It is a fact. Brexit. How and when this will all be done will become clear in the near future. But it is clear that this has an impact on your supply chain.
Although the referendum is controversial and even the slightest difference is cause for doubt, many things will change in the near future that will affect your supply chain. The first effect was already evident on the stock markets that immediately went deep into the red and immediately gave the pension funds a headache. In addition, the sentiments of independence immediately resurface in Scotland and Northern Ireland and Spain is angling for annexation of Gibraltar. The effects of this referendum will cast a long shadow on the future of Europe.
The remaining members may decide to be accommodating and to seek swift new open trade relations, but it is equally likely that she would take a harder stance towards the UK to leave any other doubters and crush a breach of the entire Discourage Union. It also plays with the fact that Cameron deliberately played a high electoral game that came back like a boomerang. Something he was explicitly warned about.
Anyway. Britain will have to conclude new treaties upon leaving the EU. This can be done within the EEA or the EFTA. The United Kingdom must also conclude new treaties with non-EU countries that are currently still running through Europe. Whatever those treaties may entail. You can be sure that the benefits will diminish within Europe and the bureaucracy will increase due to the many new regulations and treaties Britain has to conclude.
Brexit: what are the consequences for the supply chain?
During the exit negotiations, international exchange rates will most likely end up on a rollercoaster. Uncertainty in the market will increase, which will also increase speculation. During this period, those with the most supply chain insight and flexibility will best deal with the consequences. Measures such as dual-sourcing key components and distributed manufacturing can help in this, as well as looking where your inventory is. Possibly more local stock in the UK and warehousing on the continent.
Clear visibility of the inbound supply chain will be needed to correctly assess risks and determine the best mitigation strategies. Many commentators expect the pound to weaken against the US dollar and the euro, as imports of raw materials become more expensive. This will be detrimental to those companies with operations in the United Kingdom and could lead to companies operating worldwide to relocate their operations to other EU countries.
One of the few clear results of Brexit is a reduction in the freedom of labor. Many of the UK’s distribution activities are staffed by labor from the continent, particularly from Eastern European countries. Due to these restrictions, wage costs will rise because companies in Great Britain have to hire more local and therefore more expensive labor.
This may be compounded by the gradual increase in the minimum wage in the UK to £ 9 an hour in 2020. A change in labor availability and costs and transport cost trade-offs will not have an effect on the design of many supply decisions , leading to fewer sites and further automation.
Investment decisions by international companies will also be influenced. Undoubtedly, they will reassess the impact of fluctuations in costs, labor availability and trade restrictions on their supply chain before making decisions about their new financial models.
These distortions will continue even after new treaties have been adopted because Britain’s economy needs to find a new balance. This uncertainty can be the reason for many companies to be careful and transfer parts of their supply chain to the continent and postpone any investments in Great Britain.
The ability to test scenarios to support supply chain decisions will be vital. That makes the importance of analytics in supply chain design and planning absolutely crucial, and those companies that don’t have the opportunity for a quick analysis will certainly be at a disadvantage. It is therefore advisable for every organization to get started with the new reality that has arisen with Brexit.