CPO Strategy

Ivalua warns businesses are in no-deal denial

Ivalua report on Brexit

CBI data suggests only 4% of companies are prepared for no deal, putting those that aren’t at risk of tumbling over the cliff edge on the 12th April

Smart procurement firm Ivalua has today warned that businesses trading with Europe need to urgently review supply chain operations ahead of Brexit, or risk being unprepared for the cliff edge posed by leaving without a deal. With the date for leaving the European Union extended to the 12th April at the earliest, companies have been granted more time to prepare for Brexit, which must be used to assess how the disruption to goods and tariff changes could impact them.

With each vote in parliament, it looks more likely that the UK will leave the European Union with no deal in place. In a no deal scenario, the UK will leave without a transition agreement, a legislative cliff edge that will see the European Union apply new rules and tariffs at UK borders. The Government’s own Brexit advisory found no deal would cause additional costs and burdens through new customs procedures, compliance challenges and traffic reduction, all of which businesses need to assess and be prepared to face.

“Despite the spectre of leaving without a deal, many businesses are in no-deal denial, and simply aren’t prepared for free movement of goods to come to an abrupt end,” explains Alex Saric, Smart Procurement Expert at Ivalua. “There will be no transition period and no time to prepare, meaning the business environment will literally change overnight. Businesses must use this extension wisely to evaluate their supply chain and identify potential bottlenecks for the movement of goods, as well as how new tariffs would affect prices. By doing this now, they can pinpoint contracts that could be at risk due to incurring late fees or missing SLAs, allowing them to plan and communicate with customers about how they are going to mitigate against supply shortages and delays. Those that don’t prepare will be left facing the no deal cliff edge and supply chain chaos.”

The CBI said just 4% of businesses are prepared for a no deal scenario as companies bury their heads in the sand. This needs to change, as the CIPS found delays caused by Brexit could hit businesses hard, forcing them to discount goods or see contracts cancelled if there are delays at the border. Businesses must urgently look at key areas of change, factoring in longer lead times, customs and tariffs, as outlined in the PwC advisory. Even with a deal secured, companies could be left scrambling to adapt to the new terms by the 22nd of May.

“We must remember too that Brexit has multiple possible outcomes, so it’s impossible for companies to try and predict the future,” advises Saric. “Instead, businesses need to be able to act fast and make sure they are prepared no matter the result. By taking a smart approach to procurement, companies can ensure supply chains are flexible and gain complete visibility across the supply chain. This will play a vital role in supplier management, helping to identify issues such as future supply shortage or non-compliance and adapt accordingly so they can navigate the turbulent political and economic waters ahead.”

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