Logistics is one of the biggest sectors, spanning several industries and employing 1000s of people in the UK. Now more than ever, an efficient supply chain is vital to the country. The sector seems to be at a crossroads – where significant challenges pose a very real threat to many businesses while a number of innovative companies hold the potential to radically transform the sector. More needs to be done to support the sector and help it evolve to meet the issues it faces head on.
Challenges in the UK logistics industry
The UK logistics sector has experienced a few years of uncertainty – the combination of Brexit and the global Covid-19 pandemic has further increased pressure on the industry. UK logistics firms currently face threats and disruption at an unprecedented level. From contactless supply chains, longer queues at borders to increasing customer demands.
So, how do logistics companies go about overcoming these challenges and paving the way for a brighter future?
More than most sectors, continued innovation is key. Those logistics business that can adapt and make use of the latest technology have the best chance of surviving the recession and growing.
The adoption of digital technologies in day-to-day operations needs to become standard. Those firms that are unable to utilise technology and innovate will struggle to survive. Thankfully, help is at hand.
Logistics technology – a driving force
In a COVID-19 world, customer needs and expectations have risen yet further. Speed, visibility, convenience, transparency and low costs are a must. Customers want an accurate ETA, wait-times and an easy-to-use application. If you are not using technology to improve the overall experience, then the sad truth is you will not meet customer needs and will be left behind by those that can.
Innovation in logistics is still behind other industries. It requires significant investment in logistics technology when low margins are already putting on the squeeze. And if you add to this the push back from a traditional workforce, which tends to be lower skilled and often highly dispersed, it’s not easy.
The use of logistics software and technology has tended to focus on improving customer experience, operations and internal processes. As we’ve highlighted there are new challenges that require new solutions.
More recently big data, cloud infrastructure and IoT initiatives are having a significant impact. They’ve helped improve tracking, reporting and overall efficiency. But more still needs to be done.
A key area of digital innovation within logistics is software. Spanning everything from blockchain technology and improved internal systems, to collecting and extracting intelligence from multiple sources of data.
ERP and CRM systems in logistics
Enterprise resource planning (ERP) and customer relationship management (CRM) systems are a mainstay in logistics. They allow companies to maximise productivity and provide a degree of connectivity while reducing friction throughout.
An opportunity for logistics SMEs
There is the wrongly held belief that the latest technology is only available to larger businesses with the bigger budgets and their own software and platforms. It is a myth that needs dispelling for the sake of the sector. Adaptability may be part of large company culture but they can’t compete when it comes to agility.
SMEs are perfectly placed to disrupt the logistics market. Given the necessary funding, it’s far easier for smaller companies to be agile, implementing new systems and technology. There is an opportunity for innovative smaller companies to successfully integrate the latest tech and get the edge to win new customers from their less-agile competitors.
Larger and more established companies also face their own challenges around infrastructure, internal platforms and employees. They also have added complexities around technical debt so their appetite for change is lower. This occurs when a company has a system or platform for so long and keep patching it with short term fixes.
The real challenge for smaller logistic firms is getting the money together to invest in cutting edge technology and kickstart change during this difficult period. Thankfully, by investing in R&D and claiming back costs from the government incentives, they can go a long way to driving through this step change year after year.
Identifying innovation – what is R&D in logistics?
Logistics and supply-chain management have naturally high levels of innovation and R&D. There are countless businesses investing time and money into implementing new systems, improving existing ones, and developing a joined-up solution.
Many businesses remain unaware that a significant amount of their investment in innovative projects can be recouped with R&D tax credits.
R&D tax credits for logistics
Research and development (R&D) tax credits provide an source of funding for logistics businesses who may be struggling with cashflow and desperate to invest in technology. R&D tax credits are government incentives designed to encourage innovation and fuel growth. The criteria for claiming is purposefully broad.
Whether your logistics business is developing new software or processes, investing in equipment or adapting existing ones, the rebates are a valuable source of cash. You can use this to reinvest towards accelerating future R&D, hiring new staff and growing in challenging times.
The opportunity for logistics innovation is ripe, whether you want to collect and understand data around your assets; solve hard engineering problems, improve tracking or adopt cloud-technology.
Qualifying R&D in logistics sector
Examples of activities which could be eligible for r&d tax incentives include:
- Designing or customising equipment such as conveyor transfer systems for loading freight.
- Working on software solutions to markedly improve fulfilment efficiency.
- Developing a new process for lifting heavy or fragile goods.
- Creating a new software platform to better track the movement of freight in real-time.
- Developing a new technique to utilize robotic handling that meets safety requirements.
- Designing or modifying freight lifting solutions for industrial premises like freight interchanges or storage facilities.
- Designing or significantly modifying safety and performance monitoring equipment.
- Developing a new process to automate or better connect aspects of logistics or product inventories.
Logistics R&D case studies
ForrestBrown have helped many clients claim R&D incentives for their logistics innovation. Here’s some examples:
Cold-chain logistics business
Developed a first-of-its-kind logistics software platform to track the movements of perishable items against flight times. There were no existing products that met these requirements, so the platform was the first of its kind. The solution integrated several different systems, including invoicing and flight tracking programs.
A production-line specialist that worked with a print magazine distributor to automate several heavy-lifting and loading processes. The distributor’s factory hubs had several heavy lifting and loading processes still being performed manually. This was causing repetitive strain injuries within the workforce. They bought a specialist industrial robot ‘off the shelf’ and significantly modified it with the addition of a bespoke gripper mechanism. This would grasp heavy magazine-laden boxes, four at a time; lift and load them for distribution. As well as creating efficiencies, this improved safety for employees.
Logistics engineering business
ForrestBrown supported a precision engineering firm, which created an industrial sorting machine for small products within a weight range of just 0-8 grams. They transferred knowledge from pharmaceutical weight sorting to develop the machine at a lower price point for logistics.
Benefits of R&D tax credits for logistics firms
Adopting new technologies and investing in new systems can seem daunting and full of risk, but it must happen. Decision makers in the logistics sector can inspire change and propel their businesses forward in a volatile time.
R&D tax credits are a great way to take some of this financial risk away and alter attitudes to change. If awareness of the R&D incentives was greater, there would be significantly more logistics, warehousing and e-commerce operations furthering their R&D activities. We would see the sector leap forwards and overcome the challenges it faces.
A successful logistics R&D tax credit claim is all about maximising the return while working within the boundaries. It requires a specialist R&D adviser that has a rigorous process and knows the sector.
Although logistics companies find themselves in turbulent and difficult times, innovation supported by R&D tax credits offers a route to a brighter and more prosperous future. The money you get from your claim can be used to hire new staff, invest in more ambitious projects and keep your logistics company ahead of the game. At ForrestBrown, we work with you to create a culture of R&D in your business. Along with better record-keeping practice, this helps grow your claim year on year.