I’m still really interested in the TEG Road Transport Price Index and what it tells us about what is going on in the road transport spot markets. Last month I looked at the Courier element of the TEG index versus diesel price and logistics job ads, so I thought I’d do the same with the Haulage element this time but in a more conventional way!

So what’s the graph showing? The dotted pink line is the Adzuna index for logistics job ads, the dashed grey line is for diesel pump price and the solid blue line is the TEG index for haulage for spot rates for vehicles using the Transport Exchange Group haulage platform. The TEG index and the diesel index that I’ve created both start at 100 and are on the LH axis, the job ads index fluctuates more and so I’ve put it on the RH axis – the scaling is my decision and has been done to make all the indices start in the same sort of place on the graph and to show the correlation between the logistics job ads index and the TEG haulage index from the start of 2019 through to Spring 2022.

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Back in February, the ONS published some one-off data from Textkernel specifically about freight drivers which showed close correlation with the Adzuna data for general logistics jobs which the ONS publishes regularly, so it’s no surprise that the Adzuna logistics job ads has close correlation with the Haulage TEG.

After overheating in 2021, particularly with respect to drivers, logistics requirement for new people cooled a bit, but by Spring 2022 the price of diesel was rocketing, and we can see how the TEG ‘pulled’ away from the job ads index.

So, we can see the extent to which the jobs market and the cost of diesel affect spot haulage rates, but another factor which has a strong effect on price is demand. There are indices which give us a feel for this.

The HGV traffic index from DfT actually has a closer correlation to the TEG than diesel, although not available for the full time period on the graph - it only started in March 2020 as a response to Covid. HGV traffic levels were comparatively low in 2022, which is why that diesel hike didn’t have as much impact as it might have done and, HGV traffic having risen in May 2023 to the highest point since Dec 2021, has then dropped in June and July – we don’t have August yet.

And Supply Management, reporting on the S&P Global / CIPS UK Manufacturing Purchasing Managers’ Index which is at it’s lowest level since May 2020, noted slowing market conditions and declining new order intakes.

Although diesel went up in August, the Adzuna index for logistics job ads went down for first time versus July since that index started in 2018. The TEG Haulage index has gone up in August for the past four years, and it’s done just that this year, although only a tiny increase. The key question is what does that tell us about the economy as a whole?

Looks a bit scary? I’ve certainly tried to pack quite a lot of information into one graph! Last time I posted on the Courier element of the TEG Road Transport Price Index, there was interest about its relationship to the price of diesel, but there are also other cost drivers.

So, what is the graph showing? Each of the filled circles represents a data point for a particular month/year. If you follow down from any particular circle, the X-axis indicates the pump price of diesel at the middle of that month. If you follow left from any particular circle, the Y-Axis indicates how high the Adzuna index for job adverts in logistics, transport & warehousing was, again at the middle of the month.

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The size of the circle indicates the level of the TEG Courier index – the bigger it is the higher the pence per mile that customers needing spot courier work were paying on Transport Exchange Group’s platform. The TEG index figure represents the average across the whole month. The different years are then coloured up as follows:

• 2019, the first year the TEG index is available, is shown in brown – you can see that there isn’t a great deal of variation in either diesel price or job ad level – 2019 was what we thought of as ‘normal’ with December the most expensive (largest circle) for hiring couriers, as it has been in all years shown
• 2020 was the year the pandemic started and is shown in yellow – the diesel price dropped a bit due to the lockdown effect on general traffic
• 2021, shown in red, was the year the economy was opening up with staff shortages leading to very high job advert levels, impacting on spot prices – you can see the circles growing in size
• 2022, shown in grey, was when the war in Ukraine started and impacted on diesel prices big time, again impacting on spot prices – the circle to far right is July 2022
• Finally, 2023 shown in green with July 2023, the latest data point, indicated – the spot prices are still comparatively large despite the reduced diesel price – 21% higher than in July 2019

So, why is the courier index still relatively high when there is less pressure on staffing (low job ads) and the price of diesel has come down from its peak? It’s because Light Commercial Vehicle traffic was at an all-time high in June although it came down a little in July. That index isn’t shown - there’s a limit to quite how many things you can usefully show and describe on one graph!

Fortunately, we’ve had nothing up in the top right-hand corner, nothing with both very high index for logistics job adverts and very high diesel prices happening together, so I’ve been able to place the key for this graph up there!

I’ve thought of doing this post for a while, but there’s nothing like a miserable rainy weekend to get on with it: the impact of property prices on the environmental friendliness, or not, of logistics.

In the same way that commuters are often forced to live further away from work than they would wish because of property prices, logistics operations are often further from the centre of their customer demand than is ideal.

Some of you will have seen a similar map to the inset before, when I’ve done posts on the business rates assessment of large DCs – red is the highest valuation through the rainbow and ending up with purple as the lowest valuation.

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But what I’ve thought about doing and have only got around to posting today is the relationship between property prices (or their rateable value assessment) and their distance from the centre of action.

What the main graph shows is the distance in road miles from Park Royal (centre of the universe!) on the x-axis and on the y-axis the rateable value per sqm. Each spot represents a large DC in the business rates data for England & Wales, sized and coloured up by its size.

Other than one or two outliers, there is quite strong correlation in the drop off and levelling out as the distance from Park Royal increases, and then with a lift at the end as the warehouses start being closer to north than south. It can also be seen that the banana-shaped correlation is similar for both smaller and larger sized warehouses.

It’s virtually impossible to counteract the market elasticity that supply and demand imposes on property costs, but the way that logistics does that is to position its warehouses away from where its customers live and work. This isn’t green - I put some figures around this in an article for SHD Logistics just after the Nocado no-go decision back in 2021.

We are where we are, and accommodating large logistics operations in city centres is probably a thing of the past, but out-of-town generates longer distances and larger volumes of traffic.

Along with the Consumer Price Index (CPI), widely reported in the mainstream press, the Services Producer Price Index (SPPI), which is only published quarterly, became available today for Quarter 2 (April to June). The SPPI is also from the ONS (Office for National Statistics) and is a series of quarterly indices – it’s a bit like the CPI for consumer inflation, but it measures the changes in prices paid for services from UK businesses. I’ve picked out a few logistics-related elements to have a look at – I’ve shown the past five years, taking all prices back to a base of 100 at Q2 2018 so you can see the increase in prices since then.

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The two that stand out are Postal Services Under Universal Service Obligation (dark orange) at the bottom of the graph – I don’t remember Royal Mail prices going down at the start of 2021, but that seems to be the message here – it may be to do with the mix of letters and different parcel types. And then Other Transportation Support Services (pink) also stands out at the top of this graph. Back in January, the ONS reported: “other transportation support services saw a significant slowing in the annual rate as a result of ship-broker services reflecting the impact of lower freight rates”.

Then we have the SPPI aggregate index for all services (grey) - not just logistics, but a wide range of services from sewerage sludge, through publishing and real estate, to drycleaning and much else in between - that is now back under 5% year-on-year inflation.

We have road freight (blue) and courier services (light orange) ending up at the same sort of overall price increases – note these are different to the TEG Road Transport Prices Index, which I sometimes report on and which is for spot prices for consignments via Transport Exchange’s platforms. The SPPI is the result of a statutory survey, measuring changes in the price received for selected services provided by UK businesses.

And we have warehousing (purple) and railfreight (green) ending up at the same sort of overall price increase, at a higher finishing point than road freight and courier, but with warehousing flattening off while railfreight looks to be about to steam ahead, if you’ll excuse the pun.

It is only railfreight that is ahead of the CPI headline inflation, all the other indicators shown have year-on-year inflation of less than 5%, and in the case of Other Transportation Support Services there is deflation, albeit from a high rate of over 20% less than a year ago.

Are courier prices about to become deflationary? If we look at the graph, we can see the various years that the TEG index for spot courier rates has been available, starting in 2019 with the lightest colour yellow, and going through the years in increasingly darker shades, with 2021 in orange showing dramatic inflation. Finally, the darkest brown representing this year with a red spot drawing the eye to the very latest index figure for June 2023, only 0.8% more than last year. The TEG courier index is based on ppm for UK spot work transacted via Transport Exchange Group.

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There are three main causes of inflation and the economy has suffered all three in turn: Demand-pull, Cost-push and Inflation expectations. We experienced increased demand both during and following lockdowns - think silicon chips, building materials, holiday cottage rentals… Then we had cost increases, in part from that demand, but also from the impact of war in Ukraine, for example energy. Now we have expectation - everyone needs to keep their heads above water by fighting their corner on wages because of the cost-of-living and mortgage crisis.

But as well as wanting and needing more money, consumers have also become much more aware of what they are paying (witness Currys' news just today), and so it’s no surprise to see the TEG index for spot courier work starting to show considerably reduced inflation. Not all courier work is associated with home deliveries by any means, but it’s no coincidence that Motor Transport’s piece on Whistl's report, Continue to Thrive, published last month, reported that cost of delivery is now top of consumers’ online shopping agenda (54%) rather than speed (24%).

Perhaps the recent much-reduced inflation for the courier index is client companies questioning every penny they spend as the cost of doing business continues to bite and with good reason as the price of diesel has been coming back down. But demand for services which use vans (think trades as well as deliveries) continues to grow - light commercial traffic has continued to increase, certainly until May 2023 which was about 5% higher than May 2022 using the middle Wednesday of each month for comparison (unfortunately DfT haven’t yet published the June figures).

We’ll also have to wait until next month to see if the courier index crosses the line – if it becomes deflationary as haulage did at this time last year. We’ll have to wait to see which of the various economic drivers wins out – demand pushing prices up or a combination of reducing input prices and customer pressure pushing prices down. Bit of a cliffhanger!

At this year’s recent Multimodal I came across an interesting statistic from the Prologis report on its most recent sample survey of its occupants – 39% of employees in the warehouses surveyed were female. Interesting, because I had only recently calculated the proportion of women in logistics from the Office for National Statistics occupation statistics and come out with 15% - that also comes from surveys, and is then projected statistically to account for all people in employment across the UK.

The quality of the Prologis premises and distribution parks no doubt plays a big part in attracting a broader spectrum of employees, but they also tend to be larger premises occupied by larger companies, whereas we know that c4 out of 5 companies in Transport & Storage have 4 or fewer employees. This got me wondering about the relationship between the size of logistics companies and / or the size of the premises and the proportion of women employed.

The proportion of women in a company can be calculated from the gender pay gap data. The median percentage for logistics companies varies between 16-23% across the different size bands, but doesn’t follow a particular pattern – it doesn’t grow as the size of companies grow.

But I took the individual warehouse data in the Prologis report, and it’s interesting. My graph shows size of warehouse on the x-axis and total staff up the side. Each spot represents one of the (anonymous) warehouses and is coloured by the proportion of women working there. There’s two distinct clusters which I’ve marked with boxes.

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Down in the bottom left box (among plenty of other warehouses) are all of the six locations with a low proportion of women (white filled spots) – all the companies with a low proportion of women are less than 200K sqft and have 100 or less workers. Whereas up in the top right box we have a different cluster – all of the six companies that are in premises over 325K sqft are in the top bracket with respect to the proportion of women employed in them (deep pink filled spots).

