As soon as Theresa May triggered Article 50 on March 29, 2017, the process of the United Kingdom exiting the European Union began. While this meant definitive change for businesses operating with and within the U.K., logistics stood to be one that would experience seismic change. Almost four years later, there is still no definitive trade agreement. This is despite the fact that we are reaching the end of this particular roller-coaster ride, leading to Brexit fatigue and frustration for U.K. and EU businesses that have been trying to scenario plan until they fall over.
You may ask, “Why all this fuss and frustration? Is it really that big a deal?” Actually, it is. Supply chains and subsequently logistics are a fundamental function of the EU, where countries are bound together to form a continent-sized economy that offers vast economies of scale and scope. A borderless EU that remains tariff and customs-check free has facilitated the evolution of razor sharp just-in-time logistics systems that have become an integral part of companies’ end-to-end supply chains. With changing consumer behavior and the escalation of e-commerce, the capability to move product at speed is required at greater levels than ever before. As a result, upstream and downstream links have become far more time-sensitive and compressed.
Consumers shop from retailers and purchase goods online without fully understanding where the products come from and what it took to get the products to them, and why would they? Once they have the products they want and when they want them, at the price they want to pay for them, the job is completed and the satisfaction is delivered. People only really become aware of logistics when things don’t go according to plan. It is during these instances that terminologies such as “logistics nightmare” or “delivery disaster” are tagged to logistics organizations and the service they provide.
Front and center for logistics leaders and their teams are the concerns around potential time delays that tighter border controls are likely to cause. Currently, logistics modes carrying products travel across the EU with little or no inspection, allowing for speedy border crossings, aligning well to the speedy service all have become so used to in recent times. Much has been written on the potential delays that will occur particularly between the Dover-Calais crossing and the impact of increased physical border and documentation checks. This has the potential to impact all verticals importing and exporting out of the U.K. However, delays to certain products such as medicines or vaccines clearly represent a greater concern, not just to logistics leaders but to entire nations as we grapple with a global pandemic.
In order to mitigate this, the U.K. government has put in a deferral on certain products arriving into the country. Checks on goods entering Britain will be phased-in in three stages up to the summer of 2021. Starting Jan. 1, there will be checks on controlled substances, such as alcohol and tobacco, while standard goods, such as clothes and electronics, will be subject to basic customs procedures. But firms will have up to six months to complete customs declarations and pay relevant tariffs.
While this will alleviate some of the pain for organizations importing into the U.K., it will not relieve the pain for organizations exporting from the U.K., where full checks are expected to be deployed starting Jan. 1. Organizations that are both importing and exporting from the U.K. may well have to navigate two different border checks processes depending on whether the product is leaving or entering the U.K. Simplicity will change to complexity overnight.
In a recent poll by the UK No Deal Planning Commission Survey, only 43% of participants believed there would be any kind of extension to the Dec.31 deadline. Indeed, the date itself does not lend itself well to a transition as many employees are traditionally at home enjoying down-time and holidays with their families. Additionally, with less than 46 days to go, will there be enough time for all the stakeholders to examine and rubber stamp the detail of the agreement in order to successfully begin a new era in January 2021? Perhaps an additional month for preparation wouldn’t be the worst approach. However, others would argue that we are just kicking the can down the road by tagging yet another extended time period onto a process that has already gone on for far too long.
While businesses have been planning to the best of their ability to achieve a state of readiness, what of the readiness of the U.K. government and the EU itself to have all of the levers ready to pull for Jan. 1? Will they be completely ready to deploy these new customs checks and inspections successfully? Unfortunately, we may only find out in the first of week of January.
There is no doubt that the Brexit roller-coaster will have taken us all through various twists and turns before it comes to its destination on Dec. 31. Is this the final destination for this ride or will we just swap one roller coaster for another come Jan. 1?
Gartner Supply Chain