How Is Brexit Affecting Just In Time Manufacturing?

Just in time (JIT) is an inventory management system, used to manage the stock that is kept in storage. It involves receiving goods from suppliers as and when they are required, rather than carrying a large inventory at once.  It has a lot of advantages: you need less room and you have less money tied up in stock.  Often it reduces waste too. The downsides are that you have to be organised and plan in advance.  Supply chain disruptions can cause your factory to stand idle. Despite these downsides JIT worked very well in Britain for a long time.  Then came Brexit.

A deal for Brexit was reached at the last minute which didn’t help businesses prepare.  Some had taken on extra stock to help them smooth over any difficulties and many had started preparing for no deal because negotiations were being left to the last minute.  Undoubtedly this increased costs for many firms as they invested in extra stock and rented storage space.  Manufacturers will need to continue to collaborate and work closely with their supply chains to ensure that they are resilient and can fully adapt to the new trading relationship between the UK and the EU.

Throughout the UK, industries are deeply interconnected with those in the rest of the European Union through complex cross-border supply chains. Such supply chains comprise intricate processes of value-adding by firms in different countries, with component goods and services crisscrossing borders multiple times before reaching the consumer.  The industries most affected are the automotive and electronics sectors, but JIT has spread throughout the UK’s industrial base.

Customs processes, however short, are simply incompatible with JIT systems because of the uncertainty associated with delivery time variations.The delays we are seeing at the borders especially the Dover-Calais route and our container ports is already causing problems for industries dependent on JIT inventories.  Many are having to store more product which means that they aren’t able to fully leverage the cost and efficiency benefits of JIT manufacturing.  The trouble is that those industries are competing with other firms and other sites that are within the EU and who haven’t had to change their practices in the same way.  This all adds onto to the cost of the product.  Increased costs mean you either have to sell at a higher price or you take a cut to your profit margin.  In ultra competitive fields higher prices are simply not an option if you want to stay in business.

It is hard to see how technology can provide solutions to these problems, given that individual truck-containers will not only contain supplies and components from numerous different suppliers, but also the composition of each container will differ from day to day and even hour to hour. Brexit isn’t good for business practices that have evolved in a world of almost frictionless trade.  Lobbying the UK government to realise the full effects of its damaging hard Brexit is one way forward, but that will take time.  In the meantime, companies will have to adapt to the newly adverse conditions as best they can.