Friday 28th Oct 2016 - Logistics Manager

Ian veitch

There is a lack of appreciation about just how influential the logistics sector is to the UK economy – a damning statement, but when it comes from someone as high-ranking and industry-renowned as NYK Logistics’ UK chief executive Ian Veitch, surely it’s time to sit up and take note.

Like many people of his generation Veitch got into logistics purely by accident, but has stayed because it exceeded his expectations. “I think the truth of the matter is, if you talk to most people my age they will say they fell into the industry rather than sought it out, which is frankly fairly unhealthy.” That was more than 30 years ago, but the unfavourable image seems to remain.

“As an industry we generally don’t play up our importance anywhere near enough. Logistics must currently be the second biggest employer in the UK and yet the amount of focus and attention we get from the government belittles the impact we have and that obviously makes it difficult when trying to recruit the best talent because graduates aren’t aware logistics is a viable career option.

“It would be nice if the UK government recognised the fact that the logistics industry needs a bit of a helping hand just now. Getting a positive and supportive message out there would be very good news.”

The industry as a whole has suffered considerably over the past couple of months, with fuel prices rocketing and the economy plummeting, but Veitch says NYK, due to its roots in shipping and its global nature, is fairing better than most.

“If you’re more diversified then you’ve probably got more ability to absorb some of the knocks than if you’re very closely focused on one particular area. I suppose from a shipping line perspective NYK probably thinks a bit more globally than many logistics businesses because it is used to quite literally having an office in every port and people travelling around the world.”

However, Veitch admits that the next couple of years are going to be a lot more challenging. “I don’t think we’re going to see any growth in the economy at all frankly, so we will see the next two years as taking very much a holding position and to do that we’ll take a fairly aggressive view this year on how much cost we write off to make sure our cost base is as competitive as possible.”

In recent years NYK has experienced growth of around 25 per cent annually and has gone from position 22 in terms of UK market share to around sixth. In the next five years it is aiming to reach a top three spot, after going back to at least double digit organic growth over the next two years. On top of that, the company is looking to boost its outlook through mergers, acquisitions and particularly by developing the international supply chain part of the business.

“The UK manufacturing business has been generally suffering over the past decade and the next two years is likely to accelerate that. We still are a nation of consumers though, so the retail industry will probably bounce back among the first, and most retail businesses now are pretty heavily into international sourcing, so from an NYK perspective the growth of the international supply chain path is going to be pretty critical. International volumes are increasingly going to be coming from elsewhere so we need to reconfigure our capability to make sure we can capitalise on that.”

To facilitate this growth NYK has made fairly substantial investments in China, building sizeable warehouse operations in the region, as well as investing heavily in the Port of Shanghai. “We saw growth in China as being bottlenecked by the lack of infrastructure there, so in the absence of that happening, we’ve made the investment ourselves.” Veitch says the company has also had some “interesting” conversations on the acquisition front. “We’re trying to keep a couple of conversations warm within the shipping and forwarding areas, but the more sophisticated end of that – the supply chain modelling side. We have certainly looked at that area in some depth as it would be a natural fit for us.” Things have stalled somewhat over the past few months as the company waits to see what is happening with the economy, but Veitch says he expects things will begin to accelerate again in the near future.

“The thing that has been interesting, having been through a couple of recessions, is not so much the depth of this recession, but the speed of it,” he says, “and I think trying to get a handle on where it’s heading before you start making acquisition decisions is fairly important, but at the same time we don’t want to be putting off acquisition activity until the market has changed because all we’ll end up doing is paying top dollar.”

Timing, he says, is everything in these markets.