Brexit and beyond: Remaining resilient amid supply chain disruption

The supply chain chaos of recent years shows no signs of abating, with geo-political and economic headwinds disrupting the transport of goods and services around the world. Andrew Black, director at Efficio Consulting, explains how firms can set themselves up for success amid the challenges.

From the latest Brexit border rules to the Tawain earthquake, recent events from across the globe have served as an undeniable reminder of the importance of resilience and agility within the supply chain. Over four years on from the UK’s official withdrawal from the EU, the aftershocks of Brexit are still being felt across industries such as food, agriculture, and pharmaceutical.

In the last month alone, we have seen food and plant businesses thrown into chaos as compulsory inspections and complex paperwork requirements came into force at UK/EU borders. At the same time, Brexit-driven drug shortages in the pharmaceutical supply chain have now been deemed critical, with hundreds of different medicines becoming hard, and even impossible, to obtain.

Impacting other sectors, the recent Tawain earthquake paused the production of chips at a company responsible for the supply of 90% of the world’s most advanced computer processors. Whilst only temporary, this was enough to spark serious concern within the tech industry, following several years of battling an ongoing global shortage.

Whilst each of these events may vary in specifics, the consequences are much the same for businesses – delayed or decreased supply, increased costs, and ultimately a damaging impact on profitability. So, how can business leaders navigate such scenarios whilst protecting their bottom line in a world where disruption has become the norm? 

A new approach for a new supply chain era

In today’s turbulent landscape, when the next event is likely just around the corner, organisations must adapt their business models to ensure resilience across the entire supply chain. This, for many, will require a change in mindset. Whilst a business model based on pursuing revenue and squeezing costs may have worked in a low-risk world, this approach no longer makes sense. Instead, organisations must focus on building in resilience where they can. This may require sourcing multiple contracts and diversifying suppliers or onshoring manufacturing operations to ensure production takes place closer to the customer. Whilst this may be more costly initially, this readiness can limit disruption when,  more of these events arise. Rather than pursuing revenue for its own sake, businesses would be wise to pursue good margins that factor in these additional costs and make way for a more resilient supply chain.

A good starting point is identifying critical components and mapping out the supply chain tiers for these to pinpoint bottlenecks and prepare plans for when disruptions occur.

Onshoring – more than just a trend

Since the 1970s, the trend has been towards offshoring the manufacture of components and physical goods to low-cost countries. In recent years, however, this activity has slowed. Many organisations are now taking steps to nearshore or onshore manufacturing, either bringing operations back to the UK or closer to home to reduce supply chain vulnerability. The theory is that the less distance or number of journeys required to transport the goods, the less chance of disruption occurring.

Bringing manufacturing back to the UK, however, comes with its own set of challenges. For example, around 50-60% of the gross value-added material in the automotive sector is sourced from Europe. Untangling these contracts and operations will be a complicated process. Plus, many sectors will face limited capacity in the UK, in terms of both numbers of suppliers and the volumes they can handle. Onshoring will require thorough tender exercises and patience to find credible suppliers, and often, a willingness to jointly invest in new capacity should this be lacking.

Considering safety stocks

For some industries, the investment in safety or buffer stocks is another strategy for reducing risk in the supply chain. However, this can be a double-edged sword. Whilst offering continuity should a disruptive event occur, this approach can be costly and even have a damaging knock-on effect for suppliers and their own planning. Building buffer stocks therefore should be calculated based on concrete need and calculated risk.

Take the current UK drug shortages. To weather this critical challenge in the long term, ongoing horizon scanning and building buffer stocks accordingly will be key. This could include managing markets, evaluating stock holding as part of tender submissions, and including adequate lead time in tenders to allow for often lengthy contracting cycles and stock onboarding. To ensure ongoing supply of medicines, there is a need for deliberate forward-planning across products, suppliers and markets bolstered by extended regulatory capacity to allow the system to be more agile, allowing for new entrants or substitutes where possible.

Staying ahead in a high-risk world

Long gone are the so-called ‘golden years’ of procurement – the early 2000s, professionals are now finding themselves in the ‘new normal’ which involves everything from global disruptions due to geopolitical conflicts to pandemics and environmental issues. Procurement leaders must now prepare for any possible scenario and be sure their processes have the resilience to weather a number of potential threats.

Collaborative efforts with suppliers to ensure transparency and resilience in the face of disruptive events are paramount to navigating this new normal. Continuous monitoring of the landscape and any developments is also crucial to be able to make informed decisions in real-time. Taking a proactive approach to uncertainty will better position and prepare businesses for potential disruptions and ensure the robustness of their procurement processes.