Mitigating the Impact of Brexit on the Manufacturer’s Bottom Line

This year, we were asked to conduct an audit for a manufacturer to define country of origin for a range of products with complex supply chains. Not atypically in the modern era of globalised trade, the manufacturer was receiving parts from China, the Middle East, USA and across Europe.

Our task was to map their supply chain to explain the financial impact of Brexit on their business and advise how they could navigate through the bureaucracy around managing imports and exports in the post-Brexit world, whilst reducing any impact on their bottom line.

We created a data modelling system for them and conducted modelling of their existing supply chain and products; looking at product costs, legal and technical requirements and rules relating to HS codes.

This data model allowed them to systematically check the country of origin of any product and, being a repeatable process, allows them to run any new product through the programme to inform their supply chain decision-making prior to new product launches.

How did this help them?

The modelling highlighted the differences in costs and tariffs, (some cheaper and some more expensive), and informed the manufacturer as to where there were opportunities to change their supply chain to decrease cost to serve, thereby increasing their profit.

During this project, we identified:-

£290k – Tariffs due from products sourced from China with finished products sold in the EU, which could be mitigated with UK manufacture

£48k – Tariffs due from finished goods assembled in the UK and sold to the EU but without UK country of origin classification, which could be mitigated by purchasing parts that are less transformed and increasing the amount of value added in the UK.

There are two main challenges of this sort of analysis for manufacturers: first to understand the complex rules and legal technicalities around supply chains, and second to find the time and capacity to gather all of the required data and undertake the modelling work. There are often sizeable opportunities for reducing cost to serve, some of which come at relatively little cost to the manufacturer. We aren’t talking about moving a factory from one country to another, but rather tweaking how items are sourced or manufactured.

Commercially available modelling software can be prohibitive, with the cost of holding licences rendering this unviable to all but the largest manufacturers.

By working with Libra Consulting and using our own modelling system, this cost can be dramatically reduced, as can the impact on operations, with our team leading the project to minimise disruption to manufacturing schedules.

Whilst Brexit was a trigger for many companies to conduct similar audits, this is something manufacturers can do at any time and cost savings can be considerable.

For further information on how we can help your business to reduce tariff-related increases to your cost base, please contact Rob Cunningham (rob.cunningham@libraeurope.com)

 

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