Stuck in between a rock and hard place

In the last Few days, anyone in the UK reading the papers would have struggled to have missed three big stories: “Hard Brexit”, “Marmite Gate” and “Pound Plunges”.

These three stories are clearly intertwined: Brexit has caused fears for the health of the UK economy, which has caused the value of sterling to tumble, which has caused retailers to put up prices to compensate — which has ultimately lead to the armageddon-esque headlines about the nations most divisive spread.

We explained in a previous post the effect of Brexit on warehousing, but we just want to look at the effect the fall in the value of sterling is having on the retail sector. The pound has devalued by 17.5% in the last three months. Most people who use warehouses are importers or exporters. This means profits are getting wiped out — that 17.5% is huge. Margins are tighter than ever so what are you going to do about it? Pass it on to the consumer? Maybe, but see how that worked out for Unilever. Retailers in particular are stuck in between a rock and hard place.

What you do is look to the supply chain and see where cost-cuttings can be made. Being able to ‘hedge’ against uncertainty by building-in flexibility to your supply chain is what you do. Smart companies do this anyway — a good, very public example is Lidl Vs traditional supermarket model — Lidl are not committed to seeing particular products, they only sell products that they can make a margin on at the time.

But the blind spot in the supply chain is warehouses. This is what we at Stowga are addressing.

We want to allow companies the flexibility to scale up and down quickly, to build a dynamic solution that reacts to the market. Fixed, rigid, long-term contracts make no sense in the modern world. No one wants fixed costs if they can avoid them. Look around, it’s changing everywhere — on-demand, sharing economy, gig economy — it’s all related — driven by changing consumer demand and technology.

Warehousing will change because the customers need it to.

Originally published at https://medium.com on October 21, 2016.