Pre­par­ing for un­known un­knowns in Brexit

Ir­ish busi­nesses are ex­tremely vul­ner­a­ble to any dis­rup­tion of sup­plies to and from UK

The Irish Times - Business - - SUPPLY CHAIN MANAGEMENT - MIMI MUR­RAY

Be­fore Brexit com­pa­nies could get sup­plies or prod­ucts from the UK, and send them there, with­out any prob­lems. The Euro­pean Sin­gle Mar­ket is built on four free­doms: goods, ser­vices, labour and cap­i­tal.

How­ever, with Brexit set for March 29th, 2019, any goods go­ing into or out of the UK may have to pay cus­toms du­ties, face de­lays due to stop­pages and in­spec­tions, and in­cur much longer wait­ing times. The free flow of goods will be no more. These mea­sures are likely to have se­vere im­pacts on Ir­ish busi­nesses.

If you are in an in­dus­try where profit mar­gins are tight ev­ery penny counts, and ev­ery stop­page adds to costs, says Prof Donna Marshall of the UCD Smur­fit Grad­u­ate School of Busi­ness.

“That’s why most sup­ply chains try to keep the move­ment of goods be­tween coun­tries as fric­tion­less as pos­si­ble. The less fric­tion, or stop­pages, the less cost is in­curred.

“If the Brexit ne­go­ti­a­tions con­tinue as they are, with no res­o­lu­tion and no agree­ment, this will lead to con­trols into and out of the UK.

“Ire­land, more than any other coun­try in the world, will have in­creased fric­tion and inc reased co sts. The com­plex­ity comes from hav­ing to deal with new con­trols and charges and wait­ing times at ports. In prepa­ra­tion for this the Ir­ish Govern­ment has an­nounced that it is hir­ing 1,000 new cus­toms of­fi­cials.”

Su­san Dee­gan, man­ager of the sup­ply chain team at CPL re­cruit­ment, says there is a huge amount of un­cer­tainty sur­round­ing Brexit.

“Com­pa­nies are try­ing to pre­pare for the un­known. I have clients who have can­celled roles be­cause they’re try­ing to tighten their belts in prepa­ra­tion for what’s to come.

“I’m prob­a­bly see­ing the big­gest im­pact on smaller clients be­cause they wouldn’t have the fund­ing to go to con­sult­ing houses to get ad­vice. The larger com­pa­nies are in­vest­ing in be­ing Brexit-ready, they’re bring­ing in con­sul­tants from the big four and other houses to ad­vise them. I work with the big four, and they will even say we have no idea what is go­ing to hap­pen. At least if we knew the out­come then we could pre­pare,” says Dee­gan.

Lo­gis­tics costs

All of this leaves Ir­ish busi­nesses ex­tremely vul­ner­a­ble, ac­cord­ing to Marshall.

“Ir­ish man­u­fac­tur­ers are part of global sup­ply chains. Much of our sup­plies com­ing into Ire­land are from or through the UK, and many of our prod­ucts, par­tic­u­larly food, go into or through the UK. So we are ex­tremely vul­ner­a­ble.

“How­ever, it does de­pend on the prod­uct. If the prod­uct is very high value, such as med­i­cal de­vices or phar­ma­ceu­ti­cals, al­though the im­pact will be felt, it won’t be as se­vere as for low-value prod­ucts such as food, where lo­gis­tics costs make up a much higher per­cent­age of over­all costs. Those prod­ucts are much more vul­ner­a­ble to the im­pact of ad­di­tional costs.”

Dee­gan agrees that the food sec­tor is most likely go­ing to be

With Brexit set for March 29th, 2019, any goods go­ing into or out of the UK may have to pay cus­toms du­ties

one of the most af­fected in­dus­tries.

“If there are ex­tra cus­toms reg­u­la­tions in place at UK ports and, for ex­am­ple, there is fresh fruit sit­ting there, that’s not go­ing to work for their cur­rent sup­ply chain. Some of my food clients have sup­ply chains run­ning down through the UK, but if there are ex­tra reg­u­la­tions in place that may slow them down a day or two. They are go­ing to need to change that al­to­gether.”

Phar­ma­ceu­ti­cals are also go­ing to be af­fected, with a rise in the level of Asian and Chi­nese phar­ma­ceu­ti­cals look­ing to set up op­er­a­tions in Ire­land, ac­cord­ing to Dee­gan.

Marshall says most Ir­ish com­pa­nies are re­liant on the UK for one of four rea­sons: be­cause that’s where a main mar­ket is; be­cause they get sup­plies from the UK; or their prod­ucts have to pass through the UK to get to main mar­kets in con­ti­nen­tal Europe; or their sup­plies have come through the UK from con­ti­nen­tal Europe.

‘Land-bridge’

“Most road freight uses what is known as the ‘land-bridge’: get­ting ships from Ire­land to the UK and then trav­el­ling by road across the UK to get to con­ti­nen­tal Europe. Some­thing like 80 per cent of road freight from Ire­land to Europe goes through the UK. This is mostly due to cost, avail­abil­ity and tim­ing. It’s about 10 hours’ drive to Europe us­ing the land-bridge, while ship­ping di­rectly to con­ti­nen­tal Europe can take be­tween 20 and 40 hours.”

For this rea­son, Marshall is ad­vis­ing all Ir­ish com­pa­nies to plan for a hard Brexit.

“If the UK is your main mar­ket, or you get your sup­plies from the UK, you need to plan for wait­ing times for cus­toms in­spec­tions. Think about the per­isha­bil­ity of goods, ways of main­tain­ing goods that are wait­ing for a long time. Are there ways you can make cus­toms checks eas­ier?

“Long-term, think about di­ver­si­fy­ing your trans­porta­tion, mar­kets and your sup­pli­ers to con­ti­nen­tal Europe. At the mo­ment Bel­gium and Ger­many are some of our big­gest ex­port mar­kets, and I would ex­pect the shift to these other Euro­pean coun­tries to be­come even more pro­nounced.” she says.

Marshall adds that com­pa­nies need to look for the sil­ver lin­ing, and there are amaz­ing ben­e­fits for those who get real vis­i­bil­ity into their sup­ply chain.

“If all sides agree on an al­ter­na­tive ar­range­ment by March then the worst that could hap­pen is that Ir­ish com­pa­nies have gained much-needed in­sight into their sup­ply chains. If there is still no agree­ment then Ir­ish com­pa­nies are pre­pared and will not be caught un­awares.”

If the UK is your main mar­ket, or you get your sup­plies from the UK, you need to plan for wait­ing times for cus­toms in­spec­tions

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