THE emergence from lockdowns, together with the way the pandemic has changed the shopping habits of consumers, is creating an almost unprecedented opportunity for the logistics industry. 


“This sector, particularly as far as demand for warehousing is concerned, is looking at a phenomenal opportunity for growth,” says Peter Ward, chief executive of the UK Warehousing Association (UKWA). However, Ward is the first to admit that the logistics sector is facing something of a ‘perfect storm’ and has some challenges to surmount if it is going to take advantage of present opportunities.


“At our national conference just before the pandemic broke in March 2020, we were talking about the possibility of online shopping growing from 10p in the pound to something like 19p in the pound over the next few years. The change in consumer habits during the pandemic has blown those numbers out the water,” he says.


Instead of 19%, retailers with a strong online presence as well as a bricks and mortar presence, are now reporting anything from 30 to 40% of their sales are coming from their websites. 
“John Lewis recently reported that some 60% of their sales were online. Another key factor, besides this phenomenal increase in the share that online sales now enjoy, is that the idea that online shopping is the preserve of the millennials, has been exploded,” Ward says. 


Today an online shopper is just as likely to be 65 as they are to be 21. “Many of those folks who felt themselves to be in the more vulnerable categories with respect to the pandemic, as well as those over 70, have taken to online shopping in a big way,” he says. Ward adds that his own mother, who is over 90, is now buying online. 


“The older generation have joined the online shopping frenzy, so the demand on warehousing and that ‘last mile’ delivery has ramped up to astonishing proportions,” he says. 
Ward points out too, that the major grocery retailers have now grasped that prior to the pandemic they were more or less just playing at home deliveries. Once demand ramped up for home deliveries during the lockdowns, they found themselves running out of delivery slots and their websites were in danger of crashing from overdemand. 


“What we see now is that they are rapidly redesigning their whole approach to logistics. Does this mean that they reorganise to turn their stores into warehouses, or to they build more warehousing hubs closer to demand? This is changing everything about the way they operate,” he says.
On top of all this, we have Brexit and the end of the Brexit transition period. “We had a whole new set of regulations come into effect on January 1st, 2021. That fuelled a degree of over-stocking in the run-up. Then there is the fact that the pandemic in China, before it hit the West, pushed all shipping schedules from China back. 


Stock arrived from Asia just as the UK went into its first lockdown, so people missed getting the right stock into place for the summer. This was compounded by port congestion all over the world. 
Global supply chains took ages to respond to the confusion mixed with the impossibilities associated with various lockdowns. 
Another complicating factor was the mind-boggling surge in demand for PPE equipment. “There were huge amounts of PPE arriving in the system, often in the wrong places. 


“We had something like three million pallet loads of PPE equipment in the system stacked up in member warehouses all around the country,” Ward says. This squeezed out space for supply chain restocking in response to Brexit uncertainties, which helped no one. 


January and February would normally be the time when pressure eases on warehouse space, following the Christmas peak season.  
At present, however, there is just not that much warehouse space available. 
“Brexit needs more space available in the supply chain. The combination of new procedures, plus the detail that is unfolding almost day by day in the cooperation agreement between the UK and the EU, is starting to make life really difficult. 
“The additional bureaucracy within the EU and the UK, not to mention Northern Ireland is clearly causing problems, and the details now emerging from the trade agreement regarding country of origin and payment of import VAT is delaying delivery of orders and causing backlogs of stock,” he notes.


The whole essence of supply chain management lies in managing the balance between flow and capacity and the combination of Covid-19 and Brexit has played havoc with that. 
People have been massively overstocking on inventory, which means tying up capital, so as to plug any unforeseen gaps in supply. None of this does any good to a system in the 2020s that is still locked into to the ‘just-in-time’ Japanese style inventory management of the 1980s. 


“What we are seeing mandates a real expansion in warehouse capacity across the UK, and this is only going to be possible with national planning policy falling into line with the new urgencies,” he comments. Right now, the speculative building of warehouse capacity is starting to ramp up. Vacancy rates in warehouse properties are at an all time low. 
“There is a lot of uncertainty around all of this. Does this move to significantly increase warehouse space mesh with the new transformational digital working that the whole industry is moving towards?” Ward asks. 


We are heading for another release of lockdown. If a whole swathe of the population dives into taking advantage of the opening up of the hospitality sector as spring returns, are we prepared? 
“So much of the growth to come is being done on very small margins. 
“We are going to see many retailers getting into trouble because they have not got control yet of their end-to-end costs,” he concludes.

Brought to you in association with the UK Warehousing Association.