The UK Logistics Confidence Index 2020 - Barclays Corporate
Transcript of The UK Logistics Confidence Index 2020 - Barclays Corporate
⊳ Previous | 2 | Next page ⊲
Contents 3 Executivesummary
5 Asnapshotofcurrentmarketconditions
7 Businessoutlook
9 Covid-19impact
12 Challengesandopportunities
15 Brexit–nextsteps
17 Thetalentandskillsshortage
19 Technologyandinnovation
21 Greeninitiatives
22 Mergersandacquisitions
24 Industryinsight:WoodlandGroup
26 Industryinsight:AdvancedSupplyChainGroup
27 Keytakeaways
28 Aboutthisreport
29 Abouttheauthors
⊳ Previous | 3 | Next page ⊲
Executive summaryBarclaysandBDO,inconjunctionwithspecialistsectorresearchagencyAnalytiqa,haveundertakenthelatestinourseriesofsurveystoassessconfidenceandexpectationsintheUKlogisticssector.
Morethan100seniordecision-makers,includingchiefexecutiveofficers,managingdirectorsandchieffinancialofficers,providedtheirviewsandinsightsforthissurvey,conductedduringSeptemberandOctober2020.TheirresponseshavebeencompiledtocreatetheUKLogisticsConfidenceIndex2020.
Surveyrespondentsaredrawnfromallsectorsoftheindustry,coveringroad,airandsea,andinclude:freightforwarders,roadhauliers,alongwithoperatorsincontractlogistics,courierandexpressservices,ande-commerce/lastmiledeliveries.TrackingtheheadofficelocationsofourrespondentsshowsthathalfarebasedintheMidlandsandtheNorthofEngland,NorthernIreland,ScotlandandWales,withtheotherhalfbasedtowardstheSouthoftheUK.
Confidenceatlowesteverlevel
OuroverallConfidenceIndexhasfallenfrom49.7in2019to47.1thisyear.ThiscontinuesthedownwardtrendwehaveseeninrecentyearsandtakestheIndextoitslowestlevelsinceoursurveybeganin2012.
ThesetwoconsecutiveIndexscoresofbelow50indicatethat,overall,thesectorremainsmorepessimisticthanoptimisticaboutthestateofthemarket.GiventheunprecedentedimpactofCovid-19,perhapstheonlysurprisehereisthatthisyear’sfallinconfidencehasnotbeenmorepronounced.
Morethantwo-thirdsoflogisticscompanies(67.1%)saytradinghasbeentougherinthepastyearandalmosta
quarter(24.2%)saymarketconditionsaremuchmoredifficultthanlastyear–thehighestproportionsincethesecondhalfof2012.
However,logisticscontinuestobeastrongandresilientsectorandremainsamajorcontributortotheUKeconomy–totalcombinedUKrevenueforthe100+companiessurveyedis£16.4bn–and,evenunderthecurrenthighlychallenginganduncertaineconomicconditions,nearlyhalf(48.9%)ofthemsaytheystillexpecttoseeprofitsincreaseoverthenext12months.
ImpactofCovid-19
ThearrivalofCovid-19thisyear,anditsdramaticimpactonglobalandUKeconomicgrowth,hasaddedanothertotallyunexpectedlayerofchallengesfortheindustryontopoftheongoinguncertaintysurroundingtheUK’sfuturetradingrelationshipwiththeEU,andtheperennialissueofdrivershortages.
Covid-19hasclearlyhadadramaticanddistortingeffectonthesector,whichhasledtosomethingofanindustryreset.Ourresearchshows60.2%ofbusinesseshavebeennegativelyimpactedbythepandemic;itisworthnotingthatthisresponsewasrecordedbeforetheannouncementofthesecondnationallockdowninEnglandinNovember2020.
Yetthereisahighdegreeofpolarisationintheviewsofoperators,with35.5%sayingthepandemichashadapositiveimpactontheircompany’sperformance,despitetheeconomicdisruption.
Asinsomanyotherindustries,Covid-19hasshakenupthelogisticssectorbyrapidlyacceleratinganumberofexistingtrends–suchasthemovetoe-commerce,manufacturersincreasinglygoingdirecttoendconsumersandnewtechnologyadoption–andalsobyaddingunforeseenchallengesintothemix,likethepositiveornegativedisruptiveeffectsondemand,aswellasonsupplychains.Thishasleftsomeoperatorsinastrongposition,whileothershavestruggled,oftenlargelyasaresultofhowtheirend-usermarketshavebeenimpacted.
However,havingweatheredtheinitialimpactofthepandemic,thefocusisnowshiftingtoadaptingtothenewconstraintsandmarketconditions,andtheopportunitiesthatareemerging.Forexample,distributionoftherecentlyannouncedUSCovid-19vaccinepresentsbothalogisticalchallengeandagreatopportunityforthesectortoapplyandshowcaseitsexpertiseandabilitytodeliversolutions.Operatorswillneedtocontinuetoseeknewwaystoaddvalueacrossthesupplychain.It’slikelythatthemostagileandadaptablebusinesseswillemergestrongestfromthecrisis,buttheperiodofadjustmentfacingthesectormaybepainfulforsome.
⊳ Previous | 4 | Next page ⊲
Ongoingchallenges
AsidefromCovid-19,drivershortagesandBrexittransitionremainthemostpressingissuesforthecompaniesinoursurvey.
TheindustryseemstobeexperiencingamixtureofnervousnessandcalmtowardsBrexittransition.Whileoperators’attitudesareperhapsslightlymorerelaxedabout–orperhapssimplyresignedto–Brexitthanlastyear,possiblybecausetheyfeelmoreprepared,nearlyhalf(47.9%)stillfeartheywillbedoinglessbusinesswithEUcompaniesintheeventofnotradedealbeingagreed.
Meanwhile,theongoinglackofdriversinthesectorhasbeencompoundedbyanemergingshortageofskilledwarehousestaff.Toalleviatethesetalentshortages,operatorsareworkinghardtoattractmoreyoungpeopleintotheindustry,improvepayandconditionsandstrengthentraining.Inaddition,overhalfoffirmsthatrunwellnessprogrammesforemployeesareseeingimprovedstaffretention(55.2%),fallingabsenteeism(79.3%)andgreaterproductivity(56.9%)asaresult.
Morethaneverbefore,utilisingtechnologyisincreasinglyseenasthekeytoaddressingmanyofthesechallengesandtoenhancingvalue-addedserviceofferingstomeetnewservicelevelnorms.Inparticular,techisbeingdeployedtohelpalleviatethetalentshortage,with42.2%ofoperatorssayingthey’veinvestedinsomeformoftechnologytoreplacehumantalentinthelastyear.Butthereisalsoarealisationthatadifferentskillsetmayberequiredacrosstheworkforcetodrivechange.
However,whilecompaniesrecognisetheneedtoinvestinnewtechnology,automationandrobotics,themajorityoftechinvestmentcontinuestoinvolveupgradesofexistingsystems.
Lookingtothefuture
DespitetheimpactofCovid-19,morethansevenoutof10operators(72.2%)reportcontinuinginvestmentin‘green’projectsconnectedwithsustainabilityandtheenvironment.Thisprimarilyinvolvesintroducingalternative-fuelfleets,optimisingfuelusedbyexistingvehicles,recyclinginitiatives
andinstallingneweco-friendlywarehousinglightingsystems.Aswellasbringingworthyenvironmentalbenefits,manyoftheseprojectsalsodeliverlongtermcost-savingbenefits.
Finally,moresectorconsolidationlookstobeonthecards.Oursurveyshowsthat38.9%ofoperatorsareconsideringmakingacquisitionswithinthenext12months–thehighestlevelsince2017–mainlytoachieveeconomiesofscaleortoexpandtheirserviceoffering.Furthermore,theyarelikelytohavemoreopportunitiestoacquire,asstrugglingfirmsareforcedtogotomarketwhengovernmentCovid-19supportmeasuresarewithdrawn.
Wetrustyouwillfindthisreportinformativeandhelpful.
