16 Mar Brexit and the Impact on Business Continuity for SMBs
Brexit has already shown an influence on not only the UK but the world economy. As always, technology will prevail as the unknown answer to most problems but solutions to manage cross-border business are essential as we absorb the ‘new normal’ and its corresponding uncertainty. Something that we all have to embrace as we move into a new paradigm.
The UK’s concentration of trade is remarkable. More than 50% of UK businesses depend on the import of goods from the EU (France, Germany, Ireland). There is one other notable country in The Netherlands and, with its port of Rotterdam, has a significant role in international trade and financial activities. A major part of UK export goes to these same countries which means that companies doing business with these countries have to ponder their approach in terms of supply chain management, production, warehousing, and the distribution of goods. This thought process will allow them to facilitate greater flexibility in business operations. (Read more about business flexibility here)
ERP systems are designed to automate complex business processes, however, in more stable times, the net product of such automation is taken for granted. The real benefits of using ERP for operations start to become visible when unsteady times emerge. Invariably, this is precisely when the wisdom of choosing the right ERP becomes clear, certainly in terms of business continuity. We can see Brexit as a critical test for companies and the implementation of a Modern ERP as a means of succeeding in that test.
Brexit: Redefining The Business Strategy
Brexit has an impact on almost all elements of supply chain processes, from planning, with challenges such as longer lead time for customs, which in turn have an impact on inventory management because stock needs to be thoughtfully handled to counter increased lead times, changes in supply chain operations costs and the inherent bureaucracy involved in dealing with customs processes.
This, in turn, has a significant influence on overall business strategy. To automate business processes, they have to be well defined and clear, holistic.
Companies, which already have an ERP system implemented, have to redefine their business processes and decide which additional data should be monitored and added to ERP analysis. They also have to decide which enhancements are required to the existing processes, what has to be changed and what has to be stopped.
Companies that are still considering an ERP implementation are in this case in a better position, since they just need to adapt their business processes to the new reality, and set everything up taking into account new demands.
Let’s discuss here, in more detail, which elements should be taken into account when planning the overall business strategy updates:
- Strategic Thinking
In considering ‘what if’ planning, the most useful activity is predicting likely scenarios and thinking of different solutions to those scenarios.
What does it mean for companies that already have an ERP system implemented? They will need to combine their strategic planning with powerful business intelligence tools (for forecasting and analytics), which can be offered in ERP. This also has to be strengthened with the help of fast decisions and quick reactions to the market, which is impossible without real-time data visibility. The agile and flexible organisation can overcome all challenges much easier.
Reinforced business intelligence capabilities help companies to forecast future demands and plan their future sales volumes much easier. And flexibility helps to cope with high volatility and uncertainty in demand levels.
- Sourcing Processes
Amongst other important tasks is the development of alternative suppliers and potential adjustment of the product mix. Many companies may also start sourcing more locally, hedge currency, improve inventory tactics and improve business processes connected to materials sourcing to meet planned and actual demand. ERP drives the precise ordering of products and services in a way that optimises material investment which is vital when money is stretched by the changing demands on cash from the new business model. Customers become precious here and storing quality information for customer receipts and automating payments for what is ordered and received all contribute to service levels and satisfaction quotient.
- Manufacturing Processes
Companies that manufacture will need to consider adjustments to production, think about how to optimise costs, ensure that components match the production schedule, maintain the right material levels, reconsider new plans, delivery schedules and purchasing. ERP users will need to reconsider if their raw material plans take into account everything associated with Brexit changes – e.g. changes in costs of delivery, tariffs and customs duties, increased time of delivery.
The main changes will be directed to purchasing plans (what and when in purchasing) and capacity plans
(predictions of production overload and variations in resources).
- Warehousing Processes
Many companies in the food, automotive, FMCG, pharmaceutical goods have been forced to stockpile their products to meet fast-moving consumer demand in order to guarantee coverage and business continuity. This was forced by the prospect of border delays. Inevitably, some other companies struggle with insufficient inventory storage space. Forward planning and the use of business intelligence tools are essential for companies that want to maintain their positions in the market. Business processes have to be updated to reflect the new supply arrangements and demand variations. Some companies might also consider relocating their warehouses outside of the UK. In this case, managing the company will become even more complicated and we can see here that ERP can help overcome these new challenges.
- Delivery Processes
Changes in the supply of raw materials and components influence many industries directly and many companies re-evaluate their supply chains as well as focus on local supply wherever possible or find second source suppliers. These changes can be simplified and have a less destructive impact on the business operations, once the ERP system is optimised.
Business Challenges Related To Brexit
- ‘Contracts have to be updated’
Due to the new business reality, both long-term and short-term supply chain contracts will inevitably be reviewed. The major impact will be not only in terms of the contract itself but on prices for products. Companies that use ERP systems can handle many issues related to contract updates within ERP. For example, contract templates as well as price updates can be easily changed within an ERP system. Even with uncertain situations, business owners can be sure that they can handle everything related to contract management fast and efficiently.
- ‘Business processes have to be updated’
New requirements to business and trading operations with the EU force business owners to reconfigure ERP systems settings – how information is sourced, new pricing models, additional suppliers information, changes in invoicing, taxes, customs duties, tariffs, VAT and shipping rates. The flexibility of ERP systems plays a major role and has a direct impact on revenue. New business realities, such as Brexit, reflect the importance of ERP flexibility – it’s not only a crucial feature, it’s a vital one.
Brexit has fully changed the business operations of UK-based companies that deal with the EU. Although initially, the uncertainty associated with these changes seemed like a nightmare for many company owners, those who adapted to the new reality either by updating their business management systems or by implementing them from scratch, have gained a competitive advantage. They have been able to streamline their processes and, kept their business buoyant and ready for growth. Although there are many significant challenges associated with Brexit, such as new regulations, added cost from bureaucracy and therefore reduced profitability, with the correct approach to processes management, the new environment can be far more manageable. A harsh as it sounds, and as with all disruptions, it’s the fittest who are most likely to survive and that ‘fitness’ emerges clearly as essentially being a question of business agility. Only from having the right ERP will true resiliency and business continuity be achievable.