The impact of Brexit on designing a material-based global supply chain network for Asian manufacturers

Abstract

Purpose – The purpose of this paper is to investigate effects on global supply chain reconfigured in the customs duty rate of parts and specific material types brought about by Brexit and the Trans-Pacific Partnership. Design/methodology/approach – The supply chain network is modeled and formulated using mixed integer programming. Numerical experiments are conducted using bill of materials with information such as the procurement cost of each part, 3D-CAD and an industry census. Findings – The experiments indicates that if the customs duty rate increases by Brexit, manufacturers would be necessary to restructure supply chain configuration and locate the domestic factory and market. Additionally, when the UK leaves the EU and joins the TPP, there is a case where the total cost decreases in the global supply chain network compared to the baseline without Brexit. Therefore, it is reasonable for the UK to join the TPP. Practical implications – The study shows how a new trading rules from non-partnership countries can critically disrupt existing global supply chain equilibrium. Asian manufacturers should evaluate a move to more local sourcing, opening new facilities and setting up warehouses to stock finished goods or raw materials in different trading areas to overcome any barriers to the goods movement. Originality/value – This study enables us to quantitatively evaluate what there are opportunities or cost increasing risks by the selection of supply chain configuration for Asian manufacturers by political and economic factors of each country such as Brexit and participation in TPP.