Ian CranidgeRelationshipDirector,HeadofTransportandLogistics,BarclaysUKCorporateBanking
Jason Whitworth Partner,M&AAdvisoryandLogistics&SupplyChainManagement,BDOLLP
Our overall Confidence Index has fallen from 49.7 in 2019 to 47.1 this year. This continues the downward trend we have seen in recent years and takes the Index to its lowest level since our survey began in 2012.
⊳ Previous | 5 | Next page ⊲
Foronlythesecondtimesinceoursurveybeganin2012theLogisticsConfidenceIndexisinnegativeterritorybelow50,at47.1.Thisisitslowestleveltodate,reflectingtheimpactoftheCovid-19pandemic,aswellasongoingchallengesfacingthesector.
Thefallfrom49.7lastyear,itselfthefirsttimetheindexfellbelow50,isacontinuationofadownwardtrendthatbeganin2017.
OursurveyalsoshowsaslightdifferenceintheConfidenceIndexnumberbetweentheNorthandSouthoftheUK,withtheNorthslightlylesspessimisticthantheSouth.WhiletheindexnumberforoperatorsintheSouthhasremainedconsistentwithlastyear,at45.8,forrespondentsintheNorthithasdeclinedslightly,from52.9to48.2.
Thefallinoverallconfidenceisunsurprising,giventhebackdropofunprecedenteddomesticandglobalupheavalcreatedbythepandemic,inadditiontoongoinguncertaintyovertheUK’sfuturerelationshipwiththeEU,andthecontinuingskillsshortages.
Indeed,withtheoverallimpactoftheCovid-19crisisontheUKeconomyleadingtoasharpcontractioninGDPandtheprospectofrisinglevelsofunemployment,weperhapsmighthaveexpectedanevenmorepessimisticresult.
A snapshot of current market conditionsOurLogisticsConfidenceIndexhasfallentoanewlowandnowstandsat47.1.
LogisticsConfidenceIndex
H2,
201
6
2017
2018
2019
2020
H1,
201
6
H2,
201
5
H1,
201
5
H2,
201
4
H2,
201
3
H1,
201
3
H2,
201
2
H1,
201
2
57.252.5
60.3
74.9 71.4 69.261.9
51.8 53.0 56.7 52.6 49.7 47.1
⊳ Previous | 6 | Next page ⊲
Challengingbusinessconditions
Two-thirds(67.1%)ofcompaniesinoursurveysaythatcurrentbusinessconditionshavebecomemoredifficultthan12monthsago,whileaquarter(24.2%)believetheyare“muchmoredifficult”,thehighestsuchresultsincethesecondhalfof2012.
Oursurveysuggeststhatlargercompanieshavegenerallyfoundthingsmoredifficultthansmallerones,despitebeingmorelikelytobenefitfromamorediversecustomerbase,astheymayhavefoundithardertoadaptquicklytothechangingmarket.
Lookingbacktolastyear,therewasageneralbeliefamongrespondentsthatoncegreaterclarityonBrexitwasachieved,confidencewouldstarttoimprove–buttheimpactofthepandemichasclearlyunderminedthesector’soptimism.
WhiletherewerebrightersignsoverthesummermonthsastheeconomybegantopickupaftertheinitialCovid-19shock,thishasclearlybeendampened,particularlyamongoperatorsinstrugglingend-usermarketssuchashospitalityandleisure,byrenewedrestrictionsoneconomicactivityasthecountrycopeswithasecondCovid-19wave.
GiventhatconcernsoverfutureEUtraderelationshavebeenresurfacingintherunuptotheendoftheBrexittransitionperiod,oursurveyresultsreflectawhollyunexpected‘doublewhammy’facingthesector.
Polarisingimpact
Oursurveyunderlineshowthechangesinthemarketasaresultoflockdownhavepolarisedtheviewsofoperators,dependingonhowthesectorstheyaremostexposedtohaverespondedtothepandemic.Unsurprisingly,thosefocusedone-commerceandlast-miledeliveriesoronpharmaceuticalsandhealthcareforexample,havefaredrelativelywell,whileothersoperatinginmanufacturingsectors,suchasautomotive,sawunprecedentedlevelsofdisruption.
Respondentcomment
“ Margins are tough, rates are low and payment terms are difficult.”
Much more favourable
7%
Somewhat more
favourable16%
The same10%
Somewhat more difficult
43%
Much more difficult
24%
Howdoyouviewcurrentbusinessconditionsvs12monthsago?
Changes in the market as a result of lockdown have polarised the views of operators, depending on how the sectors they are most exposed to have responded to the pandemic.
⊳ Previous | 7 | Next page ⊲
Lookingattheoutlookforthelogisticssectoroverthenext12months,half(50.6%)ofthosesurveyedsaybusinessconditionswillbecomemoredifficult.
Whilethisissignificantlylowerthanthe62.0%whosaidthislastyear,theshareofcompaniesexpectingfuturemarketconditionstobe“muchmoredifficult”isclosetoahistorichigh,withlargercompaniesgenerallyexpectingthingstobetougherinthenext12monthscomparedtosmalleroperators.
However,the30.8%ofrespondentswhothinkbusinessconditionswillbemorefavourableisafifthhigherthanin2019,reflectingthepolarisingimpactofthecurrentenvironmentonthesector.
Intermsoftheimpactonturnover,justoverhalf(50.5%)forecastanincrease.Thisisanall-timelowandsignificantlybelowlastyear.The42.9%ofrespondentspredictingtheirturnoverwillfallismorethanaquarterhigherthanlastyear.
Operatorsaremorecautiousaroundexpectedprofitabilitythanturnover.Overall,thenumberofcompaniesexpectingprofitstodecreaseisatanunprecedentedlevelcomparedtooursurveysoverthelasteightyears,likelyreflectingtheirexposuretostrugglingend-usermarketsasaresultoftheimpactofCovid-19.Incontrasttotheirmorepositiveviewsonfuturemarketconditions,smallercompaniesalsogenerallyexpectabiggernegativeimpactonprofitthanlargerbusinesses.
Business outlook Operators’viewsaremixedonhowtheywillrespondtoachallengingenvironment.
Howdoyouforeseebusinessconditionsin12months’time?
The 30.8% of respondents who think business conditions will be more favourable is a fifth higher than in 2019, reflecting the polarising impact of the current environment on the sector.
0
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Much more
favourable
Somewhat more
favourable
The same
Somewhat more
difficult
Much more
difficult
Smaller Companies
Larger Companies
0
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
IncreaseNo changeDecrease
Smaller Companies
Larger Companies
Doyouexpectanincreaseordecreaseinprofitabilityin12months’timecomparedtopre-Covid-19levels?
⊳ Previous | 8 | Next page ⊲
Ofthoseoperatorsexpectingincreasedprofits,themajorityonlyanticipateanincreaseof2%to5%,andthenumberexpectingtoseeprofitsincreaseby10%ormoreissignificantlydownonlastyear,suggestingthateventhemoreoptimisticwillseeslowergrowthinprofitabilityfollowingthechallengesthisyear.
Investmentandheadcount
Respondents’viewsonlikelycapitalexpenditurereflectagreaterdegreeofcaution,withthoselikelyorverylikelytoinvestdownby5.6%thisyear.
Meanwhile,thenumberofcompaniesthatsaytheyexpecttoreduceheadcountisatanunprecedentedlevel.Morethanfouroutoftenrespondents(43.0%)expecttocuttheirheadcountinthenext12months.However,itisnoteworthythatamajorityarepredictingasmalldecreaseinheadcountratherthanmassredundancies.
Thesefindingsmostlikelyreflectgenerallylowerbusinessvolumes,staffreductionsthroughnaturalwastageandrecruitmentfreezes,ratherthanproductivitygainsandmayalsoindicategreateruseofshort-termcontractsandself-employeddriversoperatinginthegigeconomy.
Perhapsunsurprisingly,changesinheadcountareexpectedtobefeltmorebylargercompanies,whethernegativeorpositive,andsomeofthelargeroperatorsarecertainlyactivelyrecruiting,especiallytosupportB2Crelatede-commerceactivities.
DespiterisingUKunemploymentasaresultofthepandemic,manyfirms,particularlyinthesouth,areanecdotallyfacingseveredrivershortages,especiallyforlast-milework,inpartduetoaperceivedlackofavailableEUworkers.
