How will Brexit impact my supply chain? How will Brexit impact my supply chain?

It’s safe to assume that this question has already popped up in many Board meetings. With so many questions left unanswered, making a sound decision on what steps to take depends on numerous factors. And given the complexity and broad scope of the impact of Brexit across countless industries and businesses, we’ve decided to focus on the main overarching issues when it comes to managing your supply chain. 

Regardless of which direction the negotiations take, there will be a significant impact on warehousing both in the UK and in the EU. In terms of infrastructure, most businesses have chosen the location of their warehouses based on their customer service strategy. With Brexit, the question businesses should be asking themselves is – Will this infrastructure still fit the service needs of my organization? And this is before you’ve even considered changes to various legislation in terms of customs clearance and all the additional paperwork needed in terms of additional labelling or updating of technical files.

So, what are your options? You could for instance store all products destined for the UK in a UK warehouse and/or re-assess your warehouse landscape to continue servicing the remaining Member States. Ultimately, the question comes down to the location of your warehouse(s) and whether or not you use your own facility(s) or one(s) operated by a third party contractor.

If you decide to keep things internal and manage your own warehouses, you should, at least, consider the following elements:

• Does your company have the relevant skillsets and experience in terms of both project and operational management to drive such a project?
• Do you have access to the necessary assets and funding?
• Are you conscious of the potential impact of transferring your existing IT systems or implementing new ones?
• What is the effect of transferring or building up new stock in terms of working capital and service level?

If you decide to outsource the warehousing to a third party, we would advise you to take into account the following points: 

• To what extent are you familiar with outsourcing parts of your operation(s), especially when it comes to understanding the benefits and pitfalls?
• Do you have the appropriate skills and experience to manage an outsourcing procurement exercise in terms of, for example, contract management?
• Have you considered potential issues with your IT systems when you transfer your stock?

In addition to the above mentioned non-exhaustive points it is important to understand that there is currently already a shortage of warehouse space across many parts of the UK, including a short supply of development land with which to create more. And while warehouse facilities are being built, demand is still not significantly met with elements such as specific market requirements and location playing an important role. Furthermore, with the shift towards e-commerce and discounted retailers we are seeing a significant increase in demand for warehouse facilities next to major transport routes, putting further pressure on the availability of free storage space. It is expected that by 2020, if not already the case, demand will exceed supply for UK warehousing, which could lead to a strain on (e-commerce) delivery to customers.

The UK logistics industry has suffered with regard to the quantity and caliber of new recruits at all levels. In the last ten years, a large number of EU migrants coming to the UK have easily found employment across multiple warehouses. Consider what would happen if a significant proportion of very competent staff leave the UK and head back to the EU? Since the UK has quite a low unemployment level, it would be a real challenge to find the appropriate replacement staff.

The warehousing sector may need to consider to invest more in mechanization and automation bearing in mind that companies supplying such equipment are mainly concentrated outside of the UK.

Whatever your situation, it is important to know what your UK footprint is and what your UK/EU strategy will look like. In this respect, our team of experts is available to help you make a clear assessment of the potential impact of Brexit, as well as to help put in place any mitigating measures, where needed.

In case of further inquiries, please contact Steve De Poorter.