The Government’s roadmap to recovery has been welcomed by all, and organisations within the consumer, retail and leisure sector are looking at how and when they need to plan for the future. This is becoming particularly important when it comes to the functionality of their supply chains.
Over the past twelve months, the COVID-19 pandemic and the reality of Brexit have exposed vulnerabilities within existing supply chains, which organisations will need to address rapidly and resiliently in order to thrive. It’s likely that many businesses will need to redesign their supply chain, taking into consideration the affect that the events of the past year have had on costs, logistics and sourcing products. On top of this, digital enhancements and sustainable operations are going to be increasingly demanded by consumers – which means that there is a lot to consider.
In the latest edition of our ‘In Conversation’ virtual event series I was joined by three of our experts; Iain Prince, Associate Partner, and Maureen O’Shea, Partner, both from our Operational Transformation and Supply Chain team, alongside Megan Loon, one of our Supply Chain Consultants. They helped me to unpick exactly where weaknesses have been identified in the supply chains of today, and where they will show in the future. Together we covered the ways in which organisations can apply these learnings to adapt their business in their short- and long-term plans.
Brexit: how has it affected UK supply chains?
Since the Brexit deal came into place on 1st January, we have heard from our clients that its caused complications when it comes to documentation and sending products across borders, with new angles that need to be addressed at customs. For example, one of our consumer goods clients have been unable to send any e-con products to Europe for seven weeks now; which, of course, is putting a massive strain on their existing supply chain.
And if the past eight weeks have been testing, different sectors may face increased challenges across the next twelve to sixteen months due to new regulations that are continuously coming into place. One example of this is that the healthcare and pharma industry may have easier trade flows currently, but this will soon end on 31st December 2021 – which, if the rest of this year is anything to go by, will approach us sooner than we think!
There are other possible issues for the Consumer, Retail and Leisure sector, too. Those in manufacturing who supply to Europe could be impacted by ‘double duty’, and the costs of the logistics of moving products may rise. As just one example of many, containers that are brought in from Asia have doubled (or at some points, even tripled) so far since January. With rising costs and greater challenges affecting a key part of their organisation, it’s no shock that people are wondering what they can do to move forwards and adapt their supply chains to meet the new requirements.
You can address these issues in the short-term
So, how do we address these issues? Key questions that need to be addressed include; where do I source? Where do I make? How do I deliver my logistics network?
In the short term, we would recommend turning to data as a vital asset in order to monitor and address any complications you may be facing when sending products across the border. If you get the data right, you’ll hopefully be in a situation where you’ve got digital twins across your supply chain, where you can model different scenarios in real time and make database decisions. By making these decisions now, you will be evolving forwards smoothly, rather than experiencing a ‘big bang’ effect in the future.
Data can assist you with ensuring you have the correct trade deals, the correct data to ensure you’re not exposed to unnecessary logistical costs and join your supply chain with the rest of your business. Further to this point, when looking at trading, it’s going to be important that you ensure that your commercial and operations teams are joined at the hip over the next year. Afterall, the supply chain is only as strong as its weakest link.
What are the longer-term goals?
The changes that have already occurred and those that are on the horizon mean that, like it or not, you’re going to need to redesign your supply chain. To do this, you need to focus on some longer-term goals. One analogy is to look at it like you would do if you were moving to a new home. It can be expensive, you’ll need to do it carefully and, if possible, you aim to do it infrequently. Therefore, it’s important to get it right.
Resilience will be a key factor. We’ve learnt a lot about the key vulnerabilities in trading over the past year, and there will be a lot more going forward – particularly for speciality products, ingredients and materials. There will be suppliers who decide it is no longer worth the incremental costs of shipping into the UK, and that’s where there’s an issue.
To resolve this, you will need to look at reformulations to ensure resilience around your supply chain. That data-driven penetration that you implemented in the short-term will help you assess where everything comes from and how you can manage those flows going forwards. Once you’ve got that data, and the end-to-end visibility, you can really optimise and evolve to those new future-fit changes as they come.
Also, consider the ESG implications
A year ago, every company had an ESG agenda, but it was seen as less important, perhaps even kept in a drawer out of sight. But now, the consumer needs and expectations have moved on, and matching these will require changing your structure and moving towards a more ethical supply chain.
There will be short term costs when it comes to investing in ultra-low carbon assets or sustainable sourcing of raw materials, but this will drive long-term profitability and can lead to financial advantage, as investor decisions are being increasingly guided by sustainable performance. By starting this planning for the long-term, it will also help you to plan for the plastics tax that is due to come into place in 2022, which will apply to plastic packaging produced in or imported to the UK that does not contain 30% recycled plastic.
By addressing these long-term goals now, you can win the approval of your clients and consumers – and it will lead to greater efficiency and be more effective than waiting until legislations kick-in in six months’ time. Fix your future lens so that it encompasses the carbon net zero targets – as reaching these goals requires long-term commitments, they can’t be achieved with quick changes.
As long as you are considering the upcoming legislations and requirements from your organisation, and adapting to fit these early on, you should be in a good place when the longer-term issues inevitably arise. Overall, it’s not about drawing in a concrete plan around ‘this is my perfect vision for the next five years.’ It’s more about making sure you are agile, responsive, data-driven and ethical.
If you’d like to discuss this further, please feel free to reach out to me.
If you’d like to sign-up to attend our future virtual events in the ‘In Conversation’ series, please email Sarah.Rodger@KPMG.co.uk who will ensure you receive these communications.