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Supply Chain Disruptions

The Economic Shocks of the Pandemic and Brexit

The combination of the global Covid-19 pandemic, on top of changes in trading terms with the EU, has had an unprecedented impact on UK supply chains.  Although very little of the economy has remained unscathed by either of these economic challenges, specific sectors have been more negatively affected than others.

After speaking to many of our key supply partners, we’ve identified the areas of wholesale food & drink and linen as the key categories that are facing the most disadvantages at present. Below is a summary of the issues that are detrimentally impacting these categories, along with some helpful tips from our suppliers to help you mitigate the effect that these national and international disruptions are causing.

National Challenges

Following the implementation of the various UK lockdowns, suppliers have attempted to manage cash flow by reducing their stock holdings at depots. Furthermore, many are also facing issues reacting to the recent demand spikes whilst simultaneously adhering to strict social distancing measures to ensure a covid-safe environment for their workers.

 

The shortage of drivers in the UK has also now hit a critical level, with many food wholesalers experiencing difficulties delivering to both the retail and hospitality sectors. The Road Haulage Association has said the combination of Brexit, which has led to a cut in European truck drivers, and Covid, which has meant no new HGV drivers trained for over a year, has triggered the current crisis.

As some of you will already be experiencing, there are also staffing shortages across the hospitality sector, as changes to immigration rules and employees switching sectors during lockdown begin to take effect. These challenges also affect those businesses that support the hospitality sector, such as housekeeping companies and commercial linen suppliers. Some of these suppliers reduced their workforce during the pandemic due and are now finding it difficult to increase capacity in reaction to demand.

International Challenges

Shipping companies struggling with cargo bottlenecks are also facing a labour shortage, as major ports refuse to accept or replace Indian seafarers due to the ongoing surge of the Delta variant across the South Asian country. Furthermore, new sanitary rules that came into force earlier this year have dramatically slowed down the loading and unloading of cargo.

The situation in India is also affecting textile production, which is having a knock-on effect on commercial linen companies in the UK.  With rampant government-mandated textile factory closures, sellers have faced the prospect of significant disruptions in supply chains due to halted manufacturing activity and difficulty in procuring raw materials from the source nation, China.

In China, another virus outbreak in the South has disrupted port services and delayed deliveries, which could drive up costs even further. The province of Guangdong has seen a sudden rise in COVID-19 cases, and strict containment measures, including lockdowns and service suspensions, have been implemented. Guangdong is a vital shipping hub, accounting for 24% of China’s total exports, and is home to the third and fifth largest ports in the world by container volume. The new outbreak, along with the ongoing container shortage, has led to a dramatic increase in the delivery times of freight travelling from China to Europe.

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Supplier Specific Advice

Click below to see the latest advice, warnings and recommendations from some of our key supply partners. Alternatively, scroll on for more generic advice.

General Advice

Read on for hints and tips on how you can proactively avoid any potential disruption of service from these sector-wide issues.

Read below for a snapshot of how our suppliers forecast the above challenges will affect their respective sector going forward and find out what you can do to manage the risk of disruption of supply.

Forecast

What can you expect?

  • Product pricing is inflating significantly across all sectors, and this is likely to be felt by customers in the second half of 2021.

  • Suppliers have agreed in most instances to hold pricing while the length and severity of price inflation become more apparent, and Beacon continues to negotiate firmly on our customers’ behalf.

  • Impacts are felt throughout F&B, from livestock (UK cattle deadweight prices peaked at 24% higher year-on-year in May) to plastics and cardboard packaging costs (HDPE, used in milk containers is up 75% year-on-year; LDPE used in cling film, bottled & bags is up 90%).

  • “Friction costs” associated with new border regulations have been estimated by supply partner Fresh Direct at 1.6% of the line of sale (and risks increasing as further stringent measures are implemented).

  • May 2021 factory gate prices rose 4.6% year-on-year, with materials costs for British manufacturers up 10.7% (OECD) - denoting much of this inflation is yet to be passed on, high up the supply chain.

  • Labour and transport issues are likely to drive significant inflation and service issues through the rest of 2021.

  • Customers advise of significant staff shortages, particularly kitchen staff, and this is shared by supplier logistics teams. A shortage of hauliers across the UK has led to several suppliers across all areas of supply failing on their delivery commitments.

  • The price of cotton has risen by up to 40% due to lack of labour within linen producing countries such as India & Pakistan and freight rates exceeding $15,000 may have an impact on costs. We hope that the market will start to stabilise towards the end of Q4 2021 / Early 2022 based on a successful global rollout of the vaccine and increased container availability.

  • Due to severe staff shortages, our suppliers are on a huge recruitment drive, we expect this issue to be short to medium term. Some of the workers are unable to come back into the UK from the EU, therefore once travel restrictions are lifted we hope to see a further uplift in employment which will benefit services levels.

Read below for a snapshot of how our suppliers forecast the above challenges will affect their respective sector going forward and find out what you can do to manage the risk of disruption of supply.

Risk Plan Now

How can you be proactive?

  • Your Beacon account manager will be happy to support you to plan your supply appropriately. ​We can take measures to avoid the worst of these problems, but they are shared by most organisations in the affected sectors, so a supplier change isn't a reliable solution.

  • Drink Wholesale: All drink, except draught, is deliverable via your Beacon food wholesaler.

  • Wholesale Seafood: Many frozen seafood products can be included in fresh seafood deliveries.

  • Wholesale Butchery: Beacon works with high-quality BRC accredited butchers who can supply in place of food wholesalers.

  • Wholesale Dairy & Product Lines Including Prep: Your Beacon produce supplier is the best route to market for any dairy & produce lines that you usually buy via food wholesalers. Most produce suppliers can supply or sub-contract prep produce, although some may be day one for day three.

  • All Other Wholesale: Fresh food suppliers are used to supplying “emergency” orders of store cupboard products, so your Beacon fresh food supplier should have availability of wholesale essentials if needed.

  • Linen: Many laundries are not taking on new business due to the current staff shortages, therefore we encourage you to work with your local laundry depot to resolve supply issues, but if there are further issues, please contact your Beacon representative, who will escalate to our supplier. We have limited new supplier solutions based on certain locations within the UK, so if your contract ends within 6 months, please contact us. 

  • Consumables / Chemical – many food wholesalers who normally provide non-food items are limiting the availability of these lines to their customers. However, our main consumables/chemicals suppliers are not having such issues.

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