The UK’s decision to leave the European Union has added to the uncertainty for businesses operating in the construction industry. Here, Steve Smith, general manager of the GM Supply Chain for Finning UK and Ireland, discusses the steps the company has taken to help its customers bear the brunt of Brexit.
Brexit means uncertainty; on material supply, taxation, quota limits and freight fees, all of which impacts construction operations both in the UK and on the wider continent. The extent of this impact is yet unknown, but the consequences are already taking a toll on British economy.
The building industry in the UK suffered the biggest fall in new work in over a decade as uncertainty around Brexit paralysed progress in the sector. According to the HIS Markit/Cips UK construction PMI survey, new orders dropped from 44.6 in July to 40 in October, the lowest since March 2009 when the economy was in recession after the financial crash.
We are in unprecedented times. Customers rely on Finning to provide parts, service and support to keep sites running and them in business. So, it was important that we understood how different post-Brexit scenarios would affect supply chains, so that we could minimise disruption to the services and support we provide.
Start on time
Two years ago, as businesses began freezing spending and postponing investments, Finning took decisive action, putting together a cross-organisation committee to investigate the consequences of Brexit on the distribution of construction equipment. Finning’s Brexit committee was comprised of executive directors, representatives from supply chain management, treasury, finances and sales. Since Finning is UK’s leading supplier of Cat equipment we also ensured we included representatives from the machine maker, including its legal department – to make sure we covered all angles and considered all eventualities.
Ultimately our aim is to ensure our customers’ experience is unchanged. To meet our customers’ demands for parts and service, no matter what, we outlined a series of possible post-Brexit scenarios to gain an understanding of how each of them would impact our supply chain, and the impact this would have on our customers.
We also engaged with KPMG, a major multinational professional services network, who helped us to figure out the legal and financial implications of a no-deal scenario.
Adding safety stock
Relying on safety stock is one way to minimise disruption to supply and alleviate uncertainties on transportation of goods from and to the EU. The only way to bypass these inconveniences is to add extra stock, so customers can count on a steady supply. Since the creation of its Brexit committee, Finning has deliberately increased its stock by more than 40 per cent to guarantee that our customers’ demands for parts are fulfilled, regardless of what’s happening with Brexit.
Finning has also paid extra attention to the choice of its shipping partners. Making sure that suppliers have the right permits to transit to and from the EU, and that they are knowledgeable about the newest guidelines in this sense, is now part the company’s suppliers and distributors approval process.
The outcomes of Brexit negotiations have the potential to significantly disrupt the construction market, and companies that have not taken action to protect themselves could be left in a position of disadvantage. Future-proofing our supply chain by forging the right relations and increasing stock has been a costly move, however this willingness to invest and stay ahead of times will undoubtedly help our customers through these turbulent economic times.