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Manufacturers hit by ‘perfect storm’ of delays and shortages

Firms are reporting huge lead times as supply shortages, haulage delays due to a lack of drivers, rising warehouse costs and continuing issues around EU Exit create a ‘perfect storm’.

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The logistics sector is currently reeling from a severe shortage of drivers and a self-isolation ‘pingdemic’ for warehouse staff. The industry numbers the driver shortage at around 90,000, with almost 30,000 HGV driving tests having been cancelled during the pandemic. In addition, many European drivers are believed to have returned to the EU since EU Exit.

The government has stepped in by pledging to work with the logistics sector to attract new drivers, simplify training and encourage people to stay in the industry. It has also temporarily relaxed drivers’ hours rules, allowing them to drive up to 10 hours a day.

However, Logistics UK believes the plan is unlikely to solve the shortage until 2022, while hauliers have called the extension to driving hours unsafe and ‘untenable’.

At the same time, there are also concerns around a ‘pingdemic’ in the warehousing sector, with thousands of workers having to self-isolate after being notified by Test and Trace. Logistics UK said a proposed process to apply for exemptions was overly time consuming for some businesses.

These difficulties are causing so much disruption that supermarkets Asda, Tesco and Sainsbury’s are now passing increased costs onto their suppliers. A spokesperson for Asda said:

“Due to the unprecedented HGV driver shortage, the third-party logistics providers that we use to collect goods from suppliers and deliver them to depots have significantly increased their rates in recent months and to date we have absorbed this additional cost. 

“Whilst passing on any costs to suppliers is a last resort, the challenges in the logistics industry remain unresolved and as a result we are looking to work closely with our supply partners to change the rates we provide for this service.”

Even without the difficulties in the logistics sector, manufacturers were already suffering from long lead times and supply shortages for key materials. According to a recent survey by financial advisory Kreston Reeves, some manufacturers have reported stock lead times of up to 56 weeks for even the most basic of items.

Andrew Tate, Partner and Head of Restructuring and Transformation at Kreston Reeves, said:

“Manufacturing businesses are facing a perfect storm of delays caused by COVID, Brexit and the temporary closure of the Suez Canal, with stock lead times typically between 24 and 56 weeks. The demand for high quality and high value UK manufactured products is there, but the ability to stockpile for even just a few weeks is not possible for most businesses. Businesses are unable to fulfil orders and are taking a hit on margins.”

Kreston Reeves said the problems were expected to continue into the summer of 2022 and that manufacturers experiencing supply chain challenges should be speaking to their banks in advance.

There is also an ongoing shortage of warehousing space in the UK. In July, real estate company Savills said it expected the perfect storm of events to lead to a shift from operating a ‘just in time’ to a ‘just in case’ model in the medium term, meaning demand for warehousing to hold inventory will only increase.

Greater Manchester manufacturers suffering supply chain problems are encouraged to contact our specialist Manufacturing Service for fully-funded advice and guidance.

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