Wednesday, August 22, 2012

Large or Small, Bulk Cargo, Freight Handling Equipment or Road Haulage - Invest Now

Austerity Doesn't Work in the Climb from a Bear Market Say Leaders in Different Logistics Sectors
Shipping News Feature

UK – WORLDWIDE – At a time when the arguments over global government fiscal policies rage seemingly endlessly the decision to invest with a view to increased growth in the future or put up the shutters against the prevailing economic cold winds is also a subject which causes debate amongst companies in every sector of the freight and logistics fields. With the dearth of cargo following the boom years only showing slow signs of recovery, and some sectors both geographic and modal suffering more than others, be they road haulage in the UK or energy shipping across the globe, it seems that for some the investment option is the only logical choice, provided it is targeted very specifically.

In the past week or so we have seen comments from various areas of the shipping market regarding the best way for companies to spend money. From those with an eye on the future, such as John Fredriksen then the best choice is to select a potentially growing sector and throw money at it. Hence the ‘Big Wolf’s’ decision to use his restructured Frontline 2012 group to contract for two new build LPG carriers this week for a cool $127 million (much as Warren Buffett used Berkshire Hathaway to purchase BNSF in 2009 when he saw a decline in the rail freight market).

Fredriksen has a reputation for bold decisions, much of his reputed $11 billion fortune was made sending oil tankers where others feared to tread during the Iran/Iraq conflict and in addition to the two new vessels scheduled to come off the blocks in 2014 he apparently has fixed price options on four more of the same type of ship at the same rate en route to his goal to make Frontline 2012 the biggest commodity carrier with a contemporary fleet. Fredriksen said:

"We are excited about the prospect for Frontline 2012 to develop a profitable business within the LPG market. The high growth in LPG production, combined with a low new building order book and historic low new building prices for fuel efficient tonnage creates a unique opportunity to enter this market. We are hopeful that Frontline 2012 within three years can be one of the major players in this market."

In the warehousing sector this week we heard from Steve Richmond, Director of Jungheinrich UK Ltd’s Systems & Projects Division who talked up the prospects for the materials handling market opining that lack of investment in current equipment and maintenance since the slump in 2009 meant it was now inevitable that logistics handlers must invest or suffer the consequences. Obviously Jungheinrich has a vested interest in seeing their market develop but Richmond points out that, in his opinion, the tipping point has been reached saying:

“The forklift truck market has performed very positively in the past three years and sales of very narrow aisle trucks have been buoyant too. Small to medium sized projects have also held up well. But the automated projects arena has been slow to recover. But I believe that companies have now reached the point where they can no longer put-off investing in their systems and processes. The lack of investment in recent years means that, in many cases productivity and efficiency is not being maximized and, for many firms, operational costs remain higher than they need to be. In short, failing to invest in updated intralogistics systems is at odds with accepted business drivers.”

Richmond is convinced that automated handling is an irresistibly growing trend, particularly smaller tailored systems, for customers who are seeking productivity and efficiency gains and a rapid return on investment and makes the case by concluding:

“There can be a lack of innovative thinking among warehouse planners when it comes to adopting different solutions. Clients do not always know what products are available and what can be achieved. Many users now employ partial automation – hybrid systems that are part-automated and part-manual. In the past some companies shied away from automation because they felt that a move to an automated system would mean that every aspect of the operation would have to be automated. This is simply not the case. If designed correctly, semi- and fully-automated solutions can be flexible and scalable to allow for future growth and investment strategies and that will prove very attractive.”

Getting back to the more mundane anyone who is seeking a bargain fork lift truck might do worse than taking a look at Jungheinrich’s latest used equipment fair held at the company’s Europa Boulevard, Warrington site on the 13th September where all the trucks on display have been completely refurbished. Each model comes with a full service history, valid LOLER certification and up to six months warranty and stock includes electric- and engine-powered counterbalance machines and pallet trucks as well as specialist internal warehousing machines such as reach trucks.

Another UK company trying to stay ahead of the game is Lenham Storage which runs a fleet of 260 vehicles from its two warehouse sites totalling over three quarters of a million square feet with most of its trailers being the now standard 13.6 metre versions. The company has built up from a single truck over sixty five years ago and plainly always has an eye to the future. When the Department for Transport said they were prepared to trial longer vehicles in a bid to reduce road miles, as we reported last October, Lenham were amongst the first to put their money where their mouth was and apply for a licence for the right to run the bigger kit.

Trailer manufacturer Lawrence David was contracted to supply ten new curtainsiders for the trial, six being 14.6 metres and the remaining four reaching the new permitted maximum length of 15.6 metres, capable of carrying 15 more pallets. The trailers arrived recently at the family owned firm and have been trialled successfully prompting Steve Hall, Commercial Manager at Lenham Storage, to comment:

“All the trailer variants have been tested at our various customer loading bays and delivery points and there are no issues with reversing or general manoeuvrability. We have been given the opportunity to explore alternatives which, in the longer term, should be good for us and good for the industry. Lenham Storage has always been a pioneer and we are constantly looking at ways to increase efficiency and reduce our costs. This new initiative by the DfT opens a door to us to do just that, while also helping to minimise traffic movements.”

If you are in the logistics business then the choice then is yours, to raise or call? That is the simple choice, what is certain is that whether it be billion dollar investments in new vessels, second hand fork lifts, trucks and equipment or modified advertising, fortune generally favours the brave (and astute).