It's by no means a rule of thumb as there are plenty of exceptions in the first box and a mix elsewhere, but there does seem to be a bit of a pattern – companies in larger premises seem able to recruit a fairer proportion of women, perhaps because they have to put more effort in.

You can download the Prologis report, with all sorts of other interesting warehouse employment statistics – thanks Robin Woodbridge for sending it to me!

I’m bemused by the timing of Tesco Distribution making additional price demands for transport from its suppliers, as reported last week in The Grocer. In case you’re not familiar with this operation, it’s for collection of goods ex-works from suppliers and delivery into the Tesco network.

No-one disputes that the cost of doing business has been extremely tough for many logistics businesses over the past few years: pandemic panic, the economy opening up coinciding with the driver crisis, inflation on many core cost elements including diesel.

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If we look at the graph, we can see the various years that the TEG index for spot haulage rates has been available, starting in 2019 with the lightest colour blue, and going through the years in increasing darker shades, with the darkest representing this year and a red spot drawing the eye to the very latest index figure for May 2023. The relentless rise during much of 2021 makes Tesco Distribution’s decision, again reported in The Grocer, to raise prices mid-2021 unsurprising.

At the height of the driver crisis in 2021, Motor Transport reported an on-target observation from David Wells, CEO of Logistics UK, about the forced change in supply chain management: “Lots of operators tell me they have vehicles parked up ...and the frequency of deliveries is dropping. Instead of just-in-time replenishment it is ‘just when I’ve got a driver’ replenishment.” And the Haulage element of the TEG index has never been as high again as it was in September 2021. It was about here that the DVLA processed c40K licences in four weeks, DfT wrote out to all HGV licence holders, and the ONS carried out some detailed analysis on the demographics of HGV drivers.

We know that Tesco Distribution wasn’t doing too badly until February 2022 from its accounts. Yes, it showed reduced profit & profitability (c3% pre tax profit in that year if one excludes profit from property), but with the driver crisis beginning to ease, although not driver wages. This set of Tesco Distribution accounts precedes the rocketing increase in fuel prices which combined with the additional costs from the red diesel ban for temperature-controlled vehicles. There was the 5p reduction in fuel duty, but that went pretty much unnoticed, so it wasn’t that surprising when there was another price increase from Tesco Distribution mid-2022.

The TEG haulier index is based on ppm for spot work with a base of 100 at the start of 2019. It’s important to note that the TEG haulage index is calculated across a variety of vehicle types - not all temperature-controlled, although not all Tesco vehicles will be either. The pump price of diesel peaked at the end of Q2 2022, and by Q3 the quarterly index from the ONS SPPI for freight by road, which is also across a variety of vehicle types, had started coming down. And Tesco obviously thought it had planned effectively for Christmas 2022.

As I said at the start, I’m interested in the timing of the latest Tesco Distribution increase. The SPPI for road freight has started coming down. Haulage spot rates, as you can see from the red spot on the graph of the TEG index, were only 1.4% higher in May 2023 than they were in May 2021 and less than in May 2022. Diesel had come down considerably. But then we had last weekend’s OPEC announcement about cutting production, and increasing prices again, but which interestingly post-dates the Tesco letter...

The latest Modern Materials Handling magazine is out, along with its ever-interesting (to those in logistics anyway!) Top 20 System Suppliers - you can go straight to the oracle and read about it here, although ignore the growth calculation at the bottom of the Moderns table.

But I’ve done my usual thing, which is to bung all the figures into a graph …or at least, in this case, update the graph I’ve produced for a number of years.

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The story of the past few years has been growth – both generally and of the big players. The graph shows the worldwide revenue of the top 10 individually featured in the coloured bars, entries 11-20 combined (deep purple) and in previous years the companies that were in the top 20 previously (lighter shade of pale) but not now. The graph shows the accelerated growth that occurred between 2015 and 2021, resulting in approximately double the revenue over that period.

But this year has broken with the mould of the past few years. The story this year is of contraction or stasis for some of the larger players, but expansion for the smaller ones – you can immediately see the increased proportion of the 2022 bar which the deep purple element at the top represents.

With all the current cost of living headlines, one’s mind immediately questions to what extent inflation is playing into this growth, particularly with respect to the price of steel. Increased demand for automation, to cope with the increased demand for online shopping that the pandemic brought, coincided with a reduction in steel production at the start of Covid and the price of steel was then further impacted by the war in Ukraine, along with a host of other factors around the globe.

To what extent did the price of steel contribute to the increased revenue growth of the Top 20 in 2021? Traditional automation is very steel heavy. The price of steel appears to be coming back down again – to what extent is that now deinflating revenues of the larger ‘traditional’ automation companies? Or are there other factors?

That increased growth rate of the smaller players in the Top 20 shows that they are not just copycatting, but leading the market with the flexibility of some of the newer technologies. They are not sitting on the subs bench - their time has come.

The TEG figures for April are out and I promised in another post that I’d look at the SPPI for Freight Transport by Road. The TEG road transport price indices are published monthly by the Transport Exchange Group and represent the movement in price per mile for spot rates paid by users for transport provided via the two freight exchange platforms. What you can see on the graph is the TEG index for haulage shown as a dashed blue line.

The SPPI is from the ONS (Office for National Statistics) and is a series of quarterly indices – it stands for Service Producer Price Index and is a bit like the CPI for consumer inflation, but it measures the changes in prices paid for services from UK businesses, and it includes an index for Road Freight. It’s shown on the graph as the continuous blue line. I’ve rebased it so that it starts at the same level as the TEG at the start of the graph.

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The SPPI for road freight is made up of a basket of prices for various operations: refrigerated vehicles, tankers, intermodal containers, dry goods, live animals, letters & parcels.

The TEG indices are also made up of a basket of prices - Integra has started posting examples of actual pence per mile figures for different types of vehicles and journeys, showing the extent to which the market drives pricing – in this case, for an artic, whether collection or delivery, and the area of the country.

The SPPI moves much more smoothly than TEG – partly because it will include more contractual deals and partly because being quarterly irons out the bumps – but being quarterly, it’s always slightly behind the times, hence not getting to the ‘end’ of the graph. But we can see enough for it to be interesting - after peaking in late summer in 2022, driven by the price of diesel, the SPPI for road freight has reduced slightly for last two quarters.

Your eye can’t help but be drawn to the enormous difference between SPPI and TEG back in autumn 2021. It’s not really a surprise that spot rates went up so much - although it’s history now, the number of HGV drivers was at its lowest and the number without processed medicals will have been at its highest. I’ve shown the periods of lockdown and other restrictions in varying shades of background grey, and it can also be seen that the peaking in spot rates coincided with ‘release’ from the last period of lockdown. By early November that year, the ONS was reporting weekly on availability of a whole string of items.

But from the start of 2022, the TEG for haulage came right down and has been deflationary for the past 11 months. In the same way that no-one can accuse the road transport sector of embedding inflation, I don’t think anyone can accuse hauliers of greedflation.

I hate Other - you know, that biggest slice on a potentially interesting pie chart. Which elements of logistics have gone up the most in cost over the past few years? Oh, Other!

The ONS released the latest SPPI figures today. For those who aren’t familiar, the SPPI is like the CPI but for services from businesses. So, it’s not about how much of something you’ve bought over the past period, but what the relative cost is. SPPI stands for Services Producer Price Inflation and is a quarterly index published by the ONS (Office for National Statistics) which is the result of a statutory survey, measuring changes in the price received for selected services provided by UK businesses.

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So, looking at the graph, we can see the grey line, which represents the relative price paid for services as a whole over the past five years, not including financial services. Over that period the cost for services provided by UK businesses have gone up by 13.4% although it is now flattening out, and the annual rate of inflation is now down to 4.9%.

The red line represents the price paid for Warehousing & storage services – as you can see this has risen faster, and the increase over five years has been 26.5%. The blue line with the most dramatic increase over five years (although starting to come back down more recently) represents ‘Other transportation support activities’ – Other!

A bit of delving reveals the make-up of Other (although not the proportions), which I’ve included as a box-out on the graph. It won’t come as any surprise to see that ‘issue and procurement of transport documents and waybills’ and ‘activities of customs agents’ are activities that are included.

As I said above, the SPPI isn’t about how much of something you’ve bought over the past period, but what the relative cost is. BUT, market elasticity means that when there is extra demand for a service, the price is going to go up. Even when we don’t know too much about ‘Other’, in this case, knowing that it includes customs and paperwork, I think most of us can work out what’s happened!

Following the most recent interest rate hike, the governor of the Bank of England was keen to stress that if companies try to keep their prices ahead of inflation, then inflation is going to be self-perpetuating. No-one can accuse the road transport sector of embedding inflation!

While the impact of increased veg prices on inflation surprised the BBC, continued inflation was hardly a surprise in itself as the invasion of Ukraine by Russia, and its impact on fuel and energy prices, didn’t happen until c80% through February 2022 and so was only really seen in March 2022. I did believe that inflation would start coming down in March this year, all things being equal …but now we’ve had the genuinely surprise news at the start of April that various middle eastern states are cutting oil output.

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So what’s the graph showing us? The Haulage (blue line) and Courier (yellow) are elements of the TEG Road Transport Price Index - the TEG indices are published by the Transport Exchange Group and represent the movement in price per mile for spot rates paid by users for transport provided via the two freight exchange platforms.

The graph also shows the CPI (green line), the Consumer Price Index, which I’ve rebased - the point at which to make indices equal is always a matter of judgement, but I’ve rebased to January 2019 so that the movement can be seen over the full period for which the TEG indices are available. As we can see, prices for the average person with average expenditure have gone up by 20% over the past four+ years and the price per mile for couriers has ended up in a similar place after a very different journey (including the first time that it has gone down in March), whereas spot haulage has ended up less than 10% higher than it was back in January 2019.

We can see that both the haulage and courier indices have been quite volatile, responding not just to input prices but also to resource availability and demand levels. The CPI is less volatile because it is made up of a very wide basket of prices – everything you or I might buy.

The TEG indices are also made up of a basket of prices – different types of vehicles, different weights, different types of journey… We’ve learned more about the TEG over the past couple of weeks, as Integra has started posting examples of actual average pence per mile figures for different types of vehicles. While one’s initial reaction might be that it’s surprising that 18T vehicles are earning more ppm than artics, there are so many factors involved – single v multi-drop, motorway v urban, miles v hours used, backload v outward load...

We can also see extra entries for the TEG indices on the graph, as the TEG is available for March already, whereas the CPI March figures won’t come out until 19 April. I know I won’t be the only person who’s interested to see where inflation goes next!

I continue to be interested in how low the TEG index for haulage is recently. I know that February has been the lowest month of the year since the Transport Exchange Group started publishing this index (apart from covid-impacted 2020), but the haulage element of the TEG still has an element of year-on-year deflation, ongoing since June, despite rises in many operational costs. However, if we look at job adverts for drivers as a proxy for vacancies which, in turn, could be a proxy for resource availability / capacity, perhaps we see the explanation for those low spot rates.

Last month the ONS published a one-off report looking at online job adverts as a proxy for labour demand, covering the period 2017 through 2022 - the data for this ONS report came from Textkernel, an online job search engine. The category for ‘freight drivers’ represented about 1.4% of online job adverts in the last quarter of 2022. The ONS has five points which address why these ads might not represent labour demand accurately, with a pertinent one for logistics being that “adverts may represent multiple posts …for identical, or very similar positions” and it also makes the point that “the scope of online job adverts does not fully capture the scope of UK economic activity, because of differing advertising methods …word-of-mouth or in shop windows”. A key alternative in logistics is the back of trucks, where adverts for drivers form part of the livery for some companies.

