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How is Brexit Disrupting the World’s Supply Chains?

July 1, 2019
According to a new report, uncertainty over Brexit is creating more supply chain disruption than natural disasters and cyberattacks combined

A term that describes Britain’s exit from the European Union (EU), Brexit has occupied a space on the list of top supply chain disruptions for several years now. Originally decided upon back in 2016, the issue has yet to be resolved. Now delayed until October 31, 2019, the decision over how to split—or whether to split at all—has cause more supply chain disruption over the last five years than natural disasters and cyberattacks combined.

That’s one of the key findings from a new report from Vuealta, which found that 50% of UK business decision makers felt that Brexit uncertainty had negatively impacted their supply chain in the last five years. For its The Future of the Supply Chain report, the advisory firm worked with Censuswide to survey 1,002 business decision makers in the U.S. and the UK.

Here’s what it learned: 

  • Just over a fifth (22%) of these companies had suffered from supply chain disruption due to a cyberattack, and 19% from a natural disaster.
  • This was despite the fact that studies suggest extreme weather events have increased in the last six years, and that a major cyberattack can cost hundreds of millions of dollars to mitigate.
  • About 19% of businesses have a supply chain that encompasses more than 30 suppliers, reflecting a complex network to manage, particularly in times of disruption or change.
  • Business leadership often does not understand the potential impact on their supply chain, whether disruption is caused by a cyberattack (42%), political or market uncertainty (47%), or a natural disaster (43%).
  • Other factors causing negative supply chain impacts were the failure of a single supplier (30%) and spikes in demand overstretching supply chain capacity (28%).
  • The report also found that 20% of respondents thought customers would feel the impact of a supply chain failure within a day, giving them little time to fix issues when they arise.

Becoming more connected may be opening up fantastic new opportunities, but it is also exposing organizations of all sizes to adverse events they previously wouldn’t have had to worry about,” Vuealta points out in the report. “From extreme weather events, to political and market uncertainty and cyber-attacks, it doesn’t matter where you are located – with many businesses requiring ever more complex supply chains, an event doesn’t have to be particularly big for it to disrupt operations.”

What’s Holding Companies Back?

According to Vuealta, 57% of companies say that political or market uncertainty is a key factor holding them back from expanding into new markets, with 50% of UK companies saying their supply chains had been negatively affected by Brexit uncertainty in the last five years. “This might be expected, but it appears Britain’s decision to leave the EU was being felt by U.S. businesses too,” it reports, “with 18% feeling the same as their UK counterparts.”

It is not just political and market uncertainty that’s making companies nervous about expansion, however; it’s also their own supply chains. In fact, just over half (51%) labeled the capacity of their supply chains as a key factor in holding back expansion, and over two thirds (69%) agreed that they needed to improve the efficiency of their supply chains.

“Clearly, in order for businesses in both the U.S. and UK to feel confident enough to expand,” Vuealta points out, “they need to know that their suppliers and logistics partners can support them. Not an easy task when 28% of respondents had been affected by the failure of a single supplier in the last five years.”

Tackling Modern Complexities

The complexity of modern logistics isn’t helping to curb the disruption issues. In fact, it exacerbates them. Interconnected, multilayered, and often unwieldy, Vuealta explains in its report, modern supply chains can cover half the world, taking in primary, secondary, and tertiary manufacturers and producers, freight companies, ocean terminal and airport operators, along with dozens of parties in between.

“It all adds up to more links which can be broken,” it says, “more pieces which can be disabled and the potential for more disruption by outside forces.”

About the Author

Bridget McCrea | Contributing Writer | Supply Chain Connect

Bridget McCrea is a freelance writer who covers business and technology for various publications.

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