Sector News

No-deal Brexit could cause five years of supply turmoil – report

October 24, 2018
Food & Drink

It could take five years for food and beverage companies operating in the UK to successfully restructure their supply chains in the event of a no-deal Brexit, according to supply chain and logistics consultancy Scala.

The report claims that uncertainty surrounding currency exchange rates, possible new trade tariffs and the likelihood of border delays could severely impact businesses that source products or components from the EU, and/or export to the EU.

The food industry, in particular, could be vulnerable, as it may no longer be feasible for businesses to import short-shelf-life products and perishable goods from the EU.

Scala says that these factors make it increasingly necessary for food and beverage companies to undertake a full assessment of their supply chain strategies, as it could take as long five years to re-engineer and optimise their supply chains.

John Perry, managing director of Scala said: “Over the years, company supply chains have been continuously improved and developed to meet the demands of the consumer as cost-effectively as possible.

“As part of this, UK businesses have become increasingly reliant on sourcing from the EU, driven by the supply chain benefits of quick lead-times, manufacturing rationalisation and faster response times to changes in demand.

“However, in the event of a no-deal Brexit, this is all set to drastically change. Companies will need to determine the impact of new trading laws and tariffs, as well as the potential costs and duration of new supply chain routes.

“Borders will be more complicated, so supplier relationships will need to be re-evaluated, and alternative options considered such as stockpiling in UK warehousing.

“This is a complex process and these changes can’t be made overnight. For some companies, this will involve a major reset. The more complex the supply chain network, the more extensive and lengthier the process is likely to be.

“Even for proactive businesses that start preparing now, the ramifications of Brexit are major, and it is not a quick process for companies to re-optimise their supply chains.

“Some companies may just tweak elements or try and make-do for short-term survival, but for long-term competitiveness the supply chain needs to be properly re-assessed and optimised.”

By Martin White

Source: FoodBev

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