Adapting for success in an unpredictable world

Adapting for success in an unpredictable world

CEO | UKWA

We are living in times of rapid global change, possibly unprecedented in our modern business world. From seismic geo-political changes to advances in technology and the rise of the new consumer, the current and future logistics landscape is one that will be negotiated successfully only by companies able to recognise opportunity, embrace innovation and adapt to operate in an unpredictable world.
 
From a global perspective, we have seen the US effectively withdrawing from its role as a champion of globalisation since the inauguration of President Trump in January 2017, repealing agreements under the Paris Climate Treaty, pulling out of the Trans-Pacific Partnership, adopting protectionist policies and introducing punitive tariffs as part of its new ‘America First’ unilateralism.
 
Meantime, China is stepping in to take up the reins, defending free trade and investing multi-billions of dollars in its ambitious Belt and Road infrastructure enterprise, which will connect Asia to Europe and beyond, increasing China’s export potential and global political influence.
 
Closer to home, German Chancellor Angela Merkel is a much weaker force in Europe in her fourth term, only secured after months of political deadlock, while the French president Emmanuel Macron is struggling to make headway with his proposed reforms in Europe. Here in the UK, we are still unsure of exactly what form and fall out to expect from our leaving the European Union and what it will mean for the future for British businesses. 
 
It is the role of the UKWA to support members in understanding where future opportunities lie against this backdrop of global change. We challenge, interrogate and inform the Government and other policy influencers on industry issues such as the impact of Brexit on Customs and migrant labour, and we highlight both to Government and to our members those critical matters that will affect the success of the industry and of individual businesses going forward.
 
Our UKWA Advisory Boards, set up to provide expert insight into technology trends, the real estate marketplace, training and education, customs and excise, together with our newly established Logistics Users Group of retailers and manufacturers, enables the Association to keep its members abreast of latest developments and future requirements, equipping them with unique insights and valuable market intelligence with which to plan for business success.
 
One of the key drivers of change for the logistics industry is the so-called ‘new consumer’, who predominantly shops online, expects to find what they want when they want it 24/7, demands free home delivery and free returns, shops ‘fresh’ in local convenience stores little and often. Led by the likes of Amazon and Alibaba, these consumers are behind the explosion of apps, new generation cloud technology and the rising requirement for fulfilment and replenishment centres close to urban populations. 
 
Big high street stores are closing as online shopping continues to grow apace. This change of format is fuelling demand for more warehousing space. However, there is a well-documented lack of suitable development land available and supply of existing warehouse units has fallen by 71 per cent since 2009. Although UKWA has continued to highlight the imbalance of supply and demand, Savills reports only 6.5 per cent vacancy nationwide and just there per cent in London, with property developers failing to react to market demand, global investors taking advantage of the weaker pound and snapping up available real estate, with rental rates rising sharply.
 
There has been a shift of focus for new warehousing too, with big operators looking north and east to be close to available labour markets, and a requirement for proximity to the national grid to meet the huge energy requirements of major fulfilment facilities. 
 
Online retailing is also exacerbating the labour and skills shortage in the industry, according to UKWA’s Logistics Users Group. Rather than saving overheads by moving from bricks and mortar to online, leading retailers are finding the cost to serve is up to four times higher. The costs reside in significantly higher labour and delivery costs. At a time when the UK is experiencing the lowest youth employment rate since the 1970s and the Government remains committed to a post-Brexit cap on net migration to below 100,000, labour has become a scarce resource, particularly at peak times such as Christmas and Black Friday. 
 
Accordingly, UKWA is supporting members in recruiting apprentices and developing industry-specific training courses to upskill workforces, fostering staff retention and improving productivity.
 
At the forefront of all these changes is rapidly evolving technology, including robotics and automation. Could this be a solution to the labour and skills shortage in our industry? While there is worry that robotics will take people’s jobs, the reality is that instead it will enhance jobs, removing repetitive elements, eliminating human error and improving job satisfaction as well as productivity. However, for now up-front cost remains an issue. Full automation still looks to be beyond the reach of all but the biggest organisations, but as cost inevitably comes down, different technologies are becoming increasingly accessible, particularly when introduced as ‘islands of automation’, and in the end adoption will become inescapable.
 
As we head towards 2019 and the post-Brexit world, the message to the industry from UKWA is plan for the unforeseen, build in operational agility and flexibility, harness technology and above all, be prepared to adapt.
 
For further information about UKWA, visit: www.ukwa.org.uk