Photo by Naufal Giffari on Unsplash 

NOW THAT Britain has left the EU, UK-EU supply chains must comply like any other. ClearBorder are experts in international trade. In this article we explain trade compliance, how to take the worry out of trade and improve trade efficiency.

What is trade compliance?

Trade compliance refers to compliance with the rules which govern the import and export of products, services and technology. You need to know the rules to protect your reputation and bottom line.

Why is trade compliance important?

First and foremost, trade compliance is a matter of law. HMRC uses audits to “check that all matters relating to customs and international trade are correct, including that you’re paying the right amount of tax.” So it’s vital to know your compliance needs.

How do I stay compliant?

The exact procedures depend on a number of factors: origin, destination, goods, products or services, to name a few. We’ve produced a starter guide to reducing risk:

• Identify who’s in charge
• Train them, and give them access to support
• Keep accurate records
• Keep up to date with regulations
• Establish an ongoing trade compliance program

What happens if I don’t comply?

Customs rules are law. The penalties for failing to comply can vary but range from fines to delays, impounded goods, unexpected charges, criminal sanctions and/or court proceedings.

What’s involved?

We’ve highlight six key aspects you need to get right to stay compliant.

Classification: Governments use commodity codes to classify goods. This classification determines tariff rates, statistical and export control requirements. So, classifying your goods correctly is the first step to compliance. 

Preferential origin: This allows countries to trade goods tariff-free under a Free Trade Agreement. For example, you may not need to pay duty when importing EU goods - but you must record the origin correctly.

Incoterms: This defines how risks and costs are shared between buyer and seller. It’s vital your teams understand Incoterms - they are internationally-recognised and used by courts in arbitration disputes. 

Licences & permits: Trade in advanced technologies, historical artefacts, animal or plant products require permits or extra certification. You must establish what licences you need and ensure that your teams and suppliers comply.

Customs management: If you trade internationally, you will almost certainly be subject to a customs audit. It’s important to be prepared to manage an audit, keep on top of payments and demonstrate compliance.

Valuation: HMRC needs to establish the value of imported goods to determine VAT and duties. They use what’s called ‘landed value’ - a reasonable and justifiable valuation calculated with one of the six methods approved by the World Trade Organisation.

clearBorder can help

Trade compliance is important. If you get it wrong, you can face unexpected bills, fines or even prosecution. But let us help you get it right to reduce risks and build the skills you need to increase efficiency.

The Retail Supply Chain & Logistics Expo takes place at London’s Excel on 28 Feb-1 Mar. Stand PE2723

For more information, visit www.clearborder.co.uk

The latter looks more likely, as a number of factors mean global oil production is historically low. These include low oil prices over the last decade, which led to a lack of investment in production and refining capacity. On top of this, OPEC+ has signalled that it is not likely to significantly boost oil and gas production. The oil producers fear a coming recession among oil consumers and want to make sure they get a steady (high) price for what they are selling.

Even if the war ends, it is difficult to see a route for Russia to quickly reintegrate into the global energy market. It will take a long time for the world to trust Putin again, if he stays on, or place trust in his successor, if he does not.

With oil and gas greatly influencing the baseline of energy prices, it means businesses should not be surprised to see a sustained crisis.

In this issue, we highlight concerns that the UK’s energy infrastructure many not be fit for purpose to support the next generation of distribution centres. On a more positive note, we hear of the vast potential offered by warehouse roof spaces and how using this space to generate solar power could go a long way to meeting energy needs. See Page 30 for more.

What is almost certain is that energy is likely to be a major issue for the foreseeable future, and so we are focusing relentlessly on this subject for warehouse occupiers and others. We will highlight products, solutions and partners for you in the magazine, across face-to-face events such as Tomorrow’s Warehouse, and webinars as well as on our website and Enewsletters.

Picking

Autonomous Mobile Robots (AMRs) have developed rapidly over the last few years, offering the ability to tackle many warehouse processes at a time of worker shortages. In this issue, we look at Picking specifically, and talk to Geek+ Robotics, Exotec and Zebra to highlight solutions for now, and what you should be thinking about in the future as these technologies further bed in to the increasingly sophisticated modern warehouse. Among the common key themes looking ahead, is a recognition that a number of different technologies may be deployed and these will need to be linked at the control level, as well as at the workflow level with WMS. There also looks to be a growing role for robotic arms in picking, as the technology looks to have made the necessary step change to be able to make a real world difference. See Page 22 for more.

