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How to mitigate risk in manufacturing with the Brexit clock ticking

Brexit clock
Alex Saric, Smart Procurement Expert, Ivalua

With just six months to go until Britain leaves the European Union, the only thing that is certain is uncertainty. Currency values rise and fall with each announcement, negotiation update and policy document released. For manufacturers, the biggest problem they face is that there is still no clear indication of whether the UK will remain in the European Economic Area (EEA). This affects the reliability of goods arriving on time and the ability to move them across borders, as well as profit margins for each layer of the supply chain given potential tariff implications on imports and exports.

Right now, manufacturers are being told to prepare for the worst to ensure their supply chains are unaffected, but they are no closer to knowing what to prepare for. Airbus has warned that Brexit “chaos” is endangering UK operations with the lack of clarity. The government has issued advice on how organisations can act in a no deal scenario, however, delivery firm ParcelHero compared this advice to the infamous campaign recommending that citizens “hide under a table” during a nuclear strike.

So, what can actually be done while manufacturers wait for the situation to unfold? Simply put, it’s time for manufacturers to get out of the “Brexit bunker” and start building agile infrastructure that will help them to roll with the punches and adapt quickly to the uncertain landscape which is likely to be reality for many years to come.

Adapting for Brexit and beyond

While it may seem counter-intuitive, the first step to preparation is to stop trying to predict the final outcome of Brexit. While there will be major changes if the UK doesn’t remain in the EEA, manufacturers can’t afford to gamble on one outcome and find themselves wholly unprepared if Brexit goes another way entirely. As such, the manufacturers who prosper after Brexit need to be able to act fast and adapt not only when the final decision is announced, but for how the market will evolve throughout the process as new deals are struck and new tariffs and regulations are enforced.

Manufacturers need to ensure they have the capability to view their supply chain in almost real-time to identify potential risks as soon as they emerge. This holistic view must give total visibility and help to identify areas in which manufacturers need to diversify and have multiple options for supplying certain goods, in the event of disruption.

To gather this information, manufacturers must collate supplier data into a single platform, allowing them to make more informed decisions and spot upcoming risks to their supply chain. Technology investments in such platforms must ensure 360 degree supplier visibility, pulling information from suppliers, internal stakeholders and 3rd parties (ex. relevant news, predictive risk scores…). The type of information that can be gathered must be flexible. For example, in the case of Brexit it is important to survey suppliers in a scalable manner on the sources of their supply and ability to shift based on tariff policy.

Such a comprehensive and agile approach will empower manufacturers to ensure that upcoming regulations are spotted, suppliers which aren’t complying are identified and changes to tariffs and their impact are flagged. This information will give manufacturers the insights they need to mitigate any potential disruption to the supply of essential goods and services.

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In other words, organisations will be able to make informed decisions about Brexit at every turn, even after the exit date. These decisions mean manufactures can continually review supply risk and ensure the critical manufacturing of goods can continue uninterrupted – even during times of change.

Collaboration not retaliation

Manufacturers can’t afford to sit on their hands and wait for the next Brexit news cycle to propose a new scenario or possible outcome. With a system in place to identify supplier risks, manufacturers must communicate effectively to ensure suppliers are prepared too. The best way to guarantee all parties act fast in the face of change is to build partner relationships and communicate regularly to ensure suppliers can meet their goals and any potential risks can be discussed. Suppliers are facing the exact same uncertainty and challenges and the most agile supply chains will generally be those that are most collaborative, working together to deal with each new reality.

This kind of collaboration is vital in times of flux, allowing manufacturers to keep on top of changing regulations throughout the Brexit process, while giving them the opportunity to see how suppliers are faring if changes in tariffs and trade routes are disrupted.

By taking a holistic approach to supplier management, organisations will be able to react quickly when the supply of goods is disrupted, or supply routes are suddenly changed.

Agility over instability

In an increasingly uncertain landscape, manufacturers need flexibility, insight and the ability to collaborate to effectively manage supplier risk and keep the production line going – but this won’t happen overnight.

Now is not the time to bunker down and hide under the table, waiting for the inevitable Brexit strike. Instead – regardless of the outcome – manufacturers need to assess their supply chain, establish where slowdowns of goods and component might occur and understand how the supply chain can adapt to these changes to avoid shortages. This is especially important, as a frictionless border and tariff free movement of goods may no longer be a reality pending the final deal.

Smart procurement can help organisations to make decisions quickly to reduce the impact of supply chain disruption, allowing manufacturers to effectively evaluate risk and make smarter sourcing decisions in a world where the landscape will literally change overnight.

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