Strategic imperatives versus practical issues - the evolution of the supply chain in a pandemic… and Brexit
Matthew Williamson considers the evolution of the supply chain during COVID-19 and Brexit.
The recent news that thousands of testing kits for cancer diagnosis and COVID-19 were not able to reach their destinations as a result of “a logistical failure” was a high profile example of the stresses and issues that manufacturers, retailers, third party logistics providers and all the other entities which make up the modern supply chain are currently facing.
The issue in this case was made more newsworthy as the newly built automated warehouse was there to increase capacity for the healthcare company ahead of Brexit.
Having to plan strategically for Brexit, deal with the particular challenges of the pandemic, as well as attempt to do the ‘day job’ has been challenging to say the least for all parties within the supply chain.
Weightmans supply chain report commissioned last year, revealed that some of the more traditional issues that those involved in the supply chain faced e.g. fuel prices, increasing consumer demand, reduction in delivery time etc. were being complimented by more nebulous concepts such as the implementation of new types of technology e.g. the Internet of Things, increased automation and more innovative restructuring methods but some of these seemed way off on the horizon.
In pre-COVID times 59% of people we surveyed thought access to new technology would increase over the next 5 years. Given the pandemic and the acceleration (by necessity in some instances) of the utilisation of new technologies in order to adapt and respond to the current market place, it is crucial to ensure that the risks associated with any such change are addressed and mitigated. Do those within the supply chain working in these new ways have the appropriate insurance if things go wrong? As the digitisation of parts of the supply chain increases is cover available at all? Are businesses ensuring they are compliant with the retention and processing of their customers and other third party’s data (GDPR)? Whilst some pure play on line retailers may see this as old hat, those new to e-commerce need to ensure their online terms and conditions for sales to businesses and consumers, as well as their interaction with payment providers, are legal as well as fit for purpose.
As the profile of how the ultimate consumer shops changes, the available space to service that requirement needs to change as well. It may be difficult enough to find a form of distribution centre but is it going to be disproportionately expensive to configure it for consumers who, in some sectors, send and return a large proportion of items they purchase? Does the physical space, integrated with the digital offering accommodate this?
As if the issues facing companies weren’t complex enough, it is not just your own supply chain that needs to be looked at; any chain is only as strong as its weakest link. Are suppliers solvent? What happens if they suddenly face an insolvency event and how confident can businesses be that it can be dealt with once identified?
As other recent high profile cases have highlighted, whilst businesses need to adapt to new methods of working, they cannot shirk from their legal obligations; any modern slavery issue within the supply chain can decimate the brand and therefore the value of a company – essential of course for retailers. Is modern slavery something that businesses are confident they can monitor within the supply chain? Do businesses have the necessary visibility up and down stream? Our recent survey said that 38% do not believe they have processes in place to ascertain whether or not suppliers have been convicted of infringement of the Modern Slavery Act, worryingly rising to 47% at board level.
As was illustrated by the recent case referred to above, problems with any part of a supply chain can potentially have acute issues for those needing the relevant services, and that is before looking at the reputational and financial risks with not addressing a business’ obligations.
In addition to all of the issues above, the Brexit trade deal negotiations are reaching a crescendo. Both the UK and EU negotiating teams are continuing negotiations remotely as a result of the pandemic. The two remaining areas of dispute between the EU and UK are State Aid and Fishing policies. Will the issues be narrowed in time? Will the UK ‘walk away’ without a trade deal? Will there be sufficient time for ratification of any outline trade agreement? The impact on the supply chain will be wide and far reaching if the UK fall to operate under the World Trade Organisation rules in the absence of a trade agreement. Just two examples include the facilitating of customs declarations and, of course, tariffs on goods being traded. As the trade deal is reported to be 95% agreed, clarity should follow on these issues imminently.
If you have any queries or need further guidance, contact our retail solicitors.
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