Challenges of a CEO in the Logistics Sector

“The idea of a traditional five-year strategy which offers little to no flexibility or adaptability is now redundant. Our customers need highly agile strategies to accommodate and quickly respond to change. No matter the challenges, we operate a global supply chain with a worldwide view”, said Gavin Williams. 

Sector leaders are always looking for ways to add more value to their customers, so that outsourcing is the strongest option for their own operations, outlined James Wroath: “Creating shared environments is an opportunity to add value across the scale from the smallest haulier to the largest third party logistic companies; such as having a return load as well means you can charge less to both customers, whilst increasing profitability”. 

3. Talent 

Dan Myers emphasised the importance of talent in logistics, stating: "The industry absolutely needs good people, systems and processes. We've got great systems which we marry up with good processes, but unless you've got good people that can understand the interrelationship between the two, that becomes a challenge - talent is always key.”  

Gavin Williams added: “The logistics sector is one of the largest in the UK, adding £163 billion to the UK economy and generated just over £1 trillion in revenues. Yet despite this, many are unaware of its impact, and what a career could look like. We have more than 1,500 apprentices studying everything from GCE equivalents up to degree level and Masters tops up. We’re proud of our partnership with Sheffield Hallam University who are running the first logistics and supply chain degree-level apprenticeship programme. We’ve got 100 students on the current course developing the next generations skills., and we see our commitment to talent development mirrored in our great retention and internal promotion rates”. 

4. Technology and optimisation 

As the deployment of technology has moved with exceptional speed over the last two decades, the leaders described the current landscape within logistics operations as being optimiser and app based. “AI will become more and more relevant in the future because if you assess how a traditional system operates, but give it information in such a way that it optimises the outcome, it means you don’t need to change your whole core system, you can just add value on top of it. Autonomy, automation and robotics from fleet capacity to middleware integration is another key part of this, especially as customers are increasingly looking for logistics partners that can incorporate innovation and creativity into their processes to ultimately boost efficiency”, said James Wroath. 

AI, machine learning and automation is incorporated for many back-office repetitive cyclical activity, which has been found to be highly useful in saving colleagues’ time for more involved work.

GXO see a crucial role for humanoids in the logistics of the future: “While large-scale and commercial deployment is still a way off, we’re convinced that AI-driven robots will eventually be able to perform multiple tasks, making them more flexible and a key component of the warehouse of the future”, commented Gavin Williams.  

5. Warehousing 

Presently, demand for warehouse space has decreased. The larger customers will inevitably require more warehouse space but for the logistics leaders, the challenges for this is risk versus reward, commented James Wroath: “If you don't have enough space, you may lose business, and then you lose revenue very quickly, so we all suffer to a greater or lesser degree in times like now as the industry battles to fill it”. 

Over the next 5-10 years, transport costs are expected to decrease through hiring or leasing trucks due to low fixed costs. However, transitioning to battery electric vehicles will raise capital costs, including infrastructure and on-site charging stations.  

6. Fleet 

With regard to fleets, in particular, internal combustion engine (ICE) vehicles, Dan Myers stated: “The industry is focused on total cost of operating fleet which includes it’s useful life. Clearly, decisions on procuring ICE vehicles are going to be affected by the energy transition since these assets might have a working life of several years. Residual values also pay into the cost analysis as the value of ICE vehicles will be unpredictable the nearer to the energy transition we move. We can expect new ICE vehicles will become increasingly more expensive over time because investments are shifting towards battery electric or other fuels, making ICE vehicles a niche product with increasing production costs”. 

7. Pressures on cost 

Aaron Scott explained that all logistics companies are focused on cost, with some industry sectors tougher than others, and this has been a longstanding challenge. "The aim is to try and ensure equitable win-win deals, but there's sometimes a feeling of being taken advantage of or losing in some way. Open collaboration with fair reward mechanisms leads to successful outcomes and is much better for everyone. Currently, with the market pressure on cost, the approach sometimes shifts towards more ruthless procurement tactics.” 

Gavin Williams, in addressing the challenges faced by the logistics industry, noted the significant impact recent government budget adjustments have had on operational costs: “We employ about 40,000 people, which of course carries a high degree of responsibility and accountability. Considering what's happened since the last government budget, a lot of our time and attention has been spent  adjusting to a 26% increase in costs, most of which is  driven by labour costs, and  rentable values of property. Cost to serve is absolutely the lead topic in almost all of my conversations with our customers, who are looking at ways we can drive efficiencies so they don't have to pass that cost on to their own consumers whilst protecting the value that they seek”.  

The second part of this article continues the conversation with the logistics leaders to explore what needs to change within the industry as well as the talent challenges faced.