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What the graph shows is the number of Textkernel online job adverts for freight drivers (there is no category for HGV drivers or for van drivers, but there is a separate category for couriers & delivery personnel, not included here) – this is represented by the continuous darker blue line which starts at January 2017 and is measured against the left hand axis. I’ve included the non-overlap period so that we can see a longer period of what ‘normal’ looked like.

The TEG index representing pence per mile for haulage spot rates is shown by the dotted lighter blue line which starts at a base of 100 at January 2019 and runs through to February 2023, the most recently published figure – this is measured against the right hand axis. The choice of scales is mine and is designed to show the relatively close correlation for much of the overlap period, although the two lines diverge after May 2022 and stay apart. This divergence is due to the impact of various increased costs elements including diesel.

The level of Textkernel job ads, back to under 20K, suggest that driver supply is now no worse than it was pre-Covid. And the comparative lowness of haulage spot rates suggests excess capacity in the market / low demand.

Time to revisit Amazon’s square footage and see how it compared with internet sales and, therefore, likely requirement, following the news earlier this month in Logistics Manager that Amazon was starting to sublet some of its logistics locations, although only one smallish location was identified, along with others due to close which had been reported elsewhere.

The orange area on the graph shows the square footage for Amazon fulfilment centres in the UK, in millions. The grey then shows, additionally, the square footage for various other types of Amazon logistics locations eg delivery centres. This data comes from the amazing resource that MWPVL regularly compile, which I’ve then supplemented from my own research, and both are shown against the left hand axis.

The dark blue line, which is plotted against the right hand axis, shows Internet sales in £mpa for Non-store retailing only ie for Pureplay like Amazon - Amazon’s UK turnover is usually 40-50% of this figure, although some will come from other sources. This internet sales data comes from the ONS. I’ve chosen the scale to best match the fulfilment centre square footage (the orange area) and you can see that it is generally quite a close fit …until 2022.

When you consider that this is showing value before inflation has been taken into account, you can imagine what the physical volume might have done - which is, after all, what we shift in logistics.

Earlier today the ONS published the latest economic real-time indicators. I was interested to see in the report that’s part of the release, there were graphs of several sectors’ job ads, but not logistics, although it’s been included before.

Adzuna is a search engine for job adverts - it scrapes job ads from all over the web: recruitment companies, job boards, employer’s websites… The ONS uses this data and publishes two versions:

• One includes potential duplicates - where, for example, employers advertise and then the same job is advertised by recruitment companies on their behalf
• And a cleansed version where they try to strip out those extras that are ‘inflating’ the actual requirement = deduplicated

I was intending to look at the Adzuna job adverts data anyway, as I was wondering to what extent it was possible to visualise not just ‘heat’ in the logistics industry, but to have a measure of panic with respect to staff shortages.

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So, the graph. You’ll see that it covers a number of years from 2018. The lilac lines shows the two versions of the same information across the whole UK, all industries: the raw data which includes duplicates (dotted) and the deduplicated data (continuous line). You can see that, although they do separate and stay separated from autumn 2020 onwards, there is little difference between these lines.

We then have the grey lines which represent job adverts for the category ‘Transport / logistics / warehouse’ – again dotted means raw data including duplicates and continuous means deduplicated:

• In 2018 & 19, you can see the normal need logistics has for additional staffing for peak
• In 2020 the country goes into lockdown and the job advert indices plummet ...and then pick up apace in the second half of the year
• In 2021 the economy opens up, putting logistics under strain - for the first time the ‘heat’ starts showing with a high level of actual jobs to be filled, but a higher level of job adverts
• In 2022 the requirement drops away, but the ‘heat’, the extra adverts for the same jobs, doesn’t go
• At the end of 2022 and start of 2023 we have the usual plummet, followed by what is beginning to look like a usual pick up in January
• And then we have the most recent figures – while job ad levels are low in comparison with where they were in 2021, the difference between the actual level of requirements and the level of job adverts is the most extreme seen

So what can we conclude about 2023? I’ll be honest, I’d be surprised if things were hot out there at the moment – it’s not what I’m hearing anecdotally. I have asked some questions, which is what I always do when I spot something that looks slightly odd. I’ll keep you posted!

One of the things I do is to find the stories in data – looking for the patterns and outliers in boring data, by putting it on maps, into graphs… If I can help you, please do yell or DM me.

We know that with HGV drivers, shortages push up rates. But van drivers? Do less drivers push up rates or do higher courier rates attract more drivers. I think there has been a mix of those influence during the pandemic.

We also know from the recently published ‘Skills & Employment Update’ from Logistics UK that the number of van drivers in Q3 2022, was 8.5% down against three years ago. But, because there was an uplift in van drivers during 2021, that 2022 Q3 number is actually some 37K drivers below its peak.

The Office for National Statistics has identified an issue with collection of some of its survey data, but that reduction in van drivers is supported by a GoCompare survey, reported in November 2021, which revealed that more than 15% of Britain’s van drivers, equating to about 44K drivers, were planning to quit their jobs within 12 months (so, by the end of 2022). The numbers are not directly comparable. It depends on the influx of new drivers and on what you count as a van driver - official statistics would count someone if their main job of work was driving and delivering, but GoCompare is interested in people who wish to insure vans, and so it includes trades as well.

The graph below shows van driver numbers from the Logistics UK reports (the dark orange line using the left-hand axis) and the TEG courier index (the lighter dotted line using the right-hand axis). The van driver numbers are quarterly up to Q3 2022, in thousands. The TEG courier index is based on ppm for spot courier work with a base of 100 at the start of 2019 and shows the fluctuation in rates up to December 2022.

Continued below the graph...

The scales on the two axes is my choice, but in the first half of the graph, it looks as if when courier rates go down, so does the number of drivers. And the mirror image, with higher courier rates seeming to attract van drivers into the sector – either as owners or increased recruitment by companies. More recently though, it seems as if the mechanism has completely changed, with that recent reduction in van drivers pushing through into the increased rates.

Of course, both the number of drivers and the rates could have as much to do with the number of vans available. The Society of Motor Manufacturers and Traders (SMMT) reported that overall 20% less new light commercial vehicles were registered in 2022 compared with 2021, or nearly 23% less if you want to compare with pre-pandemic figures in 2019. This is put down to supply chain issues as order books are said to be strong. But going back to the Logistics UK Skills Update, more respondents to the most recent survey are reporting problems filling van driver vacancies, so it’s not just the number of vans. Perhaps van drivers have been upskilling and getting HGV licences?

The grocery industry is bracing for …for what exactly? The headlines have been full of the cost-of-living crisis since the summer, with people having to skip meals because they just don’t have the money. But, with only a week to go to Christmas, how big will Christmas dinner be this year? Will people continue to cut down and save where possible, or will they go for it at the last minute?

What does the graph show us? It’s from the ONS figures released on Friday showing average weekly volume sales from stores that are predominantly food – so, what you buy in the supermarket, convenience stores etc. Although it’s shown as value, inflation has been stripped out - the grey dotted line is 2019 and has been used as the base year. I’ve taken the total volumes and divided them out by the population for each year. Anything above that line represents additional volumes of food etc per person, anything below the line equals less.

We can see that while there were variations in the years before 2019 (shown in various shades of grey), they were much of a muchness. In 2020 & 2021 (the two lines in shades of brown) more food, groceries and other items were bought – the pandemic meant that we ate at home more often and many non-essential stores were closed. The green line is this year, and we can see that it is has been running below the traditional pattern, and well below pandemic levels, for the past few months.

But the graph shows that, whatever the variation in the rest of the year, for the past few years when it comes to December, we have bought the same volume of food – almost identically the same amount. And then cut back in January – a combination of eating leftovers, festive treats that somehow made it through uneaten, and New Year resolutions of various sorts kicking in.

With the World Cup going on this year and the cold snap we’ve just had, it’s very difficult to judge where things are going to end up – it’s been really busy on some visits I’ve made to the supermarket, but perhaps I’ve been shopping at the same time as others and it may have been deathly quiet in between! And with a full week prior to Christmas, it’s very difficult to judge how much shopping has still to be done - whether the green line is going to hit that exact same spot as usual and be on target.

The OBR (Office for Budget Responsibility) is assuming that fuel tax will go up considerably in the Spring. That news, combined with prices that have been more extreme than petrol, means that it’s time to have a look at diesel. Diesel has been hit hard in comparison with petrol as an RAC fuel spokesman explained in October: The UK has already banned Russian diesel imports and demand from Europe is higher than usual as it looks to reduce its reliance on gas.

In a recent statement to the Treasury Committee, the Chair of the OBR said: “Our forecast is based on Government policy that was announced back in March, which was that there was going to be a 5p cut to fuel duty this year, but then it was going to be made up from April next year, which means that you would add 5p on top of the usual RPI indexation…”.

That assumption is apparently based on the 5p cut earlier this year being *reversed* in 2023, although recouping it was not mentioned in the Spring statement factsheet. The OBR also assumes the ‘usual’ RPI indexation, which hasn’t happened for a decade.

Continued below the graph...

So, the graph. First, there’s three elements of the TEG Index, which are based on the spot rates for the pence per mile being agreed between providers and users through the Transport Exchange Group’s platforms. The grey line is the combination index for road transport prices, yellow is the index for Couriers and blue is Hauliers.

The dark dotted line is an index for the cost of diesel. The price is from BEIS (Department for Business, Energy & Industrial Strategy) data - the closest possible to the mid-point of the month. The BEIS costs are pump prices, but the VAT effect disappears when you are looking at percentage increase in cost, which is the same regardless of whether VAT is included. Bulk fuel is less than pump prices but moves in a similar pattern. I’ve made the index start at the same level and timeframe as the TEG, so they can be compared.

In 2019 the TEG and diesel indices started together, with the TEG having the upper hand in the latter half of the year when demand for transport is stronger. The price of diesel then plummets at the start of Covid, due to much less demand during lockdowns. During 2021, the TEG indices went up much faster than diesel, with the opening up of the economy coinciding with a driver shortage. However, in 2022, diesel has been at very high rates which are not reflected in the TEG indices, particularly haulage, meaning that spot rates are unlikely to be covering full costs.

Fingers crossed, but does anybody think an increase in fuel duty will be as invisible as the 5p reduction was?

That was my husband’s reaction from the other side of the desk when he saw this graph, so do bear with me as I describe it! What the graph is showing is the annual rate of change of various price indices = inflation. Read on, below the graph...

