With so much noise around Brexit and continued uncertainty on the exit terms and the nature of the future relationship with the EU, it can be hard to determine where companies should be focussing their efforts.
We are increasingly seeing companies planning for how they would be impacted in a no deal scenario. Having developed mitigation plans for future scenarios, businesses are starting to turn their attention to how these will play out on Day 1. How will the conditions in which businesses operate be different at the point at which the UK exits the EU and what implications will that have for business operations?
To help us think about this I asked Ian Washington, Deloitte's supply chain lead for Brexit what, in terms of business readiness, success looks like on Day 1 post Brexit. The blog that follows is Ian's take on some of the issues to consider.
Day 1 readiness
For many businesses, considering how to ensure Day 1 readiness starts with looking at supply chain operations and understanding what is needed to keep the business running. Is there product in the market ready to sell? Are there materials in the plant ready to continue production? Most likely it's a mix of both, and mitigations are needed to address each requirement, taking into account the risk profile of your organisation.
With six months until 29 March 2019, many organisations are looking at what inventory to stockpile in advance of Brexit. But how much stock inventory should an organisation build? There are some considerations organisations should be looking at to shape that answer:
- Is my inventory supplied from the EU?
- What is the current lead time on my inventory?
- Is my product life-critical (e.g. medicines or hospital equipment)?
- How prepared are my suppliers, and where does my organisation fall in their priorities?
- Is delivery speed a key component of our market offering?
- How much working capital can we afford to commit to stockpiling inventory or investing in 'insurance options'?
- What preparations can we take without capital investment, or what can be included in 'business as usual' spend?
Gaining assurance on areas outside of your control
An area of increasing focus over recent weeks for business across a number of sectors is supplier readiness. Testing the preparedness of the wider supply chain, beyond a business' direct control, and maintaining channels of communication, is key. Businesses are taking different approaches: preparing responses to specific customer questions; supplier surveys; and conferences / training days with suppliers. Working with suppliers to minimise this risk will be key to maintaining business continuity on Day 1.
Leveraging prior experience
Whilst Brexit is unique in many ways, it is nevertheless a business risk like any other. Where contingency planning has identified a particular risk, for example inability to meet contractual commitments on delivery timeframe or meeting EU regulatory requirements, organisations can leverage their experience of past events that have affected these areas. These events may include areas as diverse as new regulations, geopolitical disruption, or unexpected severe weather conditions.
Now is the time for businesses to test their operational readiness for Day 1 Brexit, and those first few critical weeks, in the event of a no deal scenario. That might involve bringing your functional leads together to stress test your current plans, or wargaming scenarios. This will help to identify the tactical plays and develop a robust, actionable contingency plan. Most importantly it will give you the confidence that you're ready to continue trading, whatever the outcome.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.