Changing global supply chain trends and geopolitical events pose big challenges
Modern supply chains couldn’t exist without the support of a highly sophisticated logistics sector. From a man in a van to Maersk, it’s the engine that gets the goods from A to B.
Often looked to as a bellwether for the economy, it’s also a sector that, fittingly enough, sees sooner than most what’s coming down the tracks in terms of technological advancements.
It’s at the front of the queue for the development of autonomous vehicles, for example. Driverless lorry testing is well under way in many countries, viewed not alone as a solution to driver shortages, but to razor-thin margins too.
Drone deliveries will soon be winging their way to a door near you too, with Amazon Prime having garnered a head start in this air space, followed by UPS’s van-top helipads. We’ve already famously seen drone-delivered pizza, thanks to Domino’s.
Automation, robotics and artificial intelligence are combining to create Industry 4.0, already in action in the port of Rotterdam, the first in the world to use automated guided vehicles and automated terminals.
Smart wearables and augmented reality are already an actual reality in warehouse picking and packing worldwide.
Innovations will only take the logistics services sector so far, however. For today’s deeply integrated supply chains to operate efficiently, and justin-time, the big challenges relate to threats to international trade, whether as a result of politics, disrupted trade agreements or tariffs. All have the potential to cause serious speed bumps. In Ireland right now, that means Brexit.
“I’m sure most companies have a preferred set of Brexit outcomes but until they know what’s going to happen, they have to put any major strategic decisions on hold. Until they know what regulations will impact movement in and out of the UK, Ireland, and the rest of the EU, it’s difficult to determine the best way to move forward,” says Bill Rose, the former UCD academic recently appointed assistant professor of supply chain management at Iowa State University.
Several factors are difficult to predict. “Changes in required documentation, inspections at the border, the time it takes to move freight across the border, and any number of other concerns influence strategic decisions such as where to invest in warehousing and production facilities, how many people to employ, and how to move products internationally,” he says.
The impact will be significant across a range of sectors, says Paul Davis, supply chain management expert at DCU. If UK food, drinks or pharmaceutical companies require different labelling for a population of just 4.5 million, will they bother, he asks. And that’s not to mention the risk if standards diverge.
For consumers, prices will rise. So far, logistics services companies have responded with talk of increased demand for warehouse space, but that’s only a short-term effect, not a long-term strategic response, he points out.
“With less choice coming in, the supply chain will change too,” says Davis. For a start, if the UK landbridge becomes less efficient, the impact on fresh produce in particular, will be significant.
“In the long term, we are looking at less consumer choice but from an exporter point of view, companies here have been very good at managing their business by using the landbridge. Remove it and competitiveness becomes an issue.”
The risk to the indigenous logistics sector is that larger European operators delivering here will simply take a back load out, leaving the sector in a perilous position. For a sector that comprises of very many owner-drivers, taking time out to respond strategically is an issue.
“Manufacturing companies will survive. They are used to VAT and tariffs – they just adjust their pricing and on they go,” says Davis. “Logistics service providers are already in a competitive market and will now be vulnerable to large European operators coming in and taking stuff back out more cheaply than they can. That will have a huge impact.”
There is, however, an opportunity. “If Ireland is not to become a backwater, it should concentrate on becoming the Singapore of Europe. We have at least six deep-water ports. They could take ships from China and Africa, split and cross-dock them across the country, and send them on to Europe. Rotterdam is getting clogged. There is a huge opportunity here but it takes vision,” says Davis.
One thing is certain for the logistics sector: “Standing still is not the best solution.”
Driverless lorry testing is well under way in many countries.