Thursday, March 5, 2020

United Kingdom Warehouse Association Conference Shows the Way to a New Logistics Business Future

eCommerce and Generation X Demands Mean More Automation and Added Value Services
Shipping News Feature

UK – Every year the annual United Kingdom Warehouse Association (UKWA) National Conference gives its members an opportunity to spend two days thrashing out the latest topics hot on the logistics agenda. Now whilst that might on first hearing not sound a very exciting prospect, in fact it means all present have sufficient time to drill down into what is currently happening, and forecast, for a sector group which effectively holds responsibility for the entire British supply chain.

If last year’s conference was good (which it was) like all business at the time it was dominated by the threat of a bad Brexit. The matter hung looming over all discussions and, whilst this year we still have no clarity, it was fast established that the UKWA members have for a large part accepted the incompetence and intransigence of politicians and are facing that previously dreaded ‘no deal’ scenario with impunity.

That is of course not strictly true, the likely outcome will be that the 90 million or so customs declarations which UK importers have to present annually will rise to around 300 million together with a consequent rise in the number of painstakingly slow customs examinations. To counter this the UKWA is working with other stakeholders to persuade the authorities to allow transit from the ports to suitable inland clearance depots, particularly for perishable goods. Whatever happens the logistics community seems ready to pay the inevitable price.

So if the gloom of last year has lifted, what were the key points at this year’s gathering? The answer is a big one, business as we have always known it, is changing. The influx in commercial terms of Generation X and the millennials means that, whereas previously business was all about profit and putting a smile on the face of the shareholders, these newcomers are dictating a demand for new values. These are centred about sustainability, who grew/made it? What was the true environmental cost?

So whilst Brexit is now so much a sideshow the government have forbidden the use of the word (it’s now Future Border Strategy) the conference was very much looking forward, and in a series of seminars there were upward of 20 speakers to cover territory from warehouse development to the way to improve business by tearing up the rule book and starting again, using younger incoming staff to be the decision makers.

As usual the conference was opened by UKWA Chief Executive Peter Ward who firstly suggested all present made their night time reading the report published by the British Property Foundation ‘Delivering the Goods in 2020’ which was undertaken in 2015. The figures have grown since as predicted with online sales predicted to rise over 50% in a ten year period. This when the UK already leads Europe in terms of ecommerce, well ahead of other countries.

Concerns over labour persist with Ward commenting that wiggle room is needed in the government’s latest immigration policy, and the need to develop warehousing of the right type in ever increasing quantities coupled with competent, well-trained staff to ensure safety in all logistics operations.

First speech was from Eleanor Winton, founder of Foresightly who, having pointed out that her predictions are always based on assumptions, took the audience on a journey to a possible future and how to prepare for it. The talk covered a wide range of subjects from the potential for growth in Africa, the changing demographic globally with a variety of age groups in regional areas and the potential for businesses to serve the new generation in a way which suited it.

The climate got a mention (and the irony of President Trump raising up to half a million dollars in campaign funds via the sale of single use plastic straws) as did the new style prefab building designs from PassivDom, the ability of artificial intelligence (AI) to create ‘art’, unification of packaging to transform recycling, undersea warehouses as studied by Amazon and how SpaceX is not a space exploration company but basically a 3PL.

Ms Winton’s best illustration of her mantra to think outside the box was the case of two young men in California who, frustrated by the processes used for over four centuries to mature scotch whisky in seasoned barrels, simply added pieces of barrel to the bottles claiming the same flavour in just 24 hours!

Dr Walter Boettcher from Colliers International gave his usual run down of the economic situation, expressing relief after three years of Brexit, sorry Future Border Strategy, stressing the time had come for the UK to retrain staff to increase productivity, invest in infrastructure such as HS2, HS3, the transport network, digital communications etc.

However Boettcher says, there are clouds on the horizon as business remains vulnerable to short term stresses (covid-19, wars etc.) yet has the power to recover. He stressed that consumption is the main driver of the economy and trade only recovers when politicians see the faults in their policies, citing Hong Kong elections as one to watch.

As mentioned in a previous article Will Laing from Savills made the case for the current state of the commercial property market, forecasting a rising demand with no significant impact from leaving the EU. The percentage take up of warehousing by 3PLs has risen sharply whilst bigger buildings are on the agenda with the rise in ecommerce.

