According to a recent survey conducted by ELCOM amongst 2900+ buyers and suppliers, more than 50% of the respondents believe that COVID-19 has significantly amplified the supply chain uncertainty created by Brexit. 2/3rd of the survey respondents agreed that the recent events have exposed pre-Brexit and pre-COVID-19 supply chains deficiencies such as missing, fragmented, or inaccurate data. The biggest challenges with today’s complex globalised supply chain.
What is going on in UK’s Supply Chain?
Businesses around the globe are facing supply chain bottlenecks as economies continue to emerge from recent lockdowns. However, the situation in the UK has worsened on account of Brexit, which has caused major supply chain disruptions. Over the recent months, there have been delayed deliveries, stock shortages, and increased prices.
Fast-food chains like McDonald’s and Nandos have reported problems due to the supply chain disruption in the UK with menu items unavailable in August. Supermarket chain Iceland’s Managing Director revealed that the retail giant has shortages of food and drink products daily.
During the pandemic, the healthcare sector reported shortages of critical supplies, medical materials, and logistic support which affected hospitals’ ability to care for patients. Now the shortage is affecting non-critical but essential items such as disinfectants, cleaning supplies, linens, toilet paper, and food. In addition, small hospitals find it challenging to maintain the supplies they need and restock quickly, whilst facing staff shortages. Many non-UK nationals working in the UK moved back to their home countries during the pandemic resulting in severe staff shortages. According to health.org.uk, staff shortages left the NHS vulnerable to the COVID-19 storm. (Recommended: Best solutions to the top five healthcare challenges.)
The Office for National Statistics reported that in late August, almost one in five of the businesses in the UK (18%) were either not able to get finished goods, raw materials, or services they needed from within the UK, or had to change suppliers or find alternative solutions.
What are the reasons for stock shortages?
Supply chain disruption in the UK is quite complex. The UK economy’s recovery from the pandemic has been faster than expected, and the surge in demand is surpassing the supply. An efficient supply chain is the need of the hour. However, acute staff shortages caused by Brexit and COVID-19 together, have been the single biggest reason for the disruption in the supply chains.
Healthcare industry revealed keeping hospitals stocked with enough equipment to deal with hundreds of thousands of cases was extremely challenging, particularly PPE kits and equipment needed to carry out critical operations. The haulage sector essential for the transport of finished goods across many supply chains is badly affected, with industry bodies estimating a shortage of 90,000 -100,000 drivers. This has led to delayed fuel deliveries, forcing some petrol stations to close.
What has caused these acute staff shortages?
Covid-19 and Brexit coming into play together resulted in a mass exodus from the UK resulting in a severe labour shortage. As per the Office for National Statistics, nearly one million non-UK-born residents left Britain in 2020. The number of job vacancies in the UK hit a record high of 1.2 million in September’ 21, with shortages across several sectors.
Brexit
Brexit has played a significant role in the labour shortage across the UK. A high number of EU nationals were employed here in the UK across diverse sectors. However, free movement of EU nationals stopped at the end of the Brexit transition period, and the government introduced a new points-based immigration system. This new system favours skilled and qualified employees and UK firms are now finding it difficult to hire from EU. For instance, sectors like food, healthcare, manufacturing, and haulage have historically employed many EU workers whose replacement is now becoming difficult. The NHS employed 13.1% of non-British nationality staff and it is difficult for the NHS to function without their international workforce. The government wants talent within the UK or train & develop talent. However, this is a long-term solution, and the supply chain continues to be disrupted.
Covid-19
A recent article by Financial Times states that the supply chain disruption will last until 2023. Several government interventions are in place; however, different sectors will have to consider long-term solutions like training UK domestic workforce and exploring local sourcing. As per ELCOM’s recent survey, 75% of the respondents believe that COVID-19 has led to an increased focus on more localised supply chain as it can minimize disaster risk and provide greater efficiency. More than 50% of the buyers and suppliers have increased their responsible supplies prioritising local sourcing by 10% or more.
Would a Smarter Supply Chain solve the problem?
As per the Quadrant knowledge report SPARK Matrix™: Procure-to-Pay(P2P), 2021 “The COVID-19 outbreak has caused considerable disruption across the supply chain and procurement. As a result, organisations are reassessing ways to execute various operational tasks. They are re-examining their supply & demand, supplier relationship, supplier diversification, short-term contracting, supplier selection, negotiation, awarding, supplier risk assessment, and spend management. Vendors are focusing on digitally transforming their business and leveraging automation for optimising their planning and decision-making skills. The outbreak has also urged organisations to invest significantly in P2P solutions due to the growing need to stay connected with remote teams. Vendors are focusing on helping the procurement strategy teams to creatively solve problems by continuously supporting integration with emerging digital technologies such as AI, machine learning, RPA, NLP, OCR, cloud-native, and more.” Access to the full report here!