With an end of October deadline looming, the reality of a hard Brexit is growing ever more evident across multi-industry supply networks. So are added reports of consumers and businesses increasing the stockpiling of goods to prepare or mitigate such a disruption. Such conditions will have consequential impacts to businesses in their ability to perform meaningful supply chain product demand and supply planning in a post-Brexit time period. Supply chain management business as usual definitely no longer applies.
With the Conservative Party’s appointment of hardliner Boris Johnson as Britain’s new Prime Minister, the scenario of the United Kingdom exiting the European Union without any formal agreement has become far more likely.
These past few weeks, Mr. Johnson has put forth his belief that the EU has little choice but to compromise on demands relative to the terms of Brexit. He has in-turn, accused anti-Brexit politicians of collaborating with the EU to delay Britain’s exit.
The latest development came this week with opposition Labour Party leader Jeremy Corbyn seeking an alliance with opposition leaders and pro-EU legislators to call for a no-confidence vote in the Conservative led government when Parliament returns from summer recess in September. That action would reportedly call for Corbyn-led temporary government that would once again, seek a delay in Brexit, but this time, call for a nationwide election. The reports that we have read point to inherent resistance to a temporary government led by Labour, or a politician from any rival party.
Meanwhile, Mr. Johnson and his supporters continue to argue that any short-term turbulence is outweighed by new economic opportunities that will come about with Britain being freed to seek out its own global trade deals.
Consumers and Businesses Preparing For The Worst
Reports this week also echo efforts among UK consumers and all forms of businesses now actively preparing for worst-case scenarios.
The Guardian cited research indicating that the country’s consumers have spent £4 billion in stockpiling goods, namely that one in five people are hoarding food, drinks and medicines. This survey reportedly found that 800,000 consumers have expended more than £1,000 in building up owned stockpiles before the end of October deadline.
The Wall Street Journal reported this week that there is a special concern regarding the alarming possibility of meaningful disruptions in the availability of critical prescription medicines and drugs. The UK Department of Health and Social Care indicated to the publication that the government was doing all that it can to prepare, earmarking £434 million to pay for continency logistics and transportation means to bring in small batches of drugs if major ports become clogged. Pharmaceutical companies have similarly arranged for contingency plans to have supplies of critical medicines and drugs moving if a hard Brexit clogs or cripples transport networks. Reportedly, some have stocked six weeks of in-country safety stocks to keep patients supplied in the event of a disruption, with up to as much as 18 weeks supply for critical life-saving drugs such as insulin.
Consequent Supply Chain Planning and Execution Impacts
From the lens of Supply Chain Matters, the current Brexit situation will likely lead to far broader and even more challenging supply chain planning and execution challenges.
The Guardian report includes a quote from the survey’s authors, Premium Credit regarding stockpiling and hoarding: “The level of stockpiling by British businesses and household is well documented, but there has been little focus on the impact this has had on cashflow.”
As we have pointed out in our prior Brexit focused blog commentaries, to prepare for the prior scheduled end of May deadline, business had already expended large sums to contract for contingency warehousing and transportation capacity, which has likely had to be extended to apply to the new October deadline.
Today’s global supply chain’s stem from a guiding principle of just-in-time, mostly product demand driven, pull-based material flows that extend from manufacturing to distribution and consumption. With the likely more than nine months of preparation for any scenarios related to Brexit, just-in-time principles can no longer apply. Add to that the realities of both added cash flow expenditures, extraordinary safety stock levels and unknown duration of logistics and transportation disruption impacts related to both end product demand and network supply, the notions of accurate forecasting and planning post-Brexit take on extraordinary challenges.
Our belief is that any business and associated Sales and Operations Planning process that is conducting business, product sales or supply contracts associated in any form with Brexit had better be of the view that prior planning processes may no longer be valid nor accurate. There are many new factors, added business risks and uncertainties to consider, and plans will likely have to be constantly checked and validated with external, outside-in focused data, information and on the ground insights.
In other words, challenges do not subside after October, they will likely magnify in many other dimensions of supply and demand.
Be prepared to challenge and revisit all prior planning assumptions and forecasting methods. If not before, now may well be the time to consider adoption of active scenario-based planning and supply chain risk mitigation practices.
When it comes to Brexit, business-as-usual in planning and customer fulfillment execution may well have been a practice of the past. These are indeed unchartered waters requiring astute navigation.
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