Automating stock management in a bonded warehouse with a WMS
A bonded warehouse can minimise the cost of Brexit, but you should ensure all goods are correctly declared, tracked and managed when handled, using a Warehouse Management System.
UK manufacturers and retailers had hoped for a seamless relationship with their European trading partners after the Brexit transition period, but the reality has proved very different. Today, businesses are facing increased shipping and administration costs, logistical complications and delays – all as a result of new and complex country of origin rules. They are also facing additional tariffs, VAT and customs costs, incurred when products either enter or leave the country.
Who is expected to pay for these costs? The timing couldn’t have been worse, given how so many retailers and manufacturers have also struggled through the Covid pandemic lockdowns. It is a double whammy for some business owners. So great is this problem, that many brands are now opening new EU based warehouses and distribution centres, to avoid what JD Sports is describing as “double-digit millions” in extra costs.
Bonded warehousing to ease cash flow
In addition to establishing distribution centres in continental Europe, another possible way to avoid hefty shipping tariffs is to use bonded warehousing. This can be especially advantageous for managing cashflow because the goods can still be stored in a UK based warehouse and the customs duties and / or import VAT only have to be paid when the goods are actually sold on.
A bonded warehouse means no import duties are immediately payable only to have the goods sitting in a warehouse until a customer orders them. It can also prevent retailers from having to pay two sets of duty on products entering and then leaving the UK. Since so many products consumed in the UK come from outside the country, bonded warehousing can be a very astute strategy. Superdry, Next, Gymshark and many other brands use bonded warehouses to help avoid having to pay double duty on their stocks.
WMS provides automated reporting for bonded warehouses
If you want to consider a bonded warehouse, it will be important to invest in warehouse management systems (WMS) software that can help keep a track of inventory entering and leaving the four walls. One of Indigo Software’s customers is a wine and spirits distributor, operating two bonded warehouses within its logistics estate. Each of these warehouses holds hundreds of product SKUs, which are supplied to thousands of retail outlets across the country.
Using Indigo WMS integrated with their main ERP system, the company can minimise warehouse management costs, eliminate time-consuming paper administration and very importantly, instantly provide the detailed customs reporting required by HMRC. A further benefit of Indigo WMS is that it comes with pre-configured inventory reporting. This helps verify all movements into and out of the warehouse, to ensure that the duty paid is accurate, that there is no stock shrinkage and no errors have occurred.
Ongoing ROI from investing in a WMS
After investing in Indigo WMS, this particular customer estimated that it saved tens of thousands of pounds in the first year alone through time saved on stock checks. They also gained further efficiencies from avoiding errors on orders and these savings have continued year on year.
If you decide to use a bonded warehouse to minimise the cost of Brexit, you will need to ensure that goods are correctly declared and very carefully tracked and managed when being placed into or being removed from your warehousing facilities. Goods must be handled in certain ways while in a bonded warehouse and Indigo Software’s WMS software will, along with many other benefits, help to ensure you can remain fully compliant with HMRC.
Disclaimer: This blog does not constitute tax advice. Tax law is complex so speak to an appropriately qualified specialist about the relevance and appropriateness of bonded warehousing for your business.