Reallies Brexit Briefing

26th June 2018 - Peter Morris

Research published at CIH Housing 2018 on Tuesday 26 June during a briefing session hosted by BBC News Home Editor Mark Easton explores how problems posed by Brexit to social housing supply chains can be turned into opportunities for organisations operating in the sector.

The report titled ‘Social Housing Supply Chains and Brexit’ has been commissioned by Reallies, a collaborative partnership of three regional social housing consortia, and conducted by Professor Dr Jonathan D Linton, Director of the Logistics Supply Chain Management Research Centre at the University of Sheffield.

Reallies are concerned that, changes in regulation (including planning), currency fluctuations, supply of materials and labour could all influence speed and structure of the supply chain, impacting the government housing and construction policy, and organisations internal medium and long-term planning.

Brexit is set to have tremendous impacts on the entire UK economy. The social housing sector is particularly vulnerable as it is not possible to pass on additional costs to the end user; occupants of social housing, who themselves are particularly vulnerable. As a result, social housing will be especially sensitive to the myriad of small and large changes associated with Brexit, with unanticipated consequences continuing to impact social housing supply chains for many years.

These changes will be too large to deal with successfully by muddling through reactively, and so this report sets out the key impacts that can occur and how organisations can best prepare to adapt to the new environment and exploit the opportunities it provides. Key aspects of the supply chain covered in the report include: financial, materials, logistics, people, infrastructure, technology, regulation and policy.

Supply chain members in social housing typically carry between 30 and 60 days of inventory, enough to provide a ‘just-in-time service’ to the sector. Any delays caused by Brexit to imported stock items would require much larger inventories to be held to continue providing the same service levels, with a decrease in product variety and an increase in shipping costs. In the short to medium terms supply chain members should expect to be exposed to logistics challenges. This can be partially offset through better planning and information sharing by social housing providers.

More emphasis will be placed on effective supply chain managers who will are equipped to manage and mitigate the impact of Brexit upon the flow of goods and materials. While information sharing and cooperation are not a function of Brexit, it is advisable that the sector consider the opportunities that closer coordination and integration can offer. Not only will integration reduce supply chain costs, but it will assist suppliers in providing the correct product to the correct location at exactly the time it is required. Such a change can reduce time and costs associated with construction, maintenance and operations.

European supply chain partners are attempting to minimize their risk by moving away from UK-based interactions. Discussions of transition periods and backstops increase the duration of uncertainty. The result is that UK interaction must offer a higher expected return to make up for this risk. Until after Brexit has been completed, UK based organizations will not be able to access the potential benefit of future trade relations or control over local regulations. As a result, supply chains will need to focus on system optimization to remove the inefficiencies that could be ignored in the past because business as usual was sufficiently profitable.

Developing information sharing practices such as dynamically adjusted forecasting expectations could provide cost reductions while providing better service regardless of Brexit. A failure to do so will undoubtedly result in supply problems that could have easily been avoided.

It has been well documented that there is a growing skills shortage in the sector, and Brexit will exacerbate this as skilled labour from EU countries declines. To counteract this, organisations will need to make a concerted effort to replace staff with the right skills and retain them. Faced with a much smaller labour pool, the value of skills will increase leading to gradual wage increases for many accompanied by increasing levels of automation. Not only will costs be higher, but a greater premium on time should also be anticipated.

Technological innovation will play a key role. Implementation of inexpensive sensors and mobile telephony will provide increased service levels through automatic monitoring and remote diagnostic reporting on building systems. Off-site construction could not only speed up and reduce the cost of home building, but partially address the growing challenge of a shortage of workers in specific trades. It would also reduce the need for a migrant workforce. Instead transferring construction jobs to locations that have a substantial and suitable workforce available.

Technology must be considered from a systems perspective to avoid investments in infrastructure that are not desired. This requires consideration and development of many factors, such as: technical, economic, functional, perceived value, aesthetics and sustainability.

After a detailed analysis of each aspect of the supply chain, the report concludes with a variety of strategic opportunities that are available to help organisations reduce risks and gain competitive advantages, including professional purchasing services, inventory policies, adopting alternative processes and technologies, development of a social housing Sector Plan, new training and career models.

In concluding his report, Professor Dr Jonathan D Linton said: “The magnitude of Brexit is too large for a strategy of muddling through with incremental change to be sufficient. While Brexit provides many risks and challenges, it also offers opportunities. There are many problems within the housing sector, Brexit offers an urgency that in combination with the Industrial Strategy can lead to a transformation of the sector over the next decade.”

 

Download the full report below.

 

About the author

Professor Jonathan D. Linton, PHD, PEng, MBA, BESc, BSc, is the Director of the Logistics Supply Chain Management Research Centre at the University of Sheffield. Jonathan is also the Editor-in-Chief of Technovation and Foreign Head of the Science Technology Studies Laboratory of the Higher School of Economics in Moscow. Jonathan has been actively conducting research on Supply Chain Management for two decades and has consulted to national governments, non-profits, multinational corporations, and small and medium enterprises in both North America and Europe.