SME logistics operations face many of the same challenges as those of a larger corporation. However, the obstacles are where SMEs differ from their larger counterparts. Maria Highland investigates how SMEs can tackle their logistics operations…
Small and medium enterprise businesses are one of the key drivers of the economy. But the complexity of modern logistics systems – moving things of different sizes and shapes across the world while also meeting various speed requirements and complying with laws, duty payments and VAT – can be a real challenge for smaller organisations.
And “in today’s customer-oriented and digitised society, businesses are under constant pressure to remain competitive, deliver high quality services and adopt innovative ways to optimise their offering. Complex business models and growing client demands are just two of the top factors that pose a challenge when it comes to their logistics operations,” says CitySprint chief executive Patrick Gallagher.
SMEs need to avoid excess spending while maintaining the best customer offering possible. “Keeping costs low while still ensuring production is high, is a battle many SMEs face,” says Access Group head of product development Lucy Pamment.
Therefore, the key is to pay particular attention to its products and the location of said products. Traceability and mindful spending and decision making can make a world of a difference to SMEs.
Baxter Freight chairman Ian Baxter recommends making “sure the product you’re buying is suitable for your needs – nothing more, nothing less.” Only spend money on what you need. “It’s all about having an understanding of buying the right product for the right price at the right time,” explains Baxter. “If you buy the cheapest all the time, it won’t always give you what you need, but you don’t need to splash the cash all the time either.”
Likewise, “customer expectations have increased with regards to later cut off times for next day delivery. Expectations have also increased with regards to flexible delivery options such as click and collect points, specific delivery slots and lower delivery charges,” explains ChoiceShops company stock controller Penny Sayce.
“I think these challenges are only going to get bigger with customer demands on faster and cheaper delivery increasing,” continues Sayce, therefore “the question is how can SMEs keep up when they don’t have the level of infrastructure that bigger companies have?” She recommends identifying “where you have economies of scale to negotiate the best deal with couriers and where you need to split out delivery contracts to different couriers.”
Agreeing with Sayce, Baxter explains that “the way to overcome the challenge is for SMEs to ensure they are working with a partner that genuinely helps them to achieve the best possible outcome for their business. They need to select a flexible logistics partner that is suitable for their needs and one that can give them the right amount of support. The partner also needs to have the capability to meet their requirements, giving them different options” says Baxter.
When choosing to insource or outsource logistics operations, SMEs need to consider what works best for the business. “It depends on the circumstances and what’s right for the customer,” explains Baxter. “There’s ultimately no substitute for having some insight into the detail of what you’re spending and what you’re getting for your money.”
“Outsourcing logistics operations has obvious benefits,” says Access’s Lucy Pamment. However, she warns that it is costly, especially for an SME or start-up. Alternatively, “managing logistics operations inhouse is getting easier thanks to scalable software that removes the need for time-consuming admin.” And today’s “solutions are developed with usability in mind. They are easy for anyone to be trained on and operate, allowing teams on the ground to focus on other tasks.”
Introduction of technology into operations can help keep logistics inhouse and keep costs down. Investing a warehouse management system can help to keep things running smoothly and reduce errors, as well as mainlining full visibility and traceability.
Pamment identifies traceability as a major issue for SMEs. “You need only look back at some of the biggest logistics disasters reported in the press over the past year to recognise that traceability can be a major issue for larger companies and SMEs alike,” she says. “From KFC’s chicken shortage and meat supplier Russell Hume’s hygiene scandal earlier in the year, to the recent needle-contaminated strawberries in Australia, it’s clear that poor traceability has serious ramifications for both a business and its customers.”
Overcoming such issues means leaning back and embracing the digital. This “is key to reducing error, improving traceability, improving accuracy and driving efficiencies,” says Pamment. “Over the coming year, traceability and efficiency will only become more pressing concerns for SMEs, but those with robust digital strategies put themselves in a stronger position to tackle these challenges.”
Indigo Software supply chain consultant Mike Chadwick supports this, noting that “having real-time access to information for real time tracking and visibility is really important. Manufacturers are very often bypassing the warehouse and shipping direct to the customer, so they are using technology to keep their customers up to date about the delivery process but in a seamless way.”
