Brexit: Uncertainty remains but supply chain preparations are a priority

By Ken Fleming, president of Logistyx Technologies.

Brexit is back in the headlines, but to those responsible for preparing supply chains in the region there is more frustration than ever. On the one hand, the UK has confirmed it will not be extending the Brexit transition period beyond 31 December.

On the other hand, the UK and EU have agreed to speed up talks to agree a deal governing the new trading rules that will apply. At the same time, however, some experts believe the UK could still crash out with no-deal.  

Obviously, the UK’s exit from the EU is going to have wide political, economic and societal ramifications. But you could also view it in a similar way to any international event that creates disruption to the supply chain, whether that’s a health-related crisis such as the COVID-19 pandemic, a weather event such as a hurricane or a trade war. 

As with any disruption, those companies that take the lead in preparing for the possible repercussions are likely to experience the least negative impact. Those who fail to prepare will find themselves in reactionary mode, having to firefight and adapt to the changes when they hit. The latter are also the ones who will most likely have to work the hardest in the recovery phase: trying to get their businesses back to where they were before the changes happened. 

For the pandemic, of course, nobody was really able to prepare. But with Brexit, there is no excuse not to do at least some preparation.

Obviously, there is still a lot of uncertainty because we don’t know whether the UK and EU will thrash out a deal or not. And if there is a deal, we don’t know what shape it will take. So, we can only begin to make an educated guess at the new rules and processes and possible duties companies will need to swallow if they are shipping goods between the UK and the EU. 

Some companies have been doing just this: making assumptions about the likely changes and preparing for them. For example, Logistyx has customers who are already testing the strategy of breaking bulk when shipping across the border. This is about minimising customs administration and documentation and streamlining customs clearance at the border by consolidating multiple orders into one big shipment - and breaking bulk into separate parcels once on the other side. 

The big carriers such as DHL and FedEx already offer specific services to support breaking bulk in this way. So, if this is relevant to your company, you should test it out to ensure your systems can support the necessary labelling and documentation requirements. If in the end there is a Brexit deal which means you never have to use this strategy, then no problem – at least you were prepared. If you do have to use it, then you will be ready to go and avoid some of the pain and impact on your business of having to react at the last minute. 

The lack of clarity right now means companies are going to have to make preparatory plans based on assumptions about what might happen. We know, for example, what processes and regulations are in place for other countries that are outside the EU who currently want to ship into and out of the region, so as a minimum you should investigate those. Learn from suppliers such as carriers and technology providers who are already doing this.

If you are a manufacturing company in the UK that imports essential parts from the EU, there’s a possibility you may have to pay additional duties or taxes so your costs will rise. Have you modelled if your business will be able to absorb those costs? And if you pass those costs to your customers by raising prices, will the market bear it? Have you investigated alternative sources of supply in the UK who could provide those parts even if you have previously rejected them as being more expensive?  Once you factor in the potential additional costs of importing, they may be more competitive.

On the other hand, if you are an ecommerce company that ships parcels to France or other EU countries what’s going to be the impact on your business and the delivery options you provide to customers? If you haven’t already, you should be talking to your existing parcel carriers about how they plan to handle post-Brexit shipping and the extra documentation and time that might be needed when crossing borders. 

Ask them what they believe you need to be do to be ready and what they can do to help you prepare. Try to assess which ones have a service that is going to be ready to go. They may charge a premium price initially because those services will be in high demand. 

A good shipper has contingency plans, and although we don’t yet know what the final Brexit deal (or no deal) will look like, some preparation is always better than none.  By seeking as much insight as possible, as early as possible, shippers will be in a stronger position to be as fully prepared as they can be come 1 January 2021.

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