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Brexit: How to Protect Your Supply Chain in Uncertain Times

Understand where the immediate risks lie and the long-term implications of Brexit, and set-up a company-wide committee to prepare for when the outcome of the Brexit negotiations is clearer

The Brexit decision caught many UK-based companies unaware and off guard, and managers say that one of their top three worries is to protect their supply chain. Successful cross-border networks of suppliers may no longer be as useful or commercially viable once the Brexit negotiations are complete.

The good news for all companies, though, is that these negotiations will take some time. That doesn’t give them any leeway but it does leave room for proper planning. Procurement teams should use the following seven steps to help.

  1. Start thinking about the long-term effects on its supply base: For companies that work with EU or UK suppliers, or companies with locations in the EU or UK itself, new trade agreements may affect their supply chains.

    This is a good opportunity for such companies to take stock of their supply base and pinpoint potential problems. For instance, if a company sources an item made especially for it from a vendor that may be affected, it’s worth noting now that a more depth examination may be necessary when the effects become clearer. Procurement should also consider:

    • Will Brexit affect its UK-based suppliers’ readiness and ability to deliver goods and services across the EU?

    • Will it affect the readiness and ability of vendors based elsewhere to deliver to the UK?

  2. Assess the immediate effects on its business: Procurement should consider whether the ongoing currency fluctuations and market turmoil will affect its company or its suppliers.

    The function should keep in touch with its most important vendors to find out whether these short-term consequences will have any impact on its relationships.

  3. Consider the specific risks to its business: Brexit will affect each company differently due to the wide range of regulations that could change. For procurement professionals, it’s worth considering now whether their company has specific characteristics that could become vulnerabilities or advantages in the face of Brexit.

    For instance:

    • Does their company rely heavily on EU or UK business?

    • Does their company employ EU workers in the UK, or UK workers in EU countries?

    • Is their industry significantly dependent on EU workers or EU regulations (or are their key suppliers)?

  4. Include Brexit when prioritizing and monitoring supply risks: As Procurement maps operational risks (like geopolitical risk and market risk), it should add Brexit and its potential effects to its model. The function should score each risk by “likelihood,” “velocity,” and “impact” to decide what its next steps should be.

  5. Build relationships with stakeholders to understand the broader implications of Brexit on the supply chain: For instance, Procurement can work with Finance to explore how Brexit would affect areas like revenue, cost, tax, partnerships, and intellectual property. Or Procurement can work with Legal to examine contractual liabilities in different scenarios.

  6. Use scenario planning: While it’s unclear what the full effects of the referendum decision will be, Procurement can start preparing plans for different scenarios now. The procurement team will need to identify the most important external factors that that will affect its strategy, such as currency instability, economic instability, and geopolitical forces.

  7. Begin coordinating the response with cross-functional partners. Companies should set up a committee to manage efforts among stakeholders — and if supply chain concerns represent a major challenge for the business, Procurement should have a seat at the table.

    “It doesn’t need to be anything enormous at this point,” Kon M. Asimacopoulos, partner at law firm Kirkland & Ellis said at CEB’s recent webinar. “Keep an eye on developments and report back periodically to see what’s happening. Map out some actions to take.”

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