This is where investing in a WMS can prove highly useful for SMEs. WMS drive efficiency, helping eliminate the need to spend hours doing paperwork and tedious admin tasks. “A WMS is especially useful for SMEs with growth ambitions as it allows businesses to manage production, offering visibility over every task, ensuring goods arrive at their destination in full and on time, and ultimately helping to drive efficiencies,” explains Pamment.
When it comes to investing in technology, a lot does depend on the SME’s “strategy and starting point in terms of existing resources,” says Chadwick. “If they have an infrastructure – a warehouse or manufacturing operation already, introducing technology like a WMS will ensure they can minimise their labour costs and operate efficiently”.
This will mean that “they will be less reliant on temporary workers, which have become significantly more expensive in recent months and technology will manage the process so the number of core people who understand the processes needed will drop.”
Low emissions zones will be a challenge
CitySprint chief executive Patrick Gallagher highlights the fact that SMEs are having to deal with the appearance of ultra-low emission zones. The “implementation of London’s ULEZ just months away, it’s clear that SMEs will have a lot more on their plates in 2019,” he warns.
“With ULEZ coming into force in London from April 2019, and several other UK cities introducing clean-air zones (CAZ) by 2020, many commercial vehicles travelling into these zones will need to meet new, tighter exhaust emission standards or pay a daily charge,” explains Gallagher. “Companies looking to comply must plan for a move away from diesel and petrol and add more alternative vehicles.”
Correspondingly, the Freight Transport Association has warned that more clean air zones are threatening SMEs, following news of clean air zones being planned in Leeds and Birmingham. The schemes demonstrate steps being taken to manage the impacts on business in the cities but will also still produce substantial costs for small businesses.
“CAZs only bring a temporary air quality benefit, bringing forward what was coming anyway. We need councils to implement these zones with as much sensitivity to local businesses as possible,” says head of UK policy Christopher Snelling.
For example, Leeds has adjusted its clean air zone boundary, restricting where possible to achieve the same air quality effects while reducing the number of HGVs located within the Zone from 13,000 to an estimated 4,500. Entering the zone will cost £50 per day for HGVs and should be enough to deter almost all operators but makes it feasible for occasional essential trips by an older vehicle. The zone remains a category B which means van users will not be affected.
Birmingham has set out plans for a zone which covers the area inside its middle ring road. This is smaller than the city-wide zone that companies responsible for deliveries to businesses in the city centre had feared. All vehicles will be included in the proposal, affecting small businesses with vans and lorries. Vans as recent as three years old will be charged under the proposals.
“CAZs need to be a last resort and as small as possible where they are used,” says Snelling.
In response to the challenge of ULEZ, Gallagher states that “the main course of action for SMEs is simple: don’t bury your head in the sand.” Unfortunately, CitySprint’s Collaborate UK research revealed that 50 per cent of SMEs in London haven’t taken any steps to prepare for the implementation of ULEZ yet.
“It’s vital that SMEs revisit their supply chains from now to future-proof themselves – whether it’s adding green vehicles to their fleets or working with logistics partners who have strong sustainability credentials,” stresses Gallagher.
Luckily, electric options are becoming increasingly viable for businesses and individuals. “With reduced maintenance and an increasing choice in models, a switch to zero-emission electric cars, vans and even bikes should be an easy decision for any SME,” says Gallagher.
However, electric and hybrid vehicles are not without their own set of challenges. “One of the current challenges for electric vehicles is ensuring there are enough charging stations for longer journeys to be completed. Efforts are being made by the government to remedy this and as more charging points are added across the UK, the opportunities for SMEs to adopt more eco-friendly vehicles, such as electric or hydrogen, are constantly increasing,” says Gallagher.
He recommends that “SMEs shouldn’t put limits on the types of sustainable vehicles they use, but instead look at the wider picture — and the benefits of each. For instance, cargo bikes are great business alternatives to small vans in cities, and electric vehicles are increasingly viable options for city logistics, where the required range is limited, and charging stations are more readily available. For longer-haul deliveries, hydrogen-powered vehicles are also a potential game-changer.”
This article first appeared in Logistics Manager, January 2019