VIRUS ENDS THE 3PL SECTOR’S ‘BREXIT BOOST’

The ‘Brexit Boost’ that has benefited the 3rd Party Logistics sector for so long appears to be coming to an end, says John Maguire managing director of Narrow Aisle Ltd and a past chairman of the UK Warehousing Association.

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Last summer warehouses across the UK were full. "There is no available space," Peter Ward of the UK Warehousing Association told BBC Newsnight in July 2019.

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The lack of spare capacity was in part the result of stockpiling as companies attempted to shore up their supply chains ahead of Britain’s departure from the EU amid growing fears that vital cargo would be held up at the ports if the ‘no deal’ scenario became reality.

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And, as more and more businesses - particularly food and FMCG manufacturers – opted to bolster their inventory, there is no doubt that the third party logistics sector enjoyed something of a ‘Brexit Boost’: empty pallet spaces in racking became a rare sight as the ‘Sorry – We’re Full’ signs went up outside 3PL facilities everywhere.

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The increase in grocery retail sector inventory proved very useful during the early days of the Covid-19 crisis when panicking consumers bought up essential items in extravagant quantities.

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But, the national shopping spree that Coronavirus fears prompted has left stock levels depleted and, as the world comes to terms with the ‘new normal’ of living with COVID-19 and the extent of the lockdown-induced squeeze on the economy becomes apparent, it seems inevitable that the amount of stock held in warehouse and distribution facilities will continue to reduce.

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As a result, FMCG and food companies will look to their supply chains to deliver the economies that will be needed to offset the impact of falling consumer confidence on their business in the months ahead.

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Of course, the 3PL sector operates on notoriously tight margins and successful logistics businesses will have the agility to respond to the shifting needs of their client base by implementing cost-saving operational changes within their warehouse facilities.

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Through its Warehouse Systems Division, Narrow Aisle Ltd has worked with many third-party logistics companies to transform existing warehouses and significantly improve efficiency and reduce operating costs.

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With 3PL capital expenditure budgets likely to be squeezed, we expect to see more third-party logistics service companies embracing mixed fleets of new and used machines. 

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The economic impact of the Covid-19 lockdown is likely to be felt for some time and, as a consequence, food and FMCG suppliers will have significantly reduced storage demands. 3PLs must act swiftly to consolidate empty warehouse space and reconfigure their storage systems to reduce storage costs if they are going to optimise their operational efficiency and safeguard their margins as we all adjust to the ‘new normal’ of the post-lockdown trading conditions.