Stockpiling and the Supply Chain
With the UK economy tackling the uncertainty of both Brexit and COVID-19, the issue of stockpiling seems more relevant than ever before. 2020 has seen consumers frantically stocking up on essential items as the coronavirus pandemic first struck, as well as UK warehouses hoarding excessive amounts of imported goods before the end of the Brexit transition period.
It’s estimated that there is around GBP 40 billion of imported stockpiled goods in UK warehouses as a result of uncertainty surrounding border disruptions post-Brexit. Following this revelation, UK supermarkets have also recently been advised by the UK Government to stockpile food as the likelihood of a no-deal Brexit grows stronger.
It is understandable why customers and businesses feel the need to stockpile goods during times of uncertainty, although, this can result in catastrophic consequences for the supply chain. Here we cover how the supply chain is affected by stockpiling and what the supply chain can do to prepare for increased demand.
What impact does stockpiling have on the supply chain?
Whilst initially, it seems as though increased consumer spending is a positive thing for the economy, it can result in placing tremendous pressure on the supply chain for numerous reasons.
During March, when the first UK lockdown was first imposed, UK food production increased by 50% to keep up with demand from panic buyers. For companies to fulfil demand, this often requires hiring additional staff, resources or materials. During the coronavirus pandemic, many factories have had to reduce staff or have experienced staff shortage as a result of social distancing and self-isolation.
With most businesses also under significant financial pressure, many are not in a position to cover the increasing costs of hiring additional staff and expanding resources. These obstacles leave the supply chain unable to fulfil demand, leading to a shortage of goods. This problem was particularly evident during the UK’s coronavirus lockdown in March, as images of empty supermarket shelves were displayed across the news.
How can the supply chain prepare for a surge in demand?
Whilst purchasing excessive levels of stock can be damaging for the supply chain, businesses can roughly forecast seasonal surges to ensure they have the appropriate levels of stock and resources to meet customer demand.
Manufacturers, for example, can assess concrete data within the dynamics of their supply chain, by observing demand from the end retailer. Often when demand from retailers gradually lowers, there will be a sudden upswing, so it’s often worth preparing for uptake during quieter periods.
Businesses should review their supply chain regularly to ensure the chance of disruption is minimal during busy periods. Assess each stage of the supply chain process from manufacturing to transportation, observing if maximum efficiency is being met. It could be worth communicating with everyone within the supply chain to decipher a plan B option, in the event of a problem.
Foreign exchange risk within the supply chain
With many UK companies conducting business with overseas manufacturers, the pressure to stockpile goods could leave businesses struggling to meet the increased level of payment.
Additionally, poor exchange rates and costly bank fees can leave businesses out of pocket when sending international payments.
To help alleviate the stress of sending international business payments during uncertain times, it’s advisable to speak with a foreign exchange specialist like Halo Financial to ensure you get the best deal. Please give us a call on 020 7350 5474 to find out more.