With just a few weeks to go before a “deal or no-deal” Brexit deadline, companies doing business in the United Kingdom and Europe are preparing for potential logistics snags, disruptions, and delays in 2021.
That includes U.S. companies that are serving the EU market from warehouses or distribution centers in the UK. On January 1, 2021, every shipment between the UK and the EU will be an import/export, including every e-commerce shipment—a situation that adds customs checks, clearances, and cost to trading relationships and as a result is sending many companies searching for logistics solutions that can address the red tape on the horizon.
“For most industries, a single European distribution center is sufficient to support the European market. Now, with the UK being a separate market, we see a lot of U.S. companies investigating a two-DC solution for Europe: one covering the EU/EEA [European Economic Area] and one covering the UK ... ,” said Stan de Caluwe, senior manager for supply chain solutions at the Holland International Distribution Council (HIDC), a non-profit organization that represents the Dutch logistics sector and helps international companies enter the European market. “We have been helping these companies with the EU part of their business, finding logistics, warehousing, and VAT [value-added tax] solutions—especially those that have relied on a UK DC for many years that can now no longer supply the EU market timely and efficiently.”
HIDC was part of a panel discussion earlier this week on steps shippers and logistics providers are taking to prepare for Brexit, the UK’s 2016 referendum to exit the EU. The panel was hosted by The Netherlands Foreign Investment Agency. As government officials continue to try and negotiate a deal by December 31, logistics experts emphasize that change is coming regardless of the outcome. Officials in The Netherlands have been preparing to accommodate increased import/export activity, especially since the country is home to Europe’s busiest container port, in Rotterdam. Customs officials in the country say they have hired more than 900 additional agents over the last couple of years, for instance, and Dutch ports have implemented a digital system to smooth the transition and address added volume; all trading partners will be required to use the digital system following Brexit.
De Caluwe and his colleagues say a shift in strategy is necessary for many U.S. companies who traditionally considered the UK as a first point of entry for the EU, regardless of whether or not they can move operations to mainland Europe.
“Some U.S. companies are heavily invested in the UK and they can’t just pick up a part of their operation and move it to the mainland, as they own a building, have a long lease or don’t want to lose good employees,” de Caluwe said. “For them, we are trying to find the best ways of moving goods post-Brexit. For example, by helping them find customs consultants/agents, fiscal representatives—to deal with their VAT obligations—consolidators or a warehouse for forward stock.”
A separate panel discussion this week hosted by advisory firm Gartner also emphasized the logistics headaches ahead for companies that aren’t yet prepared for Brexit. Delays and disruptions at ports are among the initial problems experts anticipate, leading to a ripple effect on product lead times, manufacturing operations, and storage requirements. Logistics delays and disruption ranked among the top concerns of audience members in a poll question during the November 30 Gartner online event.
“Brexit will mean change, with or without a deal,” said panelist Susan Boylan, a director analyst with Gartner Supply Chain, adding that “seismic change” in trading between the UK and EU are on the horizon.