The 2024 UK logistics digital infrastructure report

Digital trade documents explained

The Electronic Trade Documents Act removes the legal requirement for logistics companies dealing with imported or exported goods to handle commercial trade documents only on paper. These can now also be handled in electronic format.

The act is set to alleviate the administrative burden from global trade and could spearhead further digitisation of processes along the supply chain.

Kevin Shakespeare, the director of strategic projects and international development at the Institute of Export & International Trade (IOE&IT), says “the importance of the act could well be the fact that it indirectly encourages the digitisation of other documents that aren’t necessarily included as examples in the legislation. This includes e-Phyto certificates, electronic export health certificates, airway bills and CMR notes for road transport.”

What does this mean for digital connectivity?

With over two in three companies set to adopt such digital-first processes, logistics companies should be aware of the greater demand that may be put on their connectivity needs.

Historically most logistics hubs would only need a basic connection to manage its ‘on the ground’ operations. However, as the sector digitises, it requires a more modern connectivity infrastructure to deliver, store and manage data and documents across its UK infrastructure.

This connection must be resilient and available 24/7. A simple broadband solution will soon create operational limitations, and the ETDA is just a small contributor to this compared to the wider digital transformation taking place for logistics companies.

Investment in digital transformation a priority for UK logistics businesses

We surveyed leaders in the logistics industry to understand their digital investment strategies and broader transformation plans. Our focus was to identify the key investment areas the sector prioritises for growth.

Which digital investments are planned as a priority?

Digital processes account for two of the three top overall investment priorities identified by logistics companies. These include ‘upgrading to smart fleet and digital tracking technology’ (38.2%) and ‘improving internal digital communication systems’ (43.2%).

Our data found the majority of the UK logistics industry is looking at digital solutions to optimise their operations — 86.5% plan to invest in improving at least one digital technology solution over the next two years.

Findings:

The top priority for companies is ‘Predictive vehicle maintenance’ (39.3%) — just under two in five plan to invest in a solution in the next two years. An operational fleet is a must for logistics companies. Predictive vehicle maintenance leverages real-time monitoring and data-driven decisions to determine maintenance needs ahead of issues occurring. In fact, each of the priority investment areas relies on storing, analysing and accessing large data pools to yield practical insights.

Other priorities include ‘Big data analytics for improved operations’ (31.5%), and ‘Upgrading smart fleet or goods digital tracking technology’ (29.2%). Overall, as over four in five (86.5%) logistics operators continue to digitally transform their operations, the demand for connectivity upgrades and services from telecommunications companies serving the industry is clear.

Challenges remain for many in successfully adopting digital processes

Many operators in the logistics industry have been found to be experiencing challenges in adopting and implementing digital processes — 82.6% of UK logistics companies have experienced technological challenges which have impacted operations over the last 12 months.

Findings:

• The most common challenges have arisen from outdated systems hampering operations for 37% of operators. This figure aligns with the findings in the following section, showing two in five companies haven’t updated their connectivity systems since the turn of the decade.
• The next highest response is a lack of sufficient digital infrastructure for operations for 34.8%. These companies may struggle with integrating advanced technologies, and ultimately difficulties in scaling operations or adapting to market changes.
• 32.6% of companies have issues with vehicle connectivity and remote driver communication. This potentially impacts delivery times, route optimisation, and overall operational efficiency.

Results also showed wider considerations in recruitment to successfully adopt digital processes. One in four logistics companies (23.9%) stated a lack of in-house understanding of operating digital systems, potentially highlighting a shortfall of digital skills in the industry.

Connectivity capacity shortfall looms for those slow to upgrade

Investment to improve digital-first processes is a priority for over four in five (86.5%) operators in the logistics industry. This will directly impact the need for speed and capacity of connectivity across multiple business centres, as well as across national transport infrastructure.

How have companies reacted to address this so far?

Findings highlight a good portion of the UK logistics industry is ‘evolving smart’ and taking steps to facilitate digital processes through connectivity infrastructure investment.

Findings:

• One in five companies (19.6%) in the industry have invested in connectivity infrastructure in the latter half of 2023.
• 22.9% of logistics companies have invested in their connectivity infrastructure within the past 12 months to 2 years.
• 15% of UK logistics operators state they are planning to invest in connectivity improvements in the near future.

However, there’s a section of UK logistics which risks falling behind the technology curve.

Nearly one in five (18.5%) companies haven’t updated their connectivity systems since the turn of the decade, in three years or more. These responses suggest an urgent need for a portion of logistics operators to invest in upgrading their digital infrastructure. Connectivity standards have developed rapidly since 2020, and those who stand still are fast falling behind competitors in the rapidly evolving logistics sector.

UK logistics face barriers to digital transformation

We have been able to identify the challenges which UK logistics operators are experiencing, as well as the digital investment appetite from the industry for future growth. But what barriers exist to hinder this transformation?

Findings:

• The majority of UK logistics companies highlight investment costs and lack of funding as key barriers to digital process adoption. High implementation costs were cited by 43.6%, while 40.4% highlighted a lack of necessary funds for investment.
• These were both topped by cybersecurity concerns — more than half of UK logistics companies (51.1%) cited cybersecurity as a prevalent barrier to developing their digital processes. This highlights the need for assurances from technology providers that adequate protection will be provided.

Despite the wider barriers which are yet to be addressed, the opportunity for telecommunication providers remains. One out of every three logistics companies points out that inadequate communication infrastructure is a big hurdle when implementing digital transformation initiatives.

Steve Parker, director general of the British International Freight Association (BIFA), says:

“The factors facilitating increased adoption of digital transformation and those hindering it are cut from the same cloth. One of the biggest challenges faced by any company looking to undergo digital transformation is the natural resistance to change that arises within any organisation: sometimes a company’s culture, which might not be supportive of change or new technologies.”

“There is certainly plenty of willingness to adopt digital solutions to various aspects of their operations. BIFA members... are gaining greater awareness of the importance of and rewards to be gained from paying enough attention to digitalisation of the front and back end systems they employ to run their businesses.”

Are lack of digital skills a barrier to logistics sector growth?

Employee talent with digital skills are crucial in adopting and operating digital processes. Does the industry believe it has the required skills to develop into digital-first ways of working?

• The majority of the logistics sector is in need of digital skills to facilitate growth — 62.9% of companies in the sector state their employee digital skills are ‘next to none’, ‘insufficient’, or ‘sufficient for current operations’.
• However, a little under two in five companies say they are well placed for digital growth and have either sufficient digital skills to adopt new and future technology, or good or excellent digital skills in the company.

“There is a need for well-qualified staff with in-depth technical knowledge” according to Steve Parker, “and that can be lacking as a career in logistics may not be as appealing to the experts as some other sectors. BIFA is working on addressing that.”

“It is of critical importance if the companies in the sector are to capitalise on some of the key benefits of digitalization in logistics, which include improved efficiency and productivity, reduced costs, faster decision making, enhanced communication and collaboration, and more effective customer service.”

UK logistics operators call for government action to incentivise digital transformation

The government is crucial in creating an environment that supports and promotes digital initiatives, encouraging investments from stakeholders. By doing so, it facilitates the digital transformation of logistics companies.

To ensure the logistics industry keeps up with digital adoption, it’s essential that the government champions investment in critical connectivity infrastructure, like full fibre connectivity networks through Project Gigabit.

Findings:

• The government should go further to support investment in digital technology, according to the majority of UK logistics operators (65.2%) — two in three logistics companies call for more support.