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Building resilience into your supply base

by | Mar 19, 2019 | Brexit, Strategic Sourcing

Every Irish company needs a plan to deal with the impact on supply chains once the UK withdraws from the EU.This is the advice of Mike McGrath, managing director of specialist procurement consultancy ARVO.

 

“With the advent of Brexit the UK will become a third country in terms of trade with the EU,” he explains. There is a huge level of interdependence in the supply chains between the two countries, and with no Brexit deal done yet it is difficult for businesses to plan for what it will mean. It is not like Y2K, food and mouth disease or GDPR, where we had defined problems to deal with which meant businesses could prepare. Brexit is different.”

 

Understand your Brexit exposure

While some businesses will be less exposed than others to the impact of Brexit, he argues that every company still needs to understand it. “It is certainly the case that some sectors are more exposed, whereas IT and services are less so, as they do not have products crossing borders,” he notes.

 

Increased administration post Brexit

“There will be logistics issues, there will be customs declarations, there will be VAT and possibly duties, as well as a huge amount of bureaucracy to contend with,” he adds. “Businesses are busy at selling and generating profits but will have to make time for the increased administrative burden and the costs that will entail.”

 

Analysing your Brexit risk

McGrath warns against the concept of “Brexit fatigue”, the condition which first emerged as people became tired of the slow pace of Brexit negotiations. “Companies still need to make their own strategic arrangements and contingency plans. Every business should have a Brexit plan, whether that’s one page or 100. There is good support available from Enterprise Ireland for companies wishing to analyse their risk and regardless of the size of the business or the resources available, they should have a plan which prepares them for the worst while still hoping for the best.”

 

Planning for Brexit

McGrath advises businesses to go through everything, product by product, offering by offering and component by component to establish if there is a Brexit risk associated with any of them. “For example, UK suppliers won’t necessarily have a CE mark or REACH approval for chemicals anymore. You have to understand the risks and the cost implications for everything.”

Once the risk assessment has been complete, it is time to start contingency planning. “If there is to be an increase in costs, you have to ask if customers can take a price increase. Or can you reduce costs in other areas? Many Irish companies are currently going through this process.”

 

Supply chain

In some cases, it might be possible to secure alternative sources for products, but this may not always be possible. “The UK still has considerable strengths in particular industries, and it might not be possible to find an alternative supplier. Even if the supplies are coming from other EU countries, there could still be delays. The landbridge through Britain currently takes about 20 hours. After Brexit, that might be 40 hours and that could present problems for products with a short shelf life.”

The answer to many of these issues lies with the development of closer and better relationships with key suppliers. “We will still trade with the UK after Brexit, and if a product from the UK is unique, we will still need it. Building close relationships with suppliers and reaching formal agreements to secure future supplies is crucial.”

In cases where security of supply is an issue, there may be alternatives. “Companies need to look at their suppliers and see which are the most important and what the impact of Brexit might be on them if they can continue to supply. They might be able to find alternative suppliers elsewhere in the EU. If supplies are coming through a UK distributor, there is always the option for SMEs to come together to group buy directly from the source and bypass the Brexit risk.”

While companies may resent having to spend time on resources dealing with Brexit, McGrath contends that it is far from wasted. “Even if Brexit wasn’t happening, it is always good for a business to have the most resilient and efficient supply chain possible. Ash clouds, foot and mouth disease, Trump-inspired trade wars – these are all business risks that companies have to navigate their way through, and preparing for Brexit can only help with that.”

Mike Mc Grath has published an eBook Supplier Risks through Brexit. A copy is available here https://arvo.ie/go/ebook

 

Enterprise Ireland support

 

There are many supports available to Irish businesses, including Enterprise Ireland’s Act On Initiative which provides an independent consultant to analyse your business and develop a specific Brexit action plan.

Learn more about how Enterprise Ireland can support your business to strengthen its capabilities and best prepare for Brexit.

 

To learn more about building stability into your supplier relationships watch Mike’s webinar:  Building Resilience into your Supply Base.

How will Brexit impact the Irish life sciences sector?

by | Feb 6, 2019 | Brexit, Strategic Sourcing

With its global and highly regulated nature and highly complex supply chains, the Irish life sciences sector will face considerable challenges as a result of Brexit, regardless of the eventual outcome of the process.

