Whatever else we have learned about our businesses so far in this extraordinary year, the recent restrictions have underlined that successful warehousing in the twenty-first century is not about storage. At least, storage alone is not enough to sustain a profitable business in our rapidly changing logistics landscape. A recent survey of a cross-section of 100 UKWA members confirmed that for 70% of respondents, storage charges represent less (and in many cases significantly less) than 50% of total income. Instead, profitability and growth for warehouse operators is driven by flow – moving goods in and out of the warehouse, adding value for customers along the way. The importance of providing flexible value-added services is not news to most of us. Indeed, the opportunities created by innovation for forging strong collaborative relationships with customers were highlighted at this year’s UKWA National Conference in March by 3PLs and retailers alike. Along with automation and robotics, value-added services will likely define the future of our industry.
What customers want from 3PLs is a partner in innovation, a partner able to share their vision and support their own growth ambitions by delivering a range of value-added services that create competitive edge for themselves as well as their partner 3PLs.
The world of logistics has been transformed, principally by the growth of online commerce, and warehouse operators are dealing with the complexity of serving different channels on behalf of retailers, from value to premiumisation, high street store to home delivery. We are no longer sellers of space, but purveyors of diversified order fulfilment services, including personalisation, co-packing, returns management and, in some cases, even managing customers’ consumer-facing social media channels.
With the proliferation of online, the new demands of Gen Z and climate change, 3PLs must be agile, innovative and flexible, with an eye on sustainability. Supply chains must be sustainable, because that’s what our customers expect. Increasingly, they will be looking for 3PLs to demonstrate CSR credentials as climate change continues to dominate the political agenda and more sustainable practices are demanded by younger consumers. Legislation is already effecting change with larger organisations being held to account by government, and SMEs must prepare to be ready too - climate change legislation is coming!
Affordable and necessary
The other major change ahead will be a gathering momentum towards automation. Not only are the costs coming down, but if we are to address the challenges of social distancing as well as the issue of labour shortages in our industry, the rise of robotics and automation seems certain.
A recent report by PWC stated that automation is going to impact on the warehousing sector at all levels. SMEs in particular have in the past tended to be risk averse and view automation as high Capex, however as we heard at conference, this need not be the province of large companies only, as solutions for accessibility emerge, such as subscription-based services that enable companies to ‘try’ before they buy or lease technology.
Each company needs to take a view across a broader range of available technology, to identify what will be valuable to their own business and plan for investment – and training – accordingly.
Perhaps the other major takeaway this year has been that we in the logistics industry are key to keeping the nation going. Again, not news for most of us, but for the general public – and possibly for many in government too – the COVID-19 pandemic has highlighted the essential role played by our sector during the crisis and in supporting the recovery of the UK’s economy.
For UKWA, we believe it is time for that essential role to be recognised. While delivery is front of mind, we must make sure that our customers and their consumers better understand the costs and consequences of services such as free next day delivery, free returns and low-cost goods on demand. Increasing consumer expectations and demand for ever lower cost goods and services have resulted in a ‘race to the bottom’ that is simply unsustainable. We cannot continue to operate on eroded margins with low-paid workers, a consequent shortage of labour and services that in generating higher mileage and more carbon are inconsistent with environmental best practice.
The outmoded view of warehouses as storage facilities staffed by shelf-stackers is both misleading and deeply unhelpful. It is vital that we reposition our industry as essential and not ‘back room’, communicate the complex and challenging working environment in which we operate, while highlighting the exciting career opportunities we can offer.
What is certain is that the future for our industry will be machines plus people, businesses will need to invest in technology and look to attract young people with wide ranging and high-level skills.
Simply put, innovation twinned with data and systems will be foundational to business success, and those falling behind now will find it impossible to catch up in the future.