Locating last-mile logistics facilities in urban areas is the key to powering sustainable local economies, filling crucial talent shortages and enabling the sector to continue its essential work.
The logistics sector supports the smooth functioning of society, not to mention 2.6 million jobs across the UK economy, but it took a global pandemic for the vital daily role it plays to be truly recognised. In the three months up to May 2020, internet sales as a percentage of total retail sales jumped from 18 to 32.8 per cent, a growth rate that would have taken a decade to realise had it not been for the unprecedented national lockdown. Armed with key worker status, the logistics and transport sector kept supply chains ticking and kitchens stocked at a critical time.
Having propped up the economy at time of crisis, the logistics sector is now one of the few sectors actively recruiting as it continues to grow and adapt to higher online retail activity. However, it faces its own challenges. Firstly, there are widespread talent shortages with the widely reported 60,000-strong HGV driver shortage being the tip of the iceberg. There are also increasing warehouse operative roles that need filling and, with the ongoing rise of automation, engineering and technical roles. Whilst the prevailing view might still be that the sector is heavy on low-skilled jobs, that is no longer the case in this rapidly changing industry.
Recent research from Prologis, the global leader in logistics real estate, shows that demand for skills in areas such as data management and analysis, as well as developing training algorithms for use in optimising shift patterns or inventory management, has increased significantly. Though this is creating opportunities for personnel with digital and managerial skills, and logistics is one of the few sectors where there are few barriers to both entry and progression, a skills gap is holding organisations back from maximising the value of new technologies. Resilient supply chains require access to a reliable supply of skilled labour.
“For the last three or four years, certainly across our European business, the biggest issue that our customers have been facing is attracting and retaining the right talent needed to deliver logistics services,” says Robin Woodbridge, senior vice president and head of capital deployment for Prologis in the UK. “In a low-margin sector, logistics and transport firms often struggle to showcase the opportunities available. They just haven’t got the money to promote themselves and the sector.”
The second challenge facing the sector is space. Every year £54bn worth of goods flow through Prologis distribution centres in the UK alone, equivalent to 2.6% of the UK GDP. CBRE data suggests that for every extra £1bn spent by British consumers online, an additional 900,000 sq. ft. of logistics space is needed. And according to Prologis, for every sq. ft. of space required for a brick-and-mortar retail store, 3 sq. ft. of logistics space is needed to fulfil the same demand online. However, last-mile logistics facilities can’t be located anywhere. Online consumers want products to be delivered fast with a growing demand for same day deliveries. With the speed at which goods can be supplied to consumers beholden to how far away they are, last-mile logistics facilities must be located within urban areas of dense populations.
This is where the logistics sector currently appears to be on the wrong side of planning policy. While the government recognises the need for more logistics facilities, it’s clear that the current proposals to reform the planning system are too focused on supplying new homes with no regard for logistics. This is a concern, especially when you consider a city as economically important as London has already lost around 100 hectares of industrial land annually over the past decade.
“Whilst locating large warehouses on motorway junctions works well for storing bulk goods, it’s naïve to think you can just stick all last-mile facilities there as well,” says Woodbridge. “We’ve not yet come up with a teleporter to move things faster. As the need for goods to be delivered quickly continues to grow, you’ve got to hold a body of those goods closer to people. Of course, there is a housing crisis that needs to be solved, but we need a sense of balance and greater awareness, among consumers and Government, of how important these facilities are.
“There is a damaging misconception that locating these facilities outside of cities is good for sustainability, reducing traffic and improving air quality. That couldn’t be further from the truth. Through research produced in partnership with MIT, we’ve demonstrated that, to be sustainable, last-mile logistics facilities should be located close to where people live to enable the last-mile route to be faster as well as be handled by electric vehicles. According to the research, online shopping is 36 per cent more sustainable than bricks-and-mortar shops, a further 50 per cent if the right number of these buildings are in urban areas, and another 27 per cent via the shift to electric vehicles.”
Crucially, the challenges of recruiting talent and space are interlinked. Locating logistics facilities closer to where people live not only allows for faster deliveries but creates lots of job opportunities close to home, from entry level to senior management. An Oxford Economics study (2020) of the 22 industrial logistics parks owned and run by Prologis in the UK found they were responsible for the employment of around 100,000 employees. Warehouse roles have become less prominent, accounting for 49% of current jobs compared to nearly 70% in 2006. A quarter of employees are in an office-based role while managerial roles make up 12% of jobs.
Prologis has invested over half a billion pounds in London and the Home Counties in the past 18 months to ensure it can provide the urban logistics facilities its customers need. Meanwhile, it has also recently introduced the Prologis Warehouse and Logistics Training Programme, a digital learning and development programme aimed at training those leaving education, the unemployed and those looking to re-skill, equipping them with the knowledge needed to pursue a career in the logistics sector. The initiative is aiming to retrain 25,000 individuals globally by 2025.
“Some of the most difficult roles for the sector to fill are software engineers and project managers, and we’ve already got our customers queuing up to provide opportunities for the people we’re training,” says Woodbridge. “We’re proud to support such a crucial sector for our economy: it does a great job of getting on with what it’s asked to do without making a big fuss. But for too many years, we’ve taken it for granted. It’s a sector that should not be overlooked because it is vital for society to function in the 21st Century. It is essential to everyday life, so we need to start planning for it now, whether that’s for creating local jobs or the sustainable location of last-mile facilities.”