Companies are tending to look further afield as the labour shortage in the south east bites with rent levels often of secondary consideration. One effect of the increase in the home delivery market, as opposed to personal shopping, was a decrease in CO2 levels, another topic high on the conference agenda.

Next on the agenda was a round table discussion on value added services as a revenue generator and, as has been the case with farming, logistics outfits are having to seek out other ways to produce income rather than the traditional ‘big shed’ philosophy. Moderated by Josephine Coombe from Nuology, the three participants, Richard Pinkerton of Nestlé, Mark Catley of XPO Logistics and Ian Walker from 3P Logistics again covered a lot of ground in their discussion. The demand on suppliers now meant that in some of the businesses discussed, value added services now equals a third of revenue, failure to offer what the customer demands simply means they will look elsewhere.

Ian Walker said changes in demand had led to more complex warehousing with an example of a store with 32,000 product lines holding 13 million individual units for a range of 40 customers. Such complexity demanded a rethink with Mark Catley saying this meant his company was working with Nestlé on the design of a dedicated digital distribution centre.

For his part the Nestlé man pointed out the complexity to source easily distributable packaging was a permanent headache and cited the case of Tesco which has three separate types of outlet, big store, Tesco Express and the Booker wholesale business, all demanding different styles and quantities for delivery.

This fact was coupled with the changing nature of peaks and troughs as regards the date when businesses saw more or less demand. The traditional highs and lows are now seen to be changing, and businesses have to be able to predict these as far as is possible. All agreed another major demand from customers was the need to reduce waste and are prepared to compromise somewhat on unit costs to achieve this. The need was for good, efficient systems and designs to eliminate waste as far as is possible..

The first day of the conference closed with a logistics users panel discussion which saw moderator Mark Thornton of Maginus oversee a group including Katherine Parker from Sainsbury Logistics, Chris Warn of Pentland Brands and Juan Manuel Santiago Mendez, CEO of Mercedes Benz Parts Logistics in the UK.

Each participant spoke about their own roles in their companies and how those organisations fitted into the supply chain. Each mentioned the changing face of business and how the fascination of operating in an industry in which every day can be different was the hidden secret of a sector which needed to promote itself more widely.

The panel agreed with the Mercedes man that people were the key to each of their businesses, the importance of training and how labour provided the key demand as to the geographical location of the business. Katherine Parker said when many people found she worked for Sainsbury they assumed that was on the checkout counter, a sad reminder of how the gender imbalance needs urgent attention.

The need, said Parker, was to attract talent and then retain it. If you don’t make their work interesting staff can and will move on. The general opinion was that the sustainability of the sector needs to be addressed but that, at the end of the day, despite all the automation flooding in (a poll of the audience revealed 79% will be exploring this in the coming year), someone needs to produce the goods and someone has to deliver them. That would not change in the next five years, and possibly the next twenty.

After winding up the first day the speaker at the Annual Dinner was Beth Thomas fresh in from the US and founder of Change4Growth and author of the instructional ‘Powered by Happy’ which tells how success comes by making work a more pleasant experience. The traditional raffle for transport charity Transaid raised over £1300 and followed a speech from Florence Bearman which brought the diners up to date on the amazing amount of good work the organisation is achieving with its bicycle ambulances and anti-Malaria programme.

The occasion also saw a talk from Andy Page from the board game Business on the Move, again something we have covered previously. Ex-teacher Page is passionate about raising the profile of the industry and urged those present to take some time to visit local schools and explain the myriad types of jobs available in logistics, from IT and computer analysis to fork lift driving and warehouse management.

Day two opened with a study of climate change and what the defining issue of the decade means to an industry which uses energy in many different ways. Moderated by Alan Kiff of Concept Energy Solutions the panel comprehensively covered the whole spectrum of the topic from energy management through lighting solutions via Ray Conboy of Luxonic, better insulation with Chris Wallis from Kingspan and packaging covered by Matthew Marks of Pallite.

