Aberdeen Standard: Europe’s logistics sector approaching technology-led inflection point

New research from Aberdeen Standard Investments and Transport Intelligence shows Europe’s €870 million ($987 million) logistics sector is on the cusp of significant change. It shows the people working in these facilities are vital, but technology is changing the nature of employment, with far-reaching implications for the industry and real estate investors committing capital to it.

Approximately 52 percent of companies have already invested in technology such as data analytics, and 32 percent are utilizing the Internet of Things. The survey suggests the sector could be at an inflection point in terms of the adoption of technology, with barely 10 percent already investing in robotics but fully 56 percent planning to in the future.

The survey also suggests that while 25 percent have invested in warehouse automation, a further 43 percent intend to invest in it in the future. Automated technology is already the most important feature for new facilities, according to the survey.

It also demonstrates the nature of work in such facilities could be set to change. At the moment, 11 million people work in the logistics and transportation sector in Europe, with many working in low-skilled highly manual roles such as picking, sorting and moving goods.

The size of that labor force could shrink, with 47 percent of respondents saying warehouse automation will impact the amount of labor required to operate facilities. Approximately 42 percent and 36 percent said robotics and the Internet of Things, respectively, would impact their labor requirements, switching labor skills from “low-skilled, highly manual” to “highly qualified IT staff” to run the technologically advanced distribution centers.

But the survey also showed human workforces remain critical. Some 48 percent of respondents said labor was the cost to which they are most sensitive, and 60 percent of companies are undertaking initiatives to improve working conditions.

As facilities become more sophisticated, the need will be greater for more highly skilled workers who are able to service and maintain the increasingly specialist equipment. This may account for why respondents said accessing low-cost labor is relatively less important to them. When asked what feature is the most important for a facility, low-cost labor ranked sixth. This fundamentally shifts the drivers of location, which could have profound impacts on the logistics real estate market.

The survey also indicates the European logistics sector will continue to see growth in the years ahead, with 34 percent of respondents saying they do not have enough capacity to satisfy customer demand over the next one to two years. A further 39 percent said a lack of available, efficient logistics facilities were hindering their business’s growth.

“This survey is a clear illustration of both the extent and nature of growth that we are likely to see in this industry in the years ahead,” said Craig Wright, Aberdeen Standard Investments senior research analyst. “There is an inflection point approaching where logistics becomes much less about generic sheds employing low-skilled workers and much more about high-skilled workers working with increasingly sophisticated technology. Location is already fundamentally important in terms of being close to transport and consumers, and the survey shows this. Yet as we reach this inflection point, ensuring companies can access and retain those with the skills to service the technology will further define what is regarded as an optimal location. This has deep implications for local, regional and global supply chains. But it will also have implications for investors in real estate who are allocating to logistics. There is clearly going to be more demand for space that can exploit a location near consumers and transport; but also that can capitalize on highly skilled workers.”

Proximity to consumers and the transport network ranked as the second and third most important feature that respondents want from logistic facilities.

The survey was conducted for Aberdeen Standard Investments by Transport Intelligence between November and December 2018 and is based on the responses of 123 supply chain executives from 29 European countries.