The warehousing and logistics industry is on a ‘crucial countdown' where only those companies willing to be flexible and revolutionise the way they do business will be fit enough to last the course over the next 12 months, according to a new report ‘Making Space to Grow'.
According to the findings of the report and research initiative from Link 51, the UK's largest storage solution manufacturer and supplier, supported by UKWA (United Kingdom Warehousing Association, the industry is at an important crossroads.
"Businesses that embrace technology innovation will be in pole position to succeed. They will also be prepared to challenge and reinvent conventional business models and ramp up commitment to energy efficiency measures ahead of legislative requirements," explained John Halliday, managing director of Link 51.
"However, the sub-text is a stark reality for those who are slow to adopt innovative strategies and will probably not be around in 12 months' time," is the message at the core of this new report explains Halliday.
Meanwhile, the report confirms that reduction of carbon footprints are no longer pipe dreams. The sustainability agenda and drivers to reduce CO2 emissions, energy use and other hitherto ‘nice to haves' are now firmly at the top of corporate agendas.
"This report looks at issues today which will affect strategic decision-making in the coming years. Some of the key findings confirm what many of us suspected; improved customer service remains the pre-eminent issue. The growing challenge of accurate sales and demand predictions, flexibility of storage solutions and the development of stronger and more flexible partnership relationships are close behind. This is a valuable and welcome piece of research," added Roger Williams, UKWA chief executive officer.
Highlights from the ‘Making Space to Grow' Report include:
• The customer is still king (although reasoned challenges to customer issues will demonstrate how a company adds value);
• Continuing to improve customer service remains the key priority for industry players in a market that remains unpredictable for the foreseeable future;
• With space at a premium smart use of storage and distribution centres will help companies contain costs and gain competitive advantage in an increasingly margin-pressured market;
• Shifts in market demands and requirements place planning, market intelligence and flexibility at top of corporate agendas;
• Consumer behaviours and retailer innovations including e-tailing underline need for the logistics and warehousing sector to up their game and place innovation at core of their offering;
• Sustainable development, energy conservation and efficiencies not only protect a business ahead of regulatory requirements but many customers are demanding their suppliers meet or surpass minimum standards from CO2 emissions to a range of CSR (Corporate Social Responsibility) measures, such as CO2 emissions, fair working policies, involvement with communities, commitment to diversity and a raft of previously regarded ‘soft issues' now central to business success on local, national and international levels.
The report goes on to state that the turbulent nature of the UK - and indeed global - economy and the inability to predict typical patterns, means that the so-called ‘Third Revolution' will witness the expansion of technology and also the development of factories as workshops with cost pressures will be required to supply stock at minimum notice.
"It isn't all doom and gloom though," explained Halliday, "because the warehousing, storage handling and logistics sector is essentially the business barometer of any nation and is in a pivotal position to benefit from output and demand. The secret of success is to know which sectors are developing and where you can add value in the supply chain.
"It is akin to a minefield; those who are agile and deftly plan their way will be successful, whereas those who ignore the warning signs or plough on regardless may not be so lucky. Nowadays in business no one can afford to rely on luck alone."
The dynamics of consumer demand and shifts in requirements enabled by technology have propelled online shopping from a sideline to a major cog in the retail industry. This has had an impact on design, and location of warehouses and what systems are deployed to provide optimum efficiencies.
Improving storage capacity is another key driver in improving efficiency in organisations; Ian Spencer, project director at McLaren Construction said: "Reducing cost per square foot and still achieving maximum value engineering will be key, as well as reducing operating costs without compromising on quality."
The report also covered the effect on environmental issues in efforts to reduce energy and paper usage; increased efficiency in transportation was a key target. The Warehouse sector is responsible for 10.2m tonnes of CO2 emissions every year, or 3% of the UK's total output. There is light at the end of the tunnel though, with a potential cut of 16% in emissions through improved heat and light efficiency and areas such as doors.
Supplier team and people issues were dominant within the survey - being able to see things from the customer organisation's perspective was a high priority with over half of respondents giving this issue maximum score.
Link 51's Halliday summed up: "Together with a range of factors, innovation is a key differentiator and a philosophy that we place as central to the future success of our business in a competitive world. This report signposts some of those key areas that progressive businesses will need to incorporate in their thinking as they focus on ‘Making Space for Growth'. This report is probably the final warning rather than a wake-up call!"
The six-month qualitative research phases started in November 2011 and was completed in June with additional open interviews and web surveys.