High racks for storage in a warehouse

Just to be clear, your author is not just returned from backpacking in Southeast Asia. Rather less glamorously, he spent part of last week travelling between the UK towns of Milton Keynes and Northampton. Talk to anyone working in logistics and along with Daventry, these three locations comprise the country’s ‘golden triangle.’ Put another way, they are located in a strategically significant spot allowing for optimal next-day delivery to most British consumers. If you want to see logistics in action, this is the place to go.

My host for the trip was GXO Logistics, the largest listed pure-play contract logistics provider in the world. Businesses such as GXO rent warehouses from the likes of Prologis and then populate them with distribution, order fulfilment, e-commerce, reverse logistics and other supply chain services on behalf of their customers. While logistics typically comprises only 2-6% of a customer’s overall cost base as we all unfortunately know, it has a disproportionately large impact on consumer experience. Get the wrong item of clothing delivered or find something difficult to return and the likelihood of you using that company again is low.

A man on the background of the production line in a warehouse

The first stop on our tour was to visit a warehouse operated by GXO on behalf of a major global apparel business. It is hard not to be impressed when stepping into the building. It comprises ~70 aisles of products across 400,000 square feet of floor space with multiple mezzanines. Per Jeff Bezos’ idea of the ‘infinite shelf’, 140,000 different stock-keeping units are held in this warehouse. If these numbers are not mind-boggling enough, then consider that GXO’s solutions help this retailer shift around 10,000 units a day, or as many as 72,000 on last year’s Black Friday. How’s it done? Automation provides part of the answer. Picking robots mingle seamlessly with humans among the aisles. We were told that 99% of picking can theoretically be automated. When further automation initiatives come online elsewhere in the warehouse later this year, GXO estimates that productivity at this site could increase by up to 80% relative to current levels.

Around 30 minutes after this warehouse, your author found himself in a different location, an arguably more exciting venue since it was still being kitted out. GXO will go live with operations at this warehouse at the end of July. Operated on behalf of a major DIY business, it will become the company’s sole e-commerce distribution centre. Consolidating various legacy sites, it highlights the potential benefits in transitioning from manual processes to automated ones. GXO estimates that the transition can yield threefold increases in productivity. Looking ahead this is by no means the end of road. Expect even more automation. One of our tour guides suggested to us that “within five years, machines will pick as fast as humans.”

30 May 2023

​​​​​​​​​​​​​​​​​​​​​​​​​​​The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in GXO Logistics and Prologis. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.

​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​Click here to view all Blog posts.

Photos taken by the author​​​​​​​.

​​​​​​​Alex Gunz, Fund Manager

Disclaimers

The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital LLP believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital LLP, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital LLP is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital LLP disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

The document is protected by copyright. The use of any trademarks and logos displayed in the document without Heptagon Capital LLP’s prior written consent is strictly prohibited. Information in the document must not be published or redistributed without Heptagon Capital LLP’s prior written consent. 

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