A no-deal Brexit and warehousing - KPMG Belgium
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A no-deal Brexit and warehousing

A no-deal Brexit and warehousing

A no-deal Brexit and warehousing

Jeroen Gobbin | Partner,

How could a no-deal Brexit impact my supply chain? - Does this question ring a bell? Maybe you’ve come across it during a Management meeting or one of your clients asked you this recently? I think it’s fairly safe to assume that, regardless which direction the negotiations take, there will be a significant impact on warehousing both in the UK and in the EU as businesses start stockpiling goods.

It goes without saying that things will be a lot more complicated for manufacturers of products with a short shelf life such as food or cosmetics. When it comes to pharmaceutical products and medical devices, additional pressure is being put on manufacturers, healthcare systems and Authorities to ensure the continued supply of life-saving products.

In terms of infrastructure, most businesses have chosen the location of their warehouses based on their customer service strategy. Under a no-deal Brexit, the question businesses should be asking themselves is – will this infrastructure still fit the service needs of my organization? And this is before you’ve even considered changes to various legislation in terms of, for example, customs clearance and the additional paperwork regarding labelling, packaging or updating of your technical files.

One approach could be to store all products destined for the UK in a UK warehouse and/or to re-assess your warehouse landscape to continue servicing the remaining Member States. Ultimately, the question comes down to the location of your warehouse(s) and whether or not you use your own facility(s) or one(s) operated by a third party contractor. In both cases, at least the following elements need to be considered.

  • Relevant skillsets and experience in terms of both project and operational management to drive such a project
  • Access to the necessary assets and funding
  • Potential impact of implementing existing or new IT systems
  • Effect of transferring or building up new stock in terms of working capital and service level
  • Appropriate skills and experience to manage an outsourcing procurement exercise

 

In addition to the above mentioned points it is important to understand that there is currently already a shortage of warehouse space across many parts of the UK, including a short supply of development land with which to create more. Especially for the temperature-controlled and cold-storage warehousing required by pharmaceutical and food industries.

Furthermore, with the shift towards e-commerce and discounted retailers I have noticed a significant increase in demand for warehouse facilities next to major transport routes, putting further pressure on the availability of storage space. With population density in the UK already high, it even creates a particular dilemma for e-commerce companies. This is not only an issue for UK companies storing and delivering products within the UK, but also for US companies and other foreign sellers. While selling from within the UK will bypass distance selling thresholds, renting local storage space may be seen as necessary to avoid the impact of delays on international deliveries.

For these businesses, there may be more to consider than simply increasing storage capacity by building racking higher or deeper. New processes may be required to increase the efficiency of storage and retrieval, such as the implementation of automated storage and retrieval (AS/RS) systems tied into warehouse management systems. Increasingly powerful AI technology and autonomous vehicles are beginning to revolutionize warehouses, and could be pivotal in ensuring that the flow of goods in and out of the UK remains steady in post-Brexit Britain. Some businesses feel that the Government has delivered a mixed message over the past year by telling companies and traders that they need to prepare for a no-deal Brexit while at the same time saying that such a scenario was unlikely.

In July, it was estimated only 6.8% of UK warehouse space is vacant, which leaves practically no room for additional stockpiling. The new Halloween date for Brexit means another challenge for warehousing as it is in the first round of the Christmas peak season. Many of the warehouses used to stockpile goods in the run-up to 29th March are now no longer available.

Warehouse labor

The UK logistics industry has suffered with regard to the quantity and caliber of new recruits at all levels. In the last ten years, a large number of EU migrants coming to the UK have easily found employment across multiple warehouses. Following Brexit, imagine what would happen if a significant proportion of very competent staff leave the UK and head back to the EU? Since the UK has quite a low unemployment level compared to EU countries, it would be a real challenge to find the appropriate replacement staff.

Whatever your situation, it is important to know what your UK footprint is before you consider how to adapt your supply chain and warehousing strategy. Once you’ve made a clear assessment and understand the potential impact of a no-deal Brexit on your warehousing, you can start putting in place the necessary mitigating measures.