A lot has happened since I last interviewed Wincanton chief executive James Wroath (pictured) back in January. The upshot being that we’re now chatting from our homes via Zoom rather than sitting in the back office of a Sainsbury’s depot in north London.
But as the company shrugs off the impact of the Covid-19 pandemic, it’s clear that his determination to exploit supply chains that are “less mature”, remains key to his forward strategy.
Back then, Wroath was still new to the job and reluctant to reveal his evolving plans in any detail. But his tentative suggestion that e-commerce might become an area of increasing focus has since transformed into a top priority.
The company published strong results last month showing a 7% rise in profits to £52.9m. What also caught the eye was a 26% rise in revenue from its retail grocery division which picked up a major new Morrisons contract. Since then, Wincanton has also won a five-year contract to operate an online fulfilment centre, or dark store, for Waitrose.com and extended an existing deal with Asda.
Commenting on the results last week, Wroath confirmed he was looking for more growth in better margin markets. This not only included e-commerce he said, but also infrastructure where Wincanton is already involved in the Hinckley Point development.
As Wroath begins outlining his future strategy, he highlights the growing significance of the digital marketplace, which he insists the UK should now be preparing for. The idea is already taking off in the US, he says, through software and App specialists like Convoy and Uber Freight who connect independent hauliers to shippers and freight forwarders. The shippers advertise loads for sale and the hauliers accept them, depending on end location, size/weight and price.
“We’re working on it,” he says. “It’s a bit slow to come to the UK because we have a lot more customer-owned fleets. We have less mileage so the empty running miles are not as punitive as they are in the US or continental Europe but there’s no doubt in my mind this is coming to the UK.
“We were one of the first to the market with oneVASTwarehouse.com, which is our platform that connects people who need warehouse space with those who have capacity. But the next development will be in the transport marketplace.
“For us, this is both a defensive and offensive move because we’re a big transport player in general haulage and in dedicated transport management. Clearly any digital platform could be a significant disruptor. We need to make sure we’re prepared for that.
“At the same time, we’re a significant 3PL but we’re also a significant 4PL because we have plenty of volume that comes through us that we then subcontract out into the haulage market. There’s an opportunity to really grow that if we provide a technology platform to be connected to where the best rates are.”
Wroath confirms claims from various industry commentators that technology will play a bigger part in the future of the sector: “Things like the digital marketplace which makes it easier for customers to connect with the assets will definitely be a battleground going forward. And data – post Covid we’ll see a lot of customers paying even more attention to their supply chains and wanting visibility.
“The grocers are the benchmark in all this. It’s the grocers who know where their stock is all the way. Inbound to DCs and outbound at the till. I would have thought supply chains would need that level of visibility. Not least the government supply chains - issues like PPE are around visibility in the supply chain – where is everything? So technology will have a huge part to play in that. We talk about our infrastructure ambitions and using that technology, that’s why it’s a huge focus for us."
Updating me on Wincanton's e-commerce strategy, Wroath points out the company's huge reputation in big box retail contract logistics. An impressive set of customers includes Sainsbury’s, Argos, Morrisons, Co-op, B&Q and Screwfix where it carries out e-fulfillment and e-commerce as part of the omni-channel and muilti-channel services it provides for them.
It also does two-person home delivery for customers like M&S and Ikea where it apparently boasts exceptional customer satisfaction scores.
“So although Wincanton isn’t recognised as much as it should be in those areas we do a lot of business there,” Wroath tells me. “Already it’s on an increasing trend and post Covid it will be more and more rapid.”
A big e-commerce opportunity is shared user fulfillment, he explains, with Wincanton now looking to take on more Amazon deliveries for SMEs: “If you’re a small to medium largely pure play e-commerce retailer you can do it yourself, controlling your customer experience, but it’s difficult to be scaleable”, he says. “You can go to Amazon, who provide great logistics services but there’s some compromise for those retailers in terms of control of the customer experience because it’s performed by Amazon. Or you can go to any number of small 3PL providers with good service but they’re not as scaleable as someone like us with 500,000sq ft retail warehouses.
“So we see that as a real opportunity to provide high-quality scaleable retail logistics services to a fast growing market without customers having to compromise. We’ll look to increase our footprint to develop solutions for more of the small to medium shared user environment.”
Wroath also goes into more detail on dark stores: “Home delivery grocery is traditionally something grocers do themselves,” he explains. “It’s quite difficult to involve a third party if it’s fulfilled from the store. But with it moving and them needing more and more order slots the stores don’t have the capacity; there’s not enough space in the car parks. Although dark stores and customer fulfillment centres already exist we just see that growing exponentially.
