Your author had never stood amidst so much underwear in his life. The location: a former golf course, now turned into one of the largest warehouses in the UK. It’s all glamour in the world of future trends. Warehouses are integral to the functioning of modern economies. Growth in e-commerce and supply chain resilience are core secular trends. If you’re a retailer, outsourcing supply chain logistics is a key strategy for improving both margin and consumer satisfaction. We learned about all this and more.

Located in the north of England and managed by GXO Logistics on behalf of a major UK retailer, the warehouse spans 1m square feet. That is equivalent to 12 Wembley-sized football pitches. We certainly got our steps in as we toured the site. What impressed most was not the size of the venue, but its capabilities. Much of these have been enhanced by automation, but at peak, the warehouse can hold more than 10m units of stock and pick daily over half a million items. There some 40,000 pallet locations in an automated storage system and another 6,500 for picking.

The photographs don’t quite do justice to the sense of calm and meticulous efficiency that pervaded the warehouse. It operates 24-7, almost seamlessly. Much of the activity is monitored from a central control room, but it is conveyer belts and robotic arms that do much of the (literal) heavy lifting. Despite a venue of such size, even at peak, no more than 750 employees need to be present at any given time. A continuous improvement mindset continues to drive constant innovation. Better scanning solutions and improved routing constitute just two examples.

For retailers who choose to outsource their logistics and embrace automation, there are tangible benefits. We were told that since GXO had taken on the contract, it had been able to achieve cost savings amounting to tens of millions of pounds. Further, we learned how owing to better stock management systems and more coordinated IT solutions, the retailer had achieved higher e-commerce completion rates than prior to the decision to outsource, helping it to gain share in UK retail. There are also sustainability benefits attached to partnering with a specialist. Not only is the building on the way to being carbon neutral but several initiatives have also resulted in marked reductions in packaging materials. The future for outsourcing seems bright. 

16 April 2024

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. 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.

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Alex Gunz, Fund Manager

Photos by the author

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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. 

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