European logistics: Technology’s omnipresent influence

Changing technology is considered the single largest risk and opportunity to logistics business across Europe, with tech’s influence disrupting everything from the demand base, to warehouse location, operational efficiency and design, and human labour requirement.

According to the survey, Aberdeen Standard Life’s wide-ranging survey on the state of the European logistics market, six out 10 respondents (61%) stated they were already invested in warehouse management systems, while 28% were planning to invest.  Overall, automated technology was deemed the single most important feature for a warehouse.

Aberdeen Standard Investments’ research team, led by Lars Flaoyen, writes:

“The sector is going through substantial structural change. This is from two key aspects: the technological evolution of operational efficiency; and a seismic shift in the increasingly complex and time sensitive urban demand base.

“The paradox is that while technology has dramatically disrupted the demand base and the complexity of the requirements of modern living, the solution also lies within technology. This is through the implementation of incredibly advanced robotics, picking systems and the data analytics that constantly monitor, adapt and improve the functionality of the hardware. This technological leap could have a dramatic impact on us as humans and as investors.”

Despite the necessity for technologies such as robotics, the vast majority admit to being still behind the curve in respect of adoption.  According to the survey, conducted by Transport Intelligence, only 10% of respondents said they were invested in robotics – although 56% reported it is their intention to invest in this area in the future.

The survey report continued: “Human input is changing from arduous physical lifting and shifting to one of monitoring and oversight. This means that there could be some dramatic shifts in the whole supply chain and the real estate that supports it. If investors do not pay attention to these shifts, they could potentially be exposed to substantial risks without the rewards the sector offers.

“Overall, these advances have two consequences for the real estate provision. Firstly, it implies cost-effective labour will become less important and therefore warehouse location can shift towards areas where labour costs are higher (closer to consumers). This helps remove one of the barriers for the cost of urban logistics, where labour costs tend to be higher to reflect greater living expenses.

“The second issue is that logistics companies can’t invest in equipment when their contracts tend to be short. And the cost of the equipment can’t be amortised over a sufficient period to make it affordable. Where operators do commit to large-scale capital expenditure to secure operational cost savings, they may be willing to sign longer leases or perhaps pay a higher rent knowing they will be compensated in the long term by greater operational efficiency.”

james.wallace@realassetmedia.com