Tech-led logistics

In this feature, we are exploring those third party logistics companies that are embracing technology to improve service to their customers. One of the pioneers in this respect is Wincanton, for example, in its stand-out W² Labs programme, which invites warehouse and logistics related start-ups to compete for the chance to trial their solution in a live environment.

Wincanton has really committed to the process and the calibre of the entrants is very strong. It is well worth a read to see the kind of technology and approaches that are seeking to get more out of established warehouse processes, or indeed re-think supply chains to potentially make some rather large strides indeed. See Page 44 for more.

Brokers speak in hushed tones about the unprecedented weight of capital being brought to bear on the market. While some of this money is used to fund new build, much simply inflates the value of existing stock. This in turn compresses yields for owners, who move to compensate by cranking up rents. So while it sounds like a good thing that money is pouring into our sector, it isn’t necessarily going to make things easier for occupiers. In fact, it’s likely to add considerable cost, and at a time when warehouse worker wages are on the rise too. Add to this the recalculation of business rates due next year, which is likely to increase the rates that apply to the burgeoning logistics sector and the cost of doing business in the logistics space could rise significantly. This could lead to a significant drag on economic activity and further price rises for the consumer.

Perhaps we can see a precedent in the housing market, where the golden ticket of scarcity and demand has consistently pushed house prices up for decades, even as the economy ebbed and flowed and wages stagnated. In short, it’s good news if you are sat atop that weight of capital as a warehouse owner. Not so great if you are under that weight, as a warehouse tenant. We predict this will lead to a profusion of warehouse space optimisation tactics, from temporary buildings to mezzanines and much more.

Smart move for Ocado?

Ocado has refreshed the technology behind its landmark Ocado Smart Platform. Cleverly, Ocado is using this to broaden its strategic options in the face of stiffer competition than it has ever faced in the warehouse automation for grocers market. Q-commerce and micro-fulfillment are both a threat and Ocado has responded by adjusting its tech in an attempt to counter this. For example, its new robot is much lighter allowing it to cut construction costs and time to install.

It has also unveiled the idea of the ‘virtual regional distribution centre’, basically using local warehouses, linked by software, to back each other up. It remains to be seen how this will work. Computer storage virtualisation works well because software is able to track bits of information stored across disparate locations and instantly recall stored data to the point on a network where it is needed. Fleets of vans on the road network are not bits of data on a broadband connection, however, and it remains to seen how efficiently different warehouses can realistically coordinate to the extent that each has impressive range without the cost of a shared RDC. 

On the one hand, one of the key arguments for Brexit was the opportunity to close the doors to ‘less-skilled’, lower paid foreign workers. That was identified as a vote winner by the Tory party and its success at the last General Election suggests it continues to pay off.

This means it will be politically difficult for the Tories to reach for the obvious short term solution to the HGV driver shortage. It could relax rules on EU lorry drivers and allow haulage firms to quickly hire the staff they need at (probably) reasonable rates, averting a crisis for the logistics industry, its clients and ultimately the consumer.

Industry is asking for this and it would be the quick solution. I suspect the Government will be very reluctant to go down this route.

If that’s the rock, the hard place is an increase in pay and conditions for lorry drivers. That would be the medium and long term solution, which would attract greater numbers of UK-based workers to the role. 

But UK companies have benefited from low salary growth for many years and this has been as true for HGV drivers as anyone else.

It would therefore be hard for many companies to accept such a paradigm shift.

It is also a tough one for the Conservatives to encourage as better pay and conditions for workers is the tone you would expect from a left-wing Labour Government rather than the pro-business Tories.

The biggest danger for the country is that this predicament leads to paralysis. That is, without an easy decision to make, interested parties don’t make one, and the crisis builds.

The Government responded today, but it enough?

Transport Secretary Grant Shapps announced: “We’re aware of a shortage of HGV drivers, so I’m announcing a temp extension of drivers’ hours rules from Mon. 12 July, giving flexibility to drivers & operators to make slightly longer journeys.”

The move drew industry criticism.

Rob Wright, executive director of logistics consultancy SCALA said this was a ‘backwards step’.

“We do not want tired drivers of heavy goods vehicles on our roads. Instead, we need major investment in driver training to address the backlog caused by 28,000 cancelled HGV driving tests during Covid-19. Funding is also required to promote logistics as a more attractive career choice.”

Business group Logistics UK reacted with dismay at the announcement.

James Firth, the organisation’s head of road freight regulation policy, said: “The current workforce cannot be expected to fill the gaps created by the current skills shortage. The road freight industry vehemently opposed the extension of these vital road safety laws, yet the government has ignored the will of those who will be most affected by the changes.

