How the logistics sector is navigating a minefield of paperwork
The post-Brexit world of shipping and logistics is more complex than ever – but companies are determined to keep the drinks supply chain moving. Jessica Mason reports.
For every regulation imposed upon the drinks industry, the logistics sector readies itself to meet its changing needs. New hoops are put up to be jumped through, but according to those accommodating those changes, each one has become a timid step in a minefield of explosive paperwork.
As we see the world over, despite border issues, import and export taxes and duty payments, as well as the delays in freight and delivery, even though many companies are experiencing myriad pressures, others are finding new ways of meeting the challenges head-on. Finding the best routes and pathways through has become paramount. But there is hope, even though many companies’ obstacles differ from market to market.
For instance, in the US, regulations over bottle sizes come into play. Meanwhile, across Europe, it’s all about making sure there is enough stock to make all of the duties that need to be paid worthwhile. Describing these woes, SME delivery and fulfilment company Diamond Logistics founder and CEO Kate Lester explains: “The US market is incredibly difficult for our clients to break into due to all the FDA regulations.”
She also admits that this is something people are getting used to, because it is “the nature of selling in the US, even the different bottles sizes – even before you get to Customs”. According to Lester, “the EU and rest of world are more doable”, but she says things need “to be higher value transactions to make it worthwhile [because], by the time you have delivery duties and a higher cost of despatch”, it can make some elements of moving drinks less “economically viable”.
According to a recent report from Logistics UK, the economic contribution of the logistics sector has grown to £185 billion, and it generates annual revenues of £1.3 trillion. By prioritising logistics with the right policy environment, the Government can help deliver productivity gains that would supercharge the UK economy by up to £8bn per year by 2030. Added to this, the UK has dropped from fourth place in the World Bank Logistics Performance Index in 2014, to joint-19th spot in 2023.
Logistics UK head of trade and devolved policy Nichola Mallon explains: “The main challenges result from border friction, which is contributing to a decline in on-time shipments, efficient Customs processes and the tracking of shipments.”
She adds: “What is urgently needed is certainty and stability after so much turbulence and change”, but notes that, because there has been significant shift at the UK border following the UK’s exit from the EU, things are only changing slowly. Mallon explains: “GB exporters to the EU immediately faced checks and controls. After five delayed starts, the BTOM (Border Target Operating Model), which sets out a new GB import control regime, is being introduced in stages throughout 2024. The BTOM replaces the situation the UK had since Brexit on 1 January 2022, where Customs declarations were required, but no sanitary and phytosanitary (SPS) checks, or safety and security declarations, applied to EU imports to GB. When fully implemented by 31 October 2024, security controls will be applied to all imports, as well as SPS controls to all imports of live animals, animal products, plants and plant products, and germinal products.”
As Mallon outlines: “To date, the Government has been adopting a light touch approach to checks, which is to a large extent masking the full impact of this new regime.” This means all drinks business owners need to stay braced for when new elements are introduced.
BREXIT PRICE HIKES
According to the Centre for Economic Performance, a research centre at the London School of Economics, there was a 25-percentage-point increase in food and drink prices between December 2019 and March 2023. The researchers pointed out that, in this analysis, had Brexit not occurred, the increase would have been eight percentage points lower. Mallon explains: “This increase, which is happening even before the new import controls take full effect, has resulted from a combination of higher transportation costs, supply chain redesign, Customs complexity and reduced volumes transported.”
As Mallon suggests, the UK is going through a significant amount of cumulative change at its borders. She also warns that changes being introduced in 2024 “risk causing supply chain disruption, delays, traffic congestion, higher prices, reduced choice for consumers and shortages”.
Echoing this, the National Audit Office (NAO) report of 20 May 2024 stated that the Government’s approach to post-Brexit border controls is causing “uncertainty and unnecessary costs”.
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With the new EU Entry and Exit System (EES) set to be introduced in October this year, logistics companies are also concerned about the delays and disruption to UK-EU supply chains from traffic congestion, queues and delays from inbound hauliers needing to travel and queue for checks, and outbound hauliers being delayed as passengers are processed through the EES system. Logistics UK is calling on the new Labour Government to “accelerate diplomatic efforts with the European Commission to secure a delay to the introduction of EES until measures are in place to mitigate the severe impact on freight”, although Mallon hints that there are concerns that it will take time before there is a smooth flow of trade.
Describing the situation in France, Lester from Diamond Logistics believes that it might be worth considering how the exchange rate will have a knock-on effect on business. She describes the recent electoral result as “heartwarming”, but warns that “the fluctuations in currency are an element to watch too. The pound increased as a result of [new UK Chancellor of the Exchequer] Rachel Reeves’ first Treasury speech. This is good and bad: low pound makes goods cheap, but EU suppliers/sources costly – so one to keep an eye on”.
There is also something to be said for being aware of each and every trend affecting the sector, because lifestyle factors always have a knock-on effect. London City Bond sales director David Hogg says: “Experience is one thing, but we must also be constantly aware of new trends or services required by our customers. With this in mind, we have set up an ecommerce fulfilment centre at our Sawston warehouse to handle the growing trend of home delivery, but with the distinct advantage that stock can remain under bond until the last minute – even down to a single bottle.”
AVOIDING THE PITFALLS
Essentially, the assistance for most businesses comes in the form of helping drinks brand owners to avoid the pitfalls and hand over all of the complicated logistics involved in expanding from market to market, instead focusing on what they are good at: innovation and creativity. Lester reveals that her business works a lot with “scale-up brands – probably from the stage where their garage or front room has grown too full of product for them to administer – and where they have found themselves with an accidental job as ‘head of warehouse and fulfilment’, as well as trying to run their business”.
She explains: “We seamlessly outsource scale-up logistics so owner entrepreneurs can focus on sourcing or creating great product and getting and keeping customers – we do all the boring but essential bits that make sure that product gets delivered; all managed with a transparent logistics management platform, named Despatchlab, so they can be reassured that we and our carriers are doing what we say we are going to, when we say we are going to.”
Staying flexible to meet requirements has become a fundamental part of assisting the industry to move forwards, as well as taking on each change as a challenge to be met and ironing out any creases early on.
Joseph De Maio, CEO of Italian logistics operator STI Internazionale, adds: “The seismic changes to EU/UK trade that Brexit has introduced have made customers more aware that partnering with specialist regional customeroriented logistics operators massively helps overcome local problems that may arise at any time.”
De Maio goes on to explain that “at STI Internazionale, we value every single customer, no matter their size or the size of their business with us, and are always ready to listen to customers to find the best solution to cater for their requirements”.
Here. he uses the example of how the company offers all of its customers a temperature-controlled option for their shipments from Italy, and notes that “with the record-breaking temperatures we’re seeing year after year, this feature is becoming increasingly popular amongst our customers”.
For the future of the sector, positivity is still glimmering beneath the surface of tension. Paperwork and strife aside, logistics are primarily about solutions – and looking for those among the many hurdles has become a prerequisite of an industry under pressure.
Lester says: “We see it as a new dawn and look forward with optimism,” adding that “after a Covid online boom for smaller retailers, there has certainly been a contraction with the cost of living crisis, and a few smaller drinks manufacturers have closed”. More positively, she ventures: “Hopefully a bit of sun over the summer and a bit of hope for consumers will support the rest of our brands to not just survive, but thrive.”
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