X2 Managing Director Ian Cramb details the role of 4PLs in the UK’s challenging logistics landscape
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The turbulent times of the last few years have been marked by waves of demand fluctuations – a situation that has highlighted the somewhat understated role that 4PLs play within the UK’s logistics ecosystem.
Why is this the case though? And in what scenarios does the use of a 4PL make sense?
To get to the heart of this matter, and discuss a variety of pressing issues concerning the UK logistics industry as a whole, including cargo security, skills shortages, and rising operating costs, we sat down for a chat with Ian Cramb, Managing Director and Owner of Leicestershire-based 4PL company X2.
Read on to learn:
- Where 4PLs excel in the logistics ecosystem
- The advantages held by small 4PLs with a flat-management structure
- The difficulties presented by the UK’s clean air zones and the transition to zero-emission haulage
- How a ‘race to the bottom’ is pushing some road freight operators towards breaking point
- The pressing need to attract young talent to the UK logistics industry
The role of a 4PL in the UK
First off, we asked X2’s Managing Director which situations best fit the 4PL model.
Before spelling out these scenarios, Cramb admitted that 4PLs are not a one-size-fits-all solution.
“If you have a business that has regular flows and regular round trips, where you can intensively utilise your own fleet all day, so the trucks go out full, come back full, or come back with returnable packaging, for example, or if you’re also intensively utilising fleets on day and night shifts, then that is the most cost-effective way and is a sensible solution,” said Cramb, explaining that a 4PL would not be optimal in this case. However, he added “given the driver shortage is likely to get worse and that the pandemic taught us that having own fleet assets parked up with no work is not a good position to be in, a 4PL subcontract element even as part of your solution, might be a wise choice.”
On the other hand, Cramb does believe that whenever goods are being moved on a one-way basis, a 4PL could be the right solution.
“If you have big fluctuations in volumes either within a week, or within a month, or on a seasonal basis, then a 4PL solution is absolutely something to look at,” said Cramb, who added: “We have year-round relationships with those sorts of people who might have 100 loads this week and only 30 the next. You couldn’t run a dedicated fleet on that basis, it wouldn’t be cost effective. We also have customers who have consistent volume, it just makes sense, because they’ve got one way movements.”
According to Cramb, flexibility is one of the key attributes of a 4PL, especially for businesses dealing with these unpredictable volume fluctuations.
A case in point here is X2’s relationship with a garden centre group, which naturally sees different disparate volumes of freight transported at different times of the year.
Where does this extra capacity come from? In X2’s case, it’s a wide pool of haulage firms, many of which are small entities.
“We have more than 1,000 haulier partners working for us all over the country, and together they can support uplifts in volume to support our customers. For the parcel companies at Christmas, we work 6 weeks of the year with 150 vehicles on the road. In January that all goes, but no individual person suffers the pain of not being utilised after the peak goes, because the benefits of that peak are all spread widely.”
This flexibility is not limited to mere demand fluctuations either, but also the wide spectrum of needs that many businesses have.
Getting access to the right vehicles to meet these needs is, as Cramb argues, another case that lends itself to a 4PL:
“What if a company needs a van, or a semi-trailer with a tail lift, or a Moffett or a crane? We have those relationships and we can provide these vehicles. The same goes for when you want a refrigerated vehicle, a dual-compartment fridge, or a double-decker trailer – we have suppliers with these assets in their fleets.”
Being a smaller 4PL has its advantages too, X2’s Managing Director told trans.iNFO. Given that Cramb spent 7 years at DHL Exel Supply Chain as Business Director, as well as 3 years at Wincanton’s as General Manager Net Logistics, he has a decade of experience in big logistics companies to add weight to this viewpoint.
“If you deal with a small 4PL like us, one with a flat structure, quick decision-making, fleet-of- foot, fluid and rapid implementations, then you’re not working with a big corporation,” stressed Cramb, who explained he can now take on a £1m contract the next day.
This compares starkly to when Cramb worked in a corporate environment. Back then, he would have to fly over to HQ for authorisation – something that was required on deals worth as little as £50,000.
Security: protecting cargo amid an evident rise in freight theft
Despite not always being on the front line of UK logistics processes, an independent 4PL like X2 naturally casts a close eye on the challenges the industry is facing at the moment.
One such issue is the chronic shortage of secure lorry parks in the country.
The situation has left the UK facing an uphill battle with cargo theft prevention, something that has become particularly acute in recent times.
According to Cramb, a simple 45-minute stop at a motorway service station can now be a vulnerable point in a journey.
In his view, secure lorry parks with fencing are key. Such facilities typically have a barrier at the entrance that’s manned or monitored to try and stop nefarious people coming on site.
Unfortunately, as Cramb told trans.iNFO, a number of motorway service stations do not have this level of protection. This is precisely why X2 avoids such places and opts for secure parking instead, even if this entails additional cost. In fact the X2 planners as a matter of course, aim to plan as many journeys as possible as “load and go” where the haulier partner loads early morning to deliver same day hence removing the need to overnight whilst loaded.
Clean Air Zones and the journey towards zero-emission haulage
Another pressing issue in UK logistics these days is of course environmental sustainability.
When it comes to this, Cramb also stresses the environmental benefits of a one-way 4PL solution, particularly in comparison to underutilised and empty-returning fleets.
