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Brexit: optimize your Supply Chain Network?

Brexit: optimize your Supply Chain Network

The chance of a hard Brexit on the 31st of October is increasing. Do you need to redesign your supply chain network ? and if so, upfront or later-on?

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In the past companies analyzed their supply chain network once every 3-5 years. With the changing market landscapes: customer expectations are growing, digitization is transforming business models, Geopolical changes (e.g. Brexit, US-China trade wars) and the changing market landscapes drive the need for constant monitoring and updating of the status quo. Data provides new ways to optimize and segment the Supply Chain. Optimizing Supply Chain networks will provide organizations with an opportunity to not only reduce costs, but also to explore new opportunities for growth. A hard Brexit can have a significant impact on your supply chain performance, if you or your suppliers or your customers are located in the UK. If so the best is to start ASAP before you face the possible negative impact.

Customer Centricity – To what extent is a hard Brexit impacting the customer expectations?

With the explosive growth of global e-commerce, customer expectations have risen to remarkable levels. Just a few years ago, same-day delivery for consumer goods was unheard of. Now, in many markets it is the standard, and B2C e-commerce companies have optimized their processes to absorb the increased shipping costs rather than passing them on to the customer. Because of Brexit same-day delivery to or from the UK can be a new challenge due to additional border activities impacting your total lead-times and lack of clarity on customs thresholds.

Organizations are now recognizing that their customers are also consumers, and that striving to bring B2C levels of customer service to the B2B realm will be a major point of differentiation going forward. B2B customers are also coming to expect same day delivery, simple returns and a better delivery promise. Companies that optimize their Supply Chains by determining the optimal number of warehouses and strategically placing products to best serve their customers’ needs, will be able to meet increased customer expectations. After a Brexit the playing field for you can change, like e.g. decrease of volumes due to currency or tax impacts, longer lead-times due to border activities, creating new products due to change UK regulations. It may be useful to look at your service level commitments and contracts to ensure you can take suitable corrective action (e.g. Waiver or buffer stocks) for a transition period.

Brexit: optimize your Supply Chain Network?

Digitization – How will your company leverage the wave of digitization to optimize your Commercial and Supply Chain organizations after Brexit?

B2B companies that transform their Supply Chains with digitization will outperform competition, just as B2C organizations have made use of digital technologies to derive a competitive advantage from the data they collect. Advanced analytics, the internet of things (IoT), robotics and artificial intelligence (AI) are all technologies that can be used to good effect in Supply Chains.

Digitization offers an opportunity for companies to facilitate growth and to offer current or future services at lower costs, as driven by increased customer demand and possible also by Brexit. Digital technologies can be used to improve visibility of products across the Supply Chain, track movement of goods, automatically balance inventories or provide multi-point replenishment solutions.

Technology can also be used to optimize logistics operations, with smart robots that work collectively to receive, assemble and ship customer orders. Using real-time sales data, AI can predict likely future orders, and can thus send the robots to an optimal location hereby improving order delivery times. Technology can reduce the need for human input (pdf 788 kB) in the Supply Chain which can improve its safety, efficiency and transparency.

Brexit and changing market landscapes – Is your company fully integrated across the Supply Chain and ready for “new” competition?

Because of Brexit “new” competitors can arise, e.g. local UK companies who don’t face financial Brexit impact (customs, currency, transport cost) which can lead to pressure on prices, revenues and profits can grow. Companies that structure their Supply Chains to address local as well as global competition will be able to compete effectively in EU and non-EU markets.

A key differentiator will be the establishment of end-to-end Supply Chain integration. Rather than investing in a single large facility, companies that work with smaller outsourced partners as part of a localized network will be better positioned to meet the demands of a wider range of customer segments (pdf 1,8 MB), in more markets.

With the development of Supply Chain network partnerships, the regional ecosystem is becoming more significant; especially third-party network providers that help companies leverage warehouse space or manage logistics more effectively. The decisions that companies make about using data and technology to gain oversight or visibility across these networks will play a major role in determining their success.

Supply Chain Netwoork

Digital tools enable a data-driven network strategy approach

The traditional Supply Chain network optimization focused on cost efficiencies. It relied on finding the cheapest locations to manufacture goods or to ship goods from, and used that as a source of competitive advantage.

Today, however, with a shift towards customer centricity, companies can better optimize their Supply Chains by focusing on improved customer service. In this model, an optimal service level would provide next day delivery, and a guarantee that every delivery is supplied on time, and in full.

A data-driven approach allows companies to perform these assessments on a more frequent basis and at improved speed of execution, ensuring that they remain nimble in an evolving market. Digital tools as Alteryx to easily combine data sources, or Tableau to visualize data and create new insights and possibilities enable efficient execution of such assessments. Optimization of customer service levels can be achieved with digital tools using the following stepped approach:

  1. Organize a strategy workshop with key stakeholders to collectively identify gaps and prioritize needs.
  2. Conduct an assessment of current state based on customer prioritization, number of shipments, and shipment volumes. 
  3. Define an initial future network by identifying distribution centers using customer gravity maps, the locations of strategic clients, and existing manufacturing and storage locations. 
  4. Define possible scenarios and model a network using optimization logic to assess new potential locations and assumptions for costs and service levels. 
  5. Develop a final future Supply Chain network based on a comparison of the different optimization scenarios for various locations, and a critical assessment of the current state versus the desired future state.

Preparing for Brexit

If you don’t take the impact of Brexit into account, it will change the customer experience of your clients and negatively influence your customer service levels and increase costs. Adapt the changing landscape, improvements in service levels are possible with limited costs. Finally, Brexit also provides an opportunity and a reason for Supply chain managers to improve processes which were not getting the right attention or priority previously.

A fully digital approach, if adopted fast, gives companies a competitive advantage for the next 2-3 years before competition catches up. This could become a key differentiator in the market. By driving Supply Chain optimization, digital knowledge will allow companies to do a lot more, and for a lot less. 

Want to know more?

Do you want to know more about what the impact of the Brexit is for your supply chain network or business? Or do you want advice? Please feel free to contact our specialists of the Brexit-team.

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