As Brexit negotiations near their still-uncertain conclusion, stories of remote communities stockpiling food to prepare against a possible interruption of the supply chain have surfaced in the headlines. While that may seem like sensationalism, there is a real concern among importing consumer-facing businesses that a cliff-edge Brexit could lead to supply issues in 2019, in medicine as well as food.
So, is stockpiling for Brexit the answer?
For some emergency goods, such as medicines, certain precautionary stockpiling might be reasonable. However, for other sectors this is not a feasible option: for example, FMCG retailers who rely on a constant and reliable supply of perishable goods entering the UK via EU countries. The UK simply does not have the warehousing facilities to store the vast quantities of goods that would be needed to wait out long-term disruption, with the country only 60 percent self-sufficient. In addition to this, in order to transport such a bulk of goods in such a short space of time would require companies to accelerate their supply chains and risk putting them into shock before Brexit even comes into effect. The answer then, is to act now to minimise the impact any potential legal disruption could have on supply chains.
In fact, many enterprises are already preparing to make their transition to a post-Brexit norm go smoothly, not through stockpiling but with innovations that will simultaneously deliver improved efficiency and traceability. Although there may still be a question mark over many details of the change, we know Brexit is coming. And having some time still left to implement resilience and flexibility into supply chains is one of the greatest assets logistics managers have.
Regulation, regulation, regulation
Logistics managers are concerned that after the UK’s split with the EU, we will be struggling to plug a regulatory hole. Yet internationally there are already several models that might work as stand-ins. Best practice set out by the World Trade Organisation, for example, demonstrates how countries already outside of the EU form their supply chains. Whatever system is chosen to replace our current method of trade, logistics companies benefit from proactively making their supply chains more flexible. Technologies such as cloud-based electronic data interchange (EDI) help ensure that whole enterprises can update everything from routes to customs documentation, to fit new regulations almost instantaneously. This enables organisations to respond with agility to the changing customs landscape, as well as navigate any potential tailbacks caused by those less well-equipped.
Another way to reduce friction at the border is to become an Authorised Economic Operator (AEO). The accreditation is awarded to highly reputable providers with a good track record of compliance. This leads to easier border crossings and simplified customs processes and self-assessments. With the right technologies in place, compliance may not even have to happen on the border itself, with the sharing of information in the cloud meaning that companies can submit electronically in advance. Surprisingly, only 0.5 percent of eligible UK companies are AEOs, when the figure is twenty times this in Germany. This is perhaps because the government is not actively pushing the scheme. However, providers that take the initiative to become AEO accredited stand to benefit from speedier and smoother border crossings, which should act as a buffer against any disruption caused by changing customs regulations.
Facing diverse regulatory landscapes and other local challenges, logistics operations are now shifting toward a ‘global trade network’ model. The changes to UK’s relationship with the EU as a body mean that developing international relations ourselves will become even more important.
We might be worrying that our national horizons are shrinking, but an increasingly globalized logistics industry means there are many opportunities to expand through business partnerships. With the ability to integrate all of the data involved in the cloud, companies are able to manage all transactions and activity in one place and in real time. Partner relations will therefore become not only closer and more communicative, but also more flexible as resources are called up quickly to meet sudden demand.
To accomplish this, businesses require access to a global network of other shippers, trading partners, carriers and freight forwarders. But due to its collaborative and digital nature, this does not require the overheads or initial investments of entering a new market or sector. Global trade networks allow businesses to expand gradually and with relatively less risk, meaning that should things change rapidly after Brexit, businesses will be able to change their business strategy with agility, without sacrificing committed assets.
Successfully navigating the Brexit storm
Developing a supply chain based on cooperation and collaboration – rather than siloed, internal operations – and building and participating in global trade networks gives logistics teams the speed and flexibility to access a range of partners around the world. But the most valuable asset for logistics managers at the moment is the time remaining to prepare before the changes come into effect in March 2019. Is it time to panic buy? No. Rather it is by increasing resilience and agility in supply chains that much of the projected disruption can be avoided. The UK’s current relationship with the EU may be ending, but setting our sights on a future of digitally-run global supply chains should continue to be our goal.
By Mohit Paul, SVP EMEA at BluJay Solutions