Penelope Ody: Leaving the single market does not mean supply chain executives must wring their hands in despair – after all, they’ve faced predictions of doom before.
Listening to the seemingly endless debates and interviews about the impact of Brexit and the risks it brings to manufacturing industry and integrated supply chains, put me forcibly in mind of all those conferences and research reports from 20 years ago predicting the likely impact of the millennium bug.
By 1998 the Department of Trade and Industry was predicting a major spike in business failures once midnight had chimed on 31 December the following year.
Pundits forecast food shortages, massive process engineering collapse throughout industry, air traffic failures grounding all flights and frantic dairy farmers searching for ancient milking stools and buckets to relieve their desperate cattle when the automatic milking machines failed.
Back in those pre-millennium days, companies were being urged to identify their key continuity issues: for some that might be maintaining packaging supplies, others fuel to keep the furnaces running, or ensuring the availability of some vital component.
Having identified these key issues they were told to develop a contingency plan – what would happen if this crucial event occurred and what alternatives could they prepare to ensure business continued as usual.
Recommendations ranged from stockpiling products and setting up multiple sources of vital components to preparing manual plans of warehouse locations in case the automated systems failed.
I remember one conference where a speaker from Waitrose highlighted the company’s fragile gin supply: apparently their own label gin is (or at last was then) made from a grape rather than grain alcohol and successful dual sourcing was proved challenging.
I also recall a doom-saying journalist colleague, urging me to lay in crates of tinned food, and being rather put out when I dismissed the idea since I lived next to an egg farm and in January would have plenty of kale and Brussels sprouts in my vegetable garden.
None of those many predicted disasters happened, of course, because armies of programmers had been trawling through miles of computer code for years to ensure that all would continue to run smoothly.
Today, it is the turn of supply chain executives to be just as busy with risk assessments, calculations of the inventory needed in case that predicted cliff edge actually happened, or looking at alternative and multiple sourcing options.
Just as no-one back in 1998 knew for how long the millennium bug would wreak havoc – and there were plenty of stories of the gloomiest laying in enough tinned food to last a year or more – at this stage in the Brexit negotiations, we’re equally unsure about what exactly might happen at ports and border controls come 29th March next year.
Britain has espoused free trade since the repeal of the Corn Laws in 1846 so it seems rather unlikely that the powers that be will introduce a raft of new tariffs on 30th March 2019, while – with no millennium bug to worry about – existing electronic customs clearance systems on this side of the channel could continue to operate as normal.
It’s hard to imagine border officials at Calais causing problems as any delay in all those inbound trucks of French cheese or Spanish courgettes would result in the familiar farmers’ protests with plenty of merde on the motorways. Equally, why should the French want to delay a consignment of vital automobile components heading in our direction, thus causing problems for a German supplier and fellow EU business?
Outbound could well be different if and when the EU treats the UK as a “third country”.
Hopefully Britain’s free trade principles would survive any tariff war started by the EU: after all we resisted imposing tariffs on manufactured goods from the 1840s until 1931 despite what the rest of the world was up to.
There may well be a need to build extra time into shipment schedules to allow for customs delays and supply chain executives may have to rethink “just in time” approaches to inventory management.
In the fashion sector, direct shipments from overseas producers in the Far East to warehouses in end user markets, rather than to those in the home country of the retailer involved, already happen and there seems no reason why such strategies should suddenly stop. Farmers may certainly suffer in the short term – and we’ll all have to rally round and buy British milk and meat to support them (even though outside the customs union non-EU food imports will be rather cheaper than now).
Unlike the millennium bug, Brexit is not a global phenomenon: there are other markets to sell to and alternative sources to investigate. Just as 20 years ago all those programmers were busy working 15 hour days to beat the bug, today those involved in the supply chain are possibly just as busy with their own continuity plans. Perhaps, too, as with that bug, the doom-sayers’ predicted disaster might never happen.
This article first appeared in Logistics Manager, March 2018