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How innovation and resilience can prepare mobility and logistics businesses for the future

Mobility and logistics firms are facing supply chain disruption and labour shortages. But leading firms are focusing on opportunity as they meet these challenges.

Mobility and logistics businesses are operating in challenging times. But in a sector where firms range from automotive manufacturers to those in delivery and fulfilment, our recent research reveals that the leaders are focusing on opportunity amid adversity.

Richard Hill, our Head of Mobility and Logistics, says: “It’s super complex – among other challenges, you’ve got supply chain disruption, the climate change dimension, geopolitics and the effects of Brexit.

“But there is opportunity for the UK here too, particularly for businesses that can create the headspace to step back and reorientate.”

Our research, based on a survey of businesses in the sector as well as interviews with industry leaders, suggests many mobility and logistics companies are working hard to identify opportunity. They are rethinking supply chain planning to improve resilience, focusing on securing competitive advantage through an imaginative approach to talent and embracing digital transformation to position their businesses for future growth.

Dealing with supply chain disruption

The biggest difficulty for many mobility and logistics businesses is their supply chains. While the disruption seen at the height of the Covid-19 pandemic may have eased, 48% of the companies surveyed see shortages and disruption as likely to cause them significant issues in the medium term.

For many, the difficulties are already here. They’re struggling to secure the materials and parts they need – the chip shortage in the automotive sector has been a headache globally, for example – and prices are rising rapidly as inflation spirals, causing cashflow problems.

“Our biggest learning is that you have to talk about it rather than waiting until it becomes a problem,” says Matthew Grainger, CEO at Grainger & Worrall Technologies, a Midlands firm that makes automotive components for high-performance vehicles. “If you are open and transparent with stakeholders, including your customers, it is in everybody’s interest to find solutions.”

For example, customers may be willing to settle bills more quickly if a key supplier is unlikely to be able to cope with pricing pressure in its supply chain. In some cases, larger businesses are even helping smaller firms to invest in new in-house capacity or to reorient their supply chains.

The other constituency to focus on, says Alison France, Director at Green 4 Motor Company in Coventry, is the customer base. Her business serves consumers – selling them cars or repairing their vehicles – and has had to work hard to make sure they understand exactly when and why there might be delays.

“Customers haven’t got annoyed because we’ve kept them informed,” Alison says. “We’ve just been as honest and open as we possibly can.”

Matthew believes the supply chain crisis is an opportunity to rethink relationships throughout the industry. In our research, 84% of mobility and logistics businesses say low cost is their key demand of suppliers. By contrast, only 46% are concerned about supply chain diversity and only 54% agree that supply chain diversity supports resilience (see chart below).

 

How important are the following when considering suppliers? (% of mobility and logistics respondents)

But leading businesses will see this issue differently, Matthew warns: “It’s not all about price. You need long-term supply partnerships so that you can be confident about investing and planning for the future.”

Supply chain disruption: key actions to get future fit

  • Communication is vital, so stay in constant dialogue with suppliers, customers and other key stakeholders.
  • Look for partners to share the pain, for example, how customers could ease cashflow problems caused by high inflation.
  • Rethink the supply chain model, as businesses that develop trusted relationships with suppliers, rather than being overly aggressive on price, will reap the benefits.

Managing labour shortages

Many mobility and logistics businesses are struggling to compete in the war for talent, with 32% now warning that securing new staff is an increasing challenge. Moreover, in a tough economic climate, only 6% have felt able to offer higher wages to attract and retain talent. Nor is this an industry where employers are necessarily able to support flexible working, with only 6% offering hybrid arrangements.

Businesses in the sector are often quite conservative about working practices, says Alison, but employers will need to adapt to the current circumstances. For example, her own business is looking at whether shifting from a model of paying end-of-year bonuses to increasing salaries now will help with retention, given the cost-of-living crisis. It is also simply talking to staff about what the business can do to support them.

Alison explains: “We did an employee survey to identify what they worried about most and that has seen us change our policies on holidays and sick pay. We have to focus on retention because recruitment is so difficult.”

Where the firm has had some success, she says, is with apprenticeships. By recruiting non-skilled workers who can be trained and developed, the firm has extended its talent pool. And investing in apprentices can create employees who remain fiercely loyal, the company has found.

Matthew agrees: “We're having to do a lot of work on how we make the working environment and experience more engaging to keep those people that you've invested time and money into. We’re trying to create something that is sustainable for the next 10 to 20 years.”

Part of that is trying to ensure all staff feel part of something that is bigger than any one person, he adds. That is something others in the sector could learn from – our research shows only 38% of mobility and logistics firms agree that giving staff purpose at work protects against them leaving for a slightly better salary elsewhere.

Talent: key actions to get future fit

  • Identify key retention strategies by asking staff what they want most – it may not be a higher salary.
  • Identify deeper talent pools by looking beyond the constituencies where you traditionally recruit, for example, apprenticeship schemes, a focus on older workers or targeting those currently out of the workforce.
  • Reflect on purpose – employees increasingly want to work for employers where they feel engaged and valued as important to a shared endeavour.

Supply chain disruption: key actions to get future fit

  • Communication is vital, so stay in constant dialogue with suppliers, customers and other key stakeholders.
  • Look for partners to share the pain, for example, how customers could ease cashflow problems caused by high inflation.
  • Rethink the supply chain model, as businesses that develop trusted relationships with suppliers, rather than being overly aggressive on price, will reap the benefits.

Square the circle with digital transformation

Innovation and an embrace of new technology can help the sector cope with some of its challenges – automation, for example, can help drive productivity despite the labour market problem.

Our research suggests many mobility and logistics businesses have made a strong start on digitisation. Some 64% have already invested in digitisation and are now looking to make further investments. But they must not fall behind – for example, only 26% plan to invest in artificial intelligence over the next three years, compared with 35% of companies across all sectors.

The digital investment opportunity will depend on the nature of the business. At Grainger & Worrall, Matthew says: “We’re talking to customers about how we can increase capacity and productivity, and where they might be able to help.” He sees customers potentially playing a part in financing that investment.

At Green 4 Motor Company, meanwhile, Alison adds: “We’ve invested in making sure our customers can interact with us online, but also that staff have the latest technology so that they can interact with customers more efficiently in our showrooms.”

The key will be to build a broad case for transformation. In our survey, 54% of mobility and logistics firms think digitisation can help them deliver an improved customer experience, but only 36% are focused on how innovation might enable them to disrupt core business processes. By taking a broader view, it may be easier to build the business case for investment.

Digital innovation: key actions to get future fit

  • Identify digital strategies to resolve key pain points – automation can help with labour shortages, for example.
  • Consider partnering for innovation – digitisation requires investment, but stakeholders may be prepared to share the burden.
  • Be prepared to experiment as not all use cases for new technology are immediately obvious, but leaders are looking to innovate across their businesses.

Leading with intent

Richard Hill believes the sector’s most forward-thinking leaders will already have recognised many of the imperatives identified in the research. And leadership is an area he urges firms to think about more broadly.

“Many of the firms in this sector are small and medium-sized enterprises and they’re fantastically entrepreneurial,” he says. “But do they have professional leaders ready for the modern world and have they taken time to think about how to improve their own capabilities as leaders?”

Business owners and management teams who are ready to take that time, Richard suggests, will find even more opportunities to secure competitive advantage.

This material is published by NatWest Group plc (“NatWest Group”), for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by NatWest Group and NatWest Group makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of NatWest Group, as of this date and are subject to change without notice. Copyright © NatWest Group. All rights reserved.

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