Every day that the European Union and the United Kingdom fail to reach new trading agreements, the risks to your supply chain are increasing. Create scenarios and get in touch with your partners to be prepared for anything.
by Johan Smits
Brexit did not disappear because of the Covid-19 pandemic. Maybe it looks that way in the media, but in the meantime tensions are running high in Brussels and London. Negotiations are taking place there about the trade conditions between the European Union and the United Kingdom from January 1st, 2021 on. But the talks have reached a deadlock. An unwanted situation increasing the risk for Dutch companies sourcing goods from or delivering them to the UK. What can you do?
A large number of sectors will be affected if the UK and the EU do not come to terms and a no-deal Brexit becomes a reality on January 1st. But even if (partial) agreements are concluded in the coming weeks, it will be difficult to prevent disruptions: the period to adjust business operations to those agreements will most likely be too short.
The automotive sector, the manufacturing industry, the food sector (fresh and frozen), pharmaceuticals, fast fashion and the transport sector are expected to be hit in 2021. In the short term, it will be a matter of complying with British laws and regulations for admission to the British market (the uniform European rules for this will lapse) and, secondly, complying with customs formalities and certifications. In the longer term, the question is how robust your supply chain is: how responsive are your suppliers and your customers? How prepared are they? And how about the suppliers of your suppliers?
Brexit is a unique situation and that does not make things easier. After all, it is quite a challenge to determine how supply and demand will respond on both sides of the Channel. In any case, there are no historical data available on the basis of which reasonable estimates can be made. The only possibility you have, therefore, is to make (supply chain) scenarios. Ask yourself: what if...? And work out the consequences of the various possibilities. Draw up plan B and a plan C and perhaps even more variants.
Also, scenarios are the basis for your talks with your (British) customers and suppliers. These are times for intensifying your relationship management in a big way. Firstly, you will want to test your scenarios with them. What are the circumstances under which delivery or purchase is endangered? Which alternatives are then available? Can you make agreements about the division of responsibilities in unforeseen circumstances?
Based on your scenarios, you will also want to determine what is needed in the longer term to maintain your service levels. For example, think about stock management and storage options. Is there extra space available, should this be necessary? Keep in mind that since the outbreak of the Covid-19 pandemic, e-commerce companies have also become involved in the (fierce) competition for space.
In addition, Brexit will be a reason to optimize your entire network in terms of costs, tax and product flows. The costs associated with renewed certification of products and (high) import and export duties will of course have consequences for your business case(s). Also labour (e.g. EU nationals in the UK), regulatory changes (e.g. food labelling) and customs processes are being impacted. A financial resilience in your supply chain is becoming more important.
Meanwhile, the short-term consequences of Brexit do not require less attention. The Netherlands earns tens of billions of euros with imports from and exports to the United Kingdom. Because of Brexit, these trade flows are impacted as of January 1st, 2021. Even with the best possible deal, the business community will face some difficult months. An estimated 180,000 companies import goods and services into the UK, more than 10,000 truckloads a day, and they all have to make customs declarations for the first time. For products of animal origin this has to be arranged before April 1st, as of July 1st a full customs declaration is required for all products. Despite this spread, at least in the first weeks of 2021, it is assumed we will see very long waiting times at both borders, several days are unavoidable. How about the trucks with your goods? Have you checked with your Logistics Service provider? Will they be in that queue?