The Brexit effect – supply chain resilience

22nd March 2021

Fusing research and industry practice

Brexit discussions are now starting to become more prevalent, with only a few weeks to go before the official withdrawal of the United Kingdom from the European Union, it still has the potential for significant supply chain disruption.

This period of uncertainty will follow on from the significant interruption already seen as a result of the COVID-19 pandemic, which in turn is another example of high-profile external events seen in recent times including terrorism, floods, earthquakes, hurricanes, wildfires, and tornadoes. Supply Chain Resilience (SCR) has been the subject of academic research for a while, although typically focused on the significant events previously mentioned. The main difference with Brexit as a disrupting factor is that it is a constitutional change that has been discussed and debated ever since the UK public first signalled their intention to leave the EU.

The effects of constitutional change on SCR is the subject of a paper written by Professor Linda Hendry and her colleagues (Hendry et al. 2019) and is focused on local food supply chains although their findings are applicable across other applications. Their study asks the question “How can SCR be built in local food supply chains during periods of constitutional change? and is developed from multiple case study analysis of 14 firms in the food sector. Organisations studied include farmers, processors, retailers, and non-government organisations (NGOs).

Supply chain resilience perspective

Down chevron arrows

Prepare >
Actions ahead of a potential disruption to the supply chain
Respond >
Actions following a disruption to the supply chain
Recover >
Returning to a pre-disruption state or better
Dynamic capabilities perspective Sense >
Recognising opportunities and threats
Seize >
Responding to opportunities and threats
Transform >
Enhancing, combining and protecting firm capabilities

Research Model: Linking the Supply Chain Resilience and Dynamic Capability Perspectives (reproduced with kind permission from Emerald Publishing)

Supply Chain Resilience (SCR) has been defined as the ability of supply chains to prepare for and/or respond effectively to disruptions, ideally emerging as stronger entities. Traditionally the approach has been one of Prepare – Respond – Recover although the concept of Dynamic Capabilities has been introduced as the ability of firms to sense and adapt to changes in the external environment that will be key to sustainability and competitiveness.

Within the literature there are three categories of dynamic capabilities – Sensing, Seizing and Transforming (see figure 1) – where:

Sensing

Is described as having a thorough understanding of the organisation in terms of the world in which the organisation exists and the associated risks. Seizing follows on from sensing and is about having an effective response to the threats identified during the Sensing phase. Transforming involves utilising the organisations assets, both tangible and intangible, to enhance the firms’ position.

Findings

The process of building resilience is different where the issue is initiated by a constitutional change and a number of specific observations / propositions were identified, including:

  • Disruptions caused by constitutional change are characterised by: long time horizons before the disruption; high certainty of the disruption; and their widespread effect.
  • Horizontal and vertical collaboration between supply chain actors are important strategies for building resilience and to determine the effect of potential changes to the constitution and accurately anticipate the potential impact of disruptions in terms of economic, environmental, and social sustainability.
  • Organisations should seize the opportunity to effectively lobby government and influence the constitutional change.
  • Firms with dynamic capabilities to innovate in anticipation of the likely impacts of constitutional change will be able to build resilience to enhance their competitive position despite the inherent uncertainty associated with this type of disruption.
  • Supply chains with dynamic capabilities to adapt to more sustainable pricing strategies in anticipation of the likely impacts of constitutional change will be able to build SCR to enhance their competitive position despite the inherent uncertainty associated with this type of disruption.

It is clear therefore that Brexit as a constitutional change offers up both risk and opportunity to organisations, though a proactive approach must be taken aligned with a deep understanding of the issues facing the enterprise. Collaboration between supply chain players, both horizontal and vertical provides an opportunity to understand the issues in the context of the wider supply chain as well as lobby government.

Over the coming months it will become clear which organisations truly do possess those 'dynamic capabilities'.

Further information/further reading

This paper has been created in association between Emerald Publishing and The Procurement Doctor, and forms part of a series that promotes the linking of academia and practice.

For additional information please contact Emerald Publishing or The Procurement Doctor.

Dr Paul Joesbury
 


References

Hendry, L.C., Stevenson, M., MacBryde, J., Ball, P., Sayed, M. and Liu, L. (2019), “Local food supply chain resilience to constitutional change: the Brexit effect”, International Journal of Operations & Production Management, Vol. 39 No. 3, pp. 429-453. https://doi.org/10.1108/ IJOPM-03-2018-0184