“Existing drivers have been working flat out since the start of the pandemic, and this could be the final straw for many of them.”

Aside from safety concerns, pushing existing drivers to take longer journeys isn’t going to touch the sides of current demand.

A major investment is needed. Everyone knows that.

The question is who pays?

Is it the Government? If they relax EU migrant rules, they could take an electoral hit.

If they don’t, it surely falls on the industry to pay more to get more drivers from the native workforce.

Perhaps a middle ground could involve funding from Government to industry to assist a recruitment effort?

It proposes the closure of its two Dartford and Heston regional delivery hubs in the South East of England.

Instead, the grocer plans to serve the increasing number of customers shopping online by expanding its ‘in-store pick’ model – projecting the creation of 4,500 new roles in store-based online operations across the country.

It is an interesting move because it puts the emphasis very much on the existing assets within the group - store staff, store space and in-store stock. Perhaps as well as creating greater capacity, improving slot availability and allowing Asda to get deliveries to customers more quickly, it will also allow them to control costs? It has long been a tricky nut for retailers to crack, as home delivery is inherently more expensive than the store model. But with stores increasingly under-utilised post-pandemic, it makes sense to re-use these assets.

The alternative of cutting back sharply on these assets would certainly be more painful.

This might be about to get a bit easier. The pandemic has accelerated eComm even further but it has also accelerated trends such as home working, brought commuting into question and is helping to nudge people away from driving into cities, much like tightening regs on car emissions.

Looking at the future of urban transport (more bicycles, and shared ownership of electric vehicles perhaps?) the single occupant car driving into the city is unlikely to be a central part of it.

A by-product of this is that city centre multi-storey car parks are unlikely to be as heavily utilised as before.

You might not spend much time thinking about car parks, but if you do for a second, you’ll realise they are often in prime urban locations.

So why not use this soon-to-be-dead space to help with last mile logistics?

This is in its early days, but we are already seeing initiatives in major capitals such as Berlin and London.

The London Wall Car Park in the City will see 39 car park scares repurposed as a last mile logistics hub to be operated by Amazon Logistics.

After all, what else should we use the old car parks for? More flats? Mushroom farming?

Urban logistics is certainly attracting investment, such as MARK recently raising 500 million euros to invest in sites across the EU.

It’s certainly hitting some major operational hot spots that will be familiar to many.

Robots & Automation

Robotics are offering a way to bring warehouse automation to the masses. Once upon a time, warehouse automation required major infrastructure and cost up front. That isn’t necessarily so now. Modern warehouse robots - autonomous mobile robots (AMRs) - are relatively fast and inexpensive to deploy. The key word here is scalability. You can start small and build up as demand and economic rationale dictates.

To explain this trend, we have one of the leading players in this sector - Locus Robotics - and its VP, Europe Denis Niezgoda to talk you through this crucial issue and the big impacts it can have on warehouse efficiency.

On the automation side, we also have Shane Faulkner, Head of Sales, Swisslog presenting on ‘Off the Shelf’ automated solutions within 3 months. Webinar attendees can discover how solutions such as AutoStore and CarryPick can be delivered in as little as three months. With pre-defined layouts, these ASRS technologies can be adapted as demand changes and can be installed in existing buildings. Depending on the project specification, it is even possible for the flexible systems to be rented or leased to preserve liquidity exactly when you need it.

Space

Warehouse space is another key battleground for operators that is at a critical point of change due to the rise of eCommerce, the pandemic, Brexit and more. To illustrate how smart design, and the right combination of storage infrastructure and forklifts can bring about a sea change in warehouse space optimisation, Martin McVicar, MD, Combilift explains how the company’s products have enabled a major packaging supplier to optimise its warehouse space while keeping up with its ever growing production schedule.

Digging deeper

But frankly, it’s not enough to purchase a system and cross your fingers. And surprisingly, many firms do just that. They fail to think through the implications and fail to dig into the detail sufficiently. I spoke to a logistics manager earlier in the year and he said the biggest difference between a big automated warehouse project working or not, was allocating sufficient time and resource to making sure the software, old and new, works well together.

Nick Fox, Head of Logistics - Europe, at fashion retailer Theory also makes this point in as he tackles the growing trend of D2C (Direct to Consumer). The growth of D2C makes warehouse process accuracy more important than ever. But many retailers and brands think buying a system to cope is enough. Nick argues that the real work is ‘doing the detail’ and making sure IT and warehouse operations knit together effectively.

