Does your business have a stock continuity plan? ©Getty Images
Does your business have a stock continuity plan? ©Getty Images

How to avoid Brexit stock gaps

30 November 2018

Even a short survey of your supply chain can give visibility below the first tier and help to plan where and how to build in a buffer

As UK plc braces for Brexit disruption, many are doing what they can to limit supply chain issues. Andrew Brown is preparing to pull forward delivery of 25% of at-risk products into the first quarter of 2019. Among other things prompting this decision, the procurement director of electronics and engineering firm Leonardo UK sent out a survey to some of its supply chain with just a few questions.

It was really just a business continuity plan, he says, adding: “I prefer that language. It enables a dialogue around a less contentious subject.”

The procurement team could see the potential risk in the company’s tier-one suppliers through the business systems. “But we couldn’t see below that,” he says. Brown’s team procures products such as power supplies, printed circuit assemblies, and machined parts to make products, such as radars.  

Airbus, one of its customers, sent out a supplier survey with over 80 questions earlier this year, and by June announced a need to buffer €1bn of stock ahead of Brexit. While Brown agrees it is a good starting point, he wouldn’t know what to do with all the answers: “So we took a pragmatic approach.”

He used 4-box models for early scenario planning, to plot the level of impact from cross-EU border complexity in one, and legislation and compliance in the other. “We’ve done a graphical representation to show if you have a linear delivery profile through 2019, say 10 a month, our recommendation is to pull forward 25% into quarter one, or maybe even starting December this year. You still want 120 in the year, so you will have a cash flow impact quarterly but not during the whole year,” he says.

Using a shared database of suppliers delivering to a number of providers in the air defence sector, the short survey was sent out to 3,000 suppliers, 400 of which were Leonardo’s, so each supplier only had to answer once to provide the information to a number of companies. “It was good collaboration, reusing the system we already had – providing one voice to many customers,” Brown adds.

More than half of the questions were yes/no, asking about preparation, he says. Quantitative questions asked about the sales and revenues that are reliant on UK, continental Europe or other, and the level of production and procurement – “because that’s where we start to see the risk”, he says. “We don’t want to get to April and find that the supplier in France is on hold because we have a new licence to fill out and we don’t know how to do it.”

Action began on critical parts with long lead times. If a supplier said that 60% of its procurement took place in Central Europe, Brown looked deeper, finding out if that related to a Leonardo product, and if so what. If he saw a risk in quarter two, he asked them to pull forward delivery, preferably without a cost impact.

“One of the first things I learned was that not a lot of people had looked at this, or taken action,” he adds. “But there was also a growing acceptance that it needs to be on the agenda.”  

Brown produced a Brexit procurement guide to ensure everyone in his team is on the same page when engaging with suppliers. “Otherwise you will get everyone interpreting it differently,” he explains.

Keep the survey simple, and you’ll get manageable results, says Brown. “We are just putting some thoughts and plans around the unknown,” he adds, and of course something could be missed. “But I would much rather pass the red face test in April by being able to say we have got a small buffer, I’ve targeted risk material, it’s already in the warehouse and we can continue to manufacture.”

The questions

1. Has your business done a Brexit risk assessment on the effect of changes to:

1.1 Customs procedures for export and import

1.2 Common standards

1.3 Currency fluctuations on business manufacturing, transportation and storage

1.4 Employee rights to live and work in the UK/EU, and travel

1.5 Supply chain and manufacturing lead times, and supplier and contractor vulnerabilities

1.6 Legal status of corporate certificates, staff qualifications, intellectual property rights, relationships with subsidiaries and partners

1.7 Tariffs and taxes, and ability to understand and manage new requirements

2. What percentage is in UK / rest of EU / outside EU, of your:

2.1 Market

2.3 Production

2.4 Procurement of goods and/or services

3. Do you hold Authorised Economic Operator status for imports and exports, and is it granted by the UK or another EU state?

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Bramwith Consulting
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