Brexit pain for UK businesses, as supply chain costs rise
Brexit uncertainty is causing businesses to pass the increase in costs incurred as a result of supply chain challenges on to consumers, according to new research from Chartered Institute of Procurement & Supply.
Nearly a third (32%) of UK businesses with EU suppliers have already increased their prices as a result of the vote to leave the EU, while two-fifths (41%) plan to increase their prices in the future in order to offset the potential costs of Brexit.
Just under a quarter (23%) of UK businesses said they plan to reduce the size of their workforce to offset Brexit-related costs, potentially leading to an increase in UK unemployment, which rose for the first time since Brexit in February 2018 to 4.4%.
Additionally, more than one in 10 (11%) EU companies have moved some of their workforce out of the UK since the Brexit vote.
The CIPS research is the third in a series of surveys which have tracked the impact of Brexit on supply chains since May 2017. This research is the output of a survey of 2,204 supply chain managers - the professionals responsible for negotiating with the UK’s suppliers and clients at home and abroad.
Currency instability has had a detrimental impact on costs since the Brexit vote with these increases now being passed from businesses to consumers.
With three-in-five (60%) UK businesses with EU suppliers saying that currency fluctuations after the vote have made their supply chains more expensive to manage, consumers are already paying the price of EU withdrawal some twelve months ahead of official departure from the Union.
With still one year to go until the UK’s departure from the EU, 9% of UK businesses with EU suppliers have already lost or had contracts cancelled as a direct result of Brexit.
On top of the lost contracts, around one in seven (14%) EU businesses with UK suppliers have already moved parts of their business out of the UK in order to reduce their exposure to any complications resulting from Brexit.
Even more concerning is the admission that almost a quarter (22%) of UK businesses with EU suppliers are having difficulty securing contracts which run after March 2019. These numbers raise fears of an imminent collapse in the UK’s supply chain following Brexit, unless negotiators can give businesses on both side of the channel greater clarity around what the future trading relationship between the UK and EU will look like.
John Glen, Economist at the CIPS, said: “Businesses have little choice but to pass on some of their rising costs to consumers in order to protect their profit margins and stay in business, as a result of the crippling cost of Brexit. However, businesses are still taking the brunt of the impact as there is a limit to what they can pass on to consumers at a time of stagnant wage growth, and rising inflation.
“Businesses are now looking elsewhere to try and recuperate the money they are losing as a result of Brexit. To achieve this, many are also looking to switch suppliers, but they’re likely to have difficulty finding suitable alternatives in the UK. It is therefore crucial they don’t burn their bridges with their EU contacts but instead work to build stronger relationships with European partners.”
Pandora and IBM digitise jewellery supply chain
Pandora has overhauled its global supply chain in partnership with IBM amid an ecommerce sales boom for its hand-finished jewellery.
The company found international success offering customisable charm bracelets and other personalised jewellery though its chain of bricks and mortar retail destinations. But in 2020, as the COVID-19 outbreak forced physical stores to close, Pandora strengthened its omnichannel operations and doubled online sales.
A focus on customer experience included deploying IBM’s Sterling Order Management, increasing supply chain resiliency and safeguarding against disruption across the global value chain.
Pandora leverages IBM Sterling Order Management as the backbone it its omnichannel fulfilment, with Salesforce Commerce Cloud powering its ecommerce. Greater automation across its channels has boosted the jeweller’s sustainability credentials, IBM said, streamlining processes for more efficient delivery. It has also given in-store staff and virtual customer service representatives superior end-to-end visibility to better meet consumer needs.
Jim Cruickshank, VP of Digital Development & Retail Technology, Pandora, said the digital transformation journey has brought “digital and store technology closer together and closer to the customer”, highlighting how important the customer journey remains, even during unprecedented disruption.
"Our mission is about creating a personal experience and we've instituted massive platform changes with IBM Sterling and Salesforce to enable new digital-first capabilities that are much more individualised, localised and connected across channels and markets,” he added.
Pandora’s pivot to digital
The pandemic forced the doors closed at most of Pandora’s 2,700 retail locations. To remain competitive, it pivoted to online retail. Virtual queuing for stores and virtual product trials via augmented reality (AR) technology went someway to emulating the in-store experience and retail theatre that is the brand’s hallmark. Meanwhile digital investments in supply chain efficiency was central to delivering on consumer demand.
“Consumer behaviour has significantly shifted and will continue to evolve with businesses needing to quickly adapt to new preferences and needs,” said Kareem Yusuf, General Manager, AI Applications and Blockchain, IBM. “To address this shift, leading retailers like Pandora rely on innovation to increase their business agility by enabling and scaling sustainable supply chain operations using AI and cloud.”
Yusuf said Pandora’s success was indicative of how to remain competitive by “finding new ways to create differentiated customer experiences that protect their enterprises from disruptions to help mitigate risk and accelerate growth”.