Chemigraphic Brexit Q&A

The UK is leaving the EU single market and customs union at the end of 2020, and this will mean unavoidable change for business…

What issues are likely to arise after January 1st 2021?
Details are yet to be agreed between governments, and there will aspects which no-one knows, but we are doing all we can to prepare…

Price of materials: We are already considering the risks of EU export and UK import tariffs and what this would do to the price of parts and components. The probability, scope, timing and duration of new tariffs are unknown, and there is no way to accurately estimate possible impact, but new tariffs are likely to have an adverse impact on materials pricing and availability. However, steps are being to mitigate the risk by identifying customs clarifications, monitoring updates to WTO tariffs and potential EU import tariffs. We have a global sourcing platform, meaning we have access to a vast pool of specialist goods in the electronics industry.

Delays to the importation of materials across the UK/EU border: We’re mitigating the risk of increasing logistics costs by ensuring that delivery points and delivery terms are clarified between all parties, building in contingency time for deliveries.

Challenges to lead times: Chemigraphic does not believe that any party, commercial or legislative, has full visibility of what disruption will occur as a result of Brexit. Electronic components supply chains are complex, meaning that it is difficult to map every individual global source and routing of all raw materials, components and assemblies. It is difficult to ascertain whether this disruption will be limited to only those directly sourced from the European Union.  Lead times should be considered “fluid” but we are focusing on our supply chain model, letting suppliers know our future requirements and planning for all eventualities. We are trying to mitigate any possible risks to lead times by recruiting new staff and extending our working shift patterns. We have negotiated UK and CN materials holding with all our major suppliers, but only to provide for current customer orders.

Can Chemigraphic utilise alternative regions of manufacture or re-build alternative supply chains?
Yes! Chemigraphic has a wholly-owned manufacturing site in Tianjin China which creates multiple new options for alternative sites of manufacture, in-region sourcing, or some blended combination of the two- which mitigates against regional disruption.
Commonality of systems and process allow rapid and seamless transition of fulfilment between sites- but this does need to be done with cooperation of customers, so we do recommend engagement to discuss global requirements at the earliest opportunity.

In general, how does Chemigraphic mitigate risk?
Chemigraphic is the only UK EMS with a Business Continuity Management System that is aligned to the international standard ISO22301. This is a “whole of company” BCMS which risk-assesses and drives mitigation into literally every aspect of our business resilience – not just the obvious elements such as facilities and services incidents. By default this means that Chemigraphic is exceptionally resilient and well-placed to endure any external pressures.

Does Chemigraphic envisage any positive opportunities on the supply of goods and services as a result of Brexit?
We are sure there will be eventual benefits, whatever the details that emerge, but in the short term, the dominating feature of discussion continues to be about how to avoid disruption. To this end, we are advising all customers to plan ahead and make provisions now- forward planning is key!

Does Chemigraphic envisage that customers may buy significantly large volumes of products in order to mitigate the risk of supply shortage?
Our customers are already increasing demand, which absorbs more materials, and we assume that most of the industry is doing likewise. Chemigraphic is taking steps to mitigate all risks but we can only do this for current contracts and order coverage where we have demand visibility.

Does Chemigraphic expect exchange rate changes to affect normal business?
In a highly dynamic political environment, we would expect exchange rate fluctuation, and in such cases it is safer to assume that there may be some negative effects.

Is Chemigraphic concerned over instability in the workforce due to Brexit?
Chemigraphic has a very stable and dedicated workforce but it cannot comment on the wider industry.

Has Chemigraphic considered the impact of availability of funding, bonding arrangements and insurance on normal commercial terms? 
Yes, extending product manufacturing order cover and increasing call-off quantities. This will build buffer stock both at Finished Goods Level and through the materials supply chain. Chemigraphic can advise how to achieve this while minimising commitment and obsolescence risk.

Has Chemigraphic considered any exposure to ratings downgrades or volatility in exchange rates or interest rates? 
Yes, we are looking at our costs and our revenues to determine the extent to which we have an exposure to change in foreign currency. Dual invoicing, forward contract and hedge funds are all being considered to minimise risk.

Has Chemigraphic considered the continued availability of all necessary manufacturing, distribution (inc. fuel) and intellectual property licences?          
Yes. Chemigraphic has sufficient scale and diversity that we can offer more robust planning and flexible options. Regarding intellectual property licences, protection granted by EU directives and regulation should still apply (EU Withdrawal Act 2018).

If you have any other queries on Chemigraphic’s plans for Brexit, please contact the team.
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