Brexit Planning and Supply Chain Risk – Advice for SMEs (Part 2)

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In Part 1 yesterday, Advice from Ferrero on Brexit Planning and Supply Chain Risk – SME Preparedness Is Critical!, we explained how we came to be interviewing Procurement Director, Bryan Towell from Ferrero UK Ltd, the premium chocolate company, about his views on Brexit and how firms should be preparing, and at the very least doing some serious thinking about the issue now.

So at Ferrero for example, they have been thinking about the possible scenarios and weighting them in terms of likelihood. This might be reverting to WTO rules with no free trade agreement, or a trade agreement being reached after a transition, or even the UK staying in the EU after all. They drive their contingency planning for all of them, taking into account both the probability of any scenario and also its likely impact.  So depending on your organisation and what you import or export, and from where within your end-to-end supply chain, it might be a good time to start thinking about how changes to your supply chain may affect your business. This is a big step, but the point is, we can all start working together to ensure the impact on our mutual businesses is minimised.

Another recommendation is to start attending more supply chain events, where you can talk with others facing similar challenges, and share ideas on approaches. “So starting to plan,” he said, “really doesn’t need to take a lot of time and resource. Talking to the SME network you operate within, or for them to talk directly with their suppliers, doesn’t cost a thing. It’s something we all should be doing. It’s just important to remember that it’s not a one-way street. I am talking to my suppliers, for example, and the smaller ones may not have done much in the way of contingency planning, but the important thing is that the conversation starts and is two-way.”

So Customer talking to Supplier, and Supplier talking to Supplier, and Supplier talking to Customer – we are all part of this circle, and “we must protect our future,” he said, with the strong overriding message that “we are all dependent on each other.”

And of course he is absolutely right – “The Time is Now” – but we heard some fairly relaxed attitudes towards Brexit approaches in the discussion at eWorld. It did reveal an undercurrent of ‘it’s probably not worth the time just yet, because we really don’t know enough,’ which is what Bryan refers to as a “high-risk attitude.”

A “wait-and-see approach,” he warns, “is not an option I would endorse. When you think critically about the situation: once we get clarity on the outcome there may be no time to plan and execute” he says, “and by waiting we may end up at the back of a long queue of organisations all fighting for warehousing space, transport capacity and customs expertise at the same time in an already stretched market.”

So, as he said, it’s important to think about scenario planning: the obstacles in the flow of materials, products and labour across borders. The ongoing status of EU citizens in the UK who may be vital to your organisation.

If you rely on buying in raw materials, like food ingredients, or even finished goods, consider how Rules of Origin or regulatory changes may cause additional requirements. Customs certifications, export/import declarations & taxation changes may occur – a simple lack of correct documentation at border control could mean a delay that could affect your delivery into a key customer further up the road. So the earlier you think about these things, the better. “The most prepared organisations will be the best placed to benefit in competitive UK markets.”

And is Risk Management a big part of what Ferrero is doing?

“Of course, but don’t think it’s simply a case of finding alternative suppliers – which often isn’t straightforward,” he warns. “Many of the fundamental ingredients of high-quality chocolate confectionery aren’t grown in the UK – we need to consider how to maintain the smooth flow of raw materials to support our UK market. And Ferrero maintains long-term relationships with our suppliers, which is one way we can guarantee consistency in delivering high-quality confectionery products to our consumers. We value those relationships, and we need to work with our suppliers to ensure that we are both adequately prepared for what we might face; that should be a priority for all of us.”

And we had to askwill consumers be paying more for their chocolate in 18 months’ time?

“It’s a serious question of course. Prices have already been impacted by commodity inflation and the movement in currency after the vote, and future changes in the operating model driven by export/import tariffs or food law and labelling requirements could ultimately affect the cost of trading in the UK market and could be passed on to consumers. Part of my job is to minimise the cost impacts by working with supply partners and industry bodies to ensure our priorities are understood and the Ferrero business is fully prepared.”

So – many thanks to Bryan for sharing his advice on this very pressing subject, highlighting how companies’ thoughts should be turning to the entire supply base, not just the larger suppliers. Our advice? Gird your corporate loins, and start thinking seriously about what Brexit might mean – even if there may be little certainty for some time to come …

And if you would like to discuss any of these points further, or have any advice to add, please do leave a comment or contact Bryan directly through his LinkedIn profile.