3 Areas Of Your Supply Chain To Watch As Brexit Unfolds

Nearly 2 months ago the UK voted to leave the European Union. 2 months into the two year exit period and the initial media frenzy has quieted down to a murmur, but the fear and risks remain as prevalent as ever.

Brexit Europe, Great Britain

Brexit Europe, Great Britain

Supply Chain and Purchasing experts across the globe are trying to determine what they need to do, and when they need to do it. Nobody knows how the negotiations over the terms of the exit are progressing in detail, but we need to prepare and plan with the information that we have. With all confusion and chaos it’s hard to know what’s true and what’s hearsay, so we have sorted through it all so you don’t have to.

Exit Facts – Are there pre-defined procedures?

Fact 1: The exit clause of the Lisbon Treaty for EU Members (TEU Article 50) who wish to withdraw from the Union. The treaties of the European Union would cease to be applicable to that State from the date of the agreement or, failing that, within two years of the notification unless the Council, in agreement with the State, unanimously decides to extend this period. The last phrase shows that there is an uncertainty that we have to consider.

Fact 2: During the two-year negotiation period, EU laws would still apply to the UK. The UK would continue to participate in other EU business as normal, but it would not participate in internal EU discussions or decisions on its own withdrawal. That means, we are save for at least the next 22 month. Presumably.

Fact 3: Since there is no standard checklist that the EU and the UK can work off, negotiators must take into account an exiting country’s future relationship with the EU. This is where Britain needs to decide if it wants a deal like the Norwegians, the Swiss or the Turks. The default option is the existing World Trade Organization framework, which is broadly what the U.S. has.

As you see there are many open ends to deal with and this also means uncertainty for Supply Chain and Procurement professionals.

With no further ado – here they are:

The 3 areas of your Supply Chain you can start watching now when thinking about Brexit

1. Long-term contracts involving the UK

No one of us probably remembers the times when the UK wasn’t part of the European Union. No wonder as the UK entered the EU in 1973. Before that we were talking more trade barriers and regulations. Today’s contracts and arrangements are based on EU law. In theory we could be taken back to this state when conducting trade with the UK. In practice the likelihood that this is happening is low. As indicated above there are many ways of how this could turn out in the end. One way being the “World Trade Organization Framework” or other trade deals of countries close to the EU. It is worth looking into your long-term contracts and if and how you could adapt them to the new situation.

2. Supply Chain Flows through the UK

Global Supply Chains that go through the UK in one way or the other are many, complex and varied. No matter what the exit negotiations bring, there will be an impact on your supply chains as some of Europe’s largest container ports and freight hubs are located in the UK. This means you need to know your supply chains that flow through the UK. And by knowing I also mean those supply chain flows controlled by your 2nd tier suppliers. Now is the time to start looking at Supply Chain Risk Management Solutions.

3. Supply Chain Transparency

I am pretty sure you have the necessary tools in place to have 100% transparency into your supply chains as well as your 2nd tier suppliers and their supply chains, right? But what about real-time transparency into risk-related events that might pop-up along your supply chains and at your supplier sites? Are you covered in the UK and all the downstream and upstream  flows that somehow are dependent on your activities in the UK? Now is the time to make sure you have everything under control and you are prepared for long-term changes in this region.

Supply Chain and the risks involved must be more visible than ever

No doubt that you already started to evaluate ways and measures regarding Brexit. Remember that we are not talking about a tragedy here rather than an opportunity. Your goal for the next month won’t be to survive rather than to gain as much competitive advantage as possible.

Are you concerned about Brexit?
Are you concerned that the Brexit will impact your suppliers?

Have you already read part 1 of our Brexit series about how to protect your supply chain?
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Heiko Schwarz is the Founder and Managing Director of riskmethods, responsible for Sales, Marketing and Business Development. Heiko has been working in the software business for 16 years, with 13 years in different areas of the strategic purchasing market. He has excellent knowledge in procurement, supply management and risk management and has been successfully helping supply chain and procurement organizations implement solutions to increase performance, reduce costs and minimize risks.

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