Peter Edlund, DiCentral's Chief Solutions Evangelist, covers the latest on Brexit, the US and China Trade Wars, and how it is impacting retailers and their supply chain processes.The video transcript is available below. For a deeper dive, join this month's webinar where Peter will discuss how to ensure compliance amidst these changes.
[Peter] Hello, I am Peter Edlund and welcome to the connected show and today's quick connect segment.
Geo-political events such as Brexit and the continuing trade war between the US and China are having large impacts on global supply chains not to mention competitive pressures to integrate and automate supply chain related process.
Just last week Britain’s prime minister’s plan to exit the EU in an orderly fashion was put to test, as internal politics reduce the chances of having a deal worked out with the EU before the Brexit Deadline of March 29, 2019.
The British government is hard at work hammering out a deal that would ensure a smooth transition out of the EU. However many EU companies have been adjusting their supply chains for the possibility of no deal.
Several industries from aviation to agriculture could be impacted by hard borders and additional customs related paperwork. This is not only impacting businesses within Britain but many EU companies and the companies that are doing business with them. EU companies and their trading partners have developed over the past 30+ years, complex integrated supply chains that allow for seamless cross-border trade.
Here are some recent examples of how companies are preparing for the worst-case scenarios.
In the automotive space, Aston Martin, a British manufacturer, is concerned that deliveries of critical Euro-made parts will be delayed in ports and at borders, impacting the production of their British-made cars. The supply chain teams at Aston are planning on using air transportation to get their car parts to final assembly.
In addition, in the event that the EU will no longer recognize Britain automobile certification, Aston martin has just switched its EU certification process to Spain to ensure sales can continue within the EU.
Airbus is in a similar situation regarding their supply chain, the wings for their aircraft are manufactured in Britain and they depend on many EU suppliers. Like other companies preparing for Brexit Airbus is also looking at various scenarios and contingency plans for a Hard Brexit.
Now looking at the trade war with China.
I was recently visiting with a large US-based textile importer, and they told me they are feeling margin pressure because of the China tariffs. They have started the process of re-sourcing, finding new suppliers in other countries like Vietnam. Unfoundedly, years of working with and developing processes that support the smooth import of textiles will have to start all over with a new set of suppliers.
As recently reported by CNN, Steve Madden (SHOO), whose handbags have been hit by a 10% tariff, says it’s moving a significant chunk of its production to Cambodia and other countries. The company currently makes about 85% of its handbags in China, a figure that could drop to 50% or 60% next year.
As in the examples I just mentioned, reconfiguring the supply chain requires the ability to quickly onboard partners and the digital processes that drive efficiency.
Having a plan that can test and verify that supply chain partners can comply with your business automation rules is critical, as most ERP and supply chain related systems are highly dependent on accurate and timely digital data. The last thing you want is a digital process to break down causing your organization to spend more money and have the potential to negatively impact customer service and sales.
Managing change is not new to many supply chain professionals, however the rate of change is increasing and the dependency on digital supply chains are now the life blood of most companies. How companies plan and manage that change will be the difference between those that win or those that will lose.
Thank you again for joining me on today's quick connect segment. I'm your host Peter Edlund, until next time stay connected.