Big picture

We’re turning to Kevin Mofid, Head of Industrial Research, Savills for a take on the bigger picture in UK warehousing. The initial shock of the pandemic has now passed but with logistics now well into its Peak season, Kevin Mofid discusses the logistics property landscape, demand trends and implications for warehouse and logistics managers.

Register free for the webinar series here - https://bit.ly/2GQgTMI

It was very interesting to see Ocado make two robotic picking acquisitions today.

Most of the focus will, understandably, be on the tech. Ocado already has a leading position in automated grocery warehousing for home deliveries. It is first class in terms of space utilisation, mechanical speed and precision, as well as software control. 

This has allowed Ocado to diversify from its core position of online grocer to technology platform provider, as it has sold this system to a growing roster of leading retailers worldwide.

In tech terms, Ocado sees the acquisitions building on its own development in machine learning, computer vision and engineering systems and complementing them with better robotic arm tech. Indeed the Dexter HDI 7+ axis robot from Haddington Dynamics looks amazing.

However, one of the acquired companies, Kindred AI, has a considerable business in non-food warehouse automation. This foothold could offer Ocado a tasty growth opportunity. Suppliers such as Kindred AI are growing fast anyway, given the rise of eCommerce, and the accelerant of the pandemic - think of how much faster they could grow with Ocado’s cash, and engineering & marketing heft behind them.

This represents positive news for Ocado. Remember, last month, Norwegian warehouse automation technology provider AutoStore filed patent infringement lawsuits in the US and the UK against Ocado Group, alleging Ocado has infringed patents around its warehouse automation technology.

While this legal issue looks likely to rumble on, Ocado seems determined to push hard for growth regardless.

How right that is. In fact, Skechers has experienced order growth, even post-pandemic. But having made a significant investment in staff and systems over the last five years, it has been in a position to support this unexpected growth.

Seize the opportunity. If growth does not present itself, then use the time to lay the groundwork for future business. 

Now is the time to have a look at back office functions. Maybe you are relying on three delivery management systems when one would be optimal? Now could be the time to rationalise on to the best option. Maybe you’ve spent the last three years thinking about cloud-based warehouse IT? Now could be the time to get something done about it.

We are delighted to have a thoughtful column from Harry Watts of SEC Group, dealing with how you need to get on top of inventory changes six months into the crisis and deal with the implications this may have on warehouse storage and systems.

In the meantime, there is a lot to be proud of in the logistics industry. Just look at the grocery supply chain. It has been under a lot pf pressure, with acute volume fluctuations, and yet it has coped admirably. Imagine how much worse the situation would be for the public if this key sector did not have the planning, the systems and the hardworking staff to prevail.

Social distancing in the warehouse has had major knock-on effects on processes. Firms need to carefully plan pick waves to ensure workers are not crowding in the aisles. 

This is important as we approach Peak. As warehouses refine their processes, matching waves to order profiles to get goods out quickly and accurately, they will have to also factor in social distancing rules. As a result, this could be a big Peak for automaton, with many retailers looking to see just how much of extra Peak volume can be handled by automated solutions, saving both on the cost of extra employees and also the potential safety headaches they would bring.

With the pressure on to quickly produce a vaccine, the development process is being accelerated in a bid to create a viable vaccine as quickly as possible. This is understandable, and the Report suggests a vaccine could be available as early as this year.

The less encouraging news is that the trade off to this fast development, in one scenario, is lack of stability. The resulting vaccine may be based on a ‘platform’ that requires very low temperatures to be viable. This would mean a robust cold chain infrastructure is needed to store, handle and transport the vaccine effectively. This isn’t easy in the developed world, but it can be done. In much of the developing world, it is impossible.

In the white paper, DHL asks what special measures could be brought in to make it work? Perhaps drones could be used to quickly transport vaccines from cold chain hubs to remote areas, but the real challenge would be big cities in the third world. The only real solution is to develop the infrastructure and that obviously takes a lot of time.

The upshot is that while the developed world may roll out a vaccine in 2021 and be largely rid of this, the developing world may be living with it for years to come as a more stable vaccine is developed.

It would be a massive undertaking, but perhaps more should be done to build cold chain infrastructure in the developing world? Even if it arrives too late to help with Covid-19, it will assist with other health related problems, as well as providing infrastructure to store perishable food, helping exporters and creating insurance against future food shortages.

Very low interest rates mean money is practically free to borrow at the moment, and long term bonds could be issued to tackle this that would place little pressure on the creditor or debtor. 

The next question then is who would be motivated to do it? Perhaps China. After all, China has, over the last 20 years, invested vast sums in Africa alone, much of it on beefing up infrastructure. You can read about the Delivering Pandemic Resilience white paper here.