Shifting sands of automation

I WAS lucky to interview Chris Walton, product leader, contract logistics, Europe at CEVA Logistics in November 2023, just ahead of last year’s Peak and I was very excited by what he had to say about the UK 3PL market.

In November, Chris saw the UK market in a state of reflection, for example, in terms of warehousing capacity.

“I’ve worked in the industry for 24 years, and I have never seen a situation capacity-wise as it is now. There’s a wealth of capacity in the UK market. Around 12-18 months ago there was a proliferation of new facilities, but now we are seeing a perfect storm of empty space, committed rents at a high level, short-term contracting decisions, and risk-averse attitudes. It all makes it quite an interesting time.”

Heading into the 2023 Peak, Chris explained that there had been winners and losers in the retail sector. 

He said: “The biggest risk is with the middle end of the retail market, budget and luxury have been reasonably resilient. There has also been a shift from eCom to retail for some customers, so we have had to be nimble to cope with that channel shift.”

Taking a step back, there has been a major shift in 3PL customer attitude.

He explained: “What I mean by that is we’re tending to see delays in decisions to change 3PL suppliers, and decisions to extend with incumbent 3PLs, so more conservative decisions as opposed to making more significant changes to supply chain operations.

“That’s inevitable with some of the macroeconomics, the situation in various corners of the world, and Covid, which seems a long time ago, but I think of it as a three year experience, it lasted longer in supply chain terms than many realise. Add to that labour shortages, and the cost-of-living crisis, a General Election around the corner and almost inevitable political change, these together have all led to much more short-term decision making.”

The race is on

In tech terms, this then plays into how 3PLs look at and deploy automation in much shorter contracting windows. In addition, while CEVA has seen some companies experiencing volume trends in line with pandemic volumes, volumes are fluctuating for many.

Chris continued: “I actually think there’s been a permanent shift towards much more flexible automation. There’s a drive for more modular automated, mechanised and robotic solutions, with shorter term volume forecasts from customers we see a drive to pull back from very fixed, large-scale automation with high investment. The race is on to deliver a hybrid of the two, a much more flexible offering that can also scale when needed.

“The solution has not yet crystallised in the market. What is clear is opening a warehouse with tens of millions of pounds in automated equipment invested doesn’t fit with the switch to short-term thinking. It is much harder to justify that, so the race is on to find that innovative, modular, perhaps semi-automated solution. 

“It is easy to get hung up on equating innovation to an all-singing, all-dancing automated warehouse. We’re working on genuine robotics, and RaaS, and that is going to become a global option for us. This feeds into fully flexible solutions, we see this as a halfway house, without the need to invest in big, fixed automation. We are tech-agnostic, and we have both fixed and modular automated deployments. What we are seeing in the market now means the more flexible and modular automated solutions make more sense. It could shift very quickly of course.

“One additional consideration is how to fund such automation. Fixed infrastructure with scalable automated solutions can see set-up costs escalate to eight figures in no time at all. So, there are a string of logical questions to ask: how is that investment going to be funded, from where are the funds coming, could that investment be used to improve other parts of the business or operations, and how is the overall cost of capital affecting these investment decisions. Again, CEVA is agnostic in our approach, but when required, we can advise our clients and deliver pragmatic and flexible solutions.”

The race is certainly on. It will be fascinating to see how warehouse occupiers develop and deploy their automated solutions this year, in a market where it can be difficult to see the difference between short-term blips and long-term pivots.

For more information, visit www.cevalogistics.com