I’m going to run down the legend describing each trace:

• The solid lines are from the Consumer Price Index (CPI) data release made by the Office for National Statistics (ONS) earlier today – the pink one is the headline rate of inflation which rose to 11.1%, and the green solid line is food inflation which has risen to 16.2%
• The lines with the larger dashes are from the ONS Producer Price Index (PPI), also out today – the lighter brown one, output, represents inflation in the prices that manufacturers sell their goods and the darker brown one, input, represents inflation in the prices that manufacturers are buying in the various ‘ingredients’, materials, energy etc that they need to make those goods
• Next come the finer dotted lines, which are from the ONS Services Producer Price Index (SPPI) showing inflation in the prices for various services provided by UK businesses – the lilac one is for all services other than financial and the light blue one is for Freight Transport by Road
• Lastly, the lines with the smaller dashes are from the TEG index, showing inflation in spot rates paid for road transport through Transport Exchange Group’s platforms – the grey line is for the overall index, the yellowish line is for courier bookings and the darker blue for hauliers

The only figures which aren’t monthly are those for the SPPI, which are quarterly (more useful for historians than strategists?), which seems odd when the service industries now account for 79% of total UK economic output (Gross Value Added) and 82% of employment. Anyway, I’ve plotted them in the middle month of each quarter.

I’ve marked the grid line that represents zero (the point at which prices aren’t going up or down) as a thicker black line – any trace above that line represents inflation, any below is deflation. The graph starts at the beginning of 2020 and goes through to October 2022 – because the TEG index started in 2019, the first year-on-year inflation figures that can be calculated are January 2020.

While no-one is pretending that the inflation on manufacturing inputs (the dark brown dashed line) is low at 19.2%, we can see signs now of some inflation measures starting to come down.

The darker blue dashed line showing road haulage spot rates is the most interesting (at least to me!) and is the most volatile of those. It was already in slight deflation in February 2020 which then became deeper as Covid hit and many businesses didn’t require any goods to be moved. Road haulage spot rates then remained in year-on-year deflation for more than a year, before breaking through the zero line and rising dramatically to the highest level of inflation among the indices shown on the graph. That rise was fuelled by diesel prices, the economy opening up, staycations, lack of resource… There was then a long decline in inflation rates (which means that prices were still going up, but not as fast), until eventually prices started falling earlier this year.

They say that transport is a leading indicator. While the TEG road haulage rates ostensibly tell us about price per mile being paid, when that falls year-on-year while diesel prices continue to be inflationary, it also tells us that there is reduced demand for that service. So while, from a consumer point of view, we all have to hope that deflation in road haulage is leading the way, we can also deduce that there is continued slowdown in the economy in October, beyond the GDP figures currently published – not good news.

And, if I can help you with any projects, big or small, where you need support: please get in touch!

The news a couple of months back was about Amazon closing, cancelling and delaying warehouses in the US. Given today’s news in the UK, about the economy starting to shrink, it seemed to be the right time to have another look at Amazon's footprint in the UK.

Along with a lot of people, I'm really grateful for the wonderful work that MWPVL do each year in annotating known locations and pipeline around the world.

My map, created using Maptitude, shows both Fulfilment Centres and the various other logistics operations. Although many of the headlines report huge sqft, these can include multiple structural mezzanines that have been rentalised - I've tried to bring all the figures back to footprint, to make them more comparable with other logistics operations.

There’ll be more retail sales figures out in a week’s time, but in the meantime the most recent we have were for September. Weekly internet sales were c92% of September last year and the subset of internet sales from non-store retailing was down by a similar amount – that’s value not volume. Meanwhile the footprint has carried on growing in recent years.

Thought-provoking.

My interest piqued by having looked at the courier element of the TEG index a couple of times recently (see further down this page), I thought I’d do an update on what consumers are being charged for home deliveries these days. This research started off as part of a project for a client looking at the Next Day offer from various different fashion retailers back in 2009 and I’ve then updated this bit of it a few times since.

The graph below shows the change in order cut-off times and charges to the customer at five points over the past 13 years for Next Day delivery of fashion in the UK from five retailers. The various colours indicate the different retailers, with the cut-off time on the x-axis and the charge on the y-axis. The width of the ‘comet’ trace indicates the year, with the widest being 2022 to draw your attention to the current position (see legend). So what's going on?

Continued below graph...

I’ll start at the top of the legend and the bottom of the graph, with ASOS (blue). This shows the extent to which retailers are trying to protect consumers - the charge has remained the lowest across the whole period and the last order cut-off, having pushed out to midnight, had already pulled back to 10pm by 2020. ASOS also have a subscription service, which is good value if you’re a regular customer.

Harvey Nichols (red) didn't offer a next day service in 2014 hence the stray dot for 2009, and it continues to have the earliest cut-off and the highest charge. That highest current charge is shared (assuming you consider £8 and £7.99 to be the same!) with House of Fraser (green), but which offers a later cut-off, further extended in this latest data gathering.

Jigsaw (purple) has increased its price and reduced its service since I last did a snapshot. And finally John Lewis Partnership (orange) which has had the most consistent offer, with just a little refinement over the thirteen years.

Obviously there are now a much wider range of delivery fulfilment services available including Same Day etc, but back in 2009 when I started this, none of these five offered that (I recorded it at the time) and even in 2014 it was only being offered by House of Fraser. And although Click & Collect was being offered by all five by 2014, it was only from John Lewis that you could collect your purchase in 2009.

Four out of the five retailers have held their Next Day delivery charges at the same level as 2020, with ASOS continuing to offer the best value and the latest cut-off time.

With Black Friday coming up later this month, and the SPPI* for Q3 published by the ONS recently, I make no apologies for having another look at the TEG** courier index, this time graphing it against one of the postal and courier elements of the SPPI.

What the graph below shows is the non-Royal Mail courier element of the SPPI as the continuous orange line, positioned at the middle month of each quarter and brought back to a base of 100 at the start of 2019. The courier element of the TEG index is shown in as lighter dotted line.

I chose the start of 2019 for the rebase of the SPPI, so it matched the start of the TEG index and at a point we all considered relatively normal. But, as I’ve said before, deciding when to start a comparison is always a difficult choice.

The SPPI will include contractual as well as non-contractual rates and is quarterly, whereas the TEG index is for spot rates and monthly. So we see much more variation in the TEG index, whereas the SPPI gives a more gentle overview of the general direction of rates, even though it is not seasonally-adjusted.

We can see that the SPPI was pretty flat up to Q3 in 2020, with a small rise in Q4 2020 that could have been interpreted as seasonal. But since then, it has just kept on going up. After a dramatic period of inflation in Q4 last year, we can see that it has then started, very gradually, to level off at a very high inflation rate of over 14.5% year on year.

So what can the TEG Courier index tell us? The reduction in October tells us little (it always seems to dip at this time of year, prior to peaking, as one might expect, in December). But the TEG courier index is now showing inflation of <5%, down from a high of over 18% when the economy was over-heating in H2 2021. Unfortunately, any inflation is on top of any previous increases (shed-loads on shed-loads), but the good news for users and consumers is that the increases are reducing in size!

*The SPPI (Services Producer Price Inflation) is a quarterly index published by the ONS (Office for National Statistics) which is the result of a statutory survey, measuring changes in the price received for selected services provided by UK businesses. The Universal Service Provider for postal services in the UK is the Royal Mail. Plainly there are plenty of independent courier and parcels services, and it is the rates for these that the element of the SPPI that I’ve used in this graph monitors - the two most recent points are provisional figures.

**The TEG index is a monthly index published by the Transport Exchange Group which is based on the pence per mile based on spot rates actually paid. The overall TEG index is made up of both courier and haulage, with the courier element shown on the graph.

The TEG index is a monthly index published by the Transport Exchange Group which is based on the pence per mile based on spot rates actually paid. The overall TEG Road Transport Price Index is made up of both courier and haulage. Last month when the TEG came out, I looked at how the haulage element correlated with the DfT HGV traffic measure. So I thought I’d do the same this month, but for the courier index versus the DfT LCV measure. This time I’ve started the graph Jan 2019, where the TEG index started, so you can see what the TEG for courier rates did seasonally pre-Covid.

So, what this graph shows is the DfT (Department for Transport) Traffic index for Light Commercial Vehicles (yellow line measured against the left hand axis). And the TEG Road Transport Price Index for couriers (dotted orange, RH axis), which is based on the pence per mile paid for couriers organised on the Transport Exchange Group platform.

As I mentioned, the TEG index started at 100 at the beginning of 2019. The DfT index commenced in March 2020 (as a response to Covid) based on 100 representing the same day of week in the first week of February 2020 – I’ve used the Wednesday nearest the middle of each month.

We can see that there have been a couple of severe drops for the LCV index. The positioning of the scales is my choice to best show the patterns without using excess space to show the impact of the first lockdown - for those who are interested, the LCV traffic index dropped to as low as 44 mid-April 2020 and 61 mid-May 2020.

If you play a spotting game going into or out of a major city, yelling ‘trade’ or ‘delivery’ every time you see a van, you quickly realise that there are many more vans used by the trades. Think construction, maintenance, servicing, repairs… Think people who have to use a vehicle to get tools, equipment, parts and materials on site, but who aren’t carrying out deliveries as such. And this is borne out by DfT statistics for 2019-20 (the most up to date there is) – see p10 for van usage and mileage split.

So, although internet sales rose hugely during lockdowns (shown in grey banding on the graph), the measure for van traffic doesn’t match the courier rates well during these periods as we know that many trades were badly affected. We also know that many ‘lower skilled’ jobs are currently suffering shortages so, even though we know that internet sales are not everything the retailers would hope for, van traffic seems to have stopped rising. I think that the current courier story may be about capacity as well as inflation for us to be seeing such continued increases in rates.

We’re short of workers in the UK, right?

Nearly everywhere I go in logistics I hear about it. Nearly every magazine or news email I read talks about it. It seems to have moved from truck drivers to inside the warehouse and at managerial level, but the story is the same - shortage.

Other topics I keep coming across in the news and on Twitter, are things like the current length of NHS waiting lists, the number of people suffering from long Covid, the number of people who can’t stop shielding because vaccines don’t work for everyone – think those undergoing cancer treatments, etc.

I’ve included slides in a presentation and written subsequent posts on the topic of the Silver Exodus – older workers moving into economic inactivity. Economic inactivity is people, aged 16-64, who are neither working nor actively seeking employment.

But it was only on reading an ONS (Office for National Statistics) publication that came out earlier this month that I joined all the dots together.

The single largest reason for economic inactivity back in the ‘90s, and no doubt before that, was ‘Looking after family / home’. And that continued to be the case predominantly until 2013. In 2013 being a student took over and remained the single largest reason for most of the time until 2021.

But in 2021, and it remains the case in the most recent survey for May to July 2022, the single largest cause became ‘Long-term sick’. So, we’re desperately short of workers, in the NHS as well as logistics, but the largest cause of economic inactivity is now …people needing the NHS.

If it hadn’t been for another ONS (Office for National Statistics) publication, fresh out today, piquing my interest (Reasons for workers aged over 50 years leaving employment since the start of the coronavirus pandemic), I wouldn’t have had a look back at that earlier publication and the data that went with it.

Having had my realisation, I find that Faisal Islam wrote a piece, a fortnight ago, where he connects the record numbers of long-term sick with economic impact. But I don’t think this is something that is being shouted loudly enough – the current largest cause of economic inactivity is long-term sickness.

The record NHS waiting lists and Covid are impacting the numbers of workers in our industry as well as the wider economy.

Anyone who doubts that we are entering recession only needs to listen to trade associations in our industry or statistical organisations talking about transport and storage. In an email about its tracker survey for Q2 sent out mid-August, Logistics UK commented: “As a result of industry difficulties, 35% of respondents reported a decrease in orders.” Logistics UK members include shippers as well as logistics providers, so this is not just about demand for transport, but will impact.

