Season 4, Post 42: 3D Tetris
It was non-stop glamour for your author last week as he braved rain and an early start to travel 120 miles north of London to East Midlands Gateway. This snappily named venue is a 700-acre logistics park that includes a rail freight terminal and intermodal freight centre. It is strategically located close to two major British motorways (the M1 and M42) as well as East Midlands Airport. The purpose of the visit was to learn what the future of logistics may look like.
Logistics matters both for retailers developing omni-channel strategies and for all businesses seeking to build up greater supply chain resilience. The specific site we visited (which consolidates several of the UK operations for a major global consumer products group into one site) was described to us as both “state of the art” and “a centre for innovation.” To gain a sense of its scale, the plot it occupies is 129,400 square metres, the equivalent of 18 football pitches.
The warehouse has scope to store up to 100,000 pallets of products, which move around the site on 750m of dedicated monorail track. Some trolleys on the track can apparently travel up to 100km in a day. 15 cranes which reach to a height of 30m help move goods around. Everywhere you look, there is a high level of automation – and very few people. No more than 250 personnel need to be on site at any given time. We were told that “a ridiculous amount of logic is happening in the background… it’s a bit like 3D Tetris.” Machine learning and advanced algorithms help ensure that products are moved seamlessly and efficiently. Data is “the foundation” of how everything works at this site.
Such an approach has had a “material impact” on the key performance indicators for the customer in question. Productivity has increased by well over 100% while variable cost (from reduced labour) has improved by more than 50%. While impressive, there is more to come, we were told. An innovation hub is being built on site to allow universities and start-ups to trial promising new technologies while all employees are being trained to build apps that can improve how they complete their tasks. When thinking about the future, having access to sufficient warehouse space is necessary, but no longer sufficient. Making the most of how goods and people move around the warehouse is the next step. As Sun Tzu, the Chinese military strategist famously put it, “the line between disorder and order lies in logistics.”
25 October 2022
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
Alex Gunz, Fund Manager
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