In the current climate, we are only too aware of the negative impact being felt by the Hospitality, Casual Dining, Entertainments, Performing Arts and Health & Beauty / Sports sectors (sorry if I’ve missed any) and for sure, our hearts go out to all those who work and operate in these spaces.
It’s only been over the past week or two, when I tried to purchase some gym equipment to use at home (I know, a bit late to the party), that I realised how all the current Pandemic news and rhetoric is masking the impact of Brexit and how significant an effect it’s having on peoples supply chains. Especially if you are a wholesaler importing from overseas.
Globalisation or Localisation
The more I reflected on this, whilst I recognise there’s an immediate problem to solve, this has to be a huge opportunity for UK based SME businesses to drive localisation and bring low-cost manufacturing back into the UK supply chain!
Let me explain. I wanted to buy some weights or a multi-gym, and with the perfect market conditions for online retailers of these items (mass captive audience, in lockdown, with increasing trends for exercising at home and no access to high street stores), I cannot find anyone who has stock available.
In fact, many are not even able to quote a lead time replacing it with a simple message of “pre-order” or “click here to be notified when back in stock”.
This tells me that these items are coming from outside the UK and are currently in containers midway around the Pacific or held offshore waiting to be allowed into port for unloading. With a shortage of shipping containers and the extra processes introduced as a result of Brexit, this means retails and their suppliers have no clear visibility of when they will have any kind of stock availability again.
It made me reflect on how I tried to mitigate for a No Deal BREXIT back in 2018, as a wholesaler of catering equipment, and how it must have been even harder for businesses to try and mitigate for it last year.
In March 2018 we saw similar issues, with the ports implementing new software and all the concerns of BREXIT & operation “Stack”, and this resulted in us taking the decision to stockpile increasing our stock holding from £4.5m to nearly £7m.
I talked about some of the impact and concerns in this BBC News interview.
Of course, we all saw a BREXIT deal pushed back to October 2018 then into 2019, so we, like many businesses, had no choice to burn that stock and turn it back into cash.
With the pandemic last year and the resulting economic impact, I doubt many small to medium businesses and wholesalers had either a strong enough balance sheet or the credit lines to tie up much needed cash in working capital? Especially when faced with Furloughing staff and reducing the workforce ability to handle additional goods.
I’ve no doubt that many organisations now face a perfect storm of low stock holding, supply chain challenges with lead times and on-time delivery performances adversely effected, and end customer dissatisfaction perhaps leading them to alternative suppliers and sources. Which ultimately means they miss out on much needed revenue.
Here in lies the opportunity for UK based small to medium manufacturers. Large blue-chip organisations need continuity in their supply chain, especially if they are serving critical sectors such as automotive manufacturers.
The changing route to market
Wholesalers generally have been coming under pressure, needing to demonstrate the value they add in the supply chain with end users. Manufacturers are wanting to open up a direct dialogue and are seeking to cut costs and tiers in their ‘routes to market’ to increase revenue. They are looking to redefine their route to the money!
If the fundamental role of the wholesaler, distributor, drop ship seller (whatever label we choose) which is to hold local stock for local supply, is under pressure and cannot be fulfilled, then this surely is a solid case for reversing the trend of low-cost manufacturing and importing goods. Bringing it back to localisation and UK based manufacturing / production.
The main reason that small businesses have struggled with supplying the large blue-chip organisations is much less cost, but the ability to demonstrate a robust Quality Assurance process with traceability, Julian dates, and a demonstrable Quality Control mechanism. Add to this the concern of “will they be able to cope with demand if they take on additional customers or orders” (in other words will they be sustainable) you can understand why the large blue-chip companies such as Rolls Royce have chosen to import goods and service capability over the past 20 or 30 years.
In reality, implementing these processes is not that challenging and they will actually help you with efficiency gains through any production and transactional departments.
A unique supply chain opportunity
The question is are you ready to take advantage of the opportunity that is presenting itself?
A change in process, thinking and approach now (within this short window of opportunity) could lead to a much longer-term change in the fortune, scale and growth of your business.