The sector encompasses a vibrant pharmaceutical industry which is responsible for exports of almost €70 billion annually. In addition, it employs around 30,000 people directly while the medical devices sector employs a further 38,000 people.

Irish-owned life sciences businesses include manufacturers, laboratory service providers, research operations, wholesalers and distributors, and Brexit presents a number of issues for them, most notably the creation of new customs barriers between the EU and the UK, and the impact of the UK’s departure from the EU regulatory system.

 

Know your supply chain

At a recent Brexit Stakeholder Event hosted by the Health Products Regulatory Authority (HPRA), more than 400 industry representatives were given a detailed briefing on the preparations being made to mitigate the impacts of Brexit and ensure continuity of supply of potentially life-saving medicines and medical devices to Irish patients.

Aoife Farrell, Health Products Distribution Manager with the HPRA, advised companies to ensure that they had detailed knowledge of their supply chains, and posed a number of questions. “I can’t stress enough the importance of mapping out your supply chain in detail – all the way from the raw materials needed to manufacture to the end product reaching the patient. Do you know where the active substance comes from; do you know how it gets here; does it transit the UK, or does it come from a UK manufacturing or storage facility; and what new regulatory and customs requirements do you need to be familiar with?”

 

Pharmaceuticals

From a regulatory point of view, when the UK becomes a third country products will have to be tested and certified at the point of import into the EU. The EU authorisation system for pharmaceutical products has a number of layers to it and these will have to be dealt with following Brexit. HPRA emphasised that it will work with stakeholders in managing their pathway to regulatory compliance in the event of a “no deal” Brexit.

The situation was eased somewhat as the UK Government announced that EU Community Marketing Authorisations will be converted to UK Marketing Authorisations following the UK’s departure from the EU.

 

Medical Devices

The role for HPRA for medical devices is quite different as they do not authorise medical devices. These products are certified by more than 50 notified bodies across the EU. However, it is estimated that up to 40 per cent of medical device products sold in Europe are certified by UK bodies.

Niall MacAleenan, Head of the Medical Devices Department, HPRA, explained that the European Commission announced some time ago that certificates issued by UK bodies will become invalid in the event of no deal being reached on withdrawal. This requires Irish manufacturers to explore alternative certification arranges and distributors and importers to engage with their suppliers to encourage them to secure alternative certification, or to find alternative products which are certified by notified bodies within the EU-27.

A number of UK notified bodies are already making arrangements to establish a presence in the EU, and this will alleviate the situation for many Irish companies. Irish manufacturers which currently have their products certified by UK bodies may also have to make alternative arrangements in order to continue to export to EU markets.

 

Dealing with Customs

Now that the UK has become a third country customs will be a mandatory requirement for goods passing between Ireland and the UK. While there are no specific requirements applying to medicines and medical devices, Aoife Farrell had a warning in relation to mixed loads.

“If your goods are being transported in a mixed load that also contains goods like food, some of which require a mandatory customs check, there will be delays,” she warned. “If your products are subject to a short shelf life, or require particular storage conditions, it would be wise to attempt to avoid this situation.”

She added that there are special customs procedures in place for goods originating in one EU country and transiting through the UK before arriving in Ireland. “The HPRA will not regard these products as having been exported to a third country and re-imported from it.”

Carol-Ann O’Keeffe, Assistant Principal with Revenue Corporate Affairs and Customs noted that goods destined from the UK, coming in from the UK, or transiting through it will require customs declarations. “These declarations are submitted electronically and processed in milliseconds. We carry out a risk analysis and that guides us as to which consignments are checked. In general, the vast majority will be green routed with no check. At present, the reality is that 92 per cent of goods coming in from third countries are green routed.”

 

Key steps for exporters

And she had some advice for exporters. “If you are selling goods into the UK, you will need to supply certain key data in advance. These include the tariff codes for the products; the origin of the products; the consigner; the consignee; and the value. The UK is in the process of passing new legislation requiring customs formalities for imports to the UK to be completed before goods can even be loaded onto the ship. You will need to make sure that your customer has all the information needed in order to complete the formalities; otherwise, the shipment cannot go ahead.”

She advised companies with doubts in relation to customs arrangements post-Brexit to use the online customs training module available from Enterprise Ireland. “That’s a really valuable tool to access,” she added.