The Brexit deadline is approaching and the phrase ‘supply chain resilience’ is being brought up in more and more discussions.
As a company who specialises in managing supply chains, we have been invited to take part in many discussions around the subject.
How will Brexit impact your supply chain?
There are many ways in which Brexit can affect cost, but if you predominately import goods into the UK, your bottom line is likely to change dramatically.
Every time Brexit is mentioned, and a no deal scenario is discussed, the pound takes a hit. At the time of writing, trading is around the 1.2 mark, but predictions from major banks have this dropping to 1.1 or lower by Oct 31st.
If you have contracts in foreign currencies, I would strongly recommend locking the rate of exchange with forward buying. Otherwise, if your margins are tight, you could find yourself in the awful situation where you are losing money due to exchange rate changes.
Some of the larger retailers have already warned their suppliers on DDP terms that they will not accept price increases due to exchange rates or tariffs. Therefore, it is vital you build these potential changes into your pricing structure.
If you are buying your goods from Europe, you need to be prepared for a no deal and the consequences of a no deal. This could mean we leave the single market and all the goods you currently purchase without import duty suddenly have import duty.
The same is true if you are selling to Europe, as the free movement of goods might end and as such, your clients have import duty to pay.
Our suggestion is not a new principle of business, but you need supply chain resilience. This is where you have more than one supplier for a product or components. With new trade deals on the horizon it could be very advantageous to look to China or America for a new supply chain.
A white paper published several months ago suggested tariffs from China could drop to 0% on a no deal. This would make China a very attractive place to buy goods.
If we leave the single market, there is likely to be an adjustment period where the new rules are implemented. This will cause delays at the major terminals such as Southampton, Felixstowe and Heathrow as the new rules come into effect.
Be prepared for delays and build this into your lead time. The reason large companies are building up stock piles is to avoid short supply due to logistical backlogs.
Make sure you are prepared for the impact on our currency strength if you import goods into the UK. Build supply chain resilience with suppliers outside of the EU. Be prepared for delays during transport and order ahead of time if you can.
Here at GHL Sourcing, we specialise in sourcing manufacturing from China. If you’re looking to find a new supply chain outside of Europe, give us a call and see how we can help you.