For food logistics providers, a question looms large in the run-up to 2019 – ‘what’s our Brexit strategy?’ Or rather, given political uncertainty on that subject: ‘What the heck are we going to do?’
A sector already troubled by an e-commerce revolution and pressure to improve its green credentials has a massive bureaucratic minefield en route.
Christopher Snelling, head of national and regional policy and public affairs at the Freight Transport Association, shares a vision of fresh produce rotting at border crossings post-Brexit as checks delay deliveries.
For David Jinks, head of consumer research at logistics company Fastlane International, the prospect of logistics suppliers relocating their businesses from the UK to the continent is a concern, as is the UK being left out of the loop on EU-wide transport innovation trials. And how will drivers manage if the UK and the EU develop differing rules for the roads?
These are not auspicious times for an industry that manages the flow of billions of pounds of food and drink imports and exports across continental Europe.
Some £24.6bn worth of food and non-alcoholic drinks was imported to the UK from the EU in 2015 and £8.7bn value-added lines, according to figures from Her Majesty’s Revenue and Customs.
The media storm caused by import shortages earlier this year – of just courgette, spinach and iceberg lettuce due to cold weather in Spain – gives a steer on how explosive the situation could be. So, what is the UK food logistics sector’s current thinking on the impact of Brexit?
Impact of Brexit (back to top)
Professor Alan Braithwaite, chairman of LCP Consulting, remarks that the food industry is the biggest cross-channel customer – some 50% of current vehicle movements across the channel are food, representing one million journeys a year.
Depending on what is agreed in Brexit negotiations, there could be significant structural changes. Producers may opt to bring goods in from overseas via Tilbury, Essex, rather than through Europe and Rotterdam. Or production for the domestic market could move back to the UK.
Food suppliers may want to “straighten supply chains out”, and change manufacturing locations, he says.
“For example, the potential tariff on chickens is very high, so we may see chicken production come back to the UK, and a resurgence of industries such as those.”
James Walton, chief economist at IGD, comments that over the next 18 months “business as usual” is the least likely scenario.
“The UK grocery supply chain has developed over decades on the assumption of free trade within Europe and most people in the industry have never known anything else,” he says.
“There are likely to be transitional arrangements to avoid a sudden ‘cliff edge’ but each landmark along the way will probably bring significant changes.”
Imports and exports of goods from the UK could be subject to new procedures and delays, including more customs inspections. If so, companies with the international quality standard of authorised economic operator status would enjoy substantial advantages.
“It is the logistics profession that will be at the sharp end of managing any dislocation in deeply established working arrangements,” says Walton.
New immigration policies are likely to restrict the recruitment and retention of drivers from overseas and workplace regulations, such as limits on driving time, might also change.
Sourcing decisions will also be impacted, he adds. Whether it is to secure supplies or to avoid cost increases, buyers are certain to make some changes.
We could see a drop in both imports and exports and more sourcing from domestic suppliers. Optimising logistics for a post-Brexit world is likely to take a long time, requiring an overhaul of the supply chain. Most European businesses can expect some impact, Walton predicts.
And of course, any UK proposals to mitigate impact on the supply chain only become a reality if agreed with the EU27.
“The problem is that there are no answers on the table, the UK position statement is just a negotiating document,” says Snelling. “We can’t move to a plan.”
Without free and frictionless arrangements in place for Day One of Brexit in 2019, the UK would not have the IT capability to process goods which pass to and from the continent, he claims.
E-commerce and convenience (back to top)
The rise of e-commerce and convenience shopping is reshaping the supply chain, and dealing with small drops and fragmented volumes and channels is a challenge.
LCP Consulting’s Braithwaite is involved with the EU Horizons 2020 Project U-turn. This covers three different logistics scenarios, in Greece, Milan, Italy and the UK.
In the UK, the project is looking at home delivery. Micro hubs, where a manufacturer delivers to a hub for transit onwards for the last few miles, is a model that he sees taking off.
With increasing digitalisation, manufacturers can prepare store-ready orders to deliver to a hub to be picked up, perhaps by electric vehicle. The option of direct to consumer deliveries only works on high margin goods, he suggests.
Shared transport (back to top)
There are opportunities for shared use of logistics. However, many service providers are reluctant after bad experiences in the past, says Braithwaite. But not everyone agrees, given that food manufacturers are looking at their logistics structures again and challenging every cost.
Martin Dougherty, vice president for business development and account management, automotive and consumer at DHL Supply Chain, says that more manufacturers are looking at shared transport solutions to increase availability, and manage peaks in demand. “We are also seeing the convergence of drinks, food and consumable supply chains, coupled with the integration of reverse logistics flows from the same outlets such as waste, recycling and empties.”
DHL is increasingly using automation and robotics, he says, and has four collaborative Sawyer robots working across its 19 co-packing sites.
Chris Irish, supply chain insight manager at IGD, suggests the existing grocery supply chain is unfit for purpose. Differentiated supply chains, designed for specific channels: online, convenience and large stores, are likely to develop, he adds. Improving the efficiencies of reverse logistics, which has grown significantly in the online sphere, is also key.
In the longer-term, experts believe logistics companies will increasingly use predictive algorithms to boost process efficiency and anticipate demand. In five years’ time, electric delivery vehicles will be much quieter, while other equipment – such as roll cages – will be almost silent, they add. So, companies will be able to ease congestion by making more deliveries at night, they claim.
But, while vehicles may get quieter, no-one can expect a quiet life in the food logistics sector over the next five years with Brexit and the e-commerce revolution underway.