Redesigning Inventory Management with Warehousing Options for UK Businesses

March 11, 2021

January 1 ushered the biggest change to the UK’s trading arrangements with Europe in generations. The country’s departure from the European Union means that half a billion consumers across 27 neighbouring states are now out of frictionless reach for UK-based merchants.

By refocusing their warehousing and fulfilment strategies, and by utilising powerful warehouse and inventory management automation tools, UK retailers can mitigate the demands and costs of the Brexit business landscape.

Linnworks, a leading ecommerce platform that is helping traders to keep operations running smoothly, has written a helpful overview to introduce UK retailer to the concept of a multiple-warehouse strategy and how to implement the five key aspects thereof.

Manage new costs and bureaucracy with a multiple-warehouse strategy

Importers and exporters must now comply with a plethora of customs and border declarations under the new Trade and Cooperation Agreement with the EU. This may slow the movement of goods across the newly created trading frontier.

The prospects for shipments into and out of Northern Ireland are further complicated by the province’s land link with the Irish Republic, providing it with a separate set of rules.

While the agreement signed between Whitehall and Brussels a week before the official Brexit date keeps trade free of tariffs and quotas, the reality is that the creation of a new customs border will cost shippers in VAT payments and paperwork that hadn’t applied under the Single Market and Customs Union:

  • Ecommerce sellers will no longer fall under the EU’s ecommerce directive and may be subject to a variety of new regulations imposed by individual states.
  • Costs could rise as shipping times lengthen and operations are shifted.

Merchants are still learning what the redrawn business environment will mean for their operations, and their responses will evolve. But two months in, it’s apparent that merchants will need to reevaluate their logistics and fulfilment processes.

For managing the new costs and bureaucracy, merchants should consider implementing a multiple-warehouse strategy that straddles the border, establishing relationships with third-party logistics (3PL) providers and using bonded warehouses.

1. Warehousing

Shippers can bypass some of the new customs procedures and get closer to their intended markets by having a multi-warehouse management strategy that sees their goods sent to warehouses and fulfilment centres on either side of the border.

This also offers scope to reduce shipping costs and delivery times if facilities are sited in areas of greatest demand.

The incentives to do so are great. Post-Brexit, consignments that move across the Channel are now subject to rules of origin regulations. VAT must be declared on higher-value shipments.

Economic Operators Registration and Identification numbers (EORI) are required, as are amended Contracts and International Terms and Conditions, none of which were needed before Brexit. Alcohol and energy products no longer enjoy the suspension of duties under the Excise Movement Control System and Low Value Consignment Relief no longer applies.

Identifying a suitable warehousing strategy can be tricky, however, and would mean changing supply chains depending on whether merchandise is sent for fulfilment to larger distribution centres or split and sent to distributed facilities.

Setting shipping charges and fulfilling orders can also be difficult when inventory is stored in different locations. For example, how would fulfilment be priced on orders that contain multiple items stored in different warehouses?

2. Third-party Logistics

Smaller businesses and ecommerce traders who can’t afford to create new warehousing face a number of alternatives. They can hire space in the short term at government-owned storage facilities.

Longer-term, they might engage third-party logistics (3PL) providers. By outsourcing fulfilment, traders avoid the capital outlay of establishing new warehousing and restructuring operations. They can take advantage of the 3PL firm’s expertise and can rescale operations or test new markets, without having to commit to capital investment that may not eventually pay off.

But contracting others to handle fulfilment carries some risk. Traders have less control over their delivery processes, which can prove troublesome when there are delays. Additionally, companies tend to be tied to the 3PL specialist’s warehousing setup, which may not be optimal for key sales markets, and may be some distance from the contracting firm’s own operations.

3. Bonded Warehousing

Another alternative for limiting the impact of Brexit bureaucracy is bonded warehousing. In these, traders can store goods without paying duty until buyers are found and the merchandise is released. This helps to manage cashflow on goods that might not sell immediately. Bonded warehouses can also hold restricted items until the right paperwork is completed.

However, space is in short supply. Many large retailers absorbed much of the available capacity last year in anticipation of a no-deal Brexit. The pandemic’s impact on supply chains has also added to demand.

4. Amazon Merchants

Thousands of small traders that sell through Amazon’s Fulfilment By Amazon (FBA) network face separate upheavals. Many were forced to take on some logistics operations for the first time when Amazon decided that it wouldn’t ship goods across the border from its fulfilment centres after Brexit.

From now on, FBA users must have their merchandise sent to FBA centres in the UK or the EU. That could mean additional haulage costs and VAT charges if traders have to move merchandise to centres across the border.

5. Automated Solutions

While these are challenging times for all merchants, service providers have automated solutions to provide total commerce control as they get to grips with the new trading landscape.

For example, Linnworks’ inventory management software puts full control of customers’ stock in their hands and synchronises with major sales channels, including Amazon and eBay.

(If you’re selling on a third-party marketplace, here’s a story about how Hello Baby got Brexit-ready in 26 days).

Automated soluations also help traders expedite fulfilment and delivery as well as find the most cost-effective shipping services in a product that seamlessly integrates with all major haulage and courier companies.

Fully automating the key processes in the fulfilment cycle eliminates human error, helps cut costs and reduces the amount of time needed to tackle repetitive tasks, allowing customers to concentrate on building their businesses.

And that’s a wrap.

If you’d like an even deeper dive, get Linnworks Guide to Brexit for ecommerce businesses.