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The Brexit effect on cross-channel supply chains

Conflicts and war are creating no-go areas for global business, while local consumers and businesses are cut off and global supply chains are at risk. But the conflicts are both physical and ideological, resulting in a lack of trust and transparency. A report by the The Times and the Chartered Institute of Procurement & Supply (CIPS) – Future-proofing Procurement – notes that “although the world has faced conflict and uncertainty before, this time it feels like we are operating in extraordinary times.” It also notes that procurement and supply chains face volatile trading environments, increasing complexity and the influence of new technologies.

The report looks at five key areas that are changing how corporates procure and manage supply chains. One of those areas is UK's decision to leave the European Union and the report asks how is Brexit already affecting procurement and supply chains. Some of the statistics highlighted in the report include:

  • 32 per cent of UK businesses that use EU suppliers are looking for British replacements;
  • 36 per cent plan to respond to Brexit by beating down suppliers’ prices; and
  • 46 per cent of European businesses expect to reduce their use of UK suppliers.

While it seems that both EU and UK businesses intend to extricate themselves from supply chains that cross the English Channel by substituting their trade partners with others closer to home, the fact that almost half of European businesses (46 per cent) expect to reduce their use of UK suppliers is one of the most concerning statistics in the report. The figures comes from a survey conducted by CIPS of 2,000 supply chain managers.

The report also touches on businesses that are running into problems due to the rising value of the euro against sterling. It notes: “Industries including retail and hospitality that failed to hedge their currency exposure have already seen an increase in the cost of goods purchased from overseas, with some having to adjust their purchasing plans. Others with hedges in place will soon see them expire.”

FX problems aside, procurement and supply chain executives face having to renegotiate contracts as tariffs, local regulations and cross-border conditions are set to change. One supply chain expert quoted in the report advises companies to start planning for different scenarios, as well as lining up potential new suppliers and making the supply chain as flexible as possible.

The CIPS report also looks at the need for more diverse supply chains; how organisations are using automation to increase efficiency and cut costs; the environmental and social impact of supply chains; and tech mineral mining in conflict zones.


CTMfile take: This is a useful report that was published in The Times last month – if you missed it, here's an overview of one of the key issues facing a lot of companies in the UK and Europe.


This item appears in the following sections:
Cash & Liquidity Management
Cash & Liquidity Management in Europe
Trade & FSC Management
Trade & Counterparty Risk Mitigation
Working Capital Management
Procure-to-Pay Cycle in WCM

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Comments

By George Stein on 29th Aug 2017:

Good article, and too right to raise awareness in this area. It would seem that modern logistics and the true complexity of the supply chains in many industries are not well understood, either by politicians or (especially) by those who genuinely think the UK is better off outside the EU.

By Bija Knowles on 30th Aug 2017:

Thanks for the comment George. It would be very interesting to hear what professionals working in procurement and supply chain are actually doing to prepare for Brexit, seeing as no one know what it will look like yet (18 months and counting) - and whether they are taking any practical steps.

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