At the United Kingdom Warehousing Association conference in early March, David Lucas of Change4Growth told delegates “Change is the new normal – forever”. How right he was. And that of course was when Covid-19 appeared to be essentially a short-term supply-side problem and few were predicting total lockdown in major European economies.
At the conference, our members were overwhelmingly optimistic about the next twelve months, noting a British Property Foundation prediction of a doubling of online spending and a 43% increase in productivity over the next 20 years, and a requirement for 21 m sq ft of new warehousing every year.
Despite the current crisis I don’t believe such predictions are invalid. Indeed, if in response to the virus homeworking really takes off, the online move and its increased demand for warehousing may even be accelerated. But business might well be different.
Most fundamentally, Covid-19 can only encourage a rethink by manufacturers, retailers and the public sector of their sourcing and inventory policies. The globalisation-max model is already under pressure, not only from trade wars but also from a variety of ethical and environmental concerns. Single-sourcing from far-away countries on a Just-in-Time basis no longer looks quite the smartest strategy, as firms start to price in risks that they have barely had to consider in recent decades. At raw material, intermediate, and finished goods level we can expect inventories, and thus the need for warehousing, to increase across the board.
Inventory holding has costs and it will be incumbent on us to work with our customers to contain these. That may mean increased automation to alleviate labour availability issues, but also developing more flexible and creative ways of working. There is talk of relaxing competition rules during the crisis, and this is an opportunity to demonstrate that greater collaboration in logistics can be a ‘good’ for the economy and the planet.
March also saw a new Budget, which, if it is not blown completely off track, has some interesting implications. The massive increase in infrastructure spending, much of which will be targeted at ‘the North’, will likely create new demands for warehousing and storage. The new plastic packaging taxes may also involve us in the recovery, storage and delivery of clean, separated plastics flows.
Thinking more widely, Covid-19 is just the latest, although much the greatest, of a series of shocks and threats that have impacted logistics in the last couple of years. We have had, of course, repeated ‘Brexit-related events’ – and who can rule out yet another one at the end of the year – with both businesses and consumers building up and running down stockpiles. However, the industry has gained valuable experience in modelling responses to grid-locked ports and motorways, panic buying and other phenomena. Some of this will undoubtedly be proving useful in the current crisis.
I hope it is becoming clear to government at both national and local levels, if it wasn’t before, that warehousing and logistics is vital to ‘resilience’ in national as well as just supply chain terms. In a crisis, government can call on our assets and capabilities in the national interest. That might be to stockpile drugs and medical equipment; it might be to pre-position temporary flood defences; it might be to create emergency distribution paths for communities whether they are locked down by virus or just locked in by flood. I wonder how well emergency co-ordinators and planners understand the assets and skills that we possess in their districts, and how we can help to make a difference?
Through developing new automation and data techniques, and new operating practices, logistics service providers will play their part in rebuilding the economy, countering climate change, and increasing local, national and international resilience in an increasingly uncertain world. Change is indeed the new normal.