP protection, tariffs, customs, transportation within their common borders, handling trade disputes, etc. would end, where Britain is concerned, with no divorce agreement. Instead, trade would revert to World Trade Organization (WTO) rules which Arne says, “are much less detailed.”
Impact on Supply Chain
Arne explains when you put a new border between countries, suddenly you need a complete customs regime with details such as customs laws, licenses, tariffs, filing procedures, inspection sites, procedures, and people, and many other physical and paperwork details. This causes tremendous uncertainty for supply chain management and disrupts the free flow of goods.
To prepare for this uncertainty, Arne recommends supply chain professionals consider these questions:
- What will the post-Brexit trading environment look like for you?
- What additional costs do you expect?
- Where will the expected bottlenecks be and how will you manage or navigate around them?
- How do you change your supply chain in order to avoid these disruptions?
Arne says the answers to these questions will not come overnight. It takes well thought out strategies on how you will achieve end-to-end supply chain visibility. “It means going back to the drawing board,” says Arne. “Supply chain leaders have to step up.”
3 Critical Factors in Response
To respond to the supply chain challenges of Brexit, Arne lays out three critical factors that must be considered. First is the end-to-end visibility just mentioned. Second, companies must communicate and collaborate with all of their suppliers, partners and customers to develop strategies that address the Brexit uncertainties and challenges, as well as other risks in the supply chain.
The third factor is data. Whereas in the past supply chains were internally focused, now they are dependent on external players. Data must be gathered from all parties who touch the supply chain. “But today that data is stored in multiple ERP systems, standalone applications, spreadsheets and even manual files,” says Arne. “Companies must deploy a centralized platform to store and analyze all pertinent data in order to understand and direct supply chain operations effectively.”
Arne went on to discuss the obvious need for technology and trade content to support these challenges. But he also points out that Brexit is not the only event challenging supply chains. He notes the current trade and tariff war between the U.S. and China as another example. Arne suggests that preparing for Brexit will also prepare companies to face many other trade challenges. “Don’t think of Brexit as a problem, but rather an opportunity to become more agile, to reduce risk permanently, and most importantly, to improve the bottom line.”
Arne had many more excellent insights and advice on these and other topics related to Brexit, including his thoughts on what will distinguish the leaders from the laggards and what will be the catalyst for success going forward. Therefore, I encourage you to watch the full video for all the details. Then post a comment and share your own thoughts and experiences on this topic!