The Supply Chain Matters blog updates readers on a turbulent week of Brexit related developments and on the implications for multi-industry supply chain scenario disruption risk contingency planning.

This has been a turbulent week concerning Brexit and the United Kingdom’s planned exit from the European Union at the end of this month. Already, there have been three significant votes taken by Parliament. Brexit

In Tuesday’s vote, British lawmakers once again and for the second time, unanimously rejected Prime Minister Theresa May’s modified Brexit deal. The implication of that vote was to imply that a no-deal Brexit was a likely possibility.

Yesterday, Parliament voted to unexpectedly rule out a no-deal Brexit, with the implication of further confusion. While the vote possibly buffers a worst-case chaotic exit from the EU, there is reportedly still a sense of confusion as to what other actions will be needed. The vote was supposed to address the initial steps related to a postponement. Instead, the vote seemed to indicate that despite the intentions of lawmakers, the existing tenets under both EU and British law directionally imply a no-deal scenario, without another mechanism.

Today, members of Parliament overwhelmingly voted for an extension of the Article 50 withdrawal agreement. However, the wording of the legislation seems to indicate an extension to June 30 if Parliament approves Prime Minister Theresa May’s Brexit deal by March 20. The legislation was non-binding and EU bodies will have a say as to approving an extension, and for how long.

Britain’s prolific media has varied opinions as to discerning the political back and forth of Britain’s current political climate, and likely next steps, thus we defer to any attempt to do so ourselves.

The Economist summed-up the current situation as follows: “When historians come to write the tale of Britain’s attempts to leave the European Union, this week may be seen as the moment the country finally grasped the mess it was in.

Thus, it appears that more parliamentary iterations are forthcoming, with all the additional rancor that goes with that. The onus now shifts to EU bodies in their inclinations to grant an extension of the exit date, without additional conditions. An extension of the March 29th date requires the unanimous approval of 27 EU governments. It just so happens that an EU summit is scheduled for Thursday of next.

 

Industry Supply Chain Contingency Planning

For various UK and EU multi-industry supply and customer demand networks this week’s developments should be no pause in preparations and in risk awareness.

The scenarios likely point to:

1) A potential hard, default no-deal exit on March 29, if Parliament and EU countries cannot come to some basis of consensus

2) An extension of the Brexit exit for an additional three months. Any further extension beyond June seems untenable since European Parliament elections occur in the summer.

3) The wild card of either a change of Prime Minister leadership, a call for a new referendum or who knows what else.

Business and supply chain management teams will have to place their own weighting to each of such scenarios. For Scenario #1 plans most likely have been committed  and ready for execution. The question is when to pull the trigger. Scenario #2 implies that capacity, safety stock inventory, logistics and transportation contingency plans or commitments need to remain active and diligent. Important decisions loom as to how long can such contingency measures will be maintained given line-of-business budgets. Added warehousing and transportation capacity has since been committed, and the question is when or if such contracts are to be suspended.

We confess no intimate knowledge related to Scenario #3 other than active monitoring and ongoing assessment.

On the bright side, Scenarios #2 and #3 provide opportunities to add to mitigation efforts in people, process and technology preparedness.

To coin that sailing analogy: “These are unchartered waters,” but as always supply chains will adapt and respond in the best way they can.

 

Bob Ferrari

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