And in its fortnightly report on the impact on UK businesses of various current challenges, the ONS (Office for National Statistics) reported: “More than a third (37%) of businesses in the transportation and storage industry reported their turnover had decreased in July 2022” – although it needs to be said that official statistics do include passenger transport as well as logistics and there have been rail strikes, but I don’t believe that won’t have affected the percent of businesses much.

Or, if anyone still doubts that things are tough, they can look at the graph I’ve prepared for this post...

What this graph shows is the DfT (Department for Transport) Traffic index for heavy goods vehicles (light blue line measured against the left hand axis) which I’ve taken at the Wednesday nearest to the mid-point each month. And also the TEG Road Transport Price Index for hauliers (dotted dark blue, RH axis), which is based on the pence per mile paid for spot haulage organised on the Transport Exchange Group platform.

Although the TEG index started at 100 at the beginning of 2019, and the DfT index commenced in March 2020 based on 100 being the same day of week in the first week of February 2020, I’ve made the graph run from July 2020 as this avoids the very start of the pandemic when traffic volumes fell off a cliff.

You can see that while there is by no means an exact relationship between HGV traffic volumes and the price paid for haulage, they do tend to follow each other, and peaked in the same sort of pattern at the same sort of time (although it needs to be said that the positioning of the height is down to my choice of scales to best show the matching patterns).

What we can see right now is that HGV traffic volumes in mid-August 2022 were at 100, the same level as February 2020, with post-Christmas usually considered the lowest part of the year. But August was also a temporary low in traffic last year, although perhaps for different reasons, and this was a time where there wasn’t good correlation - the TEG haulage index just powered on through.

This year this element of the TEG may have risen a little but is *much* more restrained.

When I spoke at Tomorrow’s Warehouse back in June, I put up a similar graph, but this one has been both updated, and changed in a crucial way. I commented that it was really the last time I could be lazy and do the calculation I’d done just based on the value of merchandise – the inevitable happened and, after the event, someone challenged me to show the impact after I’d stripped out inflation!

First of all, what’s the graph below showing. The green elements ARE value – they are measured against the left-hand axis and represent the value in £billions based on my best estimate of non-food retail and etail sales using ONS (Office for National Statistics) data.

The darkest green is retail of non-food carried out in-store, and we can see the squeeze that lockdowns put on that element of business. The mid-green represents non-food etail sales that have been made by companies with stores, but the sales have been made online and delivered to home. The lightest green is pure play – sales made by companies that only operate online - the latter will, unfortunately, include some food (Amazon pantry, Ocado, some specialist online-only food businesses…) which it is impossible for me to remove as there are no separated statistics published. It’s not seasonally adjusted, but it is a moving average, which will smooth out much of the seasonal variance. And we can see the extent to which the light and, particularly, mid-green rose dramatically in value during the first stages of Covid.

Back in 2016, Prologis, the largest industrial real estate company in the world, and very familiar to those of us in logistics, came up with a bit of a formula: “Our research reveals online retailers need approximately 1.2 MSF per billion dollars of online sales on average, which is three times the distribution center space required for traditional brick-and-mortar retailers” - MSF is millions of square feet and at the time, this translated to roughly 1.6m sqft per billion GBP online sales and 0.5m for retail.

Obviously since then there have been price variations, with inflation particularly acute in the past few months, and warehousing is very much influenced by volume not value. For retail sales, the ONS publish both value and volume, but that’s not the case for internet sales – I asked. The advice that came back was a suggestion that I might assume that the relationship between value and volume for internet sales was aligned with retail sales, and so that is what I have done.

So the solid grey line, which refers to the right-hand axis, uses the Prologis rules of thumb converted from dollars to pounds, with the sales data for etail and retail separately converted to volume using the retail value to volume ratio, to calculate an estimate of the warehousing square footage required. And, although convoluted, we can see that that figure rises at a fairly even rate until the start of Covid.

The calculated requirement then does what we know the real warehousing requirement has done, after the very initial impact of the first lockdown, and that is to grow at a vastly increased rate. However, more recently, the volume of goods being bought in total has been quite flat and the proportion being bought online has been dropping off, resulting in a drop in the estimated warehousing requirement. I’ve put in a trend line based for what one might have expected as a warehousing growth requirement pre-pandemic – this has also been updated from the Tomorrow’s Warehouse slide to be based on volume sales rather than value.

If you’re selling online, you may be struggling for space or you may feel you over-estimated, but what the graph most definitely shows is how difficult it is to forecast and plan in logistics at the moment!

When I spoke at Tomorrow’s Warehouse in June, I included a statistic that surprised some people – that the nationwide reduction in Forklift Truck Drivers over the past couple of years has been more than a third - that statistic is from the Office for National Statistics workforce numbers on Nomis.

The graphs I also used in that presentation, about the Silver Exodus, came from an academic paper referred to in a post on the World Economic Forum website. The thrust of that post is that there were c300K more UK workers aged 50-65 “economically inactive” than before Covid – neither working or seeking work. It also gave detail on sectors and occupations most affected:

• Wholesale & retail (40% rise), Transport & storage (+30%), and Manufacturing (+25%) had the largest proportional rise in inactivity in over-50s
• Process plant & machine operatives (+50%) and Sales & customer service occupations (+40%) were the occupations with largest percentage rises

Most of this Silver Exodus demographic said they didn’t ever intend to return to work. The piece surmised that it could be that workers had saved more during the pandemic and could now afford to retire earlier than planned.

If you look at the Silver Exodus graphs, the red one is interesting as it represents workers who earned £18-35Kpa in their most recent job and shows the percentage of employed workers in that 50-65 age bracket who became economically inactive one year later. These workers were more and more likely to become economically inactive.

So, logistics has been one of the larger areas of loss and, while I suspect that the process plant & machine operatives are more manufacturing occupations, they sound like some of the sorts of jobs we have in logistics …say forklift truck drivers? £18-35K is the sort of pay for the lower paid half of FLT drivers. And in a recent survey of Forklift Truck Drivers carried out by Talent in Logistics, nearly half (48%) were over 50.

I said in my presentation at Tomorrow’s Warehouse, that my own thoughts were that it could well be that some of this older demographic now look to return to work because of the cost of living crisis. And this does indeed seem to be the case – witness the graph in this tweet, today, from the Resolution Foundation.

Logistics needs to be ready - it’s the opportunity to welcome some FLT drivers and other staff back into the industry.

It won’t come as a surprise to anyone working in the logistics and supply chain sectors, but businesses are stockpiling, and in increasing numbers. Late last week, the ONS (Office for National Statistics) published its fortnightly bulletin on ‘Business insights and impact on the UK economy’, which looks at the impact of the various challenges facing the economy. The bulletin is based on responses from a fortnightly business survey.

What the graph shows is the answers given over time to the question: Is your business stockpiling any goods or materials? It’s for businesses in all sectors which are currently trading and responded to the voluntary survey.

You can see that the answers Yes (Green) and Not Sure (Grey) are clearly trending upwards – I’ve shown the trends as hardlines and the more varying results to each survey as the dotted lines. While the trend for No as an answer (Lilac, measured on the right-hand axis, and so much larger as a proportion) is trending downwards.

Different questions are asked in different surveys, and the responses to this question are only recorded in the accompanying data since the start of 2021. Although some more recent increases in stockpiling might be put down to ‘accidental’ stock increase due to reducing sales and/or buying ahead to beat inflationary price increases, the graph also shows is that over this period, confidence in the supply chain has reduced rather than improved.

Earlier in June, in a previous bulletin, the ONS reported that the top three resources being stockpiled in late May were metals and materials (25%), food (23%) and manufacturing parts (21%).

The latest TEG Road Transport Price Index came out yesterday - May was nearly level against April. The courier element rose a little, but the haulage index went down slightly. Also yesterday, the price of diesel went up yet again, taking the cost of filling up an average car to over £100.

What I’ve done in the graph below is to take the costs from Motor Transport’s 2018 Cost Tables for an artic unit & trailer and update them for January 2019 diesel costs and put profit in at 2% of turnover. Note, profit is already very low, but it’s what the big boys in the road transport industry seem to average according to Motor Transport’s Top 100. So you can see the proportion of turnover companies spent on diesel, driver & vehicle and then what’s left over for overheads and profit. I’ve taken that as a sort of benchmark of normality.

It adds to 100 in January 2019, not only to show the percent each element of costs represented at that time, but also because the haulage element of the TEG Road Transport Price Index was 100 in that month, when it started.

I’ve then left a gap for the intervening years and recalculated costs at the midpoint each month from Jan 2022 to May, reflecting the various cost increases in diesel, driver & vehicle and what’s left over for overheads and profit if income achieved the equivalent of the spot rate of the TEG index, which is what the height of each bar represents.

You can see the real squeeze on what is left after all direct costs have been covered. Yes, I know some companies will have drivers employed for years, potentially at lower cost, and some will be operating vehicles that are not brand new. So there may be a little more in the ‘overheads & potential profit’ pot, but that pot has to cover compliance, planning, yard & office space, power, computers, phones, tolls, parking, PCNs, the accounts team and other management functions, among other costs.

At the end of last year, I predicted 2022 was the year of the 3 ‘i’s – inflation, interest rates & investment. About that last point, I said: I believe there will be a focus and pressure on indirect costs - overheads & HO – automating as many admin activities as possible. However… I don’t believe that has happened that quickly, and (I know I’ve said it before, but I’ll say it again) I do believe that many hauliers will not be making a profit right now, and some will be making a loss.

The current diesel increases will really be impacting hauliers, hauliers who need to operate on an economically sustainable basis if we’re to have food delivered tomorrow as well as yesterday. More worrying is that some may be suffering cashflow problems today because certain customers take for ever to settle invoices, and in the meantime the haulier forks out more & more cash upfront to do the job. And, as I mentioned at the start of this piece, the cost of diesel continues to rise…

Road haulage spot rates have started rising again and so has driver pay. There’s a seasonal pattern: quiet following the excess of Christmas …and then things start to pick back up in spring.

What you’re seeing on the graph is two indices – the TEG index for haulage (dark blue dotted line) and an index for HGV driver pay that I’ve created from Adzuna data (light blue) – more about that in a minute. Although I’ve not included diesel on the graph, you can’t talk about road transport without talking about diesel. It was actually quite low priced when the TEG was running under the driver pay index before, during 2020, because of lockdowns and low demand due to the pandemic, but that is certainly not the case now.

So, the HGV driver pay index. The data comes from a portal Adzuna is currently developing – it contains all sorts of info related to jobs that have been advertised. I’ve taken the annual salary nearest the middle of each month and only included roles in the logistics sector that required an HGV licence, so excluding engineering and other roles. I also excluded entry level roles to avoid any distortion from the current large number of training ads. I then converted those salaries to an index base of 100 at the start of 2019, so it’s easy to compare.

Continued below the graph...

Haulage rates are considerably higher than they were, we can see that from the TEG index. But with a combination of driver pay remaining high, diesel very high and with the capital cost of kit significantly higher over the past year or so, I can’t believe how comparatively low the TEG haulage index is at the moment. In its latest Business Insights report, the Office for National Statistics noted that 56% of Transport & Storage businesses reported an increase in the price of materials, goods and services bought …but only 35% had passed on all or some of those increases.

