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Report: Logistics pressures threaten online shopping

Report: Logistics pressures threaten online shopping

A congested transport system, lack of skilled workers, and Britain’s land constraints all need resolving if the UK’s logistics sector is to meet the growing demands of tech-savvy consumers, says a new report.
According to City law firm Addleshaw Goddard’s report "How Soon is Now?: The Future of Logistics", the rise in e-commerce and increasing growth in parcel delivery is putting extra pressure on supply chains and starting to cut into the third-party logistics (3PL) sector’s notoriously thin profit margins.
Pressures are coming from a labour skills gap, with the road haulage sector facing a shortfall of 60,000 drivers and an ageing work force, which Brexit could worsen. Congestion on the road and rail system is also causing delays to deliveries, which can see operators incur late delivery fees.
A shortfall in space for warehousing is also driving up rents, forcing some operators to move to cheaper and less well connected sites.
Without a thriving logistics sector, online retail will become unsustainable, leading industry figures caution in the report, meaning consumers will lose out through reduced convenience and choice, with the risk of longer waiting times and higher delivery charges.
The 90-page white paper sets out 12 suggestions it wants the Government to include as part of its new industrial strategy to address these growing problems. The proposals include:

  • Designating land for industrial space
  • Providing grant funding to stimulate industrial development, similar to that provided for affordable housing by the Homes and Communities Agency
  • Further investment in greater road and rail freight capacity
  • Action to tackle the haulage and construction skills gap

The report suggests that firms use new technology such as real-time supply chain management solutions in order to gain a competitive edge, by helping to reduce the supply chain risk prevalent in third party logistics operations and in retail. Nonetheless, a greater focus on skills and more investment in transport is seen as key.

However, the report does forecast that advances in transport technology could start to ease the burden for operators. Greener technology reducing vehicle noise could allow urban logistics sites to be incorporated into mixed-use developments alongside homes.
More importantly, advances in driverless technology are seen as likely to drastically reduce overheads for 3PL providers as well as allowing more nighttime freight operations, which would be transformational in reducing road congestion.
Jonathan Powling, partner at Addleshaw Goddard, said: “A lack of new development and an overhang of inactivity since the recession have caused growing supply-demand imbalance. This is pushing up rents and making industrial far more attractive to institutional investors.
“E-commerce growth and an increased global flow of goods are big drivers of change, but if we fail to deliver new employment space, then the stark reality is that some retailers will not be able to expand their online operations and others will be forced to significantly raise delivery charges to meet the increased costs of warehousing. This will ultimately affect consumer choice and value.”
Andrew Xeni, chief executive at Fabacus, said: “The retail supply chain has changed dramatically, and technology will be the key to driving greater efficiency in supply chain management. Crunching big data can help companies to have a clear, multi-tiered understanding of their supply chain rather than relying on partial information or paper records, and will help to reduce the monumentally high supply chain risk often seen in retail.

"Being able to cut and slice data in real time from a table anywhere in the world is a reality, but too many companies are still stuck in the dark ages.”

Tim Robinson, chief executive at Doddle, said: “The vast amount of items handled by carriers and retailers means they will still need the ability to consolidate. We’ll see tech-enabled, high volume, high-throughput national distribution centres supported by hyperlocal distribution facilities that allow for orders to specific postcode groups to be consolidated, be it to parcel shop networks, homes, or offices.

"That will allow carriers to pay the costs of triple-handling out of system, while also consolidating locally and getting the benefits of consolidation at a regional level.”
Ian Worboys, chief executive at P3, said: “In Britain, shoppers generally return about 7% of what they buy from physical stores. When you look at online shopping, returns are far higher – 40% for fashion and 27% overall. As a result, a huge amount of extra space is needed.

"This distribution to residential addresses just didn’t exist in any previous cycle. From last mile to delivery from airports to inner-city hubs, we’re seeing a whole range of new solutions emerging. Most cities are pretty land tied and this creates opportunity for developers.”
Kevin Mofid, director of UK commercial research at Savills, said: “In the long term, consumers could be set to see prices rise from online retailers. Record high levels of occupier take-up, record low levels of warehouse supply and a falling development pipeline are all creating a perfect storm in keeping vacancy rates low which in turn will see rents rise.
“As land struggles to come through the planning system, the political pressure to build more new homes becomes more intense and with UK consumers continuing to purchase more online I do not see this dynamic changing in the medium term.”

Jonathan Holland, senior fund manager at Legal & General Investment Management Real Assets, said: “Ten years ago, industrial was considered the poor relation in terms of the commercial property investment asset classes, but it is now increasingly favoured as an asset class with a positive growth outlook, with demand for industrial property set to grow through expanding areas such as e-commerce.

"Any loss of occupier demand from the high street is likely to be the industrial sector’s gain. In many ways industrial will be the effective high street of the future - your new high street equivalent will be a distribution warehouse such as a multi-storey shed in Tilbury, where goods are being distributed and sold online direct to consumers.”

A full copy of the report can be downloaded at

TAGS: ecommerce
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