Factors influencing up/downstream supply chain in the absence of free access to EU markets
You own a company based in Liverpool (UK) that assembles and manufactures starter motors for the major automotive manufactures with factories domestically and in Europe. The European division of your business accounts for 74% of your annual revenue and employs 300 of your 420 strong work force. To manufacture your starter motors, you source 68% of the components from Europe, the balance is sourced locally. You have been trading in the UK for the past 18 years and have become very successful based on the European free market philosophy. Your starter motors are deemed to be an essential requirement by the factories you supply, and you focus on the JIT philosophy to supply your customers so that they have limited inventory holdings, and this reduce their investment in stock. To service your customers’ requirements more efficiently you have bought a fleet of 26 trucks (40-foot trailers and tractors). To bring stability to you and your customers relationships you have 5-year contracts with your customers and all contracts are supplemented by service level agreements that define the service level you are to adhere to, most importantly there are severe penalty clauses applicable with respect to lead and delivery times of components by your company.
In June 2016 the UK voted to exit the European Union (Brexit) – the way forward is not yet clearly defined however it would appear almost certain that the UK will lose the access to the EU free market in the next months, a huge game changer in your existing business model:
1) Identify 4 key factors that will have a direct impact on your business’s up stream / downstream supply chain should the UK not have free access to the EU Markets
a. Discuss 2 of the factors above you have highlighted taking into account; the overall impact to your business, your production and landed cost, your customers, your suppliers, your staff, the local economy, the risk, the mitigation strategy you will deploy to offset the impact - 6 marks identification
b. Define and discuss the skills sets that your company will have to develop to manage the changes effectively that might occur if you lose access to the EU Markets and you retain your current customers in terms of production levels and delivery schedules
2) Evaluate in terms of your supply chain the possibly of seeking new markets to both source components from and supply finished motors to. Can you expand your supply chain into new markets and if so, what will be required? .
3) Will it still be viable to give your small domestic market to operate your business from the UK given the customers reliance on the JIT methodology? Justify your argument based on your findings to stay or relocate your factory in terms of the logistics challenge .
Additional marks will be recognized for structure and professionalism of your work (Ariel style, appropriate font, size and margin, bibliography: Harvard style, cover page, front sheet,
Additional marks will be recognized for originality of work, new concepts, valid research, and recommendation