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Industry Update on the Logistics Market

The logistics market is one which is currently booming - having reached a value of almost USD 9.96 trillion in the year 2022 and being expected to grow at a CAGR of 6.3% between 2023 and 2028 to reach a value of almost USD 14.37 trillion by 2028 - but is constantly fluctuating. This is an industry that is also characterised by frequent fluctuations in supply and demand - based both on internal factors such as workers, to external, global, factors such as pandemic and war - and must be able to adapt and respond to these factors.

Logistics is a significant part of supply chain management and considers a wide network of roadways, railways, airways, and seaways engaged in the storage, management, transportation, and delivery of products from the point of origin to the point of delivery. The most common types of logistics models include 1PL, 2PL, and 3PL logistic services and depending on the level, these models provide logistics services such as consultation, transportation, packaging, legal services, warehousing, and management.

The frenetic pace of leasing activity at the end of 2022 has declined as we moved into 2023 as the additional demand for space created by the pandemic has receded and we are now experiencing more normalised leasing conditions. Companies are now looking for high quality, efficient spaces in an attempt to mitigate rising energy costs. Across the market, occupiers’ focus appears to have shifted from raw expansion to the optimisation of both space and supply chains. Despite this shift in focus, the United Kingdom is still experiencing expansion in the private sector and growth in service and manufacturing sectors. Inflation prices have also begun to ease towards the end of this first quarter, especially in service sectors.

Current factors impacting global logistics operations include: the earthquake that hit Turkey and Syria, having shut down all work and operations with ports remaining closed; national strikes in France that are preventing usual transport and delivery operations; and global inflation causing nearly half of consumers to make changes to their shopping habits in order to reduce spending in all categories other than groceries and fuel.

The most significant factors driving the current growth rates of the logistics sector are: the growing retail sector, particularly e-commerce, rising disposable incomes, rapid urbanisation, and growing technological advancements. Alongside this growth, logistics companies are facing an era of unprecedented change, most significantly where digitisation and automation are taking hold and customer expectations are evolving. New technologies are enabling greater efficiency and more collaborative operating models; they’re also re-shaping the marketplace in ways that are only just beginning to become apparent. New entrants, whether they are start-ups or the industry’s own customers and suppliers, are also shaking up the sector.

Manufacturing industries are facing far greater expectations around efficiency and performance than ever before. Their customers expect faster time-to-market, reduced defect rates and customised products. Digitisation and automation within the industry are allowing logistics companies to respond to this, and smart warehousing solutions are becoming essential as ‘digital fitness’ becomes a must within the sector. Some of the industry’s most labour intensive processes are on the way to being fully or partially automated, from warehousing to last-mile delivery. This automation would provide benefits in terms of low-cost services, increased efficiency through a reduction of delay, and human error, and increased productivity.

Most of the emerging entrants into the logistics sector are start-ups, looking to utilise new technologies to enter the industry. They are often assetless or asset-light businesses that exploit digital technology to offer interactive benchmarking of freight rates, or match shippers with available capacity. Traditional logistics companies need to explore opportunities for new products and services – a field where start-ups have a clear advantage given their freedom from outmoded processes and hierarchical structures - in order to counter these developments. Technological innovation and changing consumer behaviour are driving this start-up growth, making it even more important for traditional logistics companies to progress their technological advances and awareness.

Market collaboration is also becoming increasingly prevalent and dynamic, but is hampered by a lack of consistency and accountability. The ‘Physical Internet’ is an example of this, it’s based on the idea that physical objects can be more efficiently moved around if they become more standardised and share common channels, like data packets on the internet. If workflows were standardised and consolidated in this way, or the ‘Physical Internet’ utilised between distributors and transporters, you could see a 10% to 30% increase in efficiency in the EU logistics sector, which would translate into €100-300 billion in cost savings for European industry. This also has a positive impact on sustainability, which will benefit customer perception.

While the logistics industry faces challenges, the overall demand in the market for its services remains strong, and opportunities for growth are extremely prevalent. Companies should, in particular, look to adopting automation and digitisation solutions in order to remain competitive within the market against incoming suppliers, the efficiency of new growth, and sustainability concerns. The rates and lead time currently remain higher for direct transport routes; however, indirect options with one or more connections are available at low prices, and longer transit time. All in all, there are no major disruptions or delays across major hubs allowing for effective and productive operation.

Here at DC Space and Storage Solutions, we are at the forefront of logistics trends and information, positioning us strategically to implement your warehouse solutions, growth, automation advancements, and expansion effectively and cost efficiently. Get in touch today to hear more from us, or for a free consultation on how we can help you optimise your warehouse operations. Call 01392 927096 or email today.

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