Respondentcomment
“ We face unknown changes in 2021 but reduced demand is the biggest challenge.”
Howlikelyisitthatyourcompanywillmakesignificantcapitalexpenditureoverthenext12months?
Doyouexpectanincreaseordecreaseinheadcountin12months’timecomparedtoPre-Covid-19levels?
Unlikely
31%
Likely
37%
Very likely
32%
0%
5%
10%
15%
20%
25%
30%
Increas
e 10%
+
Increas
e 8-10
%
Increas
e 5-8
%
Increas
e 2-5
%
No chan
ge
(-2%
to +2
%)
Decrea
se 2-
5%
Decrea
se 5-8
%
Decrea
se 8-10
%
Decrea
se 10
% +
⊳ Previous | 9 | Next page ⊲
TheCovid-19crisisisundoubtedlythesinglemostsignificantfactoraffectinghowoperatorsperformedin2020,inonewayoranother.
Aroundthree-fifths(60.2%)ofrespondentsbelieveithashadanegativeeffectontheirbusinesses,whilejustoverathird(35.5%)suggestthattheimpacthasbeenpositive.Onceagain,thesefindingsmostlikelyreflectthevaryingfortunesofoperators’end-usermarkets.
Thevastmajorityofourrespondents(94.4%)havetakenadvantageofgovernment-fundedjobretentionschemesandstafffurloughstohelpthemthroughtheCovid-19crisis,whilesomefouroutof10(43.8%)havemaderedundancies.
However,theyhavemaderelativelylimiteduseofthegovernment’sCBILSandCLBILsbusinesscontinuationloanscomparedtoothersectors,withmanycompaniesreluctanttotakeonadditionaldebt.
Halfofsurveyrespondents(49.4%)havemadeuseofVATdeferrals,underliningtheimportanceofpreservingcashduringthepandemic.
Thesinglegreatestchallengeraisedbythepandemic,identifiedbyeightoutof10companies(80.6%),hasbeenmanagingchanginglevelsofcustomerdemand.Asignificant71.0%havefacedchallengesindealingwithlabourandpersonnelissues,and47.3%hadtotacklethedisruptiontotheircustomer’ssupplychains,whilealmost
athird(32.3%)ofrespondentshighlighteddisruptiontoshippinglinesandairfreight.
Regardlessofanyfinancialsupporttheyhaveutilisedsofar,thesechallengesarelikelytobeexacerbatedwhenfurloughschemesareeventuallywounddownanditremainstobeseenthroughout2021howoperatorswilladapttothegovernment’srevisedsupportmeasures,raisingthespectreoffurtherredundanciesandpossiblebusinessclosures.
Covid-19 impact Businessesareadaptingrapidlytotheunprecedentedchallengescreatedbythepandemic.
TowhatextentisCovid-19likelytoimpactyourcompany’sperformancein2020?
Operators have made relatively limited use of the government’s CBILS and CLBILs business continuation loans compared to other sectors, with many companies reluctant to take on additional debt.
Significant negative impact
21%
Slight negative impact
39%
No impact4%
Slight positive impact23%
Significant positive impact
13%
⊳ Previous | 10 | Next page ⊲
Futurefocus
Whilemanyofourrespondentsindicatethattheyarefindingthepresentenvironmentverydemanding,theyalsoappeartobeadaptingrapidlytothe‘newnormal’.
Askedabouthowtheywilladapttothepost-Covidfuture,three-fifths(58.7%)ofthosesurveyedsaidtheywillfocusongreateruseofinvestmentintechnologytodriveefficiency,andnearlyhalf(47.8%)saidtheywillbelookingtoextendtheirserviceoffering.
Implementingsocialdistancingmeasureshasforcedmanyoperatorstore-examinetheiroperationsandsystemsindetailandinmanycaseshavehighlightedtheneedforpositive,sustainableimprovementsinefficiency.
Oursurveyresponsesshowthat,duringthecourseofthepandemic,technologyhasemergedasakeyinvestmentpriority,forexampletosupportincreasedautomationandmoresophisticatedwarehousingmanagementandtrackingsystemsascompaniesstrivetomeetchangingcustomerexpectations.
Smarttechnologyisalsoregardedaskeytoenablingcompaniestodifferentiatethemselvesinthemarketandtodeliveringbothextendedandnewserviceofferings,particularlywhendiversifyingintoalternativeindustrysectorsorcustomerbases.
Therearealsoindicationsthatoperatorsareincreasinglymakinginvestmentsthatgenerateeco-friendlybenefits,suchasLEDlightingsystemsandintroducingmoreeco-friendlyfuelsandvehiclestotheirfleets,thatbothimproveefficiencyandpotentiallydeliverarelativelyrapidreturnoninvestment.
0% 10% 20% 30% 40% 50% 60%
Other
No changes
We have new target customer / industry sectors
Amending operational terms of existing services (e.g. holding more inventory for specific customers)
Amending contractual terms of existing services
Extending existing service offering
Prompting the introduction / expansion of staff wellness programmes
Prompting greater use or / investment in technology to drive efficiencies
We are/will be diversifying our customer base to reduce risk profile
We are reacting to changes in our customers’ international supply chains (near-shoring)
Howwillyourbusinessadapttothepost-Covid-19environment?
Percentageofrespondentsselectingeachoption
⊳ Previous | 11 | Next page ⊲
Respondentcomments
“ The biggest challenge is managing the costs and consequences of operating with safe social distancing and PPE.”
“ The Covid-19 crisis has had a significant impact on many sectors – automotive and aerospace have suffered, but pharmaceuticals are performing well and have a positive outlook.”
“ The supply chain is so fractured that demand for logistics solutions has increased.”
“ Business has grown as we were lucky enough to have a customer involved in PPE.”
Covid-19impactcontinued
⊳ Previous | 12 | Next page ⊲
Askedtoidentifythemostimportantissuefacingtheirbusinessinthenext12months,overaquarterofoperators(26.1%)saidtheimpactofBrexit,closelyfollowedbythe23.9%whoprioritiseddriverandskillsshortages,with19.6%mostconcernedovertheeconomicimpactontheirendcustomermarket.Ofcourse,itremainstobeseenwhatthelongertermimpactofthepandemicwillbeontheUKeconomyasgovernmentfinancialsupportforbusinessisgraduallywounddown,quiteapartfromhowthe
governmentrespondsinthefaceofmountingpublicborrowing.
Perhapssurprisingly,managinglengtheningpaymenttermsfromcustomerswasnotflaggedupasakeyconcern,althoughcopingwithcustomerpricepressurewasratedthebiggestissueby14.1%ofrespondents.ThismaysimplyreflecttherelativescaleoftheoverallCovid-19andBrexitchallengesfacingthesector.
Whatwillbethesinglemostimportantissuefacingyourbusinessinthenext12months?
Challenges and opportunities OperatorsarefocusingonBrexit,skillsshortagesandcostcontrol,whileeyeingnewopportunitiesemergingfromthepandemic.
Respondents’ priorities reflect the pressing need to tackle the ongoing threat of Covid-19, rather than business as usual concerns.
Perhaps surprisingly, managing lengthening payment terms from customers was not flagged up as a key concern.
Further industry consolidation
1%Shortage of warehouse
space4%
Investment in physical
infrastructure4%
Investment in technology
6%
Customer price pressure14%
Economic downturn
in your end customer
market20%
Driver/skills shortage
24%
Impact of Brexit26%
0%Other Lengthening payment terms from customersEmployee wage pressureCashflow/ Availability of finance
Percentagesgiventonearestwholenumber
⊳ Previous | 13 | Next page ⊲
Costcontrol
Lookingtothemoreimmediateareasoffocusforoperatorsoverthenextyear,respondents’prioritiesreflectthepressingneedtotackletheongoingthreatofCovid-19,ratherthanbusinessasusualconcerns.
Here,themajorityrankedcostcontrolastheirnumberonefocus,againreflectingtheneedtopreservecashflowintheshorttomediumterm,andtobuildtheirbusinessresilience.
