How Will Brexit Impact Supply Chain Labeling?
by Sam Ireland, on March 7, 2019
The clock is ticking for the United Kingdom and European Union to finalize plans for the UK’s departure from the EU. Companies with operations in the U.K., on the European continent or in both places continue to scrutinize how the process will end and what the impact will be on their just-in-time supply chain practices. The uncertainty around the event has already taken a toll, with businesses acting cautiously, unsure of their next moves.
The trend of globalized production has been predicated on an existing set of customs laws, which could be set for significant change. With this seismic commerce event occurring in the near future, companies that operate in Europe need to create practices and processes that are adaptable and can stand up to rapidly changing circumstances. This includes Enterprise Labeling - one of the essential elements of a modern supply chain.
While Brexit is one of the largest potential commerce changes in recent memory, smaller disruptions occur all the time. Therefore, flexibility, resilience and reactive operations will remain relevant traits for companies to possess going forward, no matter where they're based.
Brexit Uncertainty: A Snapshot of the Ever-Evolving Consequences
"As internal U.K. debates continue, the possibility of a no-deal Brexit appears to be rising."
Perhaps the most pressing question business leaders are asking is whether a "no deal" Brexit will occur, meaning the deadline to leave the EU, presently set at March 29, arrives without a new trade agreement in place between the U.K. and the EU.
As internal U.K. debates continue, especially on the subject of contingency plans designed to prevent a hard land border between Ireland and Northern Ireland, the possibility of a no-deal Brexit appears to be rising.
Companies have spent recent months sending out public warnings about possible damage to their respective supply chains. It's easy to see the issue: The increased complexity associated with the U.K. leaving a trading agreement, especially without suitable replacement agreements, will change the processes needed to get materials and finished products from one site to another.
Risk in the Just-in-Time Supply Chain
According to Forbes contributor Dave Keating, the auto industry has led the charge in warning about the potential consequences of continued stalemates in negotiations. For instance, World Trade Organization default rules mandate 10 percent tariffs on imported cars. That, according to the auto manufacturers would wipe out their profits. Furthermore, the parts used to build cars typically move between countries multiple times as vehicles are assembled. Extra costs or hold-ups with these shipments may force companies to drastically rethink their supply chains.
The just-in-time model of production, enabled by modern digital processes and used to power many kinds of manufacturing, would be harmed by Brexit, according to both Keating and The Financial Times, which pointed out that today's agile companies don't have stockpiles of components because they often assemble their products to order. Working quickly, based on demand, is an effective way to operate from an overhead cost perspective. In uncertain times, however, organizations are limited by the way the system precludes working ahead to hedge against changing market conditions.
What Does Brexit Mean for Supply Chain Labeling?
Supply chain labeling requirements could change overnight when Brexit occurs, whether or not there is a deal in place. Companies that haven't previously required export labels to get their goods through customs may find themselves facing these new and specific needs. Furthermore, organizations based in the U.K. may find themselves facing a new set of policies that differ from the EU standards they have been following for decades. Both dealing with these immediate changes and hedging against potential long-term supply chain disruption are essential labeling objectives for companies based in the U.K. and for companies who rely on U.K based organizations as part of their supply chain. This is why solutions are actively being sought to mitigate disruption.
Flexibility in labeling is especially important in the case of Brexit, because such a massive change in international trade relationships may happen in stages. Label alterations to suit temporary or stopgap agreements may soon give way to more permanent replacements. Companies that can cope with these new developments as they occur will be better off than competitors forced to make disruptive and slow changes to operations every few months.
Steps to Mitigate the Risk of Disruption
Brexit is far from the only potential interruption in international trade. While it's rare for an event to bring such uncertainty, there are an endless series changes to deal with, including evolving regulatory requirements that must be adhered to. Organizations with flexible supply chain solutions, labeling included, will have the resilience to suit new practices with minimal downtime. This lack of interruption is key to continued profitability and compliance. It's bad enough for organizations to have to change their approaches to international commerce. If they have to bring their operations to a halt the losses may mount.
As March 29 approaches, there are a host of possible outcomes facing Europe and the U.K. In times like these, companies that are ready to make quick and responsive changes to their most fundamental importing and exporting operations may rise to the head of their industries.
Adopting a comprehensive solution that can support organizations in mitigating disruption is critical. Loftware’s solutions help to do exactly this and our report on ‘Why Enterprise Labeling Matters’ highlights the benefits of adopting a configurable automated, integrated and data driven solution.
Take a look at our report and see how your organization can help to ensure that the impact of political uncertainty, regulatory changes and supply chain disruption amongst many others can be managed with greater effectiveness by adopting an Enterprise Labeling Solution.