Plan for the worst & hope for the best

By Barney Cox, Monday 18 February 2019

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There’s one thing everyone can agree on about Brexit: no one knows what’s going to happen at the end of next month. The only certainty is that the outcome remains uncertain and if the UK does crash out without a deal then the impact on businesses is unknown.

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But just because no one knows for sure what is going to happen doesn’t mean there aren’t steps to be taken to identify the biggest risks and to attempt to minimise disruption.

Printers and their suppliers have been looking at the situation, in some cases almost since the result of the referendum back in June 2016. 

“We’ve been planning now for two years and trying to plan for all eventualities without knowing what’s going to happen,” says Premier Paper Group marketing director David Jones. “Expecting a deal will end up being done is dangerous.”

Walstead chief operating officer Roy Kingston says: “We have taken steps and planned for a worst-case scenario.”

All the companies that have been planning have come to the conclusion that getting supplies, and in particular paper, is the key focus.

“The biggest issue will be getting stock,” says Gary White, managing director at Belfast-based Northside Graphics and digitalprinting.co.uk.

With the risk of chaos at the ports holding up goods, the obvious thing to ensure you don’t run out is to stockpile. For the paper merchant the onus is very much on them, whereas printers can do it themselves, or rely on their suppliers.  

“We’ve not seen much sign of printers buying for stock, which doesn’t surprise me,” says Jones. “Most don’t have the space to store extensive stock. The structure of the market is that merchants hold stock and printers run increasingly lean. Whether it’s the automotive or the printing industry they’ve moved to a just-in-time model because there are better uses for capital.”

Andrew Horn, managing director of ADH Consultants, is an advocate of promissory notes over pallets: “Stockpiling can bite you on the way in and the way out. Not only is money tied up at the front, there’s also the issue of what happens to that excess stock afterwards – that’s when you will get downward price pressure as people dump the excess.”

Hence the approach taken by Kingston at Walstead: “We’ve asked all our suppliers what their plans are and left them to get on with it. The onus is on them, we haven’t got large warehouses to fill and we won’t be stockpiling.”

But for some, including White, it still feels like leaving too much to chance: “We needed to mitigate, so took it into our own hands and bought a two months’ supply of our main paper grades, which we intend to hold in reserve and order as usual to give ourselves a buffer.

“I understand that if you’ve got tight cashflow you wouldn’t want to tie it up in stock. But no one really knows if it’s going to be okay, and you have to work on the assumption that it won’t be. We have the funds to do it fortunately. A lot of people are depending on their suppliers. I needed to take the extra step and I’m much more confident.

“HP are sending us additional parts to hold on site here and they’ve informed us that they are also bringing in additional spares and supplies locally in the UK (rather than in Europe) in case of disruption from early March.”

For Jones, doing the utmost to ensure it has enough stock to meet printers’ needs, is central to Premier’s role: “We’re a stocking merchant, our business model relies on customers ordering today and getting the product tomorrow. We have increased our stock holding of key lines. We kept a financial provision for this back, it is a significant cost. Fortunately, it has fitted in well with our plans to open new warehouses anyway.”

Even so, he admits that ultimately the firm relies on paper mills and, just like everyone else, they may face issues beyond their control.

“We’ve been working with all our suppliers to ensure continuity of supply. We have to rely on them, 75% of our product comes from Europe, and if our suppliers’ trucks can’t get back through the ports to pick up their next load it may be an issue. We haven’t heard of any mills saying that in the event of Brexit they won’t supply Britain, but if there is disruption that will incur costs, and they will be passed on.”

While suppliers are doing what they can and there are options printers can take for themselves, ultimately there is still a chance that something may impact the print supply chain. As Jones says, with some understatement: “Some customers are asking for guarantees in the event of a hard Brexit, and with so much uncertainty that is hard to do.” 

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