Because demand is low. We know that, for example, retail food volumes have been lower recently. We know that current HGV traffic levels aren’t high but, because the DfT traffic index only started in March 2020, we don’t know what normal looks like for this time of year. We know that the ONS report had as its first key point that 20% of businesses reported their turnover decreased in March 2022 compared with February 2022, whereas only 14% reported turnover had increased.

It certainly looks as if buyers have the upper hand at the moment …even if they might not feel that to be the case!

Last Friday, the ONS (Office for National Statistics) released the latest retail sales figures. This was reported in the press, particularly with respect to the reduction in retail sales and the impact on the cost of living, particularly around food and fuel inflation.

Earlier last week, and before these latest figures were available, Warren Ackerman, Head of European Consumer Staples Research at Barclays, penned a piece for last week’s edition of The Grocer magazine. Commenting on the performance of some of the major brands such as Nestlé, Danone and P&G, given some of the recent price increases, wrote in a longer piece "The interesting point is so far we are not seeing much downtrading. Indeed, to the contrary the evidence is there is more uptrading to premium products, just at a time where disposable income is getting squeezed hard ...growth in out-of-home channels continues to be very strong even as retail sales for in-home food remain elevated ...Normally we would expect to see this growth in out-of-home impacting in-home food sales. This is not happening, and for as long as this continues, sector growth could remain elevated."

What we’re seeing in the graph are indices for Value at current prices (the grey line), so amount spent, and Volume (the purple line) representing quantity bought. Both these indices have a base of 100 for the year 2019, and both are seasonally adjusted. We can see that with some small variations, volume and value followed a not dissimilar path month by month for 2019. In 2020 Covid hit, and both the volume and value rose sharply, and then for the next year or so followed an erratic path, erratic but pretty much in step with each other. For the past year the lines on the graph have started to separate, gradually at first and now very clearly. I’ve been a bit naughty with this graph as the y-axis doesn’t start at anything like zero, but I’ve done this to emphasise the story - the headline is that as food retail sales do start to see a reduction, the amount of product in average shopping baskets is falling dramatically.

Continued below the graph...

The combination of these figures and that opinion piece in The Grocer, suggests to me that there are two quite different stories going on here. The Barclays commentary on brands suggests that middle class households which can afford brands are continuing to shop in the same sort of manner as they have been in the recent past. Poorer households, who are more likely to be buying supermarket own ranges or shopping with the discounters, are not deciding whether to stop shopping at Waitrose or between buying the basic rather than premium item (they never were), but deciding not to buy that item at all – which fits with the comment earlier in the year from MD of Iceland, Richard Walker: “We’re starting to lose some customers to food banks or, not being overly dramatic, to hunger”. And Jack Monroe, Bootstrap Cook and campaigner against poverty, more recently: “That's not people deciding not to go to the theatre or not have legs of lamb or bottles of Champagne, that's people deciding 'we won't eat on Tuesday or Thursday this week’...”

The volume of groceries now being bought is lower than 2019. If some people are buying the same sort of amount, then others are buying much less – their shopping basket is costing more but has less items in it. This has absolutely nothing to do with eating out or going back to work in the city, this is about a very real cost of living crisis for some people. And this is before elements of producer input inflation which have yet to feed through to the consumer, and the spring-loaded energy uplift this month, which has yet to make its way into official figures.

February is a good time to get a feeling of how things are really doing in ecommerce. Because it tends to be the lowest month, it’s the least confusing when looking at trends and it’s also without the hype of Christmas and other holiday-related activity.

What this graph is showing is the average weekly internet sales from February 2015 to last month, split into non-store retailing in red (think Amazon), non-food stores in blue (think John Lewis, Boohoo…) and food stores in green (think Tesco) - these are based on the ONS figures released on Friday.

I’ve then added a trendline for each based on recent Februarys up to and including February 2018, showing where each category might have gone pre-Covid. We can see that 2019 and 2020 were pretty much on the trend line and then, as we all know, the impact of the pandemic has been to raise the game for home shopping.

A straightforward projection of these trend lines would imply that internet sales for both non-store retailing (red) and predominantly non-food stores (blue) have already reached the sorts of levels they might have expected at this time of year in 2025. Predominantly food stores (green), have already reached in February 2022 what might have been expected in about 2031.

Continued below graph...

However, we can all see from the graph that the more recent trend for food appears to be on a downward trajectory, which certainly fits with my own behaviour - despite subscribing to the delivery service, I’m visiting stores more often and finding online ordering a) a bit uninspiring and b) more difficult to plan around as we all get out & about more and our lives become less routine. Back in 2020, a report from Bain & Co forecast that 35%–45% of the spending surge (not specifically UK) would survive the easing of lockdown measures.

But the big issue for ecommerce/home delivery, particularly for food and grocery, remains profitability, with the Bain report indicating that even with delivery charges, ‘traditional’ methods of grocery home delivery are not profitable.

And now there’s inflation. The figures in the graph are for value not volume and, while we’ve all been able to get away with ignoring inflation while it was low, this needs to be taken into account. Revisiting the profitability equation, baskets will start reducing in both size and quality as the customer becomes squeezed, and the supermarkets will also be impacted on the cost side by increased bills including fuel.

The headline in this morning's CIPS email was a bit shocking: Logistics sector on 'cliff edge' as it faces 400,000 labour shortfall.

But the demographics are against us - not just in logistics, but in the UK generally. And Covid has made it worse. Back in January the BBC carried an article which asked: Where are Britain's missing million workers? It explained that Covid has meant some older people took earlier retirement than they might previously have planned, and some younger people stayed in education longer than they might have otherwise done.

My picture uses a population pyramid from the ONS also published in January. I've shown it twice and drawn on different green lines demonstrating what two different scenarios for working age might have looked like on the 2020 version (so ignore the frilly line for 2030 and just look at the bars and my green lines).

You can see that for the first one, with the lines drawn at 16 and 64 the number of people joining and leaving the working age population are about the same. But in the second version, with the lines drawn at 20 and 60, not only are there less people in the band, but the number leaving the working age population will be growing, and at the same time the number entering for the next couple of years will be declining.

It's also worth noting that logistics isn't gender-balanced and there are actually two sides to each of the population pyramids!

You’ll have seen in the news already today headlines about the CPI, the Consumer Price Index, such as “Inflation: Cost of living rises at fastest pace for 30 years”.

The ONS also publishes the PPI, the Producer Price Index, which reports on changes in the prices of goods bought and sold by UK manufacturers, and once a quarter (earlier today), the SPPI, the Services Producer Price Index, which includes figures for inflation for various elements in the Transport & Storage Sector. The main graph shows how prices for all these elements have changed over the past year.

You can see that there’s the odd area, such as postal services, where prices have apparently gone down over the year, and areas with quite striking levels of inflation, the most striking of which are Other Transportation Support Services and the snappily named Warehousing and Support Services For Transportation.

The detailed description of Other Transportation Support Activities includes a number of lines, starting with “Forwarding of Freight” and including “Activities of Customs Agents”, so hardly surprising (without mentioning the B-word) that element has risen the most over the past year.

Freight Transport Services by Road looks very conservative in the main graph at 3.2% increase over the whole year, and indeed is less than the SPPI as a whole at 3.6%. But have a look at the inset graph which shows this element quarter by quarter since the start of 2019 to see how looking at the whole of 2021 just isn’t telling the whole story. It really is a game of two halves.

It’s only because of Covid that we can now see the extent to which the passenger element distorted the Transport & Storage vacancy information, for those of us who are only really interested in logistics!

So what can you see in the graph? The green line shows vacancies in Transport & Storage - earlier today, the ONS published its latest info on vacancies, which is divvied up by traditional sector, so Transport & Storage includes things like transport by pipeline, bulk storage of agricultural produce, the national archives… along with passenger transport.

The grey line shows a more recently available measure of job adverts for Transport / Logistics / Warehouse and is more aligned to our interpretation of ‘logistics’. This data is also via the ONS, which has been publishing indices of job adverts using Adzuna data – I’ve used the deduplicated version in the graph, as the same advert can appear on an employer’s website as well as via recruitment agencies. Continued below the graph...

We can see that although these two measures were not aligned during 2019 and at the start of 2020, since the pandemic started, and many passenger transport operations across all modes became affected by reduced trade, the alignment is quite marked. Unsurprisingly, other elements of Transport & Storage seem to have dropped out leaving just logistics.

Couple of other things to note. The Transport & Storage figures are for rolling quarters, which I’ve aligned with the middle month eg the latest figure of 56K vacancies is for Oct-Dec, which I’ve aligned with November. And I’ve taken the job advert index for the date closest to the middle of each month.

However, just because we have that figure of 56K vacancies, doesn’t give us the level of vacancies in logistics as we also need to bear in mind that many logistics jobs are not in the Transport & Storage sector, but in warehouses and transport operations classified as belonging to retailers, manufacturers etc. If you asked me to make a guestimate, I’d probably go for c130K vacancies across logistics operations in November just gone.

When we recover from Covid's impact, and passenger transport operations are back to normal, we will probably be better off using the Adzuna ads as a guide, rather than the traditional Transport & Storage figures, as we can see from 2019 that there is no particular pattern to the uplift. The Adzuna data is also more quickly available, hence being included in the ONS economic real-time indicators.

Unlike most of my posts, this graph hasn’t been created by me, but came from the Commercial Fleet website in the summer. I was really struck by it, so I was interested when Motor Transport’s Cost Tables for 2021 were published last week that while both capital costs and residuals, whether you’re looking at artics or vans, have risen, the residuals for vans have risen nothing like as much as we’re seeing on that graph.

I guess there are a number of potential conclusions you could draw. Five year old vans may not have risen in price to the extent of younger ones. The sort of operators who buy new could be playing it on the safe side, not wanting to count any chickens before they hatch and to cover all costs in the meantime. Perhaps the additional profit is being created by the leasing and auction companies rather than the operators.

What we do know is that there was nothing like the same number of new LCV registrations last year compared with the annual figure for the previous five, only about 80%: And based on the November YTD figures, 2021 is likely to be at the bottom end of those previous five. So perhaps that rise in prices for second-hand vans is a one-off phenomenon?

Over the past few months, I’ve been watching the CBI press releases on its Distributive Trades Survey with some interest, as stocks compared with expected sales broke with any previous pattern in an index which has been running since 1983. In the latest release, on Thursday last week, although distribution stocks don’t look particularly healthy overall, retail stocks were looking a lot more healthy prior to Black Friday.

It needs to be logged that this is a qualitative survey asking whether stock levels look ok for expected sales, and distribution is defined as retail + wholesale + motor trades. I’m not surprised that things have improved from what looked like a serious situation back in August - rather than my title of taking stock, it’s more like delivering stock!

Also on Thursday last week, the ONS released its latest real-time indicators publication and data including numbers of ships visiting the UK.

What you can see in the pair of graphs is the number of ships visiting Felixstowe and Dover in 2021 versus 2019. In each case 2021 (the lighter line) is on the RH axis, because the method of collecting data changed in June 2021, but what we can see in both cases is a not dissimilar pattern for the two years …until the sudden rise in the past few weeks. And not just a sudden rise against previous activity this year, but also in comparison with the shape of the graph for 2019. Cont below graph...

Kirsten is available for logistics projects at the moment - feel free to make contact!

