UKWA has, for as long as I can remember, warned that unless there is some uplift in the price that logistics services providers are prepared to charge their clients for the activities that they undertake on their behalf, many 3PLs will wake up one day to find that their business models are unsustainable.
And, with the dramatic changes confronting our sector, this has never been more certain than at the present time.
Quite simply, if 3PLs are to stand any chance of meeting the challenges of our fast evolving society – where technology enabled consumers demand next- or same-day delivery of the goods that they order online – margin erosion has to end.
It is, for example, difficult to understand how any logistics company operating on profits of less than one per cent can be expected to make the necessary investments in robotics and artificial intelligence that, we are repeatedly told, are going to be essential as the industry is forced to look to new forms of technology to do the jobs that it will be increasingly difficult to find people to perform.
And, without a healthy balance sheet, how will 3PLs afford to move in to the new distribution centres that will be needed to fulfill orders as consumers continue their migration away from bricks and mortar retail outlets in favour of online ordering?
The old adage ‘turnover is vanity, profit is sanity’ has never been more relevant to the logistics industry than it is today.
There will have to be adjustment somewhere because, at the moment, the retail industry’s reliance on competitive pricing to win the loyalty of the online consumer is being subsidised by logistics companies and this can not be sustained in the long term. Or, perhaps, even in the short term.
Peter Ward
UKWA, CEO
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