Where supply chains are concerned, Brexit and Covid-19 have both caused organisations to rethink. Over the past months, organisations have had to establish contingency plans to adapt to Brexit-prompted changes to the flow of goods between the UK and European Union countries, at the same time as reacting to the significant disruption caused by Covid-19, which has highlighted the need to transform traditional supply chain models.
As of 1 January 2021, UK supply chains will enter a new era, which requires them to consider new routes for trade. It will become crucial for companies to make sure they have the right data to make informed decisions in order to adapt.
Impact of Brexit on businesses
Although government leaders have decided to be flexible with customs checks laws, offering a six-month grace period for imports to allow businesses to adjust to the post-Brexit market environment, supply chains are still uncertain about the future as trade arrangements remain unclear and are still in negotiation. Businesses that were unsure about port and airport checks are aware of the additional customs formalities set out in the 206-page border document the government released on 16 July, but are yet to evaluate the impact on their profits.
Besides new customs formalities, individual businesses in the UK that want to sell to the EU will soon have to ship to a European warehouse. Considering most UK firms work closely with EU suppliers, who contribute more than half of all goods imported into the UK in total, UK supply chains will inevitably experience a greater level of unpredictability. Organisations will need real-time visibility across all operations of the supply chain.
Technology giant Amazon has already announced it is severing EU distribution ties for UK sellers using UK fulfilment centres. These businesses will no longer be offered logistics and warehousing services and will need to ship their stock to a European warehouse at their own cost. This translates into increased transport and storage costs for those businesses, which will require them to estimate how much stock they are selling in the UK versus the EU, and how to reconfigure their processes. Such a shift in process calls for increased information flow across all parties involved to make sure stocks are in the right places.
To cope with Brexit, businesses in sectors such as food and pharmaceuticals have had to resort to stockpiling to manage inventories and make sure they do not run out of stock. The UK food industry is heavily reliant on imports of perishable goods, so the delays caused by the new border controls present an outstanding material risk for supermarkets that the temporary stockpiling solution will not sustainably solve. The bigger issue will be finding suitable old storage space to keep that stock in good condition, and that might involve additional cost. It will also require storage companies to share data on how much space is available with suppliers and businesses. Equally, companies might need more data about customs charges and logistics to be able to allocate costs efficiently.
Companies have also worked on solutions including localising supply chains to reduce inventory-carrying costs, or building parallel supply chains – which involve advanced technologies to cope with the cost of UK-based manufacturing labour.
Due to custom checks and new trade arrangements, businesses might experience higher prices, increased distribution costs, shortages of raw materials, delays, and hits in profits. Incidentally, supply chains might struggle to remain efficient and agile, and businesses might need to rethink their investments. That reconfiguration requires companies to tap into opportunities such as data sharing to optimise their efficiency and keep afloat.
Data sharing helps businesses build resilience
The new UK-EU trade environment, characterised by fluctuating consumer demand and supplier uncertainty, requires greater flexibility. More than ever before, organisations will need more transparency across supply chains as they shift to new ways of working. New customs registration processes involving EORI numbers will inevitably slow down the usual pace of the flow of goods and services and create blockages in some instances due to incorrect paperwork or system glitches. Data sharing will allow businesses to monitor these blockages, keep track of supplies and avoid delays.
To remain agile and build resilience, companies must make sure the data flows safely in and out of their system, especially with the Brexit-prompted fluctuating consumer demand that calls for more efficiency. With more data on existing logistics costs and processes, supply chains will be able to make more accurate predictions, forecast demand and manage inventory volumes adequately.
Our recently published case studies show that data sharing has various benefits, including supply chain optimisation, increased efficiency and reduced costs. The supply chains of companies such as Airbus experienced the benefits of data sharing first-hand. Access to real-time data on all aspects of its supply chain helped improve the design process of its products as well as foster greater collaboration among a variety of stakeholders. Likewise, automotive giant BMW created PartChain, a trustworthy platform to unlock the value of data sharing, making sure all stakeholders could benefit from greater data transparency. That has resulted in increased component traceability and supply chain efficiency.
Companies must put data sharing at the top of their resilience building agenda as it will be key to make sure they remain agile, efficient and that they can compete with other markets. In that respect, they must make investment decisions that allow for such a transparent infrastructure.
The Open Data Institute has put together a Data Toolkit for Business, including the Data Ecosystem Mapping tool, the Data Skills Framework and the Data Ethics Canvas to help businesses identify new opportunities at every step of their data sharing journey. Other practical guidance such as webinars on topics including supply chain optimisation are also available in that practical guidance offer. The ODI has also produced an on-demand webinar, which provides organisations with guidelines on how to build a stronger supply chain to recover from Brexit.