Once again thanks for your response to last months (September) iBlog. As you know I managed to get out on expenses and had a look at the European logistics scene. If you didn’t get chance to read it then have a look in the archive – I’m told its well worth a read and, contrary to popular belief Iain and his team don’t pay me by the click! Unfortunately this month the petty cash tin was empty when I got to it, flights to New Zealand come to mind! So we missed out a month but we are back with a vengeance now in November. Over the next couple of iBlogs we are going to look at buying materials handling equipment. That’s forklift’s to you and me! This month it’s the new versus old question. Next month we will actually discuss what you should be looking for when you buy a used forklift.

Its an age old question whether to buy equipment new or go for good secondhand gear. Its no different when it comes to forklifts. So I thought I would get out and about and find out the pro’s and con’s of buying old versus new. Whilst there are some good deals to be had on used equipment at the moment, now is also a good time to buy new, so you need to be careful and get the best deal for you. Buying or leasing from new can come with a lot of confusing add-ons and packages so research the market and find out what’s best for you. And when considering the old v new question don’t forget that things like repair bills on second hand trucks could cost you thousands. With a used truck you increase your risk of breakdown, so before buying, ask yourself the following questions:

1. What will be the cost of a breakdown to your business? For example is it a specialist vehicle that is in use all the time? If it is then it’s probably better that you get a more reliable fully serviced new fork lift.
2. How long do you use the vehicle for each day? If its more than 5 hours then you should really only consider a new truck. A secondhand one at that useage level is not a good investment.
3. How demanding is the environment and the use that the vehicle is put to? If the truck is constantly lifting and stacking, or the terrain or conditions are rough a used truck may not be reliable.

iGSG can carry out an on-site survey which will help you decide which route to go down. Unlike many companies they can quote for both new and used vehicles, leased or company owned. However beware of who you deal with, more unscrupulous dealers will quote secondhand fork lifts based on what they hold in stock rather than trucks that will meet your individual needs. By contrast on new trucks, dealers will often suggest the best truck for your operation based on the range they stock.This isn’t always the right machine. So when getting a quote for a new machine go to a multi-franchise dealer, like iGSG, who has a broad range covering most forklift types. This way you know that the forklifts you are being offered are appropriate for the job. Here’s a good tip I learned from one old school warehouse manager, request both new and used quotations from your supplier, you can then easily query any variances, including capacity, mast height and truck type.

When it comes to a manufacturer, when buying new, choose one that has an established reputation for reliability. If you do this you can expect to have far fewer and less costly problems. Going for a reputable manufacturer also increases residual values. Also always choose the most reputable dealer for that manufacturer and preferably one based or with a depot in your area. Companies like iGSG are experts in their field and when you look at the total package they offer they will save you money in the long term, through less downtime and a reliable after sales service. Just as your truck should be reliable, so should your dealer.

Secondhand may seem a good idea, especially in harder economic times, but does it really save you money? The short answer for medium to heavy users is no. If your lift truck is stood down most of the time or only used for four hours or less each day then a used vehicle may give you a payback. However used vehicles don’t come with the same guarantee or back-up as a new truck. You need to carefully weigh up the advantages and disadvantages to your business of new versus old. If, at any point in your intralogistics process, your forklift is a necessity then to ensure efficient operating standards our advice is go for new.

NEXT MONTH
There won’t be an iBlog in December as we help Santa out with the biggest intralogistics problem this century. Getting the X Factor Winners dolls out before the 25th December. Wish us luck! Part Two of this article which will include a Secondhand Forklift Buyers Checklist and will be out in January 2012.

Thank you for all your feedback on our first iBlog. Those nice people at iGSG were so happy they gave me a bonus so I was able to afford a short stay in Holland on the proceeds. It was during my Dutch Dash that I noticed that almost all the logistics operations in the World must have their European base in the land of the tulip. So on your behalf I thought I’d just check that they got their decision right!

The road freight transport and logistics industry has been hit hard by the global economic recession. Never has it been more important to understand how the logistics industry makes decisions on sites for their warehousing. Or intralogitics partners decide where to set-up their European operations. In this article we look at the question “Where is the best location for your European Operations?”

Although world trade may have dropped, location next to the leading ports in Europe is still important. This means the Dutch cities of Rotterdam and Antwerp lead the way. They combine location with proximity to some of the wealthiest markets in Europe. This also means that the Benelux countries and the parts of Germany and France that border Holland seem to remain the favoured choice for European Distribution Centre’s (EDC’s).

We used LPI scores for analysis in this iBlog, these are based on countries logistics friendliness. This is a weighted measure of factors such as transport costs, labour costs and property costs that underlie the economic viability of logistics property. Analysis of the results shows some surprising facts. Most remarkable is that the Netherlands comes third in the European table and not that far ahead of others in the Top 10.

The LPI scores 155 countries on their logistics “friendliness”, based on a world survey of international freight forwarders and express carriers.

The Dutch are working to alleviate this problem but it is unlikely to really affect logistics strategies when it comes to location. The Netherlands remains the most popular country for major warehousing in Europe due to its geography. This is particularly true when it comes to the location of distribution centres that warehouse tactical inventory for delivery to pan-European markets. It is estimated that Amsterdam, Rotterdam and Antwerp between them handle 630 million tones of cargo each year, compared to Europe’s third largest port, Hamburg that handles 120 million.