Notably,maintainingtheexistingcustomerbasehasslippeddownthelistofoperators’prioritiesfromfirstplacelastyeartonumberfourthisyear,behindwinningnewcustomersandenteringnewindustrysectors,whichreflectsintentionsbymanyoperatorstodiversifytheircustomerbases.
Whatisthemainfocusforyourcompanyoverthenext12months?(Rankinorderofimportance,1=mostimportant,9=least)
21 3 4
5 6 7 8 9
Winningnewcustomers
Costcontrol Enteringnewindustrysectors
Maintainingexistingcustomerbase
Technologyinvestment
ManagingBrexit
Expansionofservices
Managingskillsshortage
Investinginsustainability
agenda
Maintaining the existing customer base has slipped down the list of operators’ priorities from first place last year to number four this year.
The majority ranked cost control as their number one focus.
⊳ Previous | 14 | Next page ⊲
Newbusinessopportunities
Morethanahalfofoperators(54.8%)saytheindustryofferingthebiggestbusinessopportunitiesin2021isonlineretail.Thisreflectsthecontinuingchangesinconsumerbuyinghabitsawayfrombricksandmortarstorestoonlinepurchasing,along-termtrendthathasbeenhugelyacceleratedbyCovid-19.Manyrespondentshighlightthesechanginge-commercetrendsanddemandfordeliveryofbasicnecessitiestohome-basedworkers,aswellasincreaseddemandforstoragespaceforonlinedeliveriesand,specifically,theroleofAmazon,askeydriversofnewbusinessopportunitiesinthesector.
Anotherkeyopportunityliesinthepharmaceutical/healthcaremarket,inpartbolsteredbyadditionaldemandformedicinesandmedicalequipmentduetothepandemic.AnumberofrespondentsidentifiedthedemandforPPEequipment,testingkitsandfuturevaccinationprogrammesasakeydriverfornewopportunitiesinthissector.
Foodretailisalsoseenasakeygrowthareabyrespondentsasitcontinuestobenefitfromstrengtheningdemandforhome-basedconsumptionoffoodanddrink,particularlyviaonlinechannels,andtheattractionsoftherelativelyrecession-proofperishablesmarket.
Manyrespondentshighlighttheneedforgreaterflexibilityintheirbusinessstrategiesandoperationsinordertocapitaliseonchangingend-usermarkets,althoughclearlythiswilloftenbeeasierforgeneralisthauliersand3PLs,thanforspecialistoperators.Atthesametime,whatonerespondentdescribesasa“fracturedsupplychain”,isincreasingdemandforinnovativelogisticssolutions.Managingthespeedofchangewillbeasignificanttestformany.
Respondentcomments
“ Customer buying habits have changed.”
“ High-yielding products that people cannot live without during Covid-19 are booming. Low-yielding products such as automotive are not.”
“ Building greater flexibility into business operations and capital exposure.”
“ Customers require higher levels of service, not just talk.”
“ Food has always been a more resilient sector that we continue to service. The growing trend of online retail and FMCG sectors we have seen continue.”
0
10%
20%
30%
40%
50%
60%
Food /
food retai
l
Foodse
rvice
/ HOREC
A
Bevera
ges
Tech
nology
Retail –
eCom
merc
e
Retail -
bricks
and m
ortar
FMCG
Pharmac
eutic
al / H
ealth
care
Industrial
/ M
anufac
turin
g
Constructi
on
Autom
otive
Whichindustriesprovidethegreatestnewbusinessopportunitiesforthelogisticsandtransportsectorin2021?
Percentageofrespondentsselectingeachoption
⊳ Previous | 15 | Next page ⊲
Unsurprisingly,concernsovertheimpactofUK/EUtradenegotiationsandtheendofthetransitionperiodremainfirmlyonoperators’minds,accordingtothisyear’sresearch,butappeartohavelessenedalittle,possiblybecausemoreoperatorsarebetterpreparedfornotradedeal.
Whilealmosthalf(47.9%)ofrespondentssaytheyexpecttodolessbusinesswithEUcustomersifthereisnotradedeal(seechartonthefollowingpage),thatissubstantiallyfewerthanthe62.4%whothoughtthatwouldbethecaselastyear.
Similarly,only17.8%oflogisticsfirmsbelievetheywilldomorebusinesswithEUcustomersifthereisnotradedeal,butthisfigureisstillanincreaseonthe10.6%ofrespondentswhofeltthatwouldbethecaselastyear.
Aroundathird(34.3%)felttherewouldbenochangeinEUbusiness,againmorethanthe27.1%whosaidthatin2019.
LookingatthepotentialforfacilitatingtradeoutsidetheEU,morethanaquarter(25.8%)ofrespondentsbelievetheywilldomorebusinesswithnon-EUcustomersunderano-dealscenario,3.1%morethanlastyear,while12.1%thinkbusinesswithnon-EUcustomerswilldecline,comparedtoafifth(19.7%)ofrespondentswhosharedthatviewayearago.
Inthescenariowhereatradedealisinplace,broadlyspeaking,themajorityofrespondentsfeelthatBrexitwillhavelessimpactontheirbusinesses,whethertradingwithEU,non-EUorUKcustomers.
Mixedresponses
CommentsfromoursurveyrespondentsreflectthetendencyofBrexittopolariseviews:rangingfrompredictionsofchaos,excessivepaperworkandhigherpricesforvehiclesandparts,topotentialnewopportunitiesasUKbusinessesadjusttheirsupplychainsandinventorylevelsandrequirenewlogisticsoperationstoservetheircustomers.
Anumberofrespondentsfocusontheincreasedpaperworkburdenthatwillimpactthesector,asbusinessestakestepstopreparefornewcustomsrequirements.
Again,itseemslikelythatoperators’responsesonBrexitareindicativeofthesectorstheyserve,butsomeseepotentialopportunitiesinofferingcustoms,advisoryandconsultancyservicesasaresultofchangestointernationaltradingagreements.
Brexit – next steps ContinueduncertaintyoverthetermsoftheUK’sfuturerelationshipwiththeEUisgeneratingbothoptimismandnervousness.
While almost half (47.9%) of respondents say they expect to do less business with EU customers if there is no trade deal, that is substantially fewer than the 62.4 % who thought that would be the case last year.
⊳ Previous | 16 | Next page ⊲
Respondentcomments
“ Customers struggling with understanding the impact on their business is creating a lot more work but also opportunities.”
“ There is still uncertainty among clients and hauliers as to what is expected from each party.”
“ It makes no difference. Only VAT/duty levels alter between the scenarios.”
“ We will lose deferment revenue but gain euro clearances.”
0% 20% 40% 60% 80% 100%
Less businessNo change
Impact on domestic business
Impact on non-EU/ROW business
Impact on EU business
More businees
Brexitimpact:whatwillbetheexpectedimpacttoyourcustomerbaseunderthefollowingend-of-transition-periodscenarios?
Deal is agreed
0% 20% 40% 60% 80% 100%
Less businessNo changeMore businees
Impact on domestic business
Impact on non-EU/ROW business
Impact on EU business
Leave transition with no deal
Brexit–nextstepscontinued
⊳ Previous | 17 | Next page ⊲
Talentshortagescontinuetobeamajorissueforlogisticsfirms,withthelackofdriversagainrankedbysurveyrespondentsasoneoftheissuesthatwillhavethegreatestimpactontheirbusinessesoverthenext12months.
Whilethatwasprettymuchthepositionlastyear,thebiggestshiftintalent-relatedchallengesin2020isalackofwarehousestaff.PerhapsbecauseofthedeclineinnumbersofEUnationalsworkingintheUK,itisnowratedasthesecondmostimportantskillsshortagefacingoperators,havingbeenrankedfourth12monthsago.
The talent and skills shortageThelongstandinglackofdriversisbeingcompoundedbyashortageofwarehousestaff.
The biggest shift in talent-related challenges in 2020 is a lack of warehouse staff.
