It’s been a long time coming, but finally Brexit is upon us. We are beginning to understand the effect this has on businesses but whilst the trade deal has been signed, negotiations are still ongoing for numerous sectors. We therefore cannot talk in great length about the service industry, for example, as there hasn’t been too much agreed as of yet. However, we want to discuss the trade deal in general and the implications it has for businesses. This article will look at four direct implications of Brexit and how your business needs to adapt to ensure that these changes do not have a large, negative impact. Keep reading to learn how your business can navigate: increased delays at the borders, difficulty importing goods, changes to mobility and freedom of movement, and changes to tariffs. These are challenges that all UK businesses are facing right now, make sure your business is ready.
Delays at the Borders
We have already seen the impact of increased administration being required to transport goods to Europe: delays – and plenty of them. One industry repeatedly making headlines is seafood. One article from the BBC reported how a Scottish shellfish firm is on the brink of bankruptcy as delays at ports are spoiling their goods. The shellfish must get to their market in France within 12-24 hours to keep them fresh – due to delays, these pallets of shellfish are arriving dead and rotten. This is just one story, many more will not be deemed interesting enough for the headlines, but the bottom line is that businesses are suffering.
It is a real challenge that more and more administration is required for goods to enter and exit the UK, these administration activities take time. This time is very likely taking even longer as a result of COVID – not everybody is in place at the ports. Not only is there increased workload of administration, but the capacity is not there to complete it. The resources working for the ports are also furloughed or working from home, or even worse, ill or self-isolating. So, it is doubly challenging in the present climate. Though, this is of no comfort to your business which is suffering the increased lead-times. The delays make it difficult to commit to due dates – which is particularly worrying if you are transporting perishable goods. Regardless of sector though, later deliveries equate to poorer customer service. In addition, it can also have an impact on the speed at which you can invoice, and therefore generate revenue.
So, your immediate problem is speed – it all needs to be faster. If your business must suffer increased delays, you need to offset that by being faster in your ability to produce and supply your goods. Every day you complete a job earlier means a delay at the borders has less effect on the service your customers experience, and on your ability to invoice sooner. Businesses should always be looking to reduce their internal lead-times, but never has it been more important to do so.
Goldratt UK uses the Theory of Constraints to improve flow and bottleneck output. Increase the flow of raw materials or products through your organisation and watch lead-times go down. Improving flow is our number one objective – what do your lead-times look like? Are they static, or even getting longer? Going to war on long lead-times should be your mantra; if you want an ally, get in touch.
Difficulty Importing Products
Over the past year we have all seen for ourselves the shortages of goods on our supermarket shelves, initially as a result of COVID, now of Brexit as well. But we are not just talking about food products. Changes in tariffs and administration at ports means that fewer products, at good prices, are going to be offered to UK consumers. As a producer of goods, this gives you an opportunity. Anything that was previously being supplied by the EU is worth considering whether your business has the capabilities and the capacity to manufacture it here in the UK. The demand for these goods isn’t going anywhere…
This is a fantastic opportunity to secure or grow your business. However, when considering adding new items to your range, it is crucial you choose the right items. If you reflect on the body of products/services you are currently offering, some will be performing better than others. Some will be selling faster, sitting on the shelves for less time and turning more quickly. You want to select new products that will perform as well.
When choosing to add new products and services to your range, there are several things to consider. Obviously, you need to examine the size of the UK demand, the selling price of the product, and understand how much revenue you can expect to make. However, this is only part of the equation. You also need to understand the raw material and variable cost components. The difference between these and the selling price is the margin any product will make for you – this is vitally important to understand. The temptation may be to include or absorb overhead and some cost allocations into the equation. These should be considered, but not in isolation per product. They should instead be considered in the overall cost of adding more capacity, space and overhead to the organisation. Ultimately, you need to be able to quantify how much additional Throughput (the rate of generating margin) adding new products to the range should generate and be confident with it.
If you would like to take advantage of this post-Brexit opportunity, get in touch at [email protected] for some guidance on how to make smart business decisions surrounding which new products to add.
Mobility and Freedom
UK nationals no longer have the automatic right to live, study or work in the EU – you would need to check each individual country’s rules. This means that the pool of available staff to recruit from in the future will be smaller. Capacity is interesting… Obviously every person you add to your organisation means an increase to the wage bill. It increases the headcount and therefore should contribute to capacity. But how often have you increased your overhead and not seen a corresponding increase in revenues delivered and, therefore, net profit? If that is happening, you are adding capacity to areas that do not contribute.
When these two things are combined – a limited pool of capacity to draw on, and understanding that adding more people doesn’t always increase output – it is crucial that you have a strategy to make sure the skills and capacity in key areas (your bottlenecks) are being well managed and planned. You may want to consider internal development programmes, or at least strategic planning for key roles.
It can be difficult to identify where your bottlenecks lie when you already have tens if not hundreds of employees; if you would like a discussion about which ones matter and which ones matter less, get in touch. It isn’t always easy to see, sometimes fresh eyes can help.
The backbone of the UK’s Brexit deal was tariff and quota free access to one of the world’s biggest markets. However, many organisations are suffering from increased fees, increased tariffs (both importing and exporting) and the ground isn’t settled yet – we will learn more as the weeks go on.
When you are unsure of how much money you will make on any business deal, or it costs you more to make the same thing, your P&L (profit and loss) suffers. Any increase to costs will have a negative impact on a company’s P&L, which is the ultimate measure of how a company is performing and needs to be ever-increasing. Good business growth does not mean increasing sales, it does not mean increasing the headcount, it means increasing net profit. How to win more business; how to make more margin and Throughput over the next month, next quarter, next year – it has never been more important to work out how best to achieve this.
When we work with our clients, we partner in net profit deals – the majority of our fees therefore come from an increase in our clients’ bottom lines. In essence, we will work with you not just in one area but across all key departments (production, supply chain, sales, etc.) to achieve a large improvement to your bottom line. Crucially, we will work with you to build a Decisive Competitive Edge so that you will win greater market share and protect a growing net profit. Get in touch at [email protected] to find out what your Decisive Competitive Edge might be. Alternatively, if you would like to work it out for yourself click here to request a free, no obligation copy of Eli Goldratt’s ‘It’s Not Luck’ which will take you through the key concepts you will need to understand.
By Phil Snelgrove, Lauren Wiles