Precisely because it could load on extra costs, Brexit can be the catalyst to put your supply chains on a firmer footing says Iain Prince.
Could the disruption brought by Brexit provide a catalyst to reset your supply chain?
That might sound odd to anyone contemplating a potentially complex and costly reorganisation, but ultimately it might be. That’s because Brexit is shattering the supply chain status quo. Costs had been reasonably steady for a decade, but now they are all in flux, swinging by 10%, 20%, even 50%. For example …
These mostly-higher prices are delivering a double whammy to business cases: hitting both the P&L account and balance sheet. Activities or contracts that were once marginal, might tip firmly into the red.
That’s why firms need to analyse their current and possible future cost to serve. With the hard data that gleans, they can have those tough conversations – whether they be with suppliers, customers or within the business. And it can only do that (as Andrew Underwood and Brian Connell suggest) by first mapping out its network and understanding how that would need to change in the absence of a trade deal and a reversion to WTO tariff barriers.
Even before Brexit, it’s a useful exercise that can reveal an unexpected picture. For example, one company we’ve been working with positions itself as a ‘large order organisation’ to clients across the world. However, analysis from our Cost to Serve Tool showed that over 70% of their customer deliveries were, in fact, less than a pallet in size. That may prove unsustainable in a hard border scenario, post-Brexit. Now, armed with that data, the company has the muscle to have an honest, fact-driven conversation with customers about a sustainable arrangement for the future, whether that be higher prices, reduced drops, larger minimum orders or revised service levels.
This is an exercise that at any time could transform the work of Finance and Supply Chain. But it is perhaps only on the cusp of something as big as Brexit that organisations have the mandate to have these conversations. Though Brexit is an issue that firms need to manage and mitigate at a tactical level, they should not forget the strategic opportunity it also presents.
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