A UKWA survey of 100 logistics and warehousing operations has confirmed the potential spectre of zero warehousing capacity in the UK within weeks as COVID-19 restrictions close factories and shops, slowing outbound supply chains while inbound flows continue to arrive at our ports.
90% of respondents say that they are totally full, which suggests that the market has just 10% pallet space availability.
This is not good news for the sector. Warehouses thrive on churn, handling and distribution, value added services – not storage. Indeed, our survey showed that for 70% of respondents, less than 50% of their income is derived from fixed storage costs. Those full of static product lines are not profitable – and some SMEs may go to the wall as a result.
It’s not good for demand side either, with cargo owners and shippers scrambling to source additional space from the shrinking pool.
With outbound flows severely reduced or stopped altogether as stores and factories are closed, inbound flows have become a mounting problem. Inbound supply chains cannot simply be turned off. Orders placed and dispatched before the lock down will continue towards destination, arriving at ports, requiring receipt, handling, onward distribution and storage.
As retailers’ own DCs become full, we expect them to turn to the third-party sector to provide annexed warehousing and, with current estimates of available storage capacity at around 1.5 million pallet spaces nationwide, our prediction is that the UK marketplace has approximately 2-3 weeks of capacity.
UKWA estimates an import volume through South/South East deep-sea ports of approximately 45,000 teu per week for the foreseeable future. This weekly volume is likely to require storage of some 750,000 pallets each week until lockdown is eased and retail stores re-open. Although we expect numbers of fulfilled orders arriving in the UK to be dropping off by the end of May, over the coming weeks, the search for additional space could become desperate.
In response to the rising crisis, UKWA has set up a COVID-19 Emergency Space Register on the website (UKWA.org.uk), where all available space identified will be collated and shared on a weekly basis.
I urge UKWA members and non-members alike to share details of any space opportunities with us, to enable the association to match supply and demand, helping alleviate the current pressure on space.
Meanwhile, we encourage and expect ports and shipping lines to continue charging quay rent, detention and demurrage charges as incentives to encourage importers and cargo owners to clear containers through the ports. UKWA believes the request by certain cargo owners for financial support to alleviate quay rent is not a useful proposal to deal with the critical issue of moving containers and suggests more effective alternative solutions should be considered.
The UKWA survey explored a range of other issues, including the ratio of leased to owned warehouses, the dependency of warehouse operators on income from storage compared to income from value-added services, levels of inbound and outbound flows, financial impacts of COVID-19 restrictions such as cashflow, furloughing, staff shortages and reduced shift patterns.
The data we gleaned will provide us with valuable real-time evidence from the ‘coal-face’ as we prepare an appeal to government on behalf of our members – and the sector in general – for additional financial help during this period. While those operating in the ‘essential’ sectors are facing the pressures of variable demand and staff unable to work through sickness, self-isolation of child-care, those in the non-essential space are suffering as warehouses fill up with static stock and profits plummet.
It is our role as the voice of the industry to make sure the government listens, understands and acts.