Analysis

ANALYSIS UK logistics hit by perfect storm of Covid and Brexit

Multiple online retailers and carriers have been reporting disruption in their UK networks this week, as the twin effects of Covid and Brexit hit.

The main disruption on the Covid side currently seems to be from staff shortages: workers, like other citizens, are falling ill in high numbers.

Royal Mail posted an update this week saying that it would be forced to suspend deliveries to multiple areas across the country, including the city of Leeds.

Online supermarket Ocado has reported that it may be forced to increase product substitutions “for a small number of customers” due to staff absences across the supply chain.

There are also disruptions to fulfilment itself, with ministers reportedly considering banning click and collect for non-grocery retailers. John Lewis has already suspended its click and collect operation.

While the nightmare scenario of a “no deal” Brexit has been avoided due to the UK striking a deal to roll over some elements of EU membership, there is still an additional bureaucratic burden on companies shipping goods to and from the EU.

According to ParcelHero, 20% of parcels are being stopped at the border between the UK and France. This is similar to the 20% of parcels which DPD reported as having “incorrect or incomplete data” in its statement saying it was having to suspend services to Europe, including Ireland. It has since extended the suspension to 15 January.

Book retailer Waterstones announced it would be suspending shipping to European customers, while M&S cut its product range in Northern Ireland.

These pressures, following quickly behind a peak season where parcel volumes were already significantly higher than in 2019, are unlikely to ease soon.

For one thing, the rate of infections in the UK is still growing and the vaccine roll-out is a while away from having tangible effects on the spread of Covid. Meanwhile, if anything, the signals are that border traffic will increase: according to the UK government, volumes last week were less than half they were the previous year.

Ensuring resilience and flexibility in the supply chain will remain crucial during this period. Some approaches that have been deployed successfully by retailers include:

  • Enabling stores as alternative distribution centres, through IT integration, opens up other supplies of inventory.
  • Working with a partner which offers customs management can reduce the risk of delays at the border.
  • Adopting a multi-carrier strategy and using management systems allows orders to be quickly rerouted to available carriers for delivery.
  • Using flexible IT systems can help retailers to quickly spin up new resources such as pick and pack workstations.
  • Drop shipping, where the order is placed on the retailer’s own site but fulfilled directly by a supplier, can offer an additional channel for meeting demand.

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