No-one knows yet what the final Brexit deal will look like - but you can still start to prepare for its impact.
If you buy goods or services from within the EU, or if you rely on cheap EU labour, start by mapping the possible impacts. From there you can mitigate the risks:
Start by assessing each of your suppliers as follows:
- Is it an EU company supplying goods or services from an EU country?
- Is it a company that is reliant on raw materials or components from the EU?
- Is it reliant on the availability of low-cost labour from the EU?
- Are its products sourced from outside of the EU but transit via the EU, including goods transiting through Rotterdam?
Given the complexity of modern supply chains, the list of suppliers each company produces could be quite long. Each organisation’s knowledge of its suppliers will be fully tested and more likely involve liaising with suppliers to establish the latest cost assumptions and supply chain challenges.
Now arrange the list in order of importance. This is likely to identify the supplier that could make the biggest impact on costs escalation for the goods and services you sell to your customers, either as finished goods or larger sub-assemblies and components.
Each supplier on the list needs to be looked at in turn. Depending on the challenges faced, there are a number of strategies and remedies that could be applied to reduce the impact of Brexit cost increases and, ideally, identify some of the cost saving opportunities.
Consider price changes
For each supplier, each of the mitigation options should be priced as an increase or decrease to the unit cost. The benchmark to measure each contingency against is to: stay with the same supplier, transacting in the same way but applying WTO tariffs rather than Single Market trading.
Doing this research will enable companies to identify the biggest cost increase, risk and opportunities available to them and focus scarce resources on managing them appropriately.
Once completed this analysis will give managers:
- An understanding of the impact of Brexit on suppliers and inbound supply chain with expected costs.
- An understanding of the options available to buyers and suppliers to offset some, or all, of the costs and impact of Brexit in the worst-case scenario.
- The chance for buyers and suppliers to make contingency plans and take mitigating action.
- A clear view of which suppliers are already mitigating the risks and costs of Brexit.
- Identification of new suppliers from outside of the EU, which were previously not competitive.
- The chance to work with new suppliers to take advantage of improved pricing once Brexit is completed.
This gives you a working document that can help you resolve and minimise the negative impact of Brexit on your business and which can be updated as negotiations proceed.
By taking action now, it is more likely you can mitigate the effects of Brexit and perhaps even find ways to benefit from the changes ahead of us.
Sponsored post. Copyright © 2017 Nigel Ransom is head of procurement services at 528 Advisory.