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Fluctuation, flexibility and forethought; the challenges of rapid market demand

By Matthew Marriott, Commercial Director of Hellmann Worldwide Logistics UK.

The global economy seems, at last, to be on the up. Whichever way you look at it, with optimism or scepticism, the figures have clearly shown that in the last six months a number of major economies have begun a belated return to action. While the US is now experiencing notable growth and China is once more posting impressive statistics, the UK has also joined the party. GDP figures have risen, the services sector is accelerating and manufacturing output is strong once more. Indeed, even construction, for so long the lonely carrot left at the back of the economic fridge, has come vividly to the fore.

And yet, without wishing to diminish the positivity of such developments, this economic growth brings its own challenges to businesses from the UK to China and beyond. As a specific example, the sheer speed of the turnaround in the UK, bolstered by dynamic Government initiatives such as Help to Buy, has left many industries needing to rapidly adapt resources to cope with sudden surges in demand. From the perspective of the logistics and freight forwarding industry, which is often considered to offer a barometer of economic health, these challenges are something that have been observed first hand. Not simply because freight companies provide the physical link between supply and demand, but because the industry is just as affected by the impacts of market fluctuation and asset management as any other. Overcoming these challenges while minimising expense and honouring contracts requires a delicate mix of flexibility and forethought.

UK construction is perhaps the industry that has been most widely reported to be struggling to meet the sudden supply demands (in terms of both basic material manufacture and house building) it faces. Although healthy demand is to be welcomed in any industry, the concern is that if house builders aren’t building houses – and when they try to they can’t get the bricks and tiles they need – then the UK’s recent economic progress, which has been heavily predicated on the strength of this particular market, might falter as quickly as it picked up.

In logistics, both globally and domestically, the principles are much the same; successful service depends on careful planning of resource and volume so as to fit market conditions. Dramatic market fluctuations, such as the one the world saw in the latter half of 2008, or, more happily, the change that the UK has seen since April 2013, can cause headaches in terms of trying to second guess the scale of the assets – in this case trucks, aircraft and and vessels – needed at particular times of the year. As with any industry, there are (relatively) ‘quiet’ times and there are busy times of the year (e.g. the Christmas ordering rush), but often we can judge expected volume with a decent degree of accuracy.

However, 2013 was certainly not straightforward – and Hellmann UK figures reflected that. In comparison to July and August last year (which, it is important to remember, was significantly bolstered by the London Olympics), the same period delivered a 25% surge in import volume in 2013. In terms of export volumes, this September was 22% up on the last. These figures represent huge leaps in demand, and ones that can easily cause serious disarray if they catch you out.

Our solution, in terms of being able to manage such changes, was flexibility. In logistics, there will always be fixed assets (such as warehousing space), which aren’t things that can be easily altered to suit market conditions in the short term, but the frequency and volume of departures can. Even when you might expect the trailer departure schedule to drop in upcoming months, it is important to have the contingency and resource to go the other way should you have to, in order to ‘clear the floor’. It’s certainly easier said than done, but maintaining the balance between fixed and mobile assets is absolutely crucial.

But apart from simply offering a snapshot of how the changing market is affecting a specific industry, how is this relevant to the present market? The answer is tied up with something that I alluded to earlier – the way that the health of the freight industry can indicate the health of the wider economy. It is logistics – the modes and means of transporting freight and cargo around the globe – that facilitates an effective supply chain, and the simple reality is that no economy can deliver growth without one. Indeed, such is the importance of freight forwarding that even if both manufacturing output and consumer demand are simultaneously sky high, if products cannot be physically transported to market with sufficient haste and efficiency, then the whole value chain fails.

Ultimately, it’s extremely good news that many of the major global economies have begun to recover; and even better news that this prosperity is beginning to ripple out into key sectors of the UK economy. But regardless of the sector, it’s important that businesses do not rest on their laurels and continue to operate with economic savvy. Markets change; companies need to be ready and able to change with them.

To find out more about Hellmann Worldwide Logistics, please visit www.hellmann.net. To follow Hellmann UK on Twitter, visit https://twitter.com/HellmannUK

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