TFG spoke to Simon Paget at Expense Reduction Analysts following their recent visit to Multimodal 2018 about the top supply chain issues in transport and warehousing. Whether you operate your own fleet or employ third party contractors to run your outbound operations you are likely to be talking about the following topics – these opinions are based on his industry knowledge and recent visit:

  1. There are numerous pieces of Legislation within the UK that need consideration and if they aren’t currently having an impact are likely to. The apprentice levy, living/ minimum wage and clean air zones set to affect 39 towns and cities at the end of 2019 are just a few.
  2. Brexit, the elephant in the room is mostly an unknown quantity around what will happen as negotiations continue and transition periods are discussed. Issues centre around border controls and customs unions, the value of sterling, immigration issues creating labour shortages but currently the impacts are unknown. There are things that can be done now to help position your business for the potential outcomes.
  3. The pace of change and how to keep up we’ve seen several big names go to the wall already this year. Typically, payback periods for investment need to be short when faced with such a dynamically changing environment to gain sign off. If cross-referenced for example against Clean Air Zones all delivery vehicles entering such a zone unless Euro 6 engine technology will incur a daily fine of between £50 – £100 for HGV’s based on proposals in Birmingham, Leeds, London (ULEZ) and Southampton. If you operated 362 days a year into Leeds that would be an additional cost of £18k, (£36k in the other places mentioned) and a capital outlay of circa £80k. Pay back over 4 years is that going to be acceptable? Certainly, with the backdrop that policy makers won’t commit to not changing the goalposts to zero emissions.
  4. Workforce driver shortages, (circa 52k short now, plus 43k non-UK drivers source Freight Transport Association) and warehouse staff consisting of 25% from the EU coupled with low unemployment (4.2% March 2108) the lowest level of unemployment in 45 years (ONS Time Series Unemployment Rate aged 16 & over seasonally adjusted) have a profound effect on an organisations capability. There also is the Brexit spectre and what may or may not happen in the long run with people perhaps returning to the country of their birth as the UK becomes less popular.
  5. Road congestion causing delays in the region of 20 seconds per mile these days due to the sheer volume of traffic. I’m finding it is more and more difficult to predict journey time particularly at peak times of the day. The impact being meeting delivery windows, the knock-on effect just trading in the UK is more inventory in the system to cover delays, which increases costs. If you export or import with Brexit this is likely to become more painful too as likely customs entry and exit delays will cause problems for time sensitive goods and perishables.
  6. Transport route optimisation what can and is being done to ensure maximum productivity of your vehicles and drivers to fully sweat your assets? Technology will prove to be an enabler of this, but drivers may be less empowered if they must follow the routes designated by an in-cab system.
  7. Warehousing space in the UK is predicted to run out in 2020, with limited speculative build going on and perhaps a year’s supply on the market in many popular areas. There’s limited land availability and nobody wants a huge box at the end of the garden. To support last mile delivery companies should be thinking about what to hold near the consumer and whether to offer same day delivery? If we want to have, “a sustainable society,” consumers will also need to consider do I need that item today? Or can I wait for a standard service? Or have it dropped at a convenient collection point. Currently the burden is solely on operators finding efficiency gains and investing in clean technologies.
  8. Warehouse optimisation sweating the footprint and fundamentals of operating the building along with tight control of inventory to ensure best in class availability. This means having the right products in the right places when received to ensure inventory turn is high and task efficiency is high. The higher the stock holding the more challenging this becomes to achieve.
  9. Picking optimisation as this is the crux of creating customer satisfaction of order right first time balanced with operator safety and speed of delivery. Best in class operators work at 99.9% accuracy with much more picking at “each or single” level (37.2% UKWA study), instead of full case, part or full pallet picking.
  10. Excess inventory and safety stocks within the supply chain as if it’s not held by the retailer or distributor it’s held somewhere in the chain. This is likely to be exacerbated by Brexit for anyone who has raw materials, work in progress or finished product crossing a border. If we considered Just in Time manufacturing such as car plants whereby items are delivered to the required location in the assembly process the cost of additional stock and warehousing required to cover delays as OEM component parts are globally sourced will be significant.
  11. Bonus item fuel cost and fuel efficiency are always likely to be high on the agenda for many fleet operators although interestingly it wasn’t discussed at Multimodal 2018 this May. We have though seen crude oil prices rise to around $80 a barrel in April so I suspect this will come back as a hot topic. The industry is expecting Platooning trials to start soon but whether this will be viable is yet to be seen.