Saturday 22nd Jul 2017 - Logistics & Supply Chain

Brexit vs digitalisation: why billions of pounds are at stake

Even for an industry used to dealing in large numbers, £4.5 billion is a lot of money. But that is what the motor industry reckons that a badly handled Brexit could cost.

Malory Davies FCILT, Editor.

Malory Davies FCILT, Editor.

The Society of Motor Manufacturers and Traders has produced an analysis that suggests that EU tariffs on cars alone could add at least an annual £2.7 billion to imports and £1.8 billion to exports.

SMMT president Gareth Jones says that import tariffs alone could push up the list price of cars imported to the UK from the continent by an average of £1,500 if brands and their retail networks were unable to absorb these additional costs.

This is all speculation of course, but numbers of this magnitude could have an impact right across the supply chain – from where components are sourced, to where vehicles are assembled and how they are sold.

Clearly, the UK government has been rattled by the potential impact of such thinking – look at how quickly the government moved to reassure Nissan that it is safe to invest further in producing new models at its Sunderland plant. The suggestion is that it will seek tariff-free access to the EU market.

From a supply chain perspective, the situation is further complicated by the imminent arrival of the fourth industrial revolution – the transition of digital manufacturing involving artificial intelligence and 3D printing.

A study by KPMG suggests that manufacturers and suppliers can both see substantial benefits from digitalisation including productivity gains, shorter lead times more personalised vehicles and enhanced services for customers.

And it suggests that these benefits could amount to £8.6 billion annually. However, achieving that is strewn with problems, notably lack of knowledge and skills as well as lack of trust between supplier and manufacturer to share data electronically.

KPMG points out that the automotive industry has a common logistics language, MMOG-LE4, for data sharing. “By giving suppliers greater visibility over changes in customer demand, the whole supply chain is able to improve scheduling, reducing downtime, overtime and inventory buffering.”

But when it asked companies if they were using connected real-time supply chain scheduling / demand data-driven supply chain, some 60 per cent said no, while only about 25 per cent said yes.

The rate at which companies can move to take advantage of these technologies is bound to be affected by the Brexit negotiations. The question is: will the government step up and drive forward industry digitalisation?

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