1 2 3
4 5 6 7
Drivers Warehousestaff Seniormanagement/leadership
Junior/middlemanagement
IT-relatedstaff Temporary/seasonalbased
roles
Office-basedroles(accounts,admin,
salesandmarketing)
Rankinorderofimportancetheareaswheretheindustry’stalent/skillsshortageishavinganimpactonyourbusiness
⊳ Previous | 18 | Next page ⊲
Pluggingtheskillsgap
Themostpopularresponsetocounteracttheseshortages,accordingtoourrespondents,hasbeentoofferapprenticeshipsandtoworkwithyoungerpeopleinadrivetoaddresstheongoingproblemofattractingthemintothelogisticssector.However,despitenumerouseffortsbytheindustryandthegovernment’sapprenticeshipspush,therehasbeenalimitedtakeupofapprenticeshipstodate.
Thenextmostpopularcourseofactiontoresolveskillsshortagesamongrespondentsisimprovingpayandconditions,followedbyenhancingthequalityandleveloftraining.
Notably,justoverfouroutoftencompanies(42.2%)saytheyhaveusedsomeformoftechnologytoreplacehumantalent,asignificantjumpfromthe7.0%whosaidtheyhaddonethisin2019,whilearoundaquarter(25.6%)saytheyhavebeenusingmoretemporarystaffandsub-contractors.
Addressingthedrivershortagespecifically,somerespondentsindicatethattheyarediversifyingcareeropportunitiesforemployeesbytrainingtheirownnewdriversfor2021,ontopoftheadditionaldrivertrainingthatcertainoperatorsalreadyprovidetoimprovesafetyperformanceandreduceinsurancecosts.
Lookingatpotentialtechnologicalsolutions,18.0%ofrespondentssaytheyareactivelyexploringtheuseofdriverlesstrucks–orplatooning–asignificantincreaseonthe5.0%whosaidtheywerethinkingaboutthisin2019,eventhoughitappearsthetechnologyisstillsomewayfrompracticalapplication.
Despitenumerousattemptstoattractamorediversetalentpooltotheindustry,thisremainsastubbornlydifficultissuetocrackandonerespondentbemoansthefactthattheincreasedrecognitionforthesectorinkeepingsupermarketshelvesfilledduringthepandemic,andstaffbeingawarded‘keyworker’status,seemstohavebeenshort-lived.
Thewellnessfactor
Nearlytwo-thirdsofourrespondents(63.3%)saytheynowrunwellnessprogrammesforstaffand,encouragingly,theseappeartobeplayingsomepartinaddressingtheskillsandtalentshortage.
Ofthosewhoofferwellnessprogrammes79.3%saytheyhaveexperiencedreducedstaffabsenteeism,56.9%reporthigherproductivityandperformancefromemployees,andwelloverhalf(55.2%)sayithasledtopeoplestayingintheirjobsforlonger.
Thissuggeststhevalueofafocusonwellnessaspartofimprovingworkingconditionsinthesector,althoughitislesscleartowhatextentdriversmaybebenefitingfromtheseschemescomparedtootheremployees.
Respondentcomment
“ For a while, at the peak of the pandemic, the driver shortage was actually less of an issue but the situation deteriorated over the summer and is sluggish recovering.”
⊳ Previous | 19 | Next page ⊲
Whilenewtechnologycontinuestobeincreasinglyutilisedbythelogisticssector,updatingexistingsystemsandsolutionsisexpectedtobethepriorityforbusinessesoverthenextthreeyears.
Accordingtoourresearch,themainfocusofsometwo-thirdsofoperators(65.2%)isonreplacingandupgradingcurrentsystems,suchasthoseusedfortransportmanagement(TMS),warehousemanagement(WMS)andEnterpriseResourcePlanning(ERP),alongsideinvestinginnewapplications.However,overall,two-thirds(67.7%)ofrespondentssaytheywillconsiderinvestinginneworreplacementequipmentandtechnology,perhapsautomatingwarehousestotackleongoingskillsandlabourshortagesandincreaseefficiency,orcontinuingtoupgradevehiclefleets.
Nearlyhalfofrespondentssurveyed(46.1%)saytheyintendtoutilisethecollaborativeandsharingeconomyandcustomerrelationshipstointroducenewtechnologies.Thesecould,forexample,includeonlinefreightexchangesandotherplatformsthathelptomanagesub-contractorsanddeterminewhenandwhereloadsareavailable.
Almostathird(30.3%)ofoperatorssaytheyarelookingatroboticstechnologyandautomationduringthenextthreeyears,whichhasthepotentialtoreleaselower-skilledemployeestocarryouthigher-valuework.However,comparedto2019,slightlyfeweroperatorsexpecttousetechnologiestoreplaceoperationalwarehousestaffwithinthenextfiveyears,possiblyimplyingamorerealisticviewofthepaceofchange.
Therearesomesmallsignsofincreasinginterestintheuseofdronesinwarehouses,perhapstocarryoutinventoryworkusingscanningandbarcoding,whichisanticipatedtohaveanimpactbyjust3.4%ofoperators,butneverthelessanincreaseonthe1.0%predictingasignificantimpactlastyear.
Bigdata,analytics,blockchainandcloud-basedservicesareallexpectedtobeutilisedbymorethanathirdoffirms,whilethenumberofrespondentscitingthatsustainabilityandenvironmentalapplicationswillimpacttheirbusinesseshasrisenfromoneintenlastyearto30.3%in2020.
Technology and innovationInvestingintechandupgradingsystemsalreadyinuseremainsthepriorityformostfirms.
Compared to 2019, slightly fewer operators expect to use technologies to replace operational warehouse staff within the next five years.
⊳ Previous | 20 | Next page ⊲
Whichsupplychaintechnologyapplicationswillhavethebiggestimpactonyourbusinessoverthenextthreeyears?
3D printing 0%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Sustainability / environmental applications
Upgrades/replacement of existing TMS/WMS/ERP/fleet solutions
Driverless trucks / platooning
Cloud services
Internet of Things
Use of drones
Leveraging the collaborative/sharing economy and/or customer platforms
Robotics and automation
Big data and analytics / blockchain
Respondentcomment
“ The industry needs to reduce labour and increase its efficiency to e-commerce levels.”
Percentageofrespondentsselectingeachoption
Technologyandinnovationcontinued
⊳ Previous | 21 | Next page ⊲
Accordingtothisyear’sstudy,morethansevenoutoftencompanies(72.2%)willbeinvestingingreen-relatedprojectsconnectedwithsustainabilityandtheenvironmentoverthenext12months–roughlythesameaslastyear.
Thetop‘green’focusareasidentifiedbyrespondentsareoptimisingfuelusedbyexistingfleets,recyclinginitiatives,warehouse-relatedimprovementssuchasinstallingLEDlighting,andintroducingandexpandingalternativeenergyvehiclefleetsinresponsetoincreasingnumbersofcitycleanairzoneswhichimposeachargeonnon-compliantvehicles.
Eachoftheseinitiatives–withthepossibleexceptionofrecycling–hasthepotentialtobeacost-saverinthelongterm,illustratingthatsustainabilityprojectscanplayapartinhelpingcompaniestomanagetheircosts.Greeninitiativesarelikelytobeamajordriverofcapitalexpendituregoingforward.
Whiletherearerelativelysmallnumbersofsustainablevehiclesoperatinginfleetscurrently,changestovehicletaxation,thephasingoutofdieselenginesandintroductionofnewlow-emissionzonesarelikelytocontinuetoincentiviseoperatorstoreplaceolder,less-sustainablevehiclesbeforetheyeffectivelybecomeworthless.
TheCovidfactor
TurningtotheimpactofCovid-19ondeliveringenvironmentalinvestment,ourresearchshowsthatthepandemichasn’timpactedinvestmentingreenprojectsforthevastmajorityofcompanies.
Nevertheless,aroundathirdofrespondents(34.8%)saythepandemichasinterfered,negatively,withinvestmentintheirgreenagenda,asenvironmentalinitiativeshavebeendelayedorbudgetscut.Thismaybeperhapsduetodifficultiesinaccessingthenecessaryexpertiseandmaterialstoimplementenvironmentalprojectsduringthepandemic.
Respondentcomment
“ Availability of contractors to upgrade lighting etc has been challenging.”
Green initiativesCovidhasbeenadistractionbuthasnotdampenedinvestmentinsustainability.
Our research shows that the pandemic hasn’t impacted investment in green projects for the vast majority of companies.
