Countdowns to Christmas are annoying at the best of times, but this year’s comes with an added annoyance of having to prepare for Brexit.
Whether the outcome is positive or negative, there are some changes that we all need to make.
Thankfully, your supply chain will be there to help you – the key is communication and preparation. These 6 essential questions will prepare both you and your supplier for Brexit.
Where are they based, and where do the products come from?
Even if most of your suppliers are the UK, it’s likely that some goods and services will be sourced from the EU.
If your key goods come from the EU, there could be some disruption to them if your supplier isn’t prepared.
Buying from a UK company doesn’t protect you if the supplier has run out of stock.
Of course, it’s your supplier’s problem to sort out their incoming goods but it’s still better to be prepared.
A simple step to take is to make a table of key supplies, the name of the supplier, what country they are based and what country the goods come from. For bulk products it could also help to track the incoming port, as some will be less disrupted than others.
What stock levels do they intend to have?
It’s good to track stock levels in terms of how long they will last. Knowing that your supplier has 2000 unicorns may sound a lot, but it’s not so good if they sell that many in a week.
I would advise that you top up your own stock as well, though this isn’t always possible and it’s a burden on cashflow.
Some tips:
- Give your supplier a forecast of what you’re likely to buy between November and March
- Raise call-off orders – this means you agree to order a certain number of goods but the supplier will store them until you’re ready (and charge you when they ship them)
- For really critical items, go and visit if possible – nothing beats seeing stock levels in person
Honesty is the best policy for planning with suppliers. They’ll be trying to balance enough goods for all their customers and over-estimating how many you require is going to harm relations longer-term. If you’re unsure of your demand, talk to your supplier about a range, for example 20-50 unicorns required each month.
Will any new regulations apply?
The government’s intention has been to ‘grandfather’ EU law over to UK law.
This means, in theory, everything should stay the same. However, new registrations or different processes might change how you operate.
For example, the REACH legislation that covers the import, manufacture and export of chemicals and substances will transfer over to UK law but there are actions that companies in this sector need to take.
Your suppliers are experts in what they do – don’t be afraid to ask questions, they’re probably hoping you do!
Do drivers accompany the goods across the border?
There are two ways goods cross the border to be shipped to you by road:
- Offloaded at the port and collected by a driver
- A single driver makes the whole journey from the EU to the UK
Trained drivers, especially ADR drivers, are in short supply.
The drivers who collect from the port are likely to stay within the UK. This means they should be carrying on as normal during the Brexit period.
The second type of` journey could cause delays. Drivers may not want to accept jobs with UK border crossings because they will lose valuable time in any delays at ports.
There’s not a huge amount you can do about this, but it’s a factor that you should include in your planning process.
What INCOTERMS will we be trading under?
Incoterms are internationally recognised ways of dealing with international deliveries.
They determine who is responsible for:
- Transport
- Insurance
- Customs
- Tariffs
Of the goods during their journeys from the supplier to you.
This isn’t the place to learn the details, but here are the main ones:
Code
Name
Description
EXW
Ex-works
All the risk is with the buyer from the moment the goods are ready to ship
CIP
Carriage & Insurance Paid
The supplier has responsibility for loading, transportation and the insurance up until the customs stage
DAP
Delivered at Place
As per CIP, but the seller is responsible for delivery to your door
DDP
Delivered Duty Paid
All the risk is with the seller, including customs and tariffs
The best way to think about it is to ask yourself: whose risk is it if something happens to the goods on their journey?
You probably won’t worry about a bearing being shipped by DHL from Manchester, but £50,000 worth of glassware from Italy could be a different story.
Suppliers may be hoping to change the INCOTERMS because of Brexit, so it’s worth having the conversation in advance.
How are they set up to do customs?
Even if there aren’t tariffs applied, customs documents will need to be completed.
Whilst we were in the EU, goods flowed freely as if the whole bloc was just one country. Governments didn’t need to track what was moving within the bloc, they just tracked what was coming in and out of the EU to the rest of the world.
Now, both the EU and the UK will want to know what’s travelling across the borders. This means that even if there aren’t tariffs attached to your goods, you’ll still need to fill out customs forms.
The UK is planning to allow businesses to defer their customs declarations throughout 2021, though details are yet to be confirmed. Even if it’s delayed, you’ll still need to track what you’ve brought in from the UK so that you or your suppliers can fill in the paperwork before the deadline.
If you’re not used to doing customs declarations, it would be better to encourage your suppliers to do this on your behalf as part of the sales contract. If not, you could use a Freight Forwarder to support you.
Conclusion | We’re All In This Together
There’s never been a more important time to work together, with both the pandemic and Brexit on the horizon. Be honest about your requirements and hopefully your suppliers will feel like they can be honest with you.
It’s probable that there will be delays for the first quarter of 2021. If your supply chain is going to have problems, it’s better to know as soon as possible so that you can prepare and adapt.
Communication is key – there’s still plenty of time to prepare with your existing suppliers or find new ones if needed.
If you have any questions on this or anything else related to procurement, please feel free to give me a call – 07588 071975