I love a good graph, so when the new TEG Road Transport Index came along, I had to have a look! The graph is from Transport Exchange Group’s website.

Looking at the graph, you can see the December peak for past 2 years. You can see the impact of the first lockdown reflected in April 2020 when the price of courier vehicles rose, while haulage went down. Haulage then ran below its 2019 rates for the whole of 2020, including over Christmas. In early 2021, the price index was again running low, so no surprise that no-one was recruiting at this point...

And then the tsunami-like increase – breaking out of any previous pattern from March 2021 onwards, with prices just getting higher and higher, and with haulage and courier separating late Spring/summer 2021. And now the dip in October.

As I’ve already commented, although this is a ‘price index’, based on ppm, it is influenced by a number of factors: Underlying cost changes; Availability/capacity of the market; and Demand for the service. And it’s how those elements impact and the result that interests me.

It’s no surprise that the price of diesel is a key influencer – if you compare the TEG Road Transport Index with the pump price of diesel at the midpoint of each month and look at R-squared in Excel, it’s 0.495 for haulage. For those that don’t know what R-squared means, if it was 1 it would mean there was perfect correlation, but if 0 it would mean the relationship was totally random. So, the haulage index is significantly (but by no means completely) impacted by the price of diesel.

The index is also significantly affected by demand. In its real-time economic indicators, the ONS has an index for traffic levels based on DfT camera data. This index started in March 2020. If you ignore the first four months (when we were all adjusting to the pandemic), and in this case compare the ONS index for the Wednesday that’s nearest to the midpoint of the month, the R-squared for the TEG Road Transport Index for courier vehicles compared with ONS light commercial traffic is 0.6012 – so, as with diesel, there is significant, but not complete, correlation.

Crucially, what we can see, if you go about halfway down this page and select HGVs, light commercials etc, is a slight drop off in traffic levels more recently, explaining the lower prices reflected in the TEG Road Transport Index.

Driver pay will also have been an element contributing to the rise from Spring 2021 onwards, but it looks as if potential over-heating of transport rates is now abating, although in the logistics industry we’re all aware of the various supply chain issues that still exist, so there may yet be further pent up demand.

Kirsten was quoted, along with the Governor of the Bank of England in this piece in the Daily Mail, among many others.

From very early in my career I’ve always been very conscious of both supplier payment and cashflow and I’ve been thinking about writing a fresh piece on cashflow for a while, because there must be real pressures on some hauliers right now, with costs like wages and diesel rising, while at the same time the issues with getting money into the business continue.

News of Missguided’s current financial issues draws attention to how changes in money flows, in part down to rising shipping costs and stock shortages, can really impact. In this case, it appears, that there have been pressures from both directions: outgoings have risen, but the ability to get income in has also been reduced. And there must be companies that are getting into difficulty because they have cash tied up in stock.

Meanwhile, in the past week or so, there’s been a news piece on CIPS website about the need to protect small businesses, Terry Corby, chairman of Good Business Pays (GBP) was quoted saying that the law needs to be strengthened after GBP found only four FTSE 350 companies paid suppliers within 30 days.

So, I’ve been thinking about writing a fresh piece, but I realise I’ve said a lot of it before in a Viewpoint in Motor Transport back in 2009, so no point in writing it all again, might as well just let you read that!

On Friday the ONS (Office of National Statistics) released the latest retail sales figures, including those for online, or internet, sales. And you can see what an amazing job the retail, pureplay and logistics sectors have been delivering over the past 18 months. Non-food has gone from its annual, increasing but reasonably predictable spike (predictable if looking at the overall figures), which have stretched the parcels operations every year. Food & groceries went 'vertical' – a real achievement for operations which didn’t peak to anything like the same extent in the early years, when the number of vans and slots effectively dictated capacity, although Click & Collect is now an accepted format.

The graph below shows average weekly internet sales in £millions from the start of 2009, the first point at which the different types of product/source of sales were broken out, up to the latest data for August this year. The green line shows sales from ‘predominantly food stores’, so home deliveries from Tesco, Ocado et al – that’s shown on the left hand axis. And the grey line, which uses the right hand axis, is for everything else that you might by online from Amazon, John Lewis and all sorts of other sources and worth roughly 7x as much. What’s shown on the graph is not seasonally adjusted and is the average weekly sales shown by month – some months have 4 weeks, some 5, and there will be more variation week on week than is shown by the average, which is what is published.

In May, Mintel did that brave thing and made a forecast of where grocery online was going, forecasting a decline of 13% for 2021 when compared to 2020, as the market rebalances following extraordinary demand during the pandemic. I’m not sure that is where things are heading - since that forecast was made, sales have been down but only by about 4% so far. Mintel’s forecast for 2025 is an additional 15% on top of 2021.

Anyone who takes an interest in the economy and looks at the regular ‘real time’ indicators on the Office for National Statistics website (section 6 via link) can’t help but to have been struck by the extent of job adverts in the logistics and transport sector, with ONS having to rescale the graphs back in June to accommodate the enormous increase!

However, anyone who works in logistics can’t have helped being struck by February not being the best base to use as an index for our industry.

So, what is my graph showing? ONS has been accessing job advert numbers via Adzuna, an online job search engine that collates information from thousands of different sources in the UK. I’ve downloaded a data set from ONS that goes back to 2018 and through to about a fortnight ago. I’ve shown the job adverts for our industry (transport, logistics, warehousing), shown by the continuous purple line, and those for the UK as a total, shown by the continuous blue line.

Continued below graph...)

The ONS data uses an index in which February 2020 acts as a base line for measuring increases and decreases in activity. February 2020 is roughly when Covid hit the country and ahead of the first lockdown. February 2020 = 100 – the first of my bright pink rings going left to right across the graph, and the blue dotted line drawing attention to that level across the whole time period shown. A value of 90 would mean that there were less job adverts than the base line and a value of 110 would mean that there were 10% more adverts.

You can see that the need to advertise for logistics staff varies a great deal more than UK plc, and that a typical level of adverts for logistics has been 85% higher at peak than it has been in February for both years before Covid got going – this level is shown by the purple dotted line.

In February 2020 the level of adverts was typical for our industry for February, but that’s not a typical level of adverts for our industry across the normal year.

Between February and May 2020, as Covid bit, logistics job ads dropped in line with the rest of the UK – see the second of the pink rings on the graph. For the UK as a whole, job ads were at about a third in May of what they had been in February. For logistics, job ads in May were only a sixth of what they had been the previous peak. So, it’s no surprise that as things relaxed and ‘eat out to help out’ encouraged people to come out of their houses in the summer and spend, the number of job ads started to rise and by the autumn had exceeded the previous peak levels.

But what’s very clear is that few people in logistics saw what was coming post-Brexit, and with IR35 and further relaxation of Covid restrictions thrown into the mix. By mid-January 2021, shown by the third pink ring on the graph, job ads in our industry had dropped back to normal post-peak levels, albeit above the level of ads across the rest of UK plc. Since then, the increases in job ads in logistics have been enormous - I don’t like hyperbole like ‘stratospheric’, but somehow ‘enormous’ doesn’t really do justice to what has happened!

By mid-April 2021 job ads in logistics had beaten the figure for peak 2020, which in itself was higher than both the previous peaks. By late June it was 50% higher than for peak 2020 as a combination of hospitality, staycations, the school holidays and logistics staff's own holidays all started to create a perfect storm.

The ONS uses this data to act as a proxy for vacancies, and has done its best to de-duplicate this data – the Adzuna data is from thousands of different sources, so it includes multiple instances of the same job - it collates direct employers’ websites to recruitment software providers to traditional job boards thus providing a comprehensive view of current online job adverts.

But I’m left wondering whether the job adverts for our industry, which has been so dependent on agencies to fill roles at peak and often at other times, include hidden duplication. How obvious is it if Agency 1 and Agency 2 both advertise generally, knowing that by being first to recruit an extra driver they will get some extra business. While at the same time, the end company may well also be advertising if it is a permanent role. Has the de-duplication managed to address multiple companies essentially advertising the same role and contributing to the feeding frenzy?

While there are plainly many, many vacancies, I guess where my train of thought ends up is that job adverts may not be a good indicator of vacancy levels for an industry so dependent on agencies.

The Motor Transport Top 100 for 2020 was published recently and, having written a piece about the Whale graph for SHD Logistics, also published in December, I thought I’d apply the same sort of analysis.

I put the 100 companies in order of percentage pre-tax profitability (on the x-axis) against the cumulative pre-tax profit of the Top 100 on the y-axis - what emerges is not so much whale as sitting bull! What emerges is that 80% of the Top 100 made all the profit, and the remaining 20% eroded it. 80% of those companies made £860m profit, but the remaining 20% then lost over £400m to end up with an overall profit for the Top 100 of just over £450m. Continued below graph...

Just one company has been solely responsible for over 50% of the losses, Eddie Stobart, which has since received financing from Dbay. Three of the other four companies that made more than 10% loss, have since collapsed or changed hands.

It’s not clear whether rates weren’t in line with market values or whether costs got away from rates – assuming the former, it looks like the company should have been charging about a third more for its services if it wanted to make the average pre-tax profit of the profit-making companies which, incidentally, is less than the 5% profit (that’s pre-tax profit!) suggested by Motor Transport’s cost tables published in the same issue.

Motor Transport makes the point that “The figures for this year’s Top 100 come mainly from companies’ 2019 accounts and so are not affected by the Covid-19 crisis”, but also that “One clear impact of Covid-19 is that fact that a few companies have been slower than normal to file their latest accounts at Companies House.”. I have queried, with Motor Transport, Royal Mail’s UK arm’s pre-tax profit being put in at exactly zero (I’m always suspicious of very round numbers!), but I’d be the first to say that I don’t envy the person who has to create the Top 100 each year, extracting all that data from annual reports.

Yesterday the Office for National Statistics published some estimates from its Annual Survey of Hours and Earnings (ASHE). I've combined two of the many data sets in the diagram below. What are the boxes in the diagram all about? It's my attempt to show the span of hours and span of pay for most full time employees working in the UK as a whole and for some specific occupations. See below the diagram for a description of how to read it.

On the x-axis is paid hours worked per week - the span of each box goes from the figure for the 10th percentile through to the 90th - if we look at the red box for the UK as a whole, it means that 80% of employees work somewhere in that span of hours (so it excludes the extremes at each end). And the y-axis shows gross weekly pay, and again the span runs from the 10th to 90th percentiles, so that 80% of employees get paid somewhere in that span. It's important to note that it will be a different 80% for the x and y elements of each box, but there will be a broad overlap.

Note the red spot which marks both median hours and median pay - so 50% of employees in the UK work less paid hours per week and 50% of employees get less gross weekly pay than indicated by the spot. You can see that FLT drivers are virtually all working more hours than the UK average, and that HGV drivers work considerably more!

NB ASHE covers employee jobs in the United Kingdom - it does not cover the self-employed, nor does it cover employees not paid during the reference period. Hourly and weekly estimates are provided for the pay period that included a specified date in April. They relate to employees on adult rates of pay, whose earnings for the survey pay period were not affected by absence. Estimates for 2020 include employees who have been furloughed under the Coronavirus Job Retention Scheme (CJRS). The forklift truck driver entry is described as an estimate as the ONS has not tried to estimate the 90th percentile for either pay or hours - I have based them on the other storage occupation shown.