Whatarethekeyfocusareasforyourcompany’senvironmentalinitiatives?
0 10 20 30 40 50 60 70 80
Other
Extending environmental initiatives to suppliers / sub-contractors
Meeting customer-enforced environmental targets
Utilising technology to drive environmental objectives
Procurement initiatives
Recycling initiatives
Warehouse initiatives (lighting, power etc)
Expanding number of alternative energy vehicles
Optimising fuel existing fleet
%
Percentageofrespondentsselectingeachoption
⊳ Previous | 22 | Next page ⊲
Thisyearthenumberofcompaniesexpectingtomakeacquisitionsisclosetotheall-timehighfortheindexin2017,with38.9%ofrespondentssayingtheyarelikelytomakeanacquisitionwithinthenext12months.
Reversingtheslightdipinpredictedacquisitionswesawin2019andtherecentmutedactivityduetoCovid-19andtheeconomicuncertainty,thisyear’sincreaseappearstoreflecttheambitionsofwell-financedcompaniesseekingeconomiesofscaleandthechancetomakeopportunisticbuysinatoughenvironment.
Asoperatorslooktoreducecostsanddriveupmargins,otherdriversfordealactivityincludeexpandingserviceofferingstoreflectthechangestobothconsumerspendingbehaviourandend-usermarketsthathavebeenacceleratedbyCovid-19.Companiesmaylooktoboltonmorevalue-addedservicestoimprovemargins,suchasproductassembly,processingreverselogistics,productreconditioningandend-of-lifewastemanagement.
Refinancingofover-leveragedoperatorsthatarestrugglinginthecurrenttoughenvironmentseemslikely,andthereisanexpectationthatmoredistressedassetswillcometomarket,givenmountingpressureasfurloughingandothergovernmentfinancialsupportends.
RecentexamplesofdealactivityincludeXPO’sproposedacquisitionofKuehne+NagelDrinksflowLogistics(subjecttoregulatoryapproval),Culina’sPurchaseofFowlerWelch,andthedisposalofTufnellsbyConnectgroupinH12020,allof
whichhighlightthevalueofconsolidation,scaleandmarketleadership.Meanwhile,theacquisitionofHermesParcelnetandHermesGermanybyAdventInternationalhighlightstheavailabilityandappetiteofinvestmentcapitaltoseekoutvalueandgrowth.
Mergers and acquisitionsWithpredictedM&Aactivityatitshighestlevelsince2017furtherconsolidationinthesectorlookslikely.
Companies may look to bolt on more value-added services to improve margins.
0%
10%
20%
30%
40%
50%
60%
70%
80% No, we are unlikely to make an acquisition(s)
Yes, we are likely to make an acquisition(s)
H2, 201
6201
7201
8201
9202
0
H1, 201
6
H2, 201
5
H2, 201
4
H1, 201
5
H2, 201
3
Areyoulikelytomakeanyacquisitionsoverthenext12monthsandwhatisthemaindrivebehindthis?
⊳ Previous | 23 | Next page ⊲
0% 5% 10% 15% 20% 25% 30% 35%
To achieve higher margins
Expansion of service offering
To achieve economies of scale
Gain access to specific customers
To enter a new sector
ForthoseundertakingM&Aactivity,whatarethedrivers?
Mergersandacquisitionscontinued This year’s increase appears to reflect the ambitions of well-financed companies seeking economies of scale and the chance to make opportunistic buys in a tough environment.
⊳ Previous | 24 | Next page ⊲
Thelogisticssectorisexperiencingasignificantshift:inhowbusinessisbeingdone,indemand,capacity,routingandmeansoftransportation.Tradelaneshavebeenshakenbytheextremepressuresplacedonthem,buttherearealsogreatopportunitiesforsupplychaincompanieswithvisiontoadapt,developandgrowinthisnewenvironment.
Weexpectcontinuedgrowthinfreightvolumesin2021asproductionofgoodscontinuestoimprove.Highdemandandlowcapacityislikelytodriveincreasedcosts,whileregulatoryissuesandthechallengessurroundingUK/EUandUS/Chinatradelaneswillremain.E-commerceandlastmileconsumerdeliveryexpectationswillcontinuetoimpactfreightcosts,availabilityanddrivedemandforlogisticsfacilities.Servicelevelswillbemoreandmoreimportant,withexpertise,localknowledge,globalreachandapersonalapproachbeingparamount.
Respondingtothepandemic
AtWoodlandGroupwe’veseenanumberofchallengesimpactthesupplychainindustryworldwideasaresultofthepandemic.
WithFCLshippinghavingprovedaconcerntobusinessesduetotheeconomicclimateoverthelast10months,we’veseenincreaseddemandforbespokeLCLsolutionsandhaveputinplaceanExpressLCLsolution.
We’vealsoseenahugeimpactonairfreight,puttingincreasedpressureonrates,andonfreightercapacitybetweenEuropeandtheUS,andoutboundfromChina.Asaresult,we’vereroutedsomeairfreighttoalternativeairportsorofferedair/sea(andrail)combinationoptionsfurtherafield.
Withwarehousingfacilitiesatornearfullutilisationlevelsduetolackofmovementoffreight,we’veprovidedservicessuchas“DelayInTransit”solutionsforgoodsatornearthepointofmanufacture,aswellasprovidingoverflowstoragearrangements.
ThisisontopofthechallengesofshortagesofdriversandessentialworkersduetoCOVID-19,especiallyintheUS;changestoimporttariffs;containershortagesandcongestionatportsacrosstheworld;theneedtoadjusttothevastarrayofnewguidelinesandregulationsglobally,particularlyaroundimportingPPE;andnewtradeagreementsandmodelscurrentlybeingimplementedand/orpreparedfor.
Staffwelfare
AtWoodlandGroup,wehavealsohadtoquicklyadaptourITsystemstoremoteworking,whilekeepingcustomerdataprotected,andimplementingnew‘Covid-19secure’workingpoliciesandprocedurestokeepourteamssafe.
We’vefocusedondevelopingalternativeinternalcommunicationtoolsandplatformstocounteractthelackofinteractionofteamsduetoremoteworking.Wenowhostregularcompany-widevideoconferencestobringallstafftogetherglobally,whichisakeylearningforthefutureintermsofinteractionandmotivationacrossthebusiness.
We’vealsoincreasedthenumberofin-housetrainingcoursestobetterpreparestafftocopewiththechallengesofthecurrentclimate,includingonmentalhealthawareness,andwe’reworkinghardtoputsupportstructuresinplacetoaidourstaffandtheirfamiliesthroughthesechallenges.
Industry insight: Finding the right solutions to adapt and growJohnStubbings,CompanySecretaryofWoodlandGroupandcurrentChairofBIFA,reflectsonarapidlychangingsupplychainindustry.
⊳ Previous | 25 | Next page ⊲
Futureopportunities
Digitisationiscontinuingtotransformthesupplychainindustry,whichhastraditionallybeenbuiltonpersonalinteractionandrelationships.WoodlandGrouphavebeeninvestinginanumberofdigitalsolutionsovertheyearstoprovideagile,trackableandcarbonconscioussolutionstoourclients.
Fromreducinginefficienciesandtheindustry’sundeniableenvironmentalimpacttohighlightingsupplychaindeficienciesandopportunities,deliveringabettercustomerexperience,communicationflowandincreasedtransparencyoftheentiresupplychain,ourdigitaldevelopmentandfocusondataanalysisarekey.Theyenableustobetterforecastandprotectourcustomers'supplychainsandsupportourexpertteamsinmeetingourclients’needs.
DealingwithBrexit
Weputalotofworkintopreparingforandquicklyadaptingtopoliticalandeconomicshiftsthatimpactthemovementofgoods,whethernationallyorinternationally.ThishasincludedimplementingstepstoprepareandguideourclientsthroughthenewregulationsthatneedtobeconsideredaroundtheUKtransition.
OurdedicatedcustomsspecialistsarepartofBIFA’sCustomsPolicyGroupandCustomsPractitionersGroupandhavebeenguidingourbusinessinprovidingsupportsolutionstoourclients.
