In his latest blog, UKWA CEO Peter Ward explains that in modern warehousing providing storage is neither the main activity nor chief revenue earner and why warehouses at full capacity is not good news for the industry…
“At first glance, to the uninitiated at least, full warehouses ought to mean good news for the industry. Surely, full warehouses means that operators are raking in the cash?
Well, no. As our recent survey confirmed, the vast majority of warehouses do not make their money on storage – certainly not on storage alone. Over 70% of respondents said that storage charges represented 40% or less of their income. In a modern warehouse, money is made from moving and managing stock, so when outbound flows cease or slow whilst inbound flows continue, warehouses become full and cannot function other than as storage hubs, yielding only 40% of normal income (and in some cases much less).
This is why UKWA has called on government for further assistance, whilst flagging the potential pinch-point that lies ahead. Both issues are based on overwhelming evidence and feedback from our members, following a comprehensive survey and independent analysis of the findings.
The impact of COVID-19 on manufacturers and retailers – particularly those in the designated ‘non-essential’ sector – has meant that the warehousing market is running at high levels of occupancy, with significant reduction of outbound distribution due to the hibernation of retail, manufacturing and other sectors. Meanwhile inbound supply, particularly non-food general merchandise from Asia, continues to arrive at UK ports. As the Trade Association representing the warehousing sector, it is incumbent on us to flag potential risks in the nation’s supply chains, supported by the evidence to hand, share our findings and offer help from our members to cargo owners.
Our survey also informed us conclusively that lack of outbound handling and other value-added services has seriously impacted members’ P&Ls. Coupled with that, members have provided clear evidence of delayed payment by customers, negatively affecting their cash flow. Hence our call on government for additional measures to help our members ride out this storm and survive the crisis.
In appealing to the government for support in terms of a six-month Business Rates holiday, UKWA is exercising its primary duty of care to members and the wider logistics industry through these unprecedented and challenging times.
We are also focussed on planning ahead. Nobody is sure how long the current lockdown restrictions will last, or what the long-term impact will be. However, in the event that UK warehousing does reach zero capacity, UKWA has combined forces with Associate Member Bis Henderson to devise a workable off-dock solution. This is not to say off-dock storage for loaded containers will become necessary – but it might, and if it does, we’re prepared.
Of course, our clear message is that cargo owners should first seek available warehousing – obviously the most practical and cost-effective option. We have set up an Emergency Space Register to help cargo owners do just that (and to set the record straight, the UKWA Emergency Space Register is open to non-members as well as members and is a free to use service).
Off dock storage is not a new idea, nor is it a cheap option, but if required, we are able to offer cargo owners multi-user, shared site solutions, where UKWA members will provide both the space and the 3PL service, operating under UKWA’s recognised Terms & Conditions. This is important in that it covers liability and insurance issues, which could easily be overlooked by cargo owners seeking space urgently.
There is a much complexity involved in providing off-dock storage for multi-users, requiring visibility, control and subsequently the coordinated and sequential retrieval of product. Flexibility, agility and traceability along with secure storage, will be key.
We are grateful indeed to the ports and other associations, including BIFA, British Retail Consortium (BRC), Make UK and others for their support in helping us reach out to cargo owners with offers of assistance.
The government too has realized the potential impact of full warehouses on supply chains and we are proud to be advising the DfT Freight Taskforce. The message from UKWA is that our industry will do all it can to support UK businesses by ensuring our sector is able to provide solutions both now and for the uncertain future we face.
It is the warehousing and logistics industry that will help our economy back to its feet when we finally emerge from lockdown, and we call on our colleagues and friends across the sector to work with us in helping the country navigate these challenges during such difficult times.