With supply chains just beginning to recover in the wake of COVID-19, the UK’s imminent transition from the EU presents new risks and opportunities in equal measure. Manufacturing Advisor Nick Brandwood explains what importers need to do to prepare, and how to build a supply chain strategy that’s fit for our post-EU future.
There’s been a lot for businesses to deal with over the last few months, and we’re not quite finished yet. With the impacts of COVID-19 on global supply chains now beginning to ease, importers must turn their attention to the UK’s imminent transition from the EU.
If you import goods from the EU, it will pay to start planning now. Fail to prepare and you could well find yourself swept along in a sea of confusing new rules, border delays and disappointed customers. Get it right and you will have a huge opportunity to increase profitability and gain competitive advantage. Events of this scale usually only come along once in a generation. Granted, we’ve had the pleasure of dealing with two this year, but you know what they say – when life gives you lemons…
First things first: familiarise yourself with new requirements
COVID-19 was a surprise; EU Transition is not. There is guidance out there to help you prepare in advance – we’ve compiled it together in one place.
A brief summary: On 1 January 2021, the EU Transition Period will end. From this date, regardless of the outcome of final negotiations, the UK will operate a full external border with the EU and new controls will be placed on imports coming into Great Britain. The controls will be brought in over three phases:
- From January 2021: Importers of standard goods (which excludes ‘controlled’ goods like alcohol and tobacco products) will need to prepare for basic custom requirements, including keeping sufficient records and deciding how to account for and pay VAT. Businesses will then have up to six months to complete customs declarations, and customs duties payable under the new UK Global Tariff regime can be deferred until submission.
- From April 2021: Products of animal origin, regulated plants and plant products will require ‘pre-notification’ and the relevant health documentation.
- From July 2021: Importers will have to make full customs declarations and pay relevant tariffs. Full Safety and Security declarations will also be required from this date.
To be able to complete customs declarations, you must get an EORI number and decide whether or not to use a customs intermediary. If you want to make declarations yourself, there are government grants available for the training and IT improvements required.
That’s a very simple overview – more information is available via our EU Transition portal.
Build your supply chain strategy
Like the COVID-19 crisis, the EU Transition process presents a whole pot of new risks to your supply chain. You could face delays and disruptions at the border, be let down by overambitious suppliers, find yourself being asked to accept poor contract terms or end up with too much cash tied up in stock. How you manage and mitigate these risks will determine your profitability; by managing them with the right strategy you will be able to operate more effectively than your competition and gain the upper hand.
Luckily, the lessons learned during the current crisis will put you in good stead. Over the last couple of months I’ve been delivering supply chain strategy workshops as part of our Strive and Thrive webinar series. In these sessions I talk about how to identify and mitigate risks within the supply chain, many of which apply to EU Transition as easily as they do to the pandemic.
The trick is to map out your full supply chain to identify areas of high risk/opportunity, and then develop a strategy that applies suitable tactics to minimise each risk and maximise profit. Segmenting the elements of your supply chain based on how much they influence the profitability of your business and how much risk they present to your business will help you to identify the appropriate tactic:
- Low risk, low value add items: These tend to be non-critical products/components that are available in abundance and have little impact on the value adding process. Don’t over think this segment; reduce costs where you can by reducing administrative burden or streamlining procurement, for example through vendor managed inventory.
- Low risk, high value add items: These are products/components that are readily available but have a high impact on the value adding process. Treat this segment as a buyers’ market. You can maximise profitability by increasing your bargaining power through tendering and regularly reviewing your pricing and supplier relationships.
- High risk, low value add items: This is where products/components have a low impact on profitability but supply is unpredictable or scarce. Suitable tactics may include holding more stock, looking for alternative suppliers, and substituting or switching to activities which add higher value.
- High risk, high value add items: These are critical products/components in terms of both contribution to the value adding process and risks in the supply chain. Look at building stronger, longer-term and more innovative partnerships with suppliers, or explore the potential to make in-house or buy local.
Remember: your strategy doesn’t have to be perfect, just better than the competition. Make sure you review it regularly – you only have to look at the last few months to see how rapidly things can change.
Communicate with your suppliers
Engage with your overseas suppliers now to discuss how to work together going forward and whether to expect delays or logistical changes. You also need to ensure both sides understand incoming rules for relevant commodities and have the right resources in place to complete new customs procedures.
Existing contracts should also be reviewed to see if the legal responsibilities and requirements of each party are affected. You can refer to international Incoterms rules for guidance.
Consider whether importing remains the best approach
Depending on the products or components you import, part of your supply chain strategy could involve reshoring supply to UK. This is a process already underway for a lot of manufacturers looking to reduce supply chain risk in the aftermath of COVID-19.
It’s a tactic that requires careful thought, and isn’t suitable in all cases, but when done successfully it not only removes risk but can improve profitability as well. Appreciation that we have an under-utilised manufacturing base in the UK is growing, with more and more businesses and consumers willing to pay a premium for British-made products. In fact, a recent survey found that three quarters of businesses are more likely to buy British post-pandemic.
Shortening your supply chain also has environmental benefits, which is a risk factor that will be increasingly important in the coming years.
As always, make sure you assess any new suppliers to ensure that they meet all the required standards.
How we can help
We have established an in-house EU Transition Initiative to provide reliable facts, insights and practice advice in preparation for EU Transition. As part of the initiative, we have a dedicated information portal on our website, including an online toolkit that provides tailored guidance for SMEs.
We also have a new support programme specifically for manufacturers, Made for Manufacturing. The programme is delivered entirely online, with virtual tours, expert speakers, peer-to-peer learning and one-to-one support from a specialist Manufacturing Advisor to put you in the best possible position for the future.