Comment: The Brexit message to logistics providers is 'be prepared'

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Faced with uncertainty as Brexit approaches, retailers and suppliers are reportedly stockpiling essential supplies to prevent potential shortages.

The possibility of goods being delayed or even halted at the UK-EU border has also led to estimates of significant financial losses for importing and exporting businesses alike.

While such claims may seem sensationalist, many now see stockpiling as a reasonable insurance policy against disruption in the supply chain.

With a variety of potential Brexit outcomes, many consumer-facing businesses feel they have been left with unclear direction on how to prepare their supply chains for the UK’s exit from the EU.

Could stockpiling really negate most disruption? 

For some emergency goods, such as medicines, certain precautionary stockpiling might be reasonable. For example, Diabetes UK has assurances from three insulin suppliers that they each have a supply of at least 16 weeks in stock.

However, for other sectors this is not a feasible option: FMCG retailers rely on a constant and reliable supply of perishable goods entering the UK via EU countries. The UK simply does not have sufficient warehousing facilities to store the vast quantities of goods that would be needed to wait out long-term disruption, with the country only 61% self-sufficient.

In addition, transporting such a bulk of goods in such a short 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 left to implement resilience and flexibility into supply chains is one of the greatest assets logistics managers have.

How will Customs change?

Logistics managers are concerned that after the UK’s split with the EU, we will be struggling to plug a regulatory hole. Although the proposed deal outlines where the UK-EU border will be, there is still little detail on how the new processes will work on a day-to-day basis.

Yet internationally, there are several models that might work as stand-ins. Best practice set out by the World Trade Organisation, for example, demonstrates how countries already outside 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 will enable 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 friction could be reduced at the border is for logistics providers to become Authorised Economic Operators (AEOs). The accreditation is awarded to highly reputable providers with a good track record of compliance. This should lead to easier border crossings and simplified customs processes and self-assessments.

Although AEO status may be important in the future, physical processes and procedures like Customs Warehousing and Customs Freight Simplified Procedures (CFSP) may deliver real benefits now. 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.

The new Brexit deal, announced on 17 October, introduced the potential for even more customs complexity in Northern Ireland, complexity that can be smoothed by the planning and implementation of the right procedure and solution.

What might come next for global supply chains?

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 globalised logistics industry means there are many opportunities to expand through business partnerships.

With the ability to integrate all 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.

Circumventing Brexit chaos

The foundations of successful supply chain operations are cooperation and collaboration, something which is unlikely to change following Brexit. Logistics providers which embrace fast and agile data-driven interaction with partners around the world will be better placed to spot new opportunities beyond the Brexit horizon.

Above all else, logistics providers must do the one thing which appears impossible: be prepared. Though the changes are unclear, what is apparent is that increasing resilience and flexibility in the supply chain is of paramount importance to prepare for potential supply chain disruption, whatever the underlying factors.

Though ties are being severed with the EU, forging new digital links within the supply chain is a solution that will benefit logistics operations during this period of uncertainty, and for many years to come.

This is a guest post by Sian Hopwood, senior vice president of B2B at BluJay Solutions