Inefficient supply chains cost UK businesses £1.5bn per year
05 / 07 / 2018
Inefficient supply chains and miscommunication in air and oceanfreight are costing UK businesses £1.5bn per year, according to a new study.
The research, published by digital freight forwarder Zencargo, found that processing each shipment takes on average three hours, with 50,000 jobs tied up in procurement, managing suppliers and freight administration.
Red tape and poor communications with "Chinese whispers"* equate to a 5% inefficiency levy on exporters, while the UK’s departure from the European Union (EU), or Brexit, could make matters worse as trading with non-EU countries is judged to be 17% less efficient.
It is also claimed that “simple technology adoption” can deliver 5% of the annual UK digitisation productivity target.
Zencargo said that the sampled shipments were taken over a four-month period from suppliers who process both air- and seafreight.
The sample was taken from a range of industries, across consumer goods, some of which were goods typically airfreighted, and raw materials.
Zencargo stated: “Detailed analysis of over 100 shipments from a cross section of UK industries suggests that UK businesses that trade internationally are wasting over three hours on average per individual shipment.
“In particular, they found employees are spending time on phone calls and emails to request and funnel data back and forth between their trade partners, the majority of which already exists on partner systems.
“Across the UK this results in over 100m hours of time wasted per annum, or the equivalent of 50,000 employees’ annual working hours, tied up in procurement, managing suppliers and freight related administration.”
The study also suggests that Brexit is likely to “exacerbate this efficiency problem further” as shipments with non-EU countries involve on average 17% more wasted time than shipments with the EU, owing to the increased communications burden around customs documentation.
Added Zencargo, whose dashboard allows supply chain teams to collaborate in real time: “The study demonstrates the urgent need for supply chain innovation as a route to solving the productivity puzzle. The adoption of simple technology that helps automate communication can deliver productivity gains now to the tune of £1.5bn per annum.
“This represents 5% of the UK Government’s annual target for productivity gains from digitisation (£30bn per year until 2030). Significant long-term transformation is possible through widespread digital adoption across the supply chain."
The analysis highlighted that organising a shipment to arrive at the destination country, including liaising with suppliers, takes 43% of the time. Getting the right documentation in place to pass the import and export customs takes 17%, while organising the final delivery drop-off takes up the remainder.
Alex Hersham, chief executive and co-founder of Zencargo, said: “Technology is the main building block to bridge the productivity gap in the UK. Lack of communication harms productivity in any business, factor in complicated and often outdated supply chains and problems very quickly escalate.
“Now is the time to invest and innovative in technology so we can truly compete on the global stage and at the same time benefit on a productivity level.”
*Chinese whispers: when a message is distorted by being passed around from person to person in a whisper.
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