The implications of the Brexit result have been discussed far and wide. From the price of food and oil to the cost of holidays and the economy, no stone has been left unturned by EU analysts. The UK’s supply chain is no different and there has been much speculation as to the future in both the short and long term.
Nothing like this has ever been undertaken in the entire history of the EU, so it is difficult to say how other countries will react. In times of uncertainty, people often play their cards close to their chest, so UK businesses must be ready for anything. UK supply chains have become increasingly intertwined as the entire supply chain industry has developed, making it even more difficult for businesses to predict and plan for the future.
The Brexit result could be particularly worrying for businesses that struggle to react quickly to changes in their supply chain, especially as concerns are likely to get worse, then better, then worse again as time goes on.
Local sourcing
The UK will likely have to establish new trading rules and barriers once Brexit is finalised, which could lead to more local sourcing and local inventories. This means that businesses will be forced to open new facilities and reposition their finished products in different trading areas to overcome any issues surrounding movement. Whatever the size of the business, this is a big undertaking and is not something that should be looked upon lightly.
Exchange Rates
It’s already been noted that exchange rates are unstable after the Brexit result and it’s unlikely that this will settle down quickly. With the Pound currently weak against the Euro and Dollar, businesses will find the cost of their raw materials increasing rapidly, affecting their supply chain from beginning to end.
To combat this, measures such as dual-sourcing of key components may be best for UK supply chains. Another measure that could be taken would involve UK companies relocating their operations to countries within the EU, to minimise any extra costs.
Freedom of movement
Restriction on the freedom of movement is likely to play a huge part in the UK’s future after Brexit, as it became a hot topic during the campaign. Unfortunately, this could have huge implications for the future of UK supply chains, with many workers currently coming from EU countries to work in UK.
This could lead to a significant labour shortage, which would further increase costs for businesses. Cuts to other areas of the business may be needed to combat this if companies want to ensure their UK supply chains stay functional.
Total Logistics are supply chain consultants, specialising in reinventing and re-engineering supply chains across the world. To find out more about how we can help your business after Brexit, visit:
http://www.total-logistics.com/