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The latest GDP figures were published earlier today along with the ONS ‘Flash productivity’, which does come with a disclaimer – as its name suggests, flash estimates are based on early data and are subject to revision as more accurate data becomes available. But this data is available at industry level, so I thought I’d have a quick look at the impact that the lockdown had had on productivity in Transport & Storage …and ended up going down a rabbit hole!

What you can see on the graph below is productivity for the Whole Economy (blue) and for Transport & Storage (purple). That productivity is £ per hour contribution to GVA - GVA is the value of an industry's outputs less the value of intermediate inputs used in the production process, and is used as a proxy for GDP – it is nothing to do with what individuals are paid.

I’ve also added some trend lines – you can see that things were rising reasonably predictably from 1997 through to the end of 2007, then the recession hit, then things started to pick up again …for the whole economy they picked up and continued to rise reasonably predictably (albeit at a reduced rate of increase – hence economists interest in the productivity puzzle), before the Covid cliff edge. But after its recovery from the Great Recession, Transport & Storage peaked at the end of 2014 and then started a downward course – a long time before the word Covid had been invented. Continued below the graph...

Pretty much as an aside, although it’s why I looked to start with, in 2020 Q2 Transport & Storage’s contribution to GVA was 67% of what it was in 2019 Q2, whereas the economy as a whole was less affected at 78%. One section of the economy improved in that comparison, Manufacturing of Chemicals & Pharmaceutical Products and the worst affected was Hotels & Catering, which only managed 12% of its 2019 Q2 level. In terms of hours worked in 2020 Q2, Transport & Storage worked 77% of the hours of 2019 Q2.

Back to my rabbit hole! Now Transport & Storage has a mix of various modes and includes public transport, transport by pipeline, bulk storage as well as road haulage, post/courier and warehousing. The air and sea elements can be put to one side as they are relatively small. Land transport has been fairly predictable in its productivity rise, but both Post/Courier and Warehousing have been more erratic, and of those warehousing is the larger by about 2.5 times.

Despite all the extra value-added work that’s come along with ecommerce, competition between industry participants is eroding both individual companies' profitability and our sector's contribution to the nation's productivity. Putting Covid to one side (and despite all that ecom), the Transport & Storage sector only represented 4.2% of the whole economy’s GVA in 2019 Q2, compared with 4.9% back in 2007 Q2. Whereas, hours worked in Transport & Storage have *risen* from 5.2% of all hours worked in 2007 Q2 to 5.5% in 2019 Q2.

If we go back to the graph, we have that decline from the end of 2014 in Transport & Storage that is not reflected in the economy as a whole. I recalled the UK Logistics Confidence Index back in 2015 commissioned by Barclays and Moore Stephens: “For the first time …maintaining their existing customer base is now the top focus for logistics companies …for over half (57%) of operators, their main source of new business over the past six months has come from ‘switchers’ from other logistics service providers. Barely one in ten said that their main source of new business came from customers renewing existing contracts.”.

We must stop fighting ourselves and stop that race to the bottom!

While in many ways no surprise, the ONS (Office for National Statistics) figures published earlier today do demonstrate just what an increase some elements of business have had to accommodate, with weekly internet sales up by a third on April last year and representing 30% of total retail sales for the first time. April is the first complete post-lockdown month and, although Easter can be a confuser in analysing Spring, it fell in April in both cases.

Non-store retailing, or Pure Play, still by far the largest proportion, up 19% against 2019 (on my graph below, purple is April 2019 sales in £m with red representing the additional sales for April 2020). Food and household goods combined up a whopping 91% - household goods stores had the larger increase, more than doubling, but 'predominantly food stores' is the larger element, up 84%. I've also combined non-specialised and other stores, both showing healthy increases.

Clothing is the only element on my graph that needs more explaining - the April 2019 sales go right to the top of that bar, including the purple border, with the red hashed area representing the decline, the drop back, to April 2020 sales. Poor old clothing, the only category showing a decline - of more than 20%.

So no real surprise that the news is about Marks & Spencer taking £1bn worth of actions to manage cash.

Well, this is a different sort of an update for the different sort of time we live in. No stats or graph, more of a blog, but very relevant to the logistics industry.

Coronavirus gets going and everyone is panic buying – the grown-ups make a fuss about people shopping, telling people it’s unnecessary. But the concept of the need to feed the nation is born, with drivers hours regs relaxed to accommodate. My husband who has an up to date CE licence and medical, but let his DCPC expire in September, feels that he ought to be available to help this push to get food to where it needs to be. So he books a DCPC course starting Monday 23 March.

We get up two mornings running at 4.30am for him to be early for a 7.30 start on the other side of the Cotswolds. First day (long story – we’re not stupid and we did our best on Saturday on the web and by phone), he doesn’t find it until c8am and is told that he and another latecomer can’t join the course. So he comes home. That evening Johnson makes an announcement, but no-one from the training rings to say it’s not going ahead, so we have another 4.30am get up – this time there are three of them hanging around in the street – the trainer never appears, doesn’t ring...

At this point we’re £450 down and the company that he booked the course through are refusing to refund his money. After a bit of argy bargy, they do get him booked on the first-ever internet-based driver CPC course, and so we spent the whole of last week with our home office given up to all-day all-week Zoom-based training.

We’d agreed that because of my husband’s age (he’s not 'old', but if he catches Coronavirus, they won’t consider reviving him a high priority on the basis of his birth certificate!), he was only going to drive if it involved foods, pharmaceuticals etc – things that were really necessary.

So what’s the point of telling you this – well, there’s certainly no driver shortage at the moment. There’s certainly no excuse for further relaxation of the drivers hours regs. He rang one of the local agencies during the week – there’s no driving work of any kind. End of.

Among other analytic and visualisation tools, I use Maptitude - mapping/GIS software. I post Maptitude tips on our website and tweet them - always aiming to have three across a variety of features. Today I thought I'd share the tweet from this week with Linkedin. It wasn't a new tip but the result of using a current tip (at the time of writing!): how to turn area census-type data into points, so you can do a heatmap.

The heatmap shows 'overheated' London. But also, given discussion about HS2, population density in Midlands and NorthernPowerhouse - demonstrating the importance of the E-W corridor as well as N-S.

The news from the ONS (Office for National Statistics) earlier this week was that the overall Transportation and storage index provided the largest upward contribution to the annual rate for the SPPI* for Q2 2019. The graph below shows the SPPI for All Services at Gross Sector level (Dark Blue - general inflation for business services) and the indices for Freight Transport by Road (bright pink), Storage and Warehousing (green), Cargo Handling (lilac) and Freight Forwarding (grey).

I usually look at a five year period, but the timing of this release of statistics made it seem appropriate to look at the three years immediately before and after the Brexit vote, and so I’ve included six years on this occasion, with the dark grey vertical line representing the timing of the Brexit vote exactly halfway through that period.

Not all the elements that make up the overall transport and storage index follow the patterns shown on the graph – some have been quite flat over the six years, others have gone up and up, and there are also passenger transport elements as well as logistics. What I’ve chosen here are some key logistics indexes that had relatively flat inflation prior to the Brexit vote, followed by increased inflation afterwards. NB Freight forwarding is often said to be countercyclical.

These indices will be affected by all sorts of things including stockpiling and other contingency measures, and increased cost of attracting staff, with the effect of exchange rates on the worth of sterling and people just not feeling like the UK is so appealing as somewhere to work and live, being part of the mix. But is the inflation genie now out of the bottle? Food for thought!

*The Service Producers Price Index is a bit like the CPI - it shows the increase in prices and rates paid, but for services provided by businesses to other businesses and government. It provides a measure of inflation for the UK service sector with individual price indices, such as Freight Transport by Road, aggregated to create an all-services industry index. The ONS says that the services sector is estimated to account for around 80% of the UK economy based on its weight in gross domestic product (GDP), and that the SPPI is estimated to represent 59% of the total services sector.

Bit of a different update - a personal story: I'm going to talk about cooking the books.

What do the Tesco accounting scandal and M&S 1Bn profit have in common with my first proper role in logistics? Pressure to improve the figures.

Towards the end of last month, Carl Rogberg was cleared of master-minding fraud. He was cleared along with the two other Tesco directors, but the fact remains that, in what has been described as a culture of pressure back in 2014, payments from suppliers were being manipulated to make the finances look healthier than they were.

I was interested that, in all the reporting, little mention was made of similar situations in other companies. Because I worked for the company, my own mind immediately jumped to M&S in the latter half of the 1990s.

Towards the end of Rick Greenbury's CEOship, when great pressure was put on all departments, and in turn on suppliers including our logistics contractors, necessary expenditure and investment was delayed and supplier profit margins were cut, as we all understood that every spare £ was going to be needed. And then the headlines: M&S made over a billion profit that year.

Now, you can put the squeeze on operations, but only until the pips squeak. When you try to squeeze year after year (at the risk of too many metaphors), you find that the well has run dry. The Wikipedia entry includes the phrase "profit margins were pushed to untenable levels". This non-strategy catches up with you and, yes, the inevitable happened – M&S profit was down dramatically.

So what do these national stories have in common with my first logistics role? I had been a graduate management trainee with NFC (National Freight Corporation – now part of DP DHL), and as part of that training had learned all about how NFC managed its finances, with every contract running its own P&L.

My first role after training was as deputy manager of a DC. The manager was leaving the company and the existing deputy manager was being promoted, but rather than taking on the same activities as the previous senior manager, our roles were in some respects reversed because of my understanding of the company’s administration. So I was responsible for the finances.

The first time it fell to me to do the monthly provisions /accruals, the area general manager, who was based elsewhere, checked my confidence levels. I said I was pretty confident I knew what I was doing, but I was going to take it all home and work on it quietly over the weekend.

I couldn’t wait for Monday to come round! It had gone really badly. The contract had been gently profitable up to now, but my weekend exercise had ended up showing a loss. So I drove over to see the area manager and we pored over my figures. They were right. The contract was making a loss.

There was a big fuss and hoo-hah, and one of the directors became involved: had someone been fraudulent? Well, not for themselves I was able to reply - no-one had actually walked out the door with any cash. This was down to genuine invoice payments being spread over too long a period. So a bit of a shock, and it left the issue of lack of profitability, but all out in the open and all apparently understood …until the following week.

In NFC we had to submit what were called ‘Quicks’ every week – a quick version of the P&L for that week. No PCs in those days – you rang your quicks through to your area manager, and they were consolidated for the area and rung through to head office. I reported a small loss that was commensurate with what had been shown by my previous exercise. The area manager immediately said that was no good and told me what figure he needed me to report (a profit). I wouldn’t. But at that point I could immediately understand why the finances had got into a mess and why the previous manager had left. He’d given in to being bullied and couldn't see a way out.

Now, returning to my reply to the director, I realised that because we were all bonused on the profit that was made, my answer had the potential to be not entirely correct, because if anyone had been paid bonus on those adjusted accounts, that would have been fraud. Money would have gone out the door.

My takeaway from this story is that you need to be extremely careful not to exert undue pressure on those below you. Some people prefer an easy life, and although you may not ever have intended them to be influenced to the extent of doing wrong, that can be the result.

And you need to be extremely careful about how people, including (particularly?) those at senior levels are incentivised.