Four and a half years after the referendum, Brexit negotiations are finally over, and our new borders are in place. While Covid-19 dominates the headlines, does this mean the potential border challenges were exaggerated for transport and logistics businesses, retailers and FMCGs? If not, what might be some suitable solutions to give the industry a well-deserved break at the start of 2021?
In this article, we’ll explore some of the challenges at Britain’s new borders. We’ll also look at the role that technology and innovative processes can play in lightening the load for those averse to arduous paperwork, and petty bureaucracy.
Teething problems at the borders
Long story short – no - the potential challenges at the borders were not a mere scare tactic by Michel Barnier. Despite Brexit being no surprise, the new processes and IT systems are not yet running as they should. As a result, German logistics giant DB Schenker recently took the decision to suspend certain cross-border deliveries to the UK due to the current red tape at borders. In a statement, DB Schenker blamed their decision on issues with the UK Government’s NCTS (New Computerised Transit System) which came in to play on January 1st. They claim it caused only 10% of their shipments to have valid paperwork.
DPD group also initially suspended UK deliveries from the EU, claiming 20% of their deliveries had incorrect paperwork using the NCTS system, causing them to be returned to sender.
MPs have also been clamouring for Boris to review Irish border processes where there are also severe delays, caused by snags in the system. Firms claimed they were informed certain declarations would be processed in 30 seconds. Yet, they face delays of up to 12 hours for a single declaration. The knock-on effect is that supermarkets are pulling hundreds of products from their shelves due to Irish Sea border issues, with rumours even that M&S’ infamous Percy Pigs may be at risk of not making it to the shelves!
Retailers face increasing logistics prices
As a result, retailers and FMCGs who are already hard-pressed, are now experiencing increased transport and logistics prices, with certain hauliers allegedly charging €7,000 for a trip from Italy to the UK pre-pandemic, this would only have cost €2,000. Whilst this is likely an unusually high example, even small fluctuations in logistics costs can erode margins in an industry such as grocery where net margins are only 2-4% to start with. Even in fashion, where the high cost of returns and pressure on margins from constant markdowns leave little room for flex in the cost base.
I first realised the sheer potential for minutiae to add delays and red tape at UK borders after Brexit following a conversation with the CEO of a leading pallet and distribution business a few years ago. He explained that not only do customs need to check for correct paperwork on taxes, food safety, lorry weight legislation and all the other usual suspects but also that pallets would now need to be checked and certified for organic life. As such pallets must now be heat treated to comply with ISPM15 certifications, to prevent fungus or foreign species entering the EU via the UK within the pallet’s wood. Naturally, however, in an industry where pallets are not cheap, and subject to significant loads, they are often rebuilt or repaired, and each time would need to be recertified. All this, of course, adds further challenges and cost for retailers. It does lead to the question of whether the current systems struggle just with standard checks or whether issues such as the above are just waiting in the wings to cause further delays down the line, when inevitably the first foreign species is detected.
Whilst there are clearly issues, it’s not unexpected that in such a large scale, brand new complex legal system such as border controls would experience problems in its first weeks. Also, despite DPD and DB Schenker’s issues, 90% of lorries leaving Britain are getting through the new procedures, with 10% being sent back due to incorrect paperwork. Whether these genuinely are “teething problems” as Boris claims or symptoms of a more fundamental issue of the need for additional paperwork and checks is yet to be discovered. Still, the sheer volume of legislative controls needed to tightly police a border such as our new one, lead me to believe these challenges will not be easily fixed.
So what can businesses do to mitigate the risks?
1. Add flexibility, and improve forecasting:
Where possible, build more flexibility and padding into supply chain and pricing. Delays are to be expected, so it’s essential to have accurate volume forecasting in place which can support stock levels, whilst pricing can be adjusted retrospectively in line with stock to try to prevent a lack of stock.
2.Automate, Automate, Automate
Whilst logistics businesses, isare waiting to restart delivery offers to the UK once they’ve recruited more people to work through the red tape, we believe automation has a key role to play here. Using technologies such as process mining and RPA, businesses can take standardised end-to-end processes such as these new border controls, and have automation robots replace the tedium of the human work and thousands of lines of paperwork that need filling.
3.Strong market intelligence and effective comms
Ensure you have real-time tracking of shipments and strong market intelligence on delays at borders. Also, communicate effectively with the workforce to maintain motivation, and prevent panic or despondency. News of the December delays in Kent spread like wildfire causing a chain reaction where hauliers and drivers alike weren’t willing to take the risk of travel. When negotiating with hauliers, make sure you have the best and most up to date information to ensure they aren’t a victim of out-of-date statistics, as the delays at borders will almost certainly reduce to some extent as the “teething problems” begin to be ironed out.
Ralph Robinson, head of retail, BJSS