“We know how to run a grocery DC - we run huge ones across the country. Now we can bring that to a customer fulfillment centre. We know how to deliver to people’s homes. So we can bring that together and be the first 3PL to do grocery deliveries. That’s really exciting for us.”
Wincanton has a long history of involvement in construction logistics going back to its purchase of Redland Distribution almost 10 years ago, focused mainly on building materials and house building.
But through its engagement with EDF Energy at Hinkley Point – said to be the largest building project in Europe – the company has grabbed a firm foothold in mainstream infrastructure projects. Not that it hasn’t looked at the sector before through its work on aircraft carrier construction as well as the London Olympics.
But the difference with Hinkley Point is that Wincanton isn’t just involved in the physical side of the work but fully embedded in the wider team and providing some innovative technology.
“Most importantly, we’ve designed a logistics management system that helps with offsite consolidation of materials in preparation for delivery to site,” Wroath explains. “EDF are forward thinking – we don’t want everything turning up to the site, we want a consolidation centre. So we’ve brought in the technology that allows people to order what they want when they want it. It’s bringing the precision of assembly line production to outside construction. It’s not something that normally would happen.
“We’ve also given them the kind of technology already used in mobile phones that means vehicles have to follow prescribed routes. It negates the need for expensive roadside infrastructure.”
Winners and losers
But amid all this positivity, the ongoing impact of the coronavirus is still hanging around in the background, of course. For some operators it has already led to job cuts and threats of strike action. But Wroath remains defiant, revealing all but 5% of Wincanton’s workforce have now returned from furlough and major job cuts are unlikely.
“We’re a very resilient business but we do have some areas that are under pressure – construction is one of the main ones. But that’s where the government is putting their own money and encouraging house building. That’s the sort of thing we want to see. We have a substantial fleet with mechanical offload and we need that fleet operating. That’s not an easy area for us.
“But on the flip side most of our retail customers have performed pretty well so it’s very much a mixed picture. In among all of the challenging areas of volume we’ve won two really exciting, pretty large pieces of business in the last month with Morrisons and Waitrose. So in some ways Covid forces people to pause projects and pause new strategies and in other ways it forces them to accelerate their plans.
"Where the challenges have come they’ve been really tough but where there are opportunities they’re really interesting. There’s enough around for me to feel optimistic."
Back in January, Wroath gave me the background to his interest in acquiring Eddie Stobart Logistics. But with that deal now off the table, he admits he doesn’t expect to be looking at any other acquisitions of that kind of size.
“From a competitor point of view our interest is around bolt-on type acquisitions,” he says, “and mostly we would look at e-commerce. We can build that and buying into it might give us a faster boost into that market.”
Unsurprisingly, e-commerce is also where he think the big success stories will emerge in the post-Covid environment.
“Clearly the winners will be people involved in things like e-commerce, so retailers that are omni-channel, pure play and agile enough to support online fulfillment are going to be winners.
“Also 3PLs that have got excess space. There’s a lot of people looking for space. It’s not as easy for us because we don’t have a lot of excess capacity. You don’t want space that customers aren’t in."
And the losers?
“The losers will be very much the specialists,” he says. “Things like mechanical offload or containers. If you’re not flexible enough it makes a difference.
"There’s going to be some reduction in overall capacity in trucking but we have no idea how much. The barriers into entry into haulage are relatively low. There always tends to be a degree of over capacity and when you’re under pressure that’s going to result in some contraction I think.
“We see the full gambit of industries that are doing really well and those that are under pressure. We’re already seeing redundancies coming through and closures of operations. There will be some of that. We hope in our business we can keep that to a minimal level.”
When asked to identify the main thing he’s learnt from the pandemic, Wroath says: “There’s a perception of third party logistics that we’re not very innovative or flexible and the opposite is true. The way that our teams reacted from the very start of this crisis, with the right safety measures and mixing resources around was really very impressive. And in the early days we shared resources with competitors. The industry stepped up to work together. If people hadn’t stockpiled the supply chains would have worked just fine."
The wider mood of the sector is also mixed, he says: “The thing about the third party logistics industry is that even if the economy isn’t performing well, if there’s more outsourcing going on then our industry can be successful. There are still opportunities for us when things are difficult. Because in-house companies think more openly about maybe outsourcing to different organisations. Waitrose is a good example, and Morrisons; some of the work we’ve won there is outsourced business that was previously being done by themselves."
Ultimately Wroath is upbeat on the company’s prospects and pleased with how the pandemic has improved perceptions of the wider sector.
"What’s happened with Covid is our people have gone from being lorry drivers to essential key workers,” he concludes. “There’s a much greater understanding in the world now of the criticality of supply chains. That means for our potential customers the resilience of their supply chains is much more of a subject for their leadership discussions. That’s good for us; we want businesses to see supply chains as critical and we want people to see us as critical to helping them deliver."