Gaps, Uncertainties and Plans; with the likelihood of a Hard Brexit increasing as a possibility, we have no other option than to prepare for the implications on supply chains.
Issues such as: increased requirements for customs declarations and the massive administration implications associated with this; new rules of origin requirements; the border checks and associated delays at all points of entry; and the availability of knowledgeable and experienced resources means there is little time left to plan: particularly with less than 80 days to go!
Simply Supply Chain conducted a survey into the implications of a Hard Brexit – focusing on issues relating to administration, physical logistics and resources. These key findings provide insight into some of the many challenges facing suppliers.
Impact of a Hard Brexit – Administration
- Customs declarations are set to rise from £55 million to c.£265 million as a result of Brexit, at a cost of c.£35 per declaration. CDS (the new Customs Documentation Service replacing the CHIEF System) has been tested to capacity and is set to be ‘available’ from Jan 2019.
- In addition, the documentation requirements for Non-EU to EU and EU to Non-EU countries are far more onerous than current, especially as Rules of Origin will determine the levels of duty paid at each border crossing (e.g. UK imports and those imported ingredients / components being manufactured into products which are subsequently exported to Eire will no longer simply be treated as UK product).
Survey results show that up to 10 or more staff per company will be required to meet the increased administration requirements – and they will need to be adequately trained as soon as possible.
Impact of a Hard Brexit – Physical Logistics
- It has been suggested that the delay on entry of a ‘frictionless’ border such as Norway into Sweden adds a minimum of 4-8 minutes, but an average of 20 minutes, delay to every transaction. For those deliveries receiving a full inspection (circa 3%) the delay is typically two hours.
- A separate study (Imperial College) has predicted that a 2-4 minute delay will translate into a 30 mile ‘stack’ at Dover, which does not have the capacity at the docks to accommodate such a tailback.
Respondents indicate that the impact on physical logistics will increase safety stock on imported raw materials and packaging by 1-2 weeks’ cover with the implication that up to 10% more storage capacity will be required for those lines. For chilled companies, the impact is greater still. Where shelf-life allows, finished good stocks are being increased to mitigate the risk of delays. However, the storage capacity currently available for ambient and chilled products has almost run out!
Impact of a Hard Brexit – Resources
- In addition to the anticipated delays highlighted above and the likely increase in fuel costs as a result of import requirements and forecast exchange rate changes, there is a significant risk on resources within the Food and Drink sector, in particular: an FDF report highlights that in the Food and Drink Industry c.38% of employees are EU Nationals.
- Furthermore, c10% of UK Nationals will reach retirement age within the next five years.
Behind Closed Doors
How can sharing knowledge help benefit all suppliers?
Ev
en at this late stage, it is worth taking a few hours away from our desks to pool our joint knowledge to mitigate any risks we can. Find out how your peers and competitors are preparing for Hard Brexit behind closed doors:
On Wednesday16th of January, two Brexit experts: Gavin Makowski and Dave Emerson will be exploring the likely and possible customs, trade and documentation implications, as well as inbound/physical logistics challenges.
This session forms a key part of our Customer Supply Group event programme - Download the full 2019 membership programme
Come and join us to hear these two experts as they share insights with a group of FMCG suppliers to explore the implications of a Hard Brexit; and collaborate with your peers as they share their progress and challenges.
Conclusion
The future may be massively uncertain, but collaboration is key to success. The answer lies in jointly understanding the implications on our own supply chains and sharing the benefits of others’ plans so that we can all be as prepared as possible, no matter the outcomes of the Brexit decision.
