Three post Brexit warehousing trends to look out for

Brexit effects on warehousing

The warehousing industry has spent time and money trying to predict the effects of Brexit – from consultancies to crystal balls, there are few things that haven’t been tried!  Today, we’ve got a clearer idea where the Brexit chips are going to fall and there are some strong clear trends that we can recognise.

Employment trending to automation

The warehousing and logistics industries have been hit doubly hard by the current employment crisis, because problems in one of these sectors has had a domino effect in the other. If warehousing isn’t fulfilling its orders, the logistics personnel have nothing to deliver, yet if warehousing are on top of order fulfilment, difficulties with deliveries can undercut their performance.  What’s exacerbating employment problems in the warehousing sector?

  • Pandemic effects – many people have gone home, are working from home or have changed sectors due to the pandemic. Many people have returned to their countries of origin, either on a forced basis or through choice and travel restrictions mean that most have not returned.
  • Brexit effects – it’s reported that 53,000 drivers have left the UK since the Brexit vote.
  • The government’s new points based system to obtain work in the UK from the EU. Because many warehouse jobs are below the £25,600 threshold, don’t require a degree and this is not a sector where people are officially in demand, many EU nationals don’t have enough points to get a job in the UK.

warehousing and Brexit

Until 2020, in the average warehouse space, one in five employees woul

d have been EU migrants. As a result, warehouse operators are staring at a 20% reduction in workforce.

Automation is becoming increasingly commonplace as a solution to employment problems rather than as an efficiency measure, although robotics have become popular where pallet storage is the norm. This is because an automated process can achieve higher pallet stacking with less safety risk and also because aisles can be narrower, creating more space for goods.  The most recent convert to full automation is Uniqlo, which is opting for fully automated warehouse space in all new builds. While this trend is increasing, it has limitations – in rented warehouse space, automation is less beneficial as there’s no predicting what the next tenant will want to use the space for.

The ‘free meal’ ending for customers

Even though Amazon is still building mega-warehousing throughout the UK, it’s primarily because those processes were already in place, pre-Brexit. The traditional model of ‘big logistics’ with huge distribution centres in the middle of vast territories is increasingly being torn up by the demand for 24 hour turnaround on deliveries. There’s a second problem for organisations that combine bricks and mortar operations with online commerce – the squeeze between meeting customer expectations and resourcing a face-to-face environment requires very different forms of logistics. This adds to the bottom line for the enterprise which isn’t necessarily being fully recognised in the way businesses finance, and fund, their logistics.

The ‘free lunch’ aspect of customer service has been the assumption of logistics cost by the company rather than the customer, and there are several different models for this process that are being utilised by organisations worldwide. IKEA’s model is the best known – it simply outsourced its logistics to consumers! This left it with a classic logistics model – from manufacture to warehouse (which is also showroom) and the additional logistics burden is in the hands of the customer. Of course, this model has become more blended since the pandemic, and IKEA is now delivering more items than ever before, but it’s still a small proportion of their overall activity. IKEA’s click and collect service costs one-fifth of its delivery service, which is a substantial cost saving. Largely online retailers need to manage their supply chain issues with customers in mind, and the element of managing customer participation is becoming an increasing trend. Retailers are educating their customers about:

  • sustainable packaging
  • transitioning to all electric fleets
  • crowd-sourcing delivery routes.

But with parcel shipping prices (the primary route for getting goods to customers) rising at the fastest rate for over a decade, transferring a degree of delivery costs back to the customer is an increasing trend. Part of this process is informing customers about current green credentials, encouraging them to invest in better sustainable logistics by supporting the vendor in improving environmental profile and – ultimately  – the process involves giving customers options about logistics that are clearly costed.

Re-shoring and on-shoring

Transferring logistics, warehousing and even manufacturing to the UK is an obvious trend. It has three major advantages:

  1. It limits the potential of supply chain disruption
  2. It gives a level of gravitas and kudos with those consumers who voted for Brexit
  3. It persists simpler costing and planning of warehousing and logistics.

While it may look expedient, several industries have difficulties with on-shoring that have to be born in mind:

– fashion and high tech are reliant on both supplies and skills that are traditionally found in the Far East. However, one consultancy has predicted that an extra £4 billion garments could be on-shored in the UK by 2025, suggesting that outside the fast fashion sector, fashion on-shoring could become commonplace.

  • 60% of the construction industry’s supplies come from the EU.
  • Hospitality has a globalised supply chain that depends on being able to identify the provenance and origin of foodstuffs from around the world.

There are also a number of factors that influence re-shoring and on-shoring: cost is obviously one, logistics another, but quality control and being able to rapidly restructure both products and supply chains is another. The UK may not meet every industry’s needs in one or more of these areas, but it’s becoming popular to look at re-shoring and on-shoring as an alternative. The advantages are clear: companies can have a closer focus on quality control, they have shorter supply chains with less risk of damage, delay or pilferage and they can make strong sustainability claims to support their green credentials. Both re-shoring and on-shoring have real implications for warehousing. In particular the cost of stockpiling can be a substantial consideration. On the other hand, companies can invest in a skilled local workforce and develop specialists in logistics and warehousing that support their own resilience and help build a local economy so we’re likely to see more of this through the 2020s as organisations adjust to new realities.

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