Building resilience in the materials handling industry
11 Sep 2019
An explosion in e-commerce has sent demand for forklifts soaring over the past decade, but global volatility and a slump in business confidence is putting the industry under pressure. Working with the right financing partner can prove critical to building customer relationships and getting deals across the line.
Materials handling equipment is integral to many of the UK’s most critical industries, from construction and aerospace, to food and beverage and manufacturing. But the remarkable resilience that the sector has displayed has been driven, overwhelmingly, by the unrelenting rise of e-commerce.
Online retail has now infiltrated almost every sector. The apparel e-commerce market was worth $525bn last year and is expected to grow at 10.3% per annum to reach a total market size of $872.6bn by the end of 2023.
Indeed, the Amazon effect has proved transformative to just about every industry, as consumers grow used to delivery within hours and fast and efficient returns policies. The knock-on implications for forklift truck demands have been considerable.
‘Cutthroat competition means manufacturing, distribution and retail businesses everywhere are having to invest in their warehousing and logistics in order to hold onto market share.’Many warehouses are now running triple shifts. Fewer pallets and bulk orders are being shipped, with more emphasis instead on individual items. Warehouse aisles are getting narrower and shelves higher. Meanwhile, a growing number of smaller, regional warehouses designed to cater for last-mile delivery and micro-fulfilment are in turn driving demand for equipment that suits these specific requirements.
Arrival of the robots
Indeed, the need for efficiency and increased productivity in e-commerce and elsewhere is being met with other rapid technological advancements, including progress in battery technology resulting in growing popularity in electric forklifts – offering a high efficiency and environmentally friendly alternative to traditional fuels.
“Cutthroat competition means manufacturing, distribution and retail businesses everywhere are having to invest in their warehousing and logistics in order to hold onto market share,” says Investec’s head of materials handling finance, Andrew Woodward. “That means more and better materials handling equipment is needed, along with the flexible financing tools that can support the investment required.”
Materials handling financing typically involves fixed or minimum-term rental agreements, where the bank buys the machinery from the supplier on day one, hiring it to the end-customer and collecting a bundled rental of finance and maintenance with the maintenance element being passed back to the supplier.
“Having the right financing partner in place can be critical to a supplier building a strong relationship with their customers and maximising the sales opportunity,” Woodward adds.
The Amazon effect has proved transformative to just about every industry, as consumers grow used to delivery within hours and fast and efficient returns policies.
The Brexit effect
Robust customer relationships are more important today than ever.
After all, while technology and rapidly changing consumer behaviour are both positive forces for the forklift truck market, there is no avoiding the political and economic instability that all industries are facing across the UK.
Indeed, while short-term contingency stockpiling buoyed demand for warehousing and associated equipment, the ultimate impact of Brexit on UK industry remains unclear. Many buying decisions are currently on hold while companies wait to see how political manoeuvring plays out. The materials handling industry is only as robust as its end-customers.
Furthermore, materials handling accounts for some of the biggest imports and exports in the UK, representing £55bn annually. Half of that trade currently takes place within Europe. Any export and import duties imposed, as well as logistical burdens and exchange rate swings, will create significant challenges for the industry.
‘The uncertainty that the sector’s end-customers are facing has inevitable implications for the manufacturers and sellers of the forklift trucks themselves.’
Andrew Woodward, Investec Head of Materials Handling
The financing edge
The ability to offer seamless service is increasingly critical to the sales process and working with a flexible and experienced financing partner, has never been more important.
Andrew Woodward's take on the industry
“At Investec, we have a team of eight dedicated purely to financing forklift trucks. That team has a combined experience of over 140 years in this sector,” says Woodward. “We know most of the people. We know most of the products. We are fully integrated into this industry.”
“We enter into long-term relationships with our clients. We are in contact with all of the suppliers we work with, of which there are now over 160 who introduce business to us on a regular basis.” Woodward explains. “That sense of partnership and longevity of relationship is highly important to us.”
The underlying growth fundamentals for the materials handling sector are resoundingly positive, both globally and here in the UK. But the UK clearly faces significant challenges in the coming months and years.
Manufacturers and suppliers of forklift trucks will need to work hard to build and maintain deep relationships with prospective and existing clients. Selecting a financing partner that can reinforce the strength of those relationships is imperative to encouraging customers over the line and, therefore, to a suppliers’ long-term success.
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