Preparing your supply chain for Brexit

Tuesday 17th November 2020

The first thing to do is identify the key risks – these might include:

● Lack of available employees due to changes in freedom of movement;

● Increased costs for EU border crossings (people and things);

● Increased time for EU border crossings;

● Changes to import and export controls;

● Exchange rate volatility;

● Changes to product standards; and

● Warehousing and stock levels

The difficulty is that until a deal is agreed we have no real way to prepare as fully as possible. That does not mean however that you cannot and should not make any preparations.

Preparation Step 1:

Carry out a risk assessment – this will help you focus your energies and time more effectively – like most things with Brexit its likely to come down to the wire. The key to analysing risk is to identify the risk and then assess what is the likelihood of it occurring and what would the impact be.

Identify the highest value contracts – these will have the greatest impact on your business

Identify those suppliers of strategic importance – they might not be the biggest but the kingdom fell for want of a nail

Map the geographic locations of your suppliers and customers – do they have branches outside of the EU or even in the UK

Check the contract expiry dates

Identify the supplier competition – if one supplier stops supplying who else can you go to? Can you negotiate a supply contract now to stop them hiking the price later?

Currency exposure – what currency are you paying in and in what currency are you being paid

Current problems – which suppliers/customers currently give you problems

Preparation Step 2:

Talk to your suppliers and customers – carry out some due diligence

Preparation Step 3:

Put in place a communication strategy – make sure the different parties know exactly who to speak to if problems arise – who are the key account managers, what are their contact details, what is their level of authority, to whom can matters be escalated?

Preparation Step 4:

Diarise regular credit risk reviews for key suppliers and key customers

Preparation Step 5:

Make sure your contracts are in place. A lot of commercial entities still do business on a handshake or an exchange of emails on the basis that “my word is my bond” and if you don’t keep your word you soon go out of business. Whilst this is true Brexit does mean there are outside influences on businesses which might mean it’s not always possible to keep your word. It is therefore really important that you have robust and clear contracts in place. No one can draft completely Brexit proof contracts but there are some provisions that may prove more useful than not.

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