We’vecreateddedicatedBrexitnewsreelscommunicatingtheinformationreceivedfromBIFA,thegovernmentandourcontactsinBrussels,includingsimplifiedliteraturetohelpcustomersbecomeBrexitready.ThroughourITsolutionswe’reabletoload-bearallourclearanceneedsacrossthecompanywithintheUKona24/7basis.
Wecontinuetoprovidetrainingforallstaffonchangesfrom1January2021onwardsandonhowtobestsupportourclients,andhavekeypartnersacrossEuropethatcanaidusandourclientswithanyproblemsthatmayarisewhilstintransitfrom1January2021onwards.
We’reworkingwithallofourhaulierstomakesurethey’reuptospeedwiththenewregulationsandprocessesfortravellingacrosstheUK/EUborderandtomakesurealldriverscarryingourgoodshavethecorrectpaperwork.
Widerchallenges
Ourindustryneedstobemoreinnovativeinaddressingthedrivershortage.Weneedtoconsidertrainingtalentfromwithinourexistingwarehouseteams–afterall,today’sFLToperatorcouldbetomorrow’sLGVorHGVdriver.Wealsoneedtoimprovethesector’simage,workinghoursandthequalityofdriverfacilities.
Theindustryundeniablyhasasignificantimpactontheenvironmentandisoneoftheleadingindustriesshapingtheuseoftechnologyanddigitaladvancement.Providingsolutionstoreduceenvironmentalimpacthasbeenakeyfocusforusandwillcontinuetogrowinimportanceinthefuture.
It’sfantastictoseethedevelopmentofgreenerandmorecarbonconscioussolutionsacrossports,somecarriersandfellowfreightforwarders.Thekeytothisisacollective,industry-wideapproachandagreementonsomeofthekeyissuesaffectingourenvironmentalimpactandwe’realreadyworkingwithanumberofourpartnersonthis.
Meanwhile,globalisationwillcontinuetodriveconsolidation.Demandforfullyintegratedserviceprovidersandglobalcoverage,andincreasingcompetition,willcontinuetopushorganisationstowardsconsolidation.
John StubbingsCompanySecretaryofWoodlandGroupwww.woodlandgroup.com
We put a lot of work into preparing for and quickly adapting to political and economic shifts that impact the movement of goods, whether nationally or internationally.
⊳ Previous | 26 | Next page ⊲
Industry insight: Opportunities opening up for agile operatorsClaireWebb,ManagingDirectorofgloballogisticssolutionsproviderAdvancedSupplyChainGroup(ASCG),discusseshowagilityiskeytothrivingintoday’sdemandingenvironment.
It’sfairtosaythatsupplychainmanagementhaschangedforeverthankstoCovid-19anditseffectonlogisticsoperatorsandtheircustomers.
EnsuringthewellbeingofemployeesandestablishingCovid-safeworkpracticeshasbeenapriorityofcourse,butsohasovercomingoperationalchallengestodeliverbusinesscontinuityforcustomers.
Thearrivalofthepandemicandanunrelentingshifttowardsonlinepurchasinghasbeenchallengingbutalsocreatedopportunities,particularlyine-commerceandmulti-channelmarkets.
Understandably,retailersarelookingtobuildresilience,flexibilityandintelligenceintotheirsupplychains.Thiscreatesopeningsforagilelogisticsoperatorswithafocusontechnologythatcangivecustomersreal-timevisibilityandinsightsintohowtheirsupplychainisworking,andenablethemtoscaleupordowninlinewithdemand.
Understandingchangingcustomer–andconsumer–needsandbeingnimbleenoughtorespondareabsolutelykeytothrivinginthishostileenvironment.Operatorswhoareheavilyautomated,withcumbersomelegacyinfrastructure,willstruggletoevolveagainstsuchafast-movingbackdrop.
Softwaresolutions
Asacompany,weofferacomprehensiverangeofspecialistsupplychainservices,atbothoriginanddestinationthroughaglobalnetworkofwhollyownedsitesintheUK,EuropeandAsia,andthroughestablishedpartnershipsinothergeographies.
Formorethanadecadewe’vebeeninvestingindesigninganddevelopingourownbespoke,technology-ledlogisticssolutionsthatprovedinvaluablewhenCovid-19hit.OurVectormodularwarehousemanagementsoftwaresystemconnectsallourUKsitesandanumberoverseastoofferseamlesslinkswithourcustomers’ownsystems,givingthema‘controltowerview’ofstockandendvisibilityoforders.
GiventheCovid-acceleratedchangestoshoppingbehaviours,investinginintelligenttechnologylikethispotentiallyoffersgreatopportunitiesforoperatorsandtheircustomers.
Understandingcustomerneeds
Ofcourse,withthepandemic,operatorshaveneededtotakestepstounderstandthechallengestheircustomersface,notleasttheheavyincreasesinfreightforwardingcharges.That’swhywerecentlycarriedoutasurveyof200seniorretailprofessionalsforawhitepaperlookingatthekeydriversofchangeforthesector.
Itrevealedthepandemiccausedstockmanagementissuesfor92%ofretailersandhasunderminedconfidenceinJustInTime(JIT)becauseitdoesn’tprovideenoughagilitytocopewithincreasingunpredictability.
Disruptionmeanttwothirdsofretailersreceivedstocklateandasimilarnumberexperiencedshortagesofgoods.Retailersidentifiedbalancingstockflowandstockpilingasthebiggestsupplychainchallengeasaresultofthepandemic,with57%investinginstockavailabilitysolutions,andasubstantialproportionrecognisingthatrealtimevisibilityplaysavitalpartinenhancingsupplychainresilience.
Takemanagingreturns,forexample;weknowconsumerswantreturnstobeaseffortlessandpainlessaspossible,whichmeansreverselogisticsisnowapivotalpartofthesupplychainandaninvestmentthatwillpayoff.
Logisticsoperatorsthereforeneedtobelookingtoutiliseuser-friendlytechnologies–suchaspaperlessreturns–thatprovideintelligentreturnsolutionswithgoodvisibilityofwhat’scomingintohelpcustomersmaximisetheiravailabilityofstock,keepwrite-offslowandgetproductsbackintoavailablestockasmarginscomeunderpressure.
⊳ Previous | 27 | Next page ⊲
Technologyandtalent
Investmentinnewtechacrossthesectorhastendedtofocusonincreasedautomation,whichmakessensefor‘bigbox’single-usesites,butoperatorsofmulti-usersitesactuallyneedpeople,ratherthanrigidautomation,toenablethemtoprovideretailersandsupplierswithmoreflexibleservicesandscaleupordownwithdemand.
Webelievethewaytoachievegreateragilityistouseintelligent,user-friendlytechnologythatenablespeopletobecomecompetentmorequickly,dotheirjobsfasterandmoreefficiently–ratherthanreplacethem.
Andwhileitseemsthesectorisfacingtalentshortages,particularlyinwarehouses,thishasn’tbeenourexperienceandit’sworthnotingthere’sagrowingleveloftalentemergingfromtroubledsectorslikehospitalityandleisureandlookingtoretrain.So,withastrongdevelopmentandtrainingplanitshouldbepossibletobridgeanygaps.
Thenearfuture
AsweneartheendoftheBrexittransitionperiod,it’sdifficulttoascertainwhatimpactthefinaloutcomewillhaveonthesector.
However,we’llbemakingtransitionthroughcustomsassimpleaspossibleforourcustomers,enablingthemto‘fast-track’throughthesystem.ThiswillbeachievedwiththeAuthorisedEconomicOperator(AEO)statuswealreadyhave,byintroducingCustomsFreightSimplifiedProcedures(CSFP)anddesignatingwarehouseswithExternalTemporaryStorageFacility(ETSF)statustoeffectivelyactasaportforcustomspurposes.WehavealsoestablishedoperationsintheCzechRepublicandMiddleEasttooffercustomersalternatesupplylines.
IrrespectiveofBrexit,itseemsfurtherconsolidationintheindustryisinevitable.Businesseswillneedtokeepaheadofthecurveandacquiretheexpertisetheydon’thavein-housetoenhancetheirflexibility,covermoresectorsandchannels,andpositionthemselvesforgrowth.
