Temperature controlled logistics is increasingly a global issue. Every day, millions of temperature sensitive goods are produced, transported, stored or distributed worldwide. Whether it’s food or pharmaceuticals, there is now greater demand for a variety of products from a wider audience. As a result, products need to cross more borders and, most importantly, need to reach their destination in the best condition possible.
Fortunately, the technology is there to keep these products in a controlled environment. But with Brexit on the horizon, there are also a number of challenges to bear in mind with regards to costs, regulation and crossing borders.
Read on as we take a closer look at the challenges of cold chain logistics in 2019.
Behind the globalisation of cold chain
Products within the cold chain warehouse space are temperature sensitive, so include perishable items like fruit, vegetables, flowers, and dairy products or medical products like vaccines, and even organs. Some chemicals and electronic components are also temperature sensitive.
With the growth of eCommerce, and a growing global middle class with broader tastes, products that were previously only manufactured and sold in one country now have a much wider target market. Suddenly, we can purchase the foods we have tasted abroad from the comfort of our own homes, and luxury items from across the globe can be transported easily to the UK.
We’re seeing more focus on the quality of these products too. Consumers want the same tastes, textures and health benefits from the products they’re buying time after time, meaning suppliers are under pressure to maintain the condition throughout the supply chain, often through a significant reduction in temperature.
But it’s not just food. Pharmaceutical manufacturers are also seeing wider demand for their products as health and well being becomes more of a focus. Similarly, these treatments often have strict temperature requirements because of active ingredients and a shorter shelf life.
Regulations add a further complication to the mix. In November 2013, the EU’s Good Distribution Practice was updated to ensure transportation is covered by temperature requirements as well as storage alone. As a result, companies now rely heavily on temperature-controlled technologies to meet consumer demand. That means investing in new, better technology, spending more on equipment, expanding capacity and continuously developing their supply chain process in order to provide the goods.
If this wasn’t enough of a challenge in itself, UK companies also have to contend with the changes Brexit will bring. Whether the government agrees on a deal or not, the UK is set to leave the EU on 29th March 2019, which brings us to the first challenge…
1. Storage
In preparation for a ‘no-deal’ scenario, a number of manufacturers and retailers have already begun stockpiling temperature-controlled goods including foods and medicines. Why? There is currently a great deal of uncertainty surrounding Brexit and what it could mean for the UK, without a deal, UK companies may have to pay large tariffs to import both food and medicine from the EU. With the added complication of changes to regulations, and whether we will have alignment with the EU, we could even have a period with no imports at all.
Whether it’s finished frozen and chilled products or raw food ingredients, the food industry needs constant supply of product into the UK. And in the case of medicine, patient safety could be at risk without necessary treatments available. Without ongoing access to foreign suppliers, they need sufficient storage on home soil to stay prepared for an interruption in the supply chain in a ‘no-deal’ scenario.
But with increasing numbers of manufacturers and retailers choosing to stockpile their resource until they know the outcome, industry chatter suggests there won’t be enough cold-chain warehouses in the UK to meet business demands and the requirements of everyday items. According to the FSDF (Food Storage & Distribution Federation), more than 90% of their members’ 385 refrigerated warehouses are already full and pressure is now being put on the UK government to ensure there is adequate storage. But this takes time, and the process of developing new temperature-controlled facilities could take years.
2. Crossing borders
The next issue is crossing the borders themselves. Even if UK companies can stockpile sufficient resources to keep their own production lines running, there will still be demand for product from overseas.
Collectively, EU countries are the UK’s largest trading partner, with £274 billion worth of exports in 2017. That’s 44% of all UK exports for the calendar year. In order to continue this relationship the Prime Minister has described the need for a “as frictionless border as possible” at both an administrative and physical level, especially to ensure the continued success of the cold chain.
Any deal between the EU and UK will likely include a continuation of current exporting laws. However, in the case of ‘no-deal’, the UK would become a non-EU country in trading terms, meaning businesses may require an exporting licence to move goods across borders and will have to provide a commercial invoice outlining all goods and their value. This would not only mean administrative backlogs, but potentially queues of traffic at ports up to 29 miles long.
Delays at the UK/EU border are of significant concern to companies in the pharmaceutical sector, with some products requiring delivery into the EU within 24 hours of manufacture. If delays at ports are going to become a regular event, new ways of transporting temperature-controlled goods will need to be developed – at huge cost to businesses.
3. Containing costs
The final consideration, within all of this, is containing costs. Businesses need to maintain supply, production and potentially exports without letting costs rise. That includes three key areas:
- Storage costs – at a time when there is high demand for temperature-controlled storage
- Product costs – with the potential for added premiums and tariffs
- Investment in controlled temperature technology – to keep products in the right condition as well as meeting industry regulations
Britain spends around £50bn a year on medicine and food from the EU. So stocking up with enough for just a month would cost around £4bn – more than the entire ‘no-deal’ planning budget of £3bn the government set aside in November 2017.
According to the Food and Drink Federation’s (FDF) latest survey, 38% of food and drink manufacturers in the UK are reporting a significant increase in business costs as a result of having to stockpile ahead of Brexit. This trend is also seen across the healthcare industry, who fear that the price of medication could shoot up if supply chain costs increase.
How to meet the demand
2019 could create a perfect storm for UK businesses, whether that’s maintaining supply of products or keeping up with demand overseas. It’s now more important than ever to find the right partners for shipping and storage.
As companies strive to meet the new demands of a more connected global supply chain, the demand for extra storage or new facilities in the UK has dramatically increased. And now reports state a shortage in cold chain warehouse space could put a spanner in the works for many businesses looking to prepare for their supply chain for potential disruption.
Despite wide spread reports, we are aware of a number of properties and competitively priced 3PL operations across the country who have underutilised warehouse capacity and a great many are searching for ways to put those resources to work.
At Bis Henderson Space, we understand that there is no ‘one size fits all’ solution to individual problems. Our approach is to look at exactly what each customer’s warehousing requirements are to present a cost effective, sustainable solution. With access to an open network of suppliers, we can actively source the warehousing and logistics services you need, when you need it most – including temperature controlled transport and facilities.
Get in touch with us today to discuss how we can support your supply chain pre, and post Brexit.
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