UK and EU business prepare supply chains for 'onshoring'

According to the Chartered Institute of Procurement & Supply (CIPS) A survey of 2,111 supply chain managers found that 32% of UK businesses who work with suppliers on the continent are actively looking for alternative suppliers based in the UK as a response to Brexit.

Is 'onshoring' an option for you?

The survey also found businesses within the EU are even more advanced in their preparations. Almost half (45%) of EU businesses who work with UK suppliers are in the process of finding local replacements.

With exit negotiations in their early stages, the most pressing supply chain challenge for UK businesses thus far has been currency fluctuation. Almost two thirds (65%) of UK businesses have seen their supply chains become more expensive as a result of the weaker Pound, with nearly a third (29%) re-negotiating some contracts as a result.

How are UK supply chain mangers preparing for Brexit?
  • 28% - Already mapping the potential costs of new tariffs
  • 23% - Strengthening our relationship with existing European suppliers
  • 44% - Performing a risk analysis exercise
  • 21% - Looking for alternative suppliers outside of the EU
  • 32% - Looking for alternative suppliers inside the UK
  • 12% - Pre-emptively increasing costs
  • 23% - We have not done any work to prepare

Gerry Walsh, Group CEO, CIPS, commented - “Diplomats either side of the table have barely decided on their negotiating principles and already supply chain managers are deep into their preparations for Brexit. Both European and British businesses will be ready to reroute their supply chains in 2019 if trade negotiations fail and are not wasting time to see what happens. “Fluctuations in the exchange rate or the introductions of new tariffs can dramatically change where British companies do business. The separation of the UK from Europe is already well underway even before formal negotiations have begun.” 


Is reshoring the right option?

Six questions to consider:

  • a) How dependent are your customers on ‘just-in-time’ and guaranteed delivery schedules?
  • b) What tariff levels would your UK customers have to pay – or you absorb –on EU-produced goods if the UK reverted to a WTO regime?
  • c) What cost, regulatory and other advantages could your firm generate over foreign-based competitors as a result of reshoring?
  • d) How long would it take you to establish a UK production facility? Could you stock inventory in UK warehouses in the interim to guarantee delivery?
  • e) By contrast, could a network of European warehouses to hold inventory make UK production more feasible?
  • f) Stress test your financial models: what would a reversion to the pound’s previous strength do to the viability of UK plants? What does that look like after the imposition of MFN tariffs?
Begin the process of stress testing your business, by checking your tariff codes here.

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