As the year 2019 kicks-off, industry supply chains are already in contingency planning mode. One clear area of supply chain disruption mitigation is the planning around either a hard or no-Brexit agreement at the close of this quarter.
As noted in our prior Supply Chain Matters updates on Brexit, with the end of March 2019 deadline looming in a mere 13 weeks, industry supply chains have little choice but to initiate tactical and operational contingency plans. The signposts are coming from multiple areas.
In mid-December, five major UK based business groups warned that a no-deal Brexit scenario carried major risks and that: “There is simply not enough time to prevent severe dislocation and disruption in just 100 days.”
From within the United Kingdom itself, there is ample evidence that businesses are bulking-up safety stocks to prepare for the worst. This week’s IHS Markit CIPS UK Manufacturing PMI report reporting on December 2018 activity reflects a headline of UK manufacturers reporting near-survey record increases in inventory holdings. The December PMI reading of 54.2 rose to a six-month high and according to the authors, was mainly driven by: “inflows of new business and a solid increase in stocks of purchases.” Manufactures reported increases in both domestic and export demand in order to build-up safety stocks to mitigate potential Brexit disruptions.
Governments are acting as-well. The Wall Street Journal reported this week that contingency planning efforts are underway to hopefully avoid for: “what could become one of the world’s biggest traffic jams.” Every day, upwards of 5000 cargo trucks descend on the Port of Dover to traverse to European Union ports. Other British manufacturers in areas such as aerospace and pharmaceutical production have plans to supplement air cargo capabilities to move goods to EU destinations on a timely basis.
The UK government plans to spend upwards of £100 million on chartered cargo ferry service reportedly to ease expected congestion at the Port of Dover. Contracts have been awarded to three ocean ferry firms, including one French and one Danish firm, in addition to UK based Seaborne Freight. Reports indicate a plan to use an abandoned airfield close to the Dover port to serve as a holding area for what is expected to be thousands of trucks. More than 3000 British soldiers are reportedly being placed on standby to supplement traffic needed wardens. Both Britain and France now have plans in-place that allow French immigration and customs officials to perform initial checks in Dover. Meanwhile, government officials are exploring added options to route traversing truck traffic thru other British ports. EU officials have offered up concessions to allow British truckers to carry goods directly into the EU during a nine-month provisional period if the UK grants similar permissions for EU based truckers.
An additional sign of the looming Brexit disruption are governments urging manufacturers and businesses to be prepared to fill-out customs declarations prior to shipments. The UK National Audit Office has called for upwards of a quarter of a million British businesses to be prepared to fill-out customs declarations for the first time.
Some British politicians have been quick to criticize such contingency initiatives and actions, claiming that they serve to alarm rather than help. The reality however is that the looming lack of time and shear scope of the potential disruption warrants individual business and governmental contingency planning to begin in earnest.
Plans can be changed or altered, but the scope of such a disruption cannot.
© Copyright 2019. The Ferrari Consulting and Research Group and the Supply Chain Matters® blog. All rights reserved.