It is a
fact: Brexit. How and when all this will play out will become
. But it is
crystal clear.
Although the
referendum is controversial and even the narrow margin of victory is now causing uncertainty,
many things are set to change in the coming period that will
. The first impact was already evident on the stock markets, which immediately plunged
the red, causing headaches for pension funds. In addition,
sentiments in favour of independence are flaring up again in Scotland and Northern
Ireland, whilst Spain is angling for the annexation of Gibraltar. The effects of this
referendum will continue to cast a long shadow over the future of
Europe.
New
agreements.
The remaining
members may decide to be accommodating and seek to establish new, open
trade relations, but it is equally likely that they will adopt a tougher stance
towards the United Kingdom in order to drive away any other
doubters and to prevent a split across the entire Union
. Another factor is that Cameron deliberately played a high-stakes electoral game
which came back to haunt him. Something he had been expressly
.
In any case, upon leaving the EU, the UK will have to conclude new agreements
. This could be within the EEA or the EFTA. The United Kingdom will also have to
renegotiate agreements with non-EU countries that are currently channelled through the EU.
Whatever the terms of those agreements may be, you can be sure that the
benefits within Europe will diminish and bureaucracy will increase due to the
many new regulations and treaties that the UK will have to conclude.
Brexit: what are
the implications for the supply chain?
During the exit
negotiations, international exchange rates are highly likely to
on a rollercoaster ride. Market uncertainty will increase, which will also
speculation. During this period, those with the greatest supply
insight and flexibility will be best placed to
. Measures such as dual-sourcing key components and
distributed production can help in this regard, as can assessing where your stock
is located. Perhaps maintaining more local stock in the UK whilst still using warehousing facilities on
the continent.
Clear
visibility of the inbound supply chain will be needed to accurately
and determine the best mitigation strategies. Many
commentators expect the British pound to weaken against
the US dollar and the euro, making imports of raw materials more expensive
. This will be detrimental to those companies with operations in the United
and could lead to globally operating companies
operations to other EU countries.
One of the
few clear consequences of Brexit is a reduction in the freedom of
labour mobility. Many distribution operations in Great Britain are
carried out by workers from the continent, particularly from
Eastern European countries. As a result of these restrictions, labour costs will rise because
companies in Great Britain will have to hire more local – and therefore more expensive – workers
.
This could be
exacerbated by the gradual increase in the minimum wage in Great Britain to £9 an hour by 2020. A change in the availability and cost
of labour and the transport cost trade-offs will undoubtedly have an impact on
the formulation of many supply chain decisions, leading to fewer sites and further
automation.
Investment decisions by
international companies will also be affected. They will
undoubtedly reassess the impact of fluctuations in costs, labour availability and trade restrictions on their supply chains
before making decisions on their new financial models.
FutureThese
disruptions will continue even after new treaties have been finalised,
as the UK economy will need to find a new equilibrium. This
uncertainty may prompt many companies to play it safe
and transfer parts of their supply chain to the continent, whilst postponing any
postpone any investments in the UK.
The ability
to test scenarios in order to inform supply chain decisions will be of
vital importance. This makes analytics in supply chain design and
planning absolutely crucial, and those companies that do not have the ability
to carry out rapid analysis will certainly be at a disadvantage. For every organisation,
, it is therefore advisable to start adapting to the new reality
that has emerged as a result of Brexit.
Hans Groen – Supply Chain and Performance Management Consultant
