Suppliers and supply chain
You are only as strong as your supply chain.
Organisations need to consider the impact of changes to the trading landscape on their suppliers and contractors.
Things to think about
- Security of supply – Your ability to navigate disruption depends on your suppliers plans and preparations. A problem with even one key supplier can be critical. Have you spoken with your suppliers to ensure they are prepared and can continue to support you?
- Cost of supply may increase – Stockpiling, a drop in sales, or interest rate changes may impact the cashflow of suppliers creating financial difficulties in supply chains. Suppliers may demand new payment terms as they attempt to chase outstanding bills. They may also increase prices to cover additional expenses.
- Contracts may no longer be valid – Leaving the EU may change the legality of some UK contracts which may create risks or opportunities. It may be worth extending delivery times to reflect any changes.
- Disruption may increase time to supply – Changes to the UK’s relationship with Europe are likely to cause significant disruption. Delays at borders are likely to impact supply chain in-bound, potentially causing shortages of key inputs. The delays will be as a result of new customs checks and initial chaos if not all traders have adopted the new customs requirements.
Steps to take now
- Agree plans with suppliers – identify your critical suppliers and communicate with them to ensure they are prepared across their key areas. It may be worth agreeing actions to develop a shared plan or providing additional support.
- Review contracts – checking for any references to EU and force majeure. With new contracts, aim to keep flexibility. This may include pricing for inflation, exchange rate assumptions, using currency that reduces FX risk, and extended delivery times.
- Establish a plan to mitigate disruption at borders. This may be by extending delivery times to customers; assessing alternative freight routes; stockpiling key parts and materials; fewer and larger consignments; or possible UK sourcing options.
- Diversify and prioritise markets. Consider how to serve markets less affected by economic downturn (e.g. ‘value’ offerings; or high-net-worth customers). Reduce exposure to higher risk distributors and review credit risk of customers.