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Summary
- Logistics businesses in the UK are looking forward to improving their operations as most of the shoppers have migrated to online platforms.
- As online delivery orders soar, Hermes is likely to create 10k new jobs; it has invested around £30 million to bolster its operations
- British retailers went on a hiring spree amid Covid-19 induced lockdown and logistics firms have followed the trend
Logistics is the art and science of obtaining, producing, and distributing goods & services in proper quantities and in the proper place. The management of logistics is part of the supply chain management that plans, implements, and controls the forward and reverse flow, along with storage of goods & services, related information such as information on source or destination.
People usually end up mixing the supply chain and the logistics, however, they are two different things. An application of the supply chain is transforming raw materials into finished goods. However, the movement of materials in the whole supply chain is logistics. The contribution of logistics to an economy is immense.
Covid-19 impact
Apart from providing several jobs during the unprecedented times, the supply of food and other essentials remain undisrupted. For instance, agricultural production has been unfazed by the outbreak of pandemic and therefore has a negligible impact on the harvest and production.
Nowadays, almost every one of us is an online shopper. During the unprecedented crisis, most of us were heavily reliant on e-commerce websites and online platforms for our groceries and other products. Due to the increasing number of coronavirus infections, people still fear going out to buy stuff. Recently, a local lockdown was imposed in the city of Leicester due to a sudden spike in the number of coronavirus infections. Everybody is doing his/her bit to keep the rate of infection low. People still lack the confidence to visit stores.
According to the data from ONS, the online spending done by the consumers have nearly tripled in ten years. It has increased from just 4.9 per cent (2008) to 17.9 per cent (2018). In addition, 54 per cent of senior citizens (aged 65 years and over) have shopped online in 2019. Nearly 90 per cent of adults used the internet daily in 2019. This data belongs to the pre-pandemic era. During the unprecedented crisis, it was far more convenient to order things online as they were delivered within the expected timelines.
Logistics businesses in the UK are looking forward to improving their operations as most of the shoppers have migrated to online platforms. To cope with the shift to online orders during the lockdown induced by the coronavirus pandemic, UK’s Parcel delivery firm, Hermes is likely to offer more than 10,000 job opportunities. However, the company could offer wages less than the prevailing minimum wage with no fringe benefits and holidays. The logistics company has invested around £30 million to bolster its operations.
As online orders soared, the logistics companies have been under the pump to increase their resources during the lockdown. The logistics companies work closely with online retailers. The online retailers witnessed a huge surge in orders during the lockdown. Some of the online retailers even went on a hiring spree to cater to the unprecedented surge in delivery orders.
Industry experts believe that online retailers are likely to continue recording strong growth in the times to come. The recent demand was hugely driven by the unprecedented crisis, which resulted in ramp-up of additional workforce and internet operations by the retailers to serve millions of shoppers as fears of Covid-19 still haunts the potential customers.
Tesco Plc reported growth in online sales by nearly 49 per cent. In addition, Ocado Group plans to raise £1 billion to cater to the surge in online orders amid the unprecedented crisis induced by the novel coronavirus.
Tesco Plc (LON:TSCO) has reportedly doubled its number of delivery slots to more than a million in recent times. In addition, J Sainsbury Plc (LON:SBRY) and Waitrose Limited are also likely to increase their number of delivery slots in the upcoming months.
The British retailers went on a hiring spree. Tesco, the market leader, intended to hire 20,000 people. Asda announced hiring 5,000 people temporarily who lost their jobs amid the coronavirus crisis. Discounters Aldi & Lidl aimed to hire nearly 8,000 people. Morrisons was also looking to hire 3,500 representatives during the unprecedented crisis.
The exclusive wine company, Naked Wines Plc (LON:WINE) reported growth in revenue by 14 per cent year on year to £203 million in the fiscal year 2020. Having attained 81 per cent of revenue growth in the initial months of the current fiscal year (FY21), the company had an ideal start to the current year. The company seems to have endured the impact of Covid-19 with great momentum primarily through its online business model, which is ideally suited for the current climate. During the unprecedented crisis, Online sales as a percentage of retail sales made a new high of 22.3 per cent, according to the ONS.
Logistics in the UK from another perspective
It has been a double whammy for UK’s economy, Covid-19, and Brexit. Both events are of high impact in nature and have caused material disruption to supply chains across the UK. For instance, the supply of automobile spare parts from China was disrupted amid the pandemic induced lockdown. Similarly, many manufacturing facilities which are set up centrally to reduce costs are heavily reliant on logistics. For instance, car manufacturing is done in emerging or low wage economies. However, the finished products (cars) are then shipped to other developed markets. Both Brexit and Covid-19 have the potential to impact the supply chain in terms of increased distribution costs, inaccessibility of raw materials, and skilled labour availability.
In the future, manufacturing companies might look for the transition to a decentralised approach from a centralised model. For instance, UK based leading fashion brand, Boohoo Group Plc (LON:BOO) sources 70 per cent of their stock from its Leicester based suppliers. The locally produced products are the primary reason for its competitive advantage in the apparel industry as the company can sell the latest trending designs within weeks.
British retailers and logistics should ideally need to prioritise resilience and responsiveness over cost and efficiency as the economy is facing headwinds on multiple fronts with respect to Covid-19 and UK-EU trading relationship. In addition, the companies need to invest in their existing network of operations to achieve economies of scale and resilience, which would allow them to lessen the exposure and mitigate risks with reference to Brexit and future pandemics.