Thiscouldwellbethroughacquisition,astherewillbedistressedbusinessesupforsale,butalsojustaslikelythroughpartnershipsandcollaboration.
Overthecomingyearlogisticsisgoingtobeaveryinterestinganddemandingsectorthatwillundoubtedlyseeoperatorsinvestinginarangeofdifferentsolutionstogivetheircustomersacompetitiveadvantageaswealladapttotheevolvinglandscape.
Claire WebbManagingDirectorofgloballogisticssolutionsproviderAdvancedSupplyChainGroup(ASCG)
www.advancedsupplychain.com
It’s worth noting there’s a growing level of talent emerging from troubled sectors like hospitality and leisure and looking to retrain. So, with a strong development and training plan it should be possible to bridge any gaps.
⊳ Previous | 28 | Next page ⊲
( Our Confidence Index has fallen from 49.7 in 2019 to 47.1 this year, its lowest-ever level and the second year running it has dipped below 50.
( Two-thirds (67.1%) of respondents say current business conditions have become tougher in the past 12 months.
( While half of respondents (50.6%) think business conditions will get more difficult in the year ahead, and fewer than half (48.9%) think profits will be up, many still see opportunities to grow revenues by focusing on the changing supply chain, the growth of e-commerce and delivering value-added services.
( Three-fifths (60.2%) of those surveyed say Covid-19 had a negative effect on their business in 2020 – a dramatic and distorting factor as businesses enter a period of adjustment and adapt to new service lines and end markets.
( There is a high degree of polarisation in the views of operators, with 35.5% saying the pandemic has had a positive impact on their company’s performance, despite the economic disruption.
( In addition to the pandemic, operators think the biggest challenges over the next 12 months will be driver shortages, Brexit and cost control.
( The long-standing shortage of drivers is being compounded by a lack of warehouse staff but employers also report that their wellness programmes are having positive effects on overall staff productivity, retention and absenteeism.
( System upgrades remain the main technology focus, but the sector has a growing appetite for investing in automation and other enabling technologies.
( More than 7 out of 10 businesses (72.2%) say they will be investing in sustainable, environmental or ‘green’ projects in the next 12 months.
( Predicted M&A activity over the next 12 months is at a level only just below the all-time high for the index in 2017.
Key takeaways
⊳ Previous | 29 | Next page ⊲
About this reportAllfiguresanddatarelatingtotheUKLogisticsConfidenceIndexwithinthisreporthavebeenresearchedbyAnalytiqa.
Theindexcalculationisbasedontheproportionofrespondentsreportingeitheranimprovement,nochangeordeteriorationwithinthesector,scoredfrom0to100.Therefore,anumberover50indicatesanimprovement,whilebelow50suggestsadecline.Thefurtherawayfrom50theindexis,thestrongerthechangeovertheperiod.
Thetotalcombinedrevenueofthecompaniesincludedinoursurveythisyearis£16.4bn,accordingtothelatestcompanyaccountsavailable.
Wewouldliketothankour100-plussurveyrespondentsfortheirgreatlyvaluedinsightandloyalty.Halfofthemhavenowparticipatedin10ormoreofour13reports,providinguswithvaluableconsistencyofparticipation.
Analytiqa
⊳ Previous | 30 | Next page ⊲
JasonWhitworth
Partner, M&A Advisory and Logistics & Supply Chain Management, BDO LLP
JasonisaPartnerinBDO’sCorporateFinanceadvisoryteamandhasextensiveexperienceacrosstheLogisticsandSupplyChainManagementSector.
Hehasmorethan20years’experienceleadingcorporatefinancetransactionsandasuccessfultrackrecordincompletingnumerousmid-marketdeals,includingMBOs,salemandates,acquisitions,privateequity,debtfundraising,andstrategicadviceacrossawiderangeofendmarkets.
Jasonhasworkedwithabroadclientbase,bothUK-basedandglobal,acrossawiderangeofsectorbusinesses,includingroadhaulage,warehousing,fulfilment,palletisedfreight,freightforwarding,couriertransport,andlogisticstechnologyandautomation.
Jasonproducesregularupdatesandreportsforthesector,providinganalysisofthekeytrendsthataredrivingvalueinthemarket.
T:+44(0)1132041237E:[email protected]
IanCranidge
Relationship Director, Head of Transport and Logistics, Barclays UK Corporate Banking
IanheadsuptheTransportandLogisticsSectorforBarclays’UKCorporateBank,providingexpertisewhichhelpsshapethebank’soutlookonthesector.
Heprovidesclientswithaccesstothebank’sfullsuiteofproductsandsolutions,includingbutnotlimitedtocashmanagement,debtfinancing,foreignexchangeandinvestmentbanking.
IanhasbeenwithBarclayssince2002,joiningoriginallyasaLocalRelationshipmanagerinEastLondon.
Inhis18-plusyearswiththebankhiscareerhasincludedrolesinLargeCorporateBankingcoveringpowerutilitiesandinfrastructure,leveragedfinance,asset-basedlendingandoffshorebankinginLondonandNewYork.
T:+44(0)2071167204E:[email protected]
About the authors
IDEAS | PEOPLE | TRUST
barclayscorporate.com
@BarclaysCorp
Barclays Corporate Banking
www.bdo.co.uk
@bdoaccountant
BDO UK LLP
BarclaysBarclaysBankPLCisregisteredinEngland(CompanyNo.1026167)withitsregisteredofficeat1ChurchillPlace,LondonE145HP.BarclaysBankPLCisauthorisedbythePrudentialRegulationAuthority,andregulatedbytheFinancialConductAuthority(FinancialServicesRegisterNo.122702)andthePrudentialRegulationAuthority.BarclaysisatradingnameandtrademarkofBarclaysPLCanditssubsidiaries.
Theviewsexpressedinanyarticlesaretheviewsoftheauthoralone,anddonotnecessarilyreflecttheviewsoftheBarclaysBankPLCGroupnorshouldtheybetakenasstatementsofpolicyorintentoftheBarclaysBankPLCGroup.TheBarclaysBankPLCGrouptakesnoresponsibilityfortheveracityofinformationcontainedinthethirdpartyguidesorarticlesandnowarrantiesorundertakingsofanykind,whetherexpressorimplied,regardingtheaccuracyorcompletenessoftheinformationgiven.TheBarclaysBankPLCGrouptakesnoliabilityfortheimpactofanydecisionsmadebasedoninformationcontainedandviewsexpressed.
BDOThispublicationhasbeencarefullyprepared,butithasbeenwritteningeneraltermsandshouldbeseenascontainingbroadstatementsonly.Thispublicationshouldnotbeusedorreliedupontocoverspecificsituationsandyoushouldnotact,orrefrainfromacting,upontheinformationcontainedinthispublicationwithoutobtainingspecificprofessionaladvice.PleasecontactBDOLLPtodiscussthesemattersinthecontextofyourparticularcircumstances.BDOLLP,itspartners,employeesandagentsdonotacceptorassumeanyresponsibilityordutyofcareinrespectofanyuseoforrelianceonthispublication,andwilldenyanyliabilityforanylossarisingfromanyactiontakenornottakenordecisionmadebyanyoneinrelianceonthispublicationoranypartofit.Anyuseofthispublicationorrelianceonitforanypurposeorinanycontextisthereforeatyourownrisk,withoutanyrightofrecourseagainstBDOLLPoranyofitspartners,employeesoragents.
BDOLLP,aUKlimitedliabilitypartnershipregisteredinEnglandandWalesundernumberOC305127,isamemberofBDOInternationalLimited,aUKcompanylimitedbyguarantee,andformspartoftheinternationalBDOnetworkofindependentmemberfirms.Alistofmembers’namesisopentoinspectionatourregisteredoffice,55BakerStreet,LondonW1U7EU.BDOLLPisauthorisedandregulatedbytheFinancialConductAuthoritytoconductinvestmentbusiness.BDOisthebrandnameoftheBDOnetworkandforeachoftheBDOmemberfirms.BDONorthernIreland,apartnershipformedinandunderthelawsofNorthernIreland,islicensedtooperatewithintheinternationalBDOnetworkofindependentmemberfirms.
Copyright©November2020BDOLLP.Allrightsreserved.PublishedintheUK.