Key Points
  • Effective January 1, 2021, the transition period for Brexit will end and all shipments between the European Union (EU) and the UK will be subject to customs regulations

  • This will lead to increase in documentation required to move shipments between the EU and the UK

  • Digitization will be crucial for shipping and logistics players as they seek greater speed and accuracy across processes while keeping operational costs in check

The shipping and logistics industry will experience the full impact of the challenges posed by Brexit from January 1, 2021 when the free flow of goods between the European Union (EU) and the UK comes to an end. Companies on both sides of the English Channel could find their operations becoming slower, costlier and more complex. As the EU’s largest trading partner, in 2019, UK’s exports to the EU stood at 43 percent while imports from EU were 51 percent.

From January 1, 2021, all shipments between the EU and the UK will be regarded as international, and will be subject to customs regulations. The UK government is estimating a six-month period of disruption at its border, expecting the worst for the first three months. Border delays will have an inevitable impact on supply chains that will slow shipments, lower inventory turns and increase costs. In the event of a ‘No-deal’ Brexit, companies will have to bear GBP 15 Billion in annual costs only on customs forms.

In addition, there will be an increase in the documentation required to move shipments between the EU and the UK This means companies used to borderless trading until now will have to quickly adapt to international trade and compliance requirements to avoid delays at the border. They will have to become familiar with the documentation requirements of international shipments, and the description and classification of the goods being shipped.

Post-Brexit, companies will have to process more than 250 million customs declarations every year compared to 55 million at present. The paper-based format of this process only adds to the challenges. According to a survey by the Chartered Institute of Procurement and Supply, only one in five companies had completed all the steps required to handle the additional bureaucracy and challenges of trading with the EU after January 1, 2021. This was before COVID-19 disrupted the landscape. Companies are now even less prepared to meet the challenges as they reset strategies and begin the arduous journey to recovery.

As the volume of documentation and information increase, adopting a digital approach is now more crucial than ever. Digitizing the data will enable interventions in the form of analytics, Artificial Intelligence (AI), Robotic Process Automation (RPA), Natural Language Processing (NLP) and Machine Learning (ML). Apart from cost optimization, these technologies can drive automation, speed and accuracy, and offer real-time actionable insights.

It would augur well for companies to get a head-start by making the transition to digital early on. For instance, at WNS, we offer clients our proprietary digital platform – WNS Malkom. It specializes in digitizing documents for the logistics industry, thereby simplifying a rather laborious and time-consuming activity. WNS Malkom uses AI, enhanced Optical Character Recognition (OCR) and bespoke ML algorithms to efficiently and accurately move paper documents to the digital realm with minimal or no human intervention. Once digitized, this information can be easily moved to the Transportation Management System (TMS), custom brokers, Her Majesty’s Revenue and Customs (HMRC) and beyond.

Additionally, analytics can offer interactive dashboards with real-time insights, and volume forecasts, along with the monitoring of daily performance. While there are a few external applications and software that allow for seamless integration into the existing billing workflow, companies should ensure that their digitization packages encompass a sufficiently broad range of capabilities such as billing audits, and accounting and collections.

Even before the arrival of COVID-19, Brexit was threatening to make trade between the UK and the EU more complex, cumbersome and costly. However, similar to its impact on other industries, the virus has accelerated an existing trend — the shift to digitization. Companies that have already started on this path will be able to handle the additional hurdles introduced by Brexit. It will enable them to keep costs down and maintain an efficient supply chain, thereby gaining competitive advantage.

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