The impact of Brexit: Three key logistics concerns
The United Kingdom's upcoming exit from the European Union could severely disrupt the island nation's logistics industry by raising fuel prices, exacerbating driver shortages, and impeding border crossings.
Dominating both economic and political discussion for over a year now, the United Kingdom's planned exit from the European Union (EU) is set to shake up the commerce of the nation like few events have done before. The decades-long status quo has, for the moment, been replaced by uncertainty. All eyes are now on the negotiating teams of both parties as they try to hammer out an agreement that hopefully makes provisions for businesses on both sides of the divide.
Yet, in spite of all the talk about fairness and mutual gain, there are a number of concerns being shared by many in the U.K. who fear for the future of their trade with Europe. Logistics firms in particular derive a significant proportion of their income from this cross-Channel trade, so just what are the main issues that those within the industry should be concerned about?
The impact on imports and exports
In line with many other Western countries, the U.K.'s imports of natural resources far exceed its exports. Clearly, the prospect of the U.K. sitting outside the single market is of significant concern for those operating or investing in logistics services, since trade tariffs, higher fuel prices, and increased commodity and finished-goods prices could all combine to hamper economic growth.
Fuel prices should be a particular concern since the country's North Sea oil fields cannot meet its needs and just over a quarter of all petroleum products used in the U.K. arrive through EU countries. If fuel from EU member countries becomes more expensive, it's inevitable that logistics firms will have to pass on those increased costs to consumers.
The negotiations could also put U.K. exports at a competitive disadvantage. For example, the U.K. currently leads Europe in terms of products derived from its sizable herds of sheep, chiefly meat and wool. However this share of the market is greatly threatened by the prospect of a harsher deal (or lack of one), which would see the U.K. revert to World Trade Organization (WTO) rules. This would bring with it a host of trade tariffs and other red tape, making it a near certainty that competitors from across Europe would seek to reposition themselves as the cheaper and easier-to-deal-with alternative to British goods.
In some cases, however, there may be a silver lining to these trade barriers, as they could encourage innovation. For example, some observers have been quick to point out that the rise in fuel prices might, in fact, be seen as an opportunity for U.K.-based vehicle manufacturers to push forward with the development of commercial vehicles that use alternative fuels. Of course, environmentalists have been championing this approach for many years, but Brexit may well offer the nation a compelling financial incentive for reducing its dependence on fossil fuels. Developing transport solutions based on alternative fuels would have a twofold benefit: reducing pollution and lessening dependence on imported fuel.
The continuing driver shortage
Another key concern for the logistics industry is that EU nationals make up around one-tenth of the U.K.'s commercial drivers. Even though Brexit negotiations are barely under way, many EU nationals are already considering employment elsewhere in countries where they can be more certain of their future rights. The loss of this workforce pool would hit the logistics industry hard, as the existing shortage of commercial drivers in Britain is placing demand at an all-time high. While British drivers may find that this shortage helps to push up earnings, there is no suggestion that it will help bring more people into the industry. As a result, this skills shortage will only continue to grow. The agricultural industry is already feeling the impact of the loss of seasonal migrant workers, so there is a precedent for this eventuality.
One possibility is that the U.K. government may respond to the labor shortage by offering generous incentives to commercial drivers from across the EU and around the world to come to the U.K. to work. There has already been much discussion on how post-Brexit immigration controls could be used to attract skilled workers from overseas, and the logistics industry could well benefit from such a policy.
Trade and border crossing with Ireland
It's unlikely that the EU will agree during negotiations to some significant concessions in terms of freedom of movement and goods. As a result, it is almost inevitable that customs controls in the U.K. will become much tighter and more evident than is currently the case, both for imports and exports.
This will be particularly pronounced in Ireland, which is the only EU member to share a physical border with the United Kingdom. Northern Ireland and the Republic of Ireland currently trade freely with one another, and the trading volumes involved are significant. Unless an acceptable trading agreement is reached, trade and logistics between Ireland and the U.K. would be severely hampered, and the costs of the resulting delays and additional bureaucracy could run into billions of pounds. For instance, it's common for those living near the border on both sides to do their weekly food shopping on the other side, and new taxes on produce crossing international boundaries could severely disrupt life for the average consumer. On a larger scale, firms that enjoy a sizable clientele from abroad will surely see their revenues reduced, as buyers may not have the funds to continue doing business as they did pre-Brexit.
Citizens and politicians on both sides of the border have expressed their concern for such a potential predicament, as culturally and economically there are still strong ties between the two nations. Whilst many may wish for a separate negotiation focusing specifically on the changes in this unique relationship, the Republic is still an EU member and, as such, can only engage in dialogue as part of the larger bloc. The U.K. and Ireland must therefore agree on a compromise that not only satisfies the two parties but also the whole of the EU.