However, it is impossible to ignore the challenges that the drive towards zero-emissions is creating across the road transport industry.
For example, the recent introduction of low and ultra-low emission zones in major UK cities has meant that a number of vehicles still in service cannot be used for some transports.
Cramb told trans.iNFO that this has slightly restricted the pool of resources that X2 and other 4PLs can draw upon. The good news is that newer vehicles are coming on stream, something that will alleviate this issue over time.
Meanwhile, although there is an appetite for decarbonisation, and a number of road transport and logistics companies are seeking to meet this by using alternative fuels like HVO and CNG, Cramb also noted that there are still supply and infrastructure shortcomings to take into account:
“There’s not a high level of investment going into infrastructure, certainly in the UK. So you might have good intentions to have a vehicle converted for HVO, but then find you can’t actually get access to the fuel when away from base.”
When it comes to electric vehicles, Cramb shared the view that they just don’t have the range yet to make them viable for many operations.
He nonetheless added that the tech related to electric vehicles is moving very fast, giving hope that battery-powered trucks may be used for long-haul operations sooner rather than later.
The role of rail freight
Another means of reducing logistics emissions is the use of rail freight.
Although Cramb acknowledges there are useful applications for rail freight, particularly the utilisation of intermodal terminals at sea ports, he also believes there are a number of factors holding this transport mode back – not least the country’s outdated railway infrastructure.
As Cramb told trans.iNFO, the expectations of the market are another:
“The UK is becoming obsessed with same day, day one day two, and day one day three deliveries. When it comes to order processing, by the time it’s picked in a warehouse for day two, it’s got to be loaded on a vehicle. It’s got to go straight to wherever it’s going. So, I think for rail with a few exceptions, the whole commercial dynamic would have to change certainly from a retail point of view, and let’s not forget in most cases you still need a driver and a vehicle to make the final mile delivery” stressed Cramb.
How rising transport costs are bringing a ‘race to the bottom’ into sharp focus
Like a number of other figures in the UK logistics industry, Cramb has seen how shippers with high purchasing and bargaining power have pressurised the logistics industry to drive down costs.
This may sound like a positive development for consumers, particularly during a cost-of-living crisis. Cramb nonetheless warns that the low price expectations from retail giants and other major shippers simply can’t be met by hauliers without them risking running at a loss.
On the other hand, Cramb did add that when resource is tight, attitudes can change.
“The cost of transport depending on the product value can be as low as 2%, but not getting it on the shelf could be a 50% gross margin loss,” he told trans.iNFO, highlighting the potential cost of a logistical failure brought about by an overemphasis on low-cost transport.
Despite this, Cramb warned that purchasing attitudes in the UK largely haven’t moved on:
“I don’t think there’s been a major shift in the way people purchase. Certainly everybody’s under pressure to reduce cost. Eventually, people will say no, and stress they can’t deliver at that cost. Then they’ll go and do something as an alternative that does make commercial sense. And those service providers won’t go out of business.”
Does that spell an end to the ‘race to the bottom’? Possibly, but as the X2 Managing Director told trans.iNFO, it’s not quite that simple:
“Unfortunately, there are plenty of people who are still chasing volume, because by keeping the wheels moving, the money coming through will feed the cash. Even so, eventually, you can’t continue to do that if you’re not making a return. So there are difficult conversations to be had.”
Chief among the increased costs for hauliers in recent times is of course the increased price of fuel. Cramb notes that diesel prices are currently not far off last year’s peak following Russia’s invasion of Ukraine. This has seen fuel take up an even greater share of road transport operating costs.
“I think no matter how good a purchaser you are, you can’t really look at the price of diesel today and not be willing to pay any more money. On some of the routes that we do, diesel is 30%, or even 50% of our costs. If you don’t get the money from the customer, you will go out of business eventually,” Cramb told trans.iNFO.
Unfortunately, going out of business is a decision that some long-running haulage companies are taking right now.
“I’ve sat down with people who are just going to liquidate their assets and retire because they see no future. Probably their children are dentists or accountants or working in different areas, and see no future in the transport business either,” admitted Cramb, despite his evident enthusiasm for the industry.
Tackling talent shortages in UK logistics
It isn’t just experienced haulage bosses that are due to depart from the industry either. Many industry veterans are set to bow out and take retirement, which will only exacerbate existing shortages.
To do its bit to address the issue, X2 is sponsoring the government-backed Generation Logistics campaign.
The campaign is on a mission to promote the opportunities in logistics to a new generation of talent. Besides holding various events, the organisation has been utilising social media platforms like TikTok to get the message across.
Cramb told trans.iNFO that when he approached Generation Logistics about becoming sponsor, he was shocked to hear the prognosis that 49.7% of all senior management and directors in the warehousing sector in the UK will be retired in just over a year’s time.
This doesn’t mean that the sector is an unattractive place to be for young budding professionals, far from it. As Cramb told trans.iNFO, there is a wide-spectrum of enticing roles to choose from in an industry crucial to our economy and way of life that already employs over 1.7 million people:
“When you’re working for a logistics company, you can be an accountant, an engineer, a facilities engineer, be in marketing, transport operations, warehouse operations, international freight management, Solutions design, project management IT, business development or even a robotics specialist. Indeed you can be all sorts of things. There’s a huge range of career opportunities out there but people just don’t know about it,” said Cramb, ending the discussion on a positive note.