The emphasis was on future proofing operations whilst the UK faces different challenges now it is not linked to the EU responses to the subject. The UK will need now to set up its own Carbon Trading Scheme. The likelihood of ambitious policy changes looms large for those companies who have not given future energy use their attention. However the rapidly evolving technology means that for many the changes may prove very cost effective, particularly if available schemes to reduce tax be taken up, something many companies were simply unaware of.

One issue which rankled with many of those present was the responsibility of a tenant and whether environmental responsibility should now be mandatory for landlords. In the case when extensive changes are made to something like a building’s lighting or insulation, when the lease term is up the tenant bears the cost of dilapidations in full to return the premises to its former, less efficient state on the whim of the owner.

Automation was next on the agenda with a presentation from Priya Ravidran from PWC followed by a discussion moderated by Guy Willot at Voiteq and a panel of Rachel Price, Siemens Intralogistics, Niccolò Corsini MD at Sonodot and, once again Sainsbury’s Katherine Parker who explained how Sainsburys was using algorithms to predict peaks and troughs on its fashion deliveries, a notoriously fickle business.

The company uses CCTV to monitor inward deliveries, an oft neglected side which has the power to disrupt an automated, or indeed manual system. She mention a BBC report on a rival company which actually used AI to study customers shoes to determine the type of client entering stores and use the information accordingly.

Corsini pointed out that companies need not go for wholesale automation, they could integrate it on a piecemeal basis as and when required. Rachel Price explained how the need to automate Siemen’s Congleton plant, which had seen successive generations of workers using the same technology, used virtual reality to explain the change of roles to staff in a move which changed the entire nature of the plant.

Corsini said whatever was introduced needed to be plug and play and user friendly from the outset. Additionally it was necessary to demonstrate the advantages to customers, if there are savings they will buy in and equally one must have the right people as well as the right technology.

The discussion was centred around the fact that further automation is not the preserve of the ‘big boys’ but can be integrated into smaller companies as and when required and at a time when costs are likely to fall.

Next up was a debate on logistics and whether it is now the new retail. The surge in ecommerce has meant a sea change in logistics with responsibilities increasing, particularly for those who act as fulfilment houses, where goods coming from overseas are distributed to individual purchasers. The 3PL then bears a heavy degree of responsibility for the health and safety aspects of the products as well as the tax status.

Murray Gibson introduced the session with Ian Bartholomew, logistics director at Urban Outfitters, Stuart Ager of Century Logistics and Howard Catherall of Gotelee Solicitors, and an expert in transport and logistics law. Gibson opened by pointing out that previously mentioned figure that the UK take up of ecommerce was over twice the average amount of the rest of the EU.

He pointed out home deliveries had spurred the reinvention of the left luggage locker and foretold an age when coffee shops would not only act as parcel delivery points but might even have changing rooms so returns of fashion goods could be immediate and from one location. He stressed the importance of good, future proof warehouse design saying many will be built to suit. Location, as ever, was the big factor, Prologis have just taken a 120,000 square foot unit in Edmonton, London for an astonishing £51.4 million! Obviously the need for close proximity, same day delivery, urban delivery centres is a pressing one.

The liability of the fulfilment householders is a vague subject, even for an expert like Howard Catherall. He stressed that all a logistics operator can do is ensure all products have correct labelling, full health & safety instructions and are properly audited and documented. Even then he admitted in our questioning that there are no set rules with decisions of liability at the discretion of the local officers from Trading Standards and HMRC.

Gotelee Solicitors actually have an App dedicated to running a Fulfilment House which we gave full details of in an article back in 2018. Whilst a Fulfilment House might not have the responsibility for testing products, when Which tested numerous versions of 18 types of product bought online, a horrifying 66% failed to meet current legislation and were found to be not fit for purpose.

Certainly it became obvious in this final session that, whilst logistics retains its traditional roles, it has also now shifted to become a more complex organism and effectively has indeed often adopted the traditional ground occupied by the high street retailers.

Closing what had been a very enlightening event for all who attended Peter Ward thanked members, sponsors and the team at UKWA which once again produced an conference well worth attending. He emphasised the continuing UKWA involvement with government in matters such as the Freeport Consultation and Immigration, a subject which needs to be at the top of the logistics agenda given the current proposed minimum salary for a potential worker.

Photo:Peter Ward Addresses the annual UKWA Conference