Stockpiling: a pre-packed disaster?
As Brexit looms closer, companies across all industries are looking for ways to prepare either financially or strategically. From weekly steering groups on how to prepare for the eventuality that luxury fresh items like flowers could be held up at customs, to creating global visibility of spend to understand how and where the savings opportunities are – companies are preparing for it all.
However, one of the main industries with opportunities for savings and cost reduction is the manufacturing sector. Agency labour costs, MRO, logistics and courier services are all key areas that need addressing, but this article focusses on packaging opportunities.
Recent surveys state that manufacturers have been stockpiling packaging in anticipation of rising cost bases post-Brexit – but is this the best option?
Data from the Food and Drink Federation reveals that over a third of food and drink manufacturers are reporting an increase in costs as a result of stockpiling ahead of a possible ‘no-deal’ Brexit. With other European countries already leading the way on sustainability and packaging innovation, would Brexit mean Britain risks being left behind? Importantly for those that are already stockpiling, does this mean that organisations will have stockpiled an increasingly redundant product?
Getting left behind
With the likes of Morrison’s and Iceland blazing the trail of plastic free packaging and more supermarkets planning to follow suit, food and drink manufacturers run the risk of stockpiling a product that suddenly isn’t required by their largest customers. Morrison’s already has 82% recyclable packaging and aims to be completely plastic free by 2025.
With consumers becoming more environmentally conscious, the collaboration between consumers and businesses to align their interests should increase, resulting in continuous change.
Perhaps one positive to come out of Brexit is the ‘forced rhubarb’ effect on British industry. With no alternative, manufacturers will be forced to grow and develop new technologies and innovations. Non-EU Norway is a good example of how a country can continue to flourish in technology and development if the infrastructure and funding is already there, as in the UK.
What's the solution? Is there one?
Instead of stockpiling, manufacturers could look at locking in savings to brace themselves for the impact of Brexit. Obviously, tackling all areas of spend across the business is paramount but for various reasons this isn’t always possible for organisations – resource, time, skillset are all key factors in this. However, this article focuses on packaging spend, so addressing the margin and locking in the saving there should be the answer. As opposed to buying potentially the wrong product at the wrong price, companies should squeeze the margins, lock in the savings and adapt to the new products and changes that will inevitably come up by being prepared financially.
Points to consider:
- Stockpiling increases the risk of buying at the wrong price and using up valuable warehouse space
- Risk of being left behind in terms of technology and innovation
- British industries should hopefully be forced to develop and innovate
- Solution is to address the margins and lock in future savings