The border with Ireland is just one of many complex issues that need to be resolved. The nature of these problem means that there will be no easy fixes. But at the same time, decisions must be made as quickly as possible, in order to provide stability and certainty as the EU and the U.K. redefine their relationship. It's vital that both sides at the negotiating table approach this issue in a respectful and measured way, rather than viewing the process as a battle. There are potential pitfalls and opportunities for both sides. It is to be hoped that negotiators will recognize this as they work towards a solution that is beneficial for all parties.
The relationship between shippers and third-party logistics services providers (3PLs) is at the core of successful supply chain management—so getting that relationship right is vital. A panel of industry experts from both sides of the aisle weighed in on what it takes to create strong 3PL/shipper partnerships on day two of the CSCMP EDGE conference, being held this week in Nashville.
Trust, empathy, and transparency ranked high on the list of key elements required for success in all aspects of the partnership, but there are some specifics for each step of the journey. The panel recommended a handful of actions that should take place early on, including:
Establish relationships.
For 3PLs, understand and get to the heart of the shipper’s data.
Also for 3PLs: Understand the shipper’s reason for outsourcing to a 3PL, along with the shipper’s ultimate goals.
Understand company cultures and be sure they align.
Nurture long-term relationships with good communication.
For shippers, be transparent so that the 3PL fully understands your business.
And there are also some “non-negotiables” when it comes to managing the relationship:
3PLs must demonstrate their commitment to engaging with the shipper’s personnel.
3PLs must also demonstrate their commitment to process discipline, continuous improvement, and innovation.
Shippers should ensure that they understand the 3PL’s demonstrated implementation capabilities—ask to visit established clients.
Trust—which takes longer to establish than both sides may expect.
EDGE 2024 is sponsored by the Council of Supply Chain Management Professionals (CSCMP) and runs through Wednesday, October 2, at the Gaylord Opryland Resort & Convention Center in Nashville.
While the Council of Supply Chain Management Professionals' 2024 EDGE Conference & Exhibition is coming to a close on Wednesday, October 2, in Nashville, Tennessee, mark your calendars for next year's premier supply chain event.
The 2025 conference will take place in National Harbor, Maryland. To register for next year's event—and take advantage of an early-bird discount of $600**—visit https://www.cscmpedge.org/website/62261/edge-2025/.
**EDGE EARLY BIRD Terms & Conditions: Promotion is for the EDGE 2025 conference in National Harbor, Maryland. Offer valid for Premier and Basic Members only. Offer excludes Student, Young Professional, Educator, and Corporate registration types. Offer limited to one per customer. Offer is not retroactive and may not be combined with other offers. Offer is nontransferable and may not be resold. Valid through October 31, 2024.
Honoring supply chain professionals and companies for their contributions to the industry is a tradition at the Council of Supply Chain Management Professionals annual EDGE Conference. The following are some of the recognitions given out this year.
The 2024 Distinguished Service Award was presented to Heather Sheehan, owner of Crispy Concepts LLC, instructor with Penn State University, and board member and adjunct faculty member with the University of Denver’s Transportation & Supply Chain Institute.
Sheehan, along with Roger Penske, chairman of Penske Corp., were inducted into CSCMP’s Supply Chain Hall of Fame.
Travis Kupla, Ph.D, of the University of Arkansas, won the Doctoral Dissertation Award for his paper “How Supply Chains Respond to Disruptions: Three Essays on Responses to Operational, Geopolitical, and Natural Disaster Disruptions.”
The Bernard J. La Londe Best Paper Award was given to Matias G. Enz from the University of Missouri-Saint Louis, and Douglas M. Lambert from The Ohio State University for their paper “A Supply Chain Management Framework for Services.”
Wenting Li and Dr. Yimin Wang of Arizona State received the E. Grosvenor Plowman Award for their research paper, “A Procurement Advantage In Disruptive Times: New Perspectives On ESG Strategy And Firm Performance.”
The Teaching Innovation Award was given to Dr. Shane Schvaneveldt of Weber State University for his paper, “A Lean 5S Experiential Learning Game for Logistics and Supply Chain Management.”
To see a full list of honorees, please visit cscmp.org and click on the tab "Academia & Awards."
Supply chains today are facing an onslaught of disruption and change from geopolitical events to technological advances to economic shifts. Supply chain partners that successfully navigate those changes together will seize a competitive advantage that will win them market share and increase profits.
