A Hard Brexit


As we inch towards the end of 2020 the UK retail industry is facing into a 2021 double whammy. Not only are the prospects of COVID 19 impacts disappearing fairly faint, at least in the short term, but the reality of Brexit raises its head for another bout of supply chain chaos.

Excluding supermarkets, and pure-play online retailers, continued demand suppression for retail goods as a consequence of either tiered or national lockdowns in the new year looks inevitable. Retailers who are already overrun with the wrong stock, not only need to be much more controlled over what they are buying and spending their cash on, they then need to navigate the choppy waters of Brexit related delays.

Whilst the Brexit deal agreed between UK and EU leaders on Christmas Eve may not to be everyone’s taste, it does at least avoid the scenario of tariffs to be paid on goods crossing borders. That said, border delays are inevitable. Within the Brexit deal, there is no language outlining an agreement on conformity assessment which would limit the level of border checks, so from the 1st of January it’s fair to assume that goods entering the EU from the UK (and vice versa) will face paperwork and checks; customs declarations, country of origin paperwork, and product safety certification.

Worryingly, UK ports are already reporting significant delays. The backlog of road haulage was clear to see in Kent as soon as the French Government closed their border with the UK on the 20th December following the announcement of a faster-transmitting variant of the COVID 19 virus- thankfully reduced by 95% now. Less publicised is that Felixstowe experienced an increase in import traffic back in early November due to some UK businesses stockpiling ahead of the January 1st transition deadline. Reduced air freight traffic as a result of fewer commercial flights hasn’t helped the issue. The immediate solution to easing the pressure at Felixstowe was to divert traffic to Southampton which, predictably met the same issues as Felixstowe. With reports of 4 weeks delays before we even start 2021, the retail sector is facing another known unknown.

Shipping lines have now been reducing traffic into the UK due to the congestion, which in turn is impacting the return of empty containers to the port of origin- creating more congestion- and at the same time forcing the price of container shipping to the UK up as supply reduces due to the above. Some UK companies have reported a tripling in the price of a 40ft container.

As the perfect storm of too much wrong stock and not enough right stock comes together to force up cost prices, shrink margins, reduce availability and tie up cash further, even the very best retailers will be challenged among the core disciplines of Forecasting, Planning, Allocating and Pricing to ensure that every potential unit of demand is capitalised.

For many non-food related retailers with a store presence, Forecasting based on last year’s history no longer works, for the obvious reason that the addressable market is between 40 and 45% less than in 2019. This coupled with the Brexit related port delays impacting Planning lead times, ensures that pressure on the merchandiser to land the right stock in the right place at the right time has never been greater. With cash reserves depleted by stock mountains of wrong product, there will be no prizes handed out for bloated order books or misallocated stock - they could be fatal.

TPC provides demand forecasting and stock allocation solutions tailored to meet each business’ needs. Combining data science techniques with machine learning, our forecasting and replenishment approach together with our smart allocation tooling helps to increase stock turn and cash generation whilst minimising markdown costs.

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