July 6, 2016
How many words and Xs does it take to kick out a sitting head of state and cause global market turmoil? The answer is two words (“Leave” and “Brexit”), and about 17.4 million votes marked with an X. With close to 52 of percent of voters in the United Kingdom voting “Leave,” Brexit is now breaking the Internet (and world markets and political careers).
Ever since the majority of voters in the U.K. elected to have the country leave the European Union altogether, the fallout has been disruptive (and not in the positive Silicon Valley sense).
- Prime Minister David Cameron resigned not long after the referendum votes became official.
- Standard & Poor’s, Moody’s and Fitch Ratings all lowered their debt assessments of the U.K.
- The British pound lost much of its worth, and reached lows not seen since 1985 in the immediate aftermath of the vote.
- There have been rumors swirling that Scotland and even London might declare their independence from the U.K., while others have speculated that perhaps Northern Ireland would leave as well.
What does Brexit mean for your supply chain?
The two biggest effects Brexit may have on the supply chain is the cost and the shipment of goods. For one, with the pound at an all-time low, the costs associated with doing anything in the U.K. are lower too. This means that a liter of petrol is cheaper now than before, but it also means that firms can expect to bring in smaller gross profits with final goods selling for comparatively less now.
As far as the supply chain is concerned, perhaps the biggest fallout from Brexit may come from the U.K. ostensibly leaving the EU’s open market. While the European Union is in part a political entity, it is also an economic force as it removes just about all trade barriers between member states. After Brexit, The Wall Street Journal reported, the U.K. will likely have to negotiate new trade terms with each EU country, and that may mean more tariffs, taxes, and other barriers when shipping goods and services to and from the U.K. It may even mean that certain factories and ports become more popular over other options due to evolving trade agreements.
Considering that the “Leave” vote tallies took some by surprise, the Brexit is now forcing many companies to reconsider how their entire supply chain is structured. Systems that used to be ideal may no longer be so with costs and logistics in flux.
How supply chain intelligence helps you battle uncertainty
While it is unclear what the final outlook will be with much to be negotiated and strategies to be finalized, there is some ways a company can manage In particular, by adopting supply chain intelligence now, firms will have greater oversight and clarity over all elements of their value chain, providing them with the descriptive, predictive and prescriptive analytics capabilities needed to weather such a change in economic climate.
Disruptions to the value chain can happen quickly, unexpectedly and from many different sources. It is just plain old macroeconomics. But with supply chain intelligence, you can better pivot as necessary when such sea changes arise.
Check out our customer success stories to learn more about how other companies better navigate risks and improve profit margins with supply chain intelligence. The story of Columbia Sportswear can really help shed light on this most recent macroeconomic change, as the brand used supply chain intelligence to weather port closures on the West Coast in 2015 and continually improve profits – a true win-win situation!