Post Brexit - inefficiencies of supply chains

The most recent figures from the UK Office for National Statistics[1] made grim reading. Imports from the EU to the UK, having fallen by almost 30% in January, showed only an anaemic recovery of 7% in February. At first glance, it appears that exports from the UK to the EU had fared better, with a good proportion of January’s loss returning in February. Looking under the surface, however, shows that most of this recovery was due to two sectors – machinery and transport equipment (incl. cars) and chemicals (incl. vaccine ingredients). This indicates that the impact of Brexit on trade volumes is likely to be persistent.

While some businesses may have given up on cross-border trade, many more are determined to make it work but have found that operating in the post-Brexit world comes at a price. Some cost increases are obvious and immediate, such as brokerage fees. Others may take longer to be recognised, such as increases in transport rates or raw material prices. The complexity of internal organisations has also increased as processes become bloated with new, non-value-adding activities. Arguably worst of all is the fact that the drive for supply chain optimisation has been halted because many businesses are simply operating in Brexit survival mode.

The most popular response has been to outsource clearance activities, but this is not without its own difficulties. Demand for brokerage services has been outstripping supply, and so this is not a buyer’s market. In addition, border clearance often requires the coordination of multiple services (for example production of documentation, veterinary certification for some foods, export declaration, import declaration, port clearance and, of course, transportation). Finding a service provider to cover all these activities is difficult – few freight forwarders, for example, would provide veterinary services. In most cases, companies must manage multiple suppliers and deal internally with the resulting increase in cost and complexity.

Automation is one way out of this trap. Leading providers are now offering software that is increasingly sophisticated and capable. However, no one solution will do everything, and some tasks cannot currently be automated. Even when the right solution is found, expertise is needed to integrate software into existing operations, diligence is needed to ensure that the necessary data is maintained, and human oversight is needed to manage unforeseen events. Consequently, many businesses are reluctant to start down the path of automation.

Maybe we should expect businesses to build their own expertise in this new discipline of border clearance? After all, it is now a capability that impacts operational efficiency, new product development and even customer acquisition. However, building these skills internally is difficult, especially when there seem to be almost daily changes in regulations. As most businesses need one, or at most two, such experts, issues of succession, absence and career planning will arise. In many cases, the whole subject is simply put in the ‘too difficult’ box, supply chain inefficiencies are deliberately created in order to avoid confronting the subject and new business opportunities are written-off as being too costly.

This is a bleak picture of successful and capable businesses that are struggling under the weight of added costs, increased complexity and reduced flexibility. There is a real danger that mid-sized companies, whose horizons should have been expanded by the promise of tariff-free trade between the UK and EU, will focus on their domestic markets due to the genuine difficulties of doing business across the new borders.

Here at Centigo, we have over 300 consultants who are highly qualified, well trained and deeply experienced across a wide range of industries. In particular, we have experts in customs and border clearance who have helped businesses large and small through this kind of process before. We can bring to the table tried and tested approaches that can be tailored to your specific needs. We can help you:

It will not be easy to emerge from Brexit survival mode, but those companies that lead the way will gain competitive advantage as they are quicker to return to – and exceed - pre-Brexit levels of efficiency and flexibility. To find out how Centigo can help you be amongst these leaders, please contact one of our partners below.

[1] Office for National Statistics release “UK Trade: February 2021”.