The strongest competitors to the Netherlands remain the bordering countries of Belgium and also Northern France and parts of Western Germany along the Rhine. The authorities in some of these regions are placing a lot of land on the market to keep prices low, compensating for their greater distance from the major channel ports and making them more attractive.

In terms of rival locations one place that is emerging is the Nord-Pas de Calais region in France. Its strength is that it can offer plentiful, comparatively cheap and high quality warehousing. It also has the advantage that it can serve Northern and Southern Europe and ourselves in the British Isles. The latter due to its location near the Channel Tunnel, an increasingly important factor in cross channel distribution. Lesser ‘hot spots’ include the Kassel area in Hesse which in part reflects the growth of demand in central Europe, but Eastern Germany in particular.

Despite the cost differentials between Holland and its competitor locations, it is clear that the underlying geography of distribution locations is not changing that much. Although the “demand centre” for inventory is moving eastwards as the economies of central and eastern Europe grow, it has not yet diminished the attractiveness of the Netherlands. Figures show that in 2009 around half of major EDC’s were being built in the Netherlands.

One change that can be seen is the increasing attractiveness of ‘multi-modal’ locations. Concerns about transport costs, congestion and changes in transport policy in the future are making logistics managers consider locating new distribution centres at hubs with access to road, rail and river transport. For example in fifteen years time will road congestion make it possible to distribute by road in the way we do now? Rail, which has not been a major player in transport strategies in recent years, is being reconsidered. This is particularly true in mainland Europe where most cities can be accessed in a single rail journey, goods not requiring transportation by road until the final delivery stage. So businesses are looking for sites that offer them alternatives. For example Liege is becoming more attractive due to its inland container port facilities linking it to Antwerp and the European rail network and for developers as it offers cheaper land prices. In Germany a similar situation is happening at the port of Duisburg, on the Rhine. The customers for warehousing developments increasingly require a high degree of flexibility, especially in the amount of space they need. They are also increasingly unwilling to sign leases for more than a few years so developers need to make returns more quickly, hence the need for cheaper land.

However it appears that the process of “stripping containers” shipped from outside Europe, in particular China, and storing stock in an EDC is not changing. Supply chains may or may not be adapting to new economic realities, but so far the location of your EDC or intralogistics supplier still reflects the need to be near to major container ports. Of course this might change in the future if supply chains rely more on production based ion the Continent particularly Central and Eastern Europe.

Indeed the effects of the growth of the Central and Eastern European economies is making little difference to location strategies. Although the attraction of locations around the North German ports, for example, may be increasing, so far the main impact has been to increase demand for secondary level warehousing serving the domestic markets of these economies and not other European countries.

The present recession may affect strategic decision making about warehouse location to a degree. For example other locations may see a fall in the price of labour, increasing their relative competitiveness. However the core decision making never seems to change whether its Europe or the UK – its all about location, location, location and probably location. So overall it’s the Orange that wins out in Europe!

In this first iBlog I will be covering two topics. Third party logistics, or 3PL as the Yuppies of the industry call it, and the Government’s continued failure to help our industry beat the recession.

Before I start I am sure you all want to know:

a) how did I get a name like Larry Logistics
b) how qualified am I to talk to you on these logistical matters.

The first answer is easy, I’m not called Larry and my surname has nothing to do with the supply chain! In fact it’s what’s called alliteration, a writer’s tool, rather like yours is a fork lift!

The second one is more difficult. I’m certainly not God when it comes to intralogistics but I have worked in the storage and transportation sector for a multi-national and that nice MD at iGSG is paying me (a fair price may I say) to inform and entertain you once a month.

So what about Third Party Logistics (3PL). Historically companies needed to maintain their own factory and warehouse locations to best serve their markets and many still do. In the late part of the last century however many chose to outsource their logistics operations to operators we now know as 3PL’s. I still can’t get on with that term, it reminds me of photocopiers and lime juice.

So why has the 3PL market expanded so rapidly? Initially I am sure it was down to our accountancy friends wanting to drive out costs. But today 3PL’s bring more than cost savings, they bring expertise. For smaller and medium sized businesses they bring knowledge and added value to the supply chain. As well as making cost savings they deliver shorter order cycles, better customer service and greater efficiencies. It’s because they specialise. Larger organisations can afford the management and specialist equipment to deliver this themselves but as a smaller manufacturer or supplier the 3PL is an option which should be carefully considered.

Onto the Government. This is a topic we will return to in future iBlogs but lets get the first arrow in now. Successive Governments have failed many in industry and commerce but nobody more than the logistics industry. A failure to control diesel prices or bring price into line with what our European cousins pay. The excessive duty on just about everything, the lack of investment tax breaks for basic technology items like warehousing equipment. The list goes on. Here is my first warning to those in the corridors of power in Westminster and Whitehall (that’s alliteration again!). Do something to help the UK logistics and intralogistics industry before it goes the same way as the railways, which are an ineffective and obsolete transport infrastructure that needs millions spending on it to bring it up to scratch. And before you spend all that money on a high speed rail link from London to the North, take a trip up the M1 and M6 and tell me why planning in our industry is an absolute nightmare!

So first rant over. Hope you’ve enjoyed it. If you want to leave comments please do so. But that nice man at iGSG hasn’t yet considered paying me for more than the iBlog so don’t expect an answer until next month, intra-on!