With the UK formally leaving the European Union (EU) over the course of the next year, there’s a lot of uncertainty around the future of trade and cross-border relationships.
In the manufacturing sector specifically, the UK is heavily reliant on its relationship with the EU for exports. Brexit is impacting British manufacturers in many ways, and much of the future hinges on the trade agreements that will be put in place.
Below are a few of the impacts Brexit could have on UK manufacturing, and strategies to help companies successfully navigate the coming months and years.
Prepare for supply chain uncertainties
Brexit will undoubtedly have a huge impact on the manufacturing supply chain, both in the UK and more broadly in Europe. In a survey conducted late last year by the Chartered Institute of Procurement and Supply, it was found that 63 per cent of EU27 supply chain managers who work with UK suppliers said they expect to move some of their supply chain out of Britain. Not only this, but one fifth of UK companies involved in supply chain have struggled to secure contracts past March 2019 because of Brexit.
Splitting existing supply chains on both sides is likely to raise costs and reduce efficiency in the manufacturing industry. British companies therefore need to prepare for this by optimising their end-to-end supply chain, especially their service parts supply chain, which can help them dramatically increase both margins and revenue.
Fortunately, smart cloud solutions exist today to help manufacturers track parts, eliminate excess and obsolete parts and forecast when new parts are needed. These practices are critical for meeting customers’ increasing service expectations and maintaining an edge over both direct competitors and third-party parts providers. Beyond keeping products in the right place at the right time, inventory management technology also reduces carrying costs – which are estimated at around 25 per cent of the value of inventory that’s on the shelf.
Blue sky thinking? Adopting the cloud
Switching over to a cloud infrastructure also means that manufacturers can keep their data and operations under one roof. This allows them to streamline workflows across an entire organisation and use real-time business intelligence, overcoming challenges that Brexit might throw up.
Cloud computing for the supply chain is expanding, and it’s projected to be worth $4.4 billion by 2019. A cloud-based system that integrates ERP, pricing and other after-sales service processes, for example, allows manufacturers to make the best decisions for their business by linking all of the company’s available information together with minimal downtime. This stands to benefit all aspects of business, from customer satisfaction to production.
Overcome automotive angst
An industry which will be particularly impacted by Brexit is automotive manufacturing. Each car can contain around 30,000 individual parts – each of which may require input from four different suppliers across Europe. With Brexit complicating the cross-border supply chain, it could be much harder to assemble these automobiles in Britain. For example, 60 per cent of Mini and Rolls Royce parts are imported from the EU to be assembled in Britain. If no deal is struck with the EU, tariff rates could make the production of cars in the UK much more expensive.
To combat this, car manufacturers must look at ways to increase margins and revenue in other ways. While many executives are keenly aware that pricing is a very powerful revenue and profit lever, they often overlook the opportunities associated with optimising the prices of service parts inventories, which can frequently be measured in tens or hundreds of thousands of pounds!
Dynamic pricing offers a data-driven approach. It uses customer value-based algorithms, IoT data and competitor monitoring services to optimise your pricing and therefore increase margins. For example, after adopting a dynamic pricing structure in 2013, Amazon saw a 27 per cent sales increase. The company has been pushing the boundaries of dynamic pricing ever since. With service parts optimisation software, British manufacturers can synchronise pricing at a global level, and easily and automatically adjust it if necessary, helping them stay competitive.
Despite current struggles, manufacturers shouldn’t hang their heads. Instead, they should pay attention to market shifts and realise the profits that can be gained by embracing and maximising the potential in the after-sales service space. It is now the time for British manufacturers to beat the status quo and respond to the challenges of Brexit by allocating spending to increase efficiency and benefits.
By Gill Devine, VP sales EMEA, Syncron.