The “2025 Third-Party Logistics Study,” spearheaded by Dr. C. John Langley of Penn State University and developed in collaboration withNTT DATAand Penske Logistics highlights the crucial role that change management plays in the relationship between third-party logistics providers (3PLs) and their customers. Unveiled today at the Council of Supply Chain Management Professionals (CSCMP) EDGE conference, the study delves into the dynamic nature of relationships between shippers (companies that manufacture goods or provide services) and third-party logistics providers.
“While users and providers of 3PL services continue to report successful relationships, they find themselves having to deal with an increasingly wide range of challenges,” said Dr. C. John Langley, Professor, Supply Chain & Information Systems, Penn State University. “While examples include economic concerns, geopolitical unrest, and changing markets for supply chain services, they also are taking advantage of change management processes to benefit from new and improved capabilities such as artificial intelligence (AI) and direct-to-customer proficiencies.”
The survey found that both shippers (61%) and 3PLs (73%) agree that supply chain change management is vital. Respondents from both groups indicated that the top factors that are driving the need to change their operations were shifting customer demands, economic factors, and technological advancements. In particular, both shippers and 3PLs believe that improvement and change is needed in supply chain visibility, with 69% of shippers and 68% of 3PLs citing it as an area of concern.
AI as change agent
One technological advance that is enabling change in supply chain operations, according to survey respondents, is AI. Both shippers and 3PLs agree that AI can be pivotal in automating data analysis, identifying patterns, solving problems, and automating repetitive tasks. Top implementation areas for AI cited by respondents include supply planning and demand forecasting (33% of shippers and 19% of 3PLs) and transportation and route optimization (27% of shippers and 22% of 3PLs).
The e-commerce effect continues
Omnichannel retailing and e-commerce continue to exert pressure on supply chain operations for shippers and their third-party logistics partners. Both shippers and 3PLs view delivery speed and visibility as strong areas of differentiation. According to the study, 48% of shippers and 53% of 3PLs reported that customers routinely expect deliveries in less than two days, and 27% of shippers and 26% of 3PLs noted that there are three-day or less delivery expectations. Shippers (44%) and 3PLs (38%) are willing to absorb a small percentage of the costs related to shipping speeds.
The Annual 3PL Study surveys 3PL providers and users of 3PL services to understand the current state of 3PLs and how 3PL relationships are evolving with their customers. The 2025 study and past versions are available for download at www.3PLStudy.com.
Container flows at dozens of U.S. East Coast and Gulf Coast ports shuddered to a simultaneous stop this morning when dockworkers launched a promised strike over pay levels and job automation.
The action is affecting work at major locations such as New York/New Jersey, Savannah, Houston, Charleston, Norfolk, Miami, Baltimore, Philadelphia, New Orleans, Jacksonville, Boston, Mobile, Tampa, and Wilmington. That broad span of geographic locations will affect imports and exports for industries spanning retail, automotive, agriculture, food and beverage, and manufacturing, according to an analysis by Overhaul.
Those impacts are forecast to grow rapidly with each additional day the strike continues, since more than 100 vessels are estimated to arrive at the 36 affected ports this week alone, according to analysis by supply chain visibility provider Project44. The recovery from that backup could take some time, as some shippers estimate that for every one week of strike, it will take 4-6 weeks to fully recover, the firm said.
Because of the sudden stop, logistics providers today are quickly reaching out to shippers and other clients to plan for future cargo movements. Specifically, the strike immediately froze a range of work such as the movement of import and export containers and the loading and unloading of containers, according to German maritime transportation provider Hapag-Lloyd AG. “As a result of this situation, which is beyond our control, we will need to adjust our services or temporarily suspend operations as conditions evolve. Our priority remains the protection of your cargo during this period,” Hapag-Lloyd AG said in a note to shippers.
Despite those large impacts, the timeline is unclear for finding a resolution of negotiations between the union—the International Longshoremen’s Association (ILA)—and the port management group, United States Maritime Alliance (USMX).
Under those conditions, retail and manufacturing groups have renewed their calls for their White House to step in and force workers back on the job while negotiations resume.
One of those voices came the National Retail Federation (NRF). “NRF urges President Biden to use any and all available authority and tools — including use of the Taft-Hartley Act — to immediately restore operations at all impacted container ports, get the parties back to the negotiating table and ensure there are no further disruptions,” NRF President and CEO Matthew Shay said in a release. “A disruption of this scale during this pivotal moment in our nation’s economic recovery will have devastating consequences for American workers, their families and local communities. After more than two years of runaway inflationary pressures and in the midst of recovery from Hurricane Helene, this strike will result in further hardship for American families.”