There is yet a new development regarding Brexit and the many supply and customer demand networks that would be impacted by an ill-defined exit plan.  Brexit

This week Prime Minister Theresa May met with European Council members to secure an extension of the end of this month exit date, reportedly to the end of June. The meeting lasted from early evening upwards to midnight, reportedly because Council members sought assurances that a deadline extension would not have to be revisited once again.

The new plan extends the Brexit deadline to May 22, the day before the European Parliament elections, but with a stipulation. That stipulation is that the British Parliament moves to approves a Brexit agreement by the end of next week.  If the British Parliament does not come to agreement next week, the deadline supposedly reverts to April 12 with another stipulation. That further stipulation is reportedly a far broader extension date that also implies that Britain be prepared to hold European Parliament elections, a de-facto admission of the UK remaining in the EU and an option that is loath to the Conservative ruling party.

In game of poker parlance, the stakes are being raised, as is the players call.

Multi-Industry Supply Chain Implications

The multi-industry supply chains, the latest development adds even more uncertainty. A scenario that still remains is a Brexit with no agreement, one that provides the most significant challenge in supply and demand product movements and the just-in-time material flows.  A short extension, with the hopes of an agreement of some sort, is likely a manageable challenge.

However, from our Supply Chain Matters lens, a longer extension that drags on the specifics of trade practice agreements among the UK, the EU, and other nations will invariably lead to the need for added, more definitive decisions related to production supply sourcing and distribution.

The temporary measures related to augmented warehousing, transportation, distribution and logistics capacity can only sustain themselves for a finite period. Business have to absorb such added expenses and that can only prevail for a finite period before becoming a significant drag on financial results.

Automotive and commercial aerospace supply networks have special considerations in the need to sustain just-in-time material movements. The question is how long such an environment can be sustained without making the decisions that begin to mitigate such uncertainty.

The player calls for businesses can only magnify with each passing month without some sense of what a Brexit end-state is supposed to be.

While the political drama and brinkminship play out, the reality of keeping supply and customer demand networks operating at peak efficiency are increasingly at-odds.

 

Bob Ferrari

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