Now is the time to invest in digital technologies

Using technology is key to overcoming challenges facing the industry. Yet many firms are missing out on valuable funding that could support it, says Rob Lowe, a senior digital technology specialist at R&D tax credit consultancy ForrestBrown.

Businesses across the nation have faced their fair share of uncertainty in the last couple of years – and the logistics sector is no exception. The combination of Brexit and the global Covid-19 pandemic have put immense pressure on the industry, with contactless supply chains and longer queues at the border expected to be commonplace for some time. In short, UK logistics firms are facing threats and disruptions like never before.

Rob Lowe, a senior digital technology specialist, R&D tax credit consultancy ForrestBrown,

Solving these challenges won’t be easy. But one thing is clear: those businesses that innovate are the ones that will thrive. In 2020 and beyond, companies across the sector must accelerate the use of digital technologies in their day-to-day operations as standard. If not, they run the risk of being unable to cope with the demands being made of them.

Technology: the driving force of logistics
Of course, the use of technology and software within logistics isn’t new. We’ve seen it consistently improve customer experience, operations and internal processes for years. Big data, cloud infrastructure and IoT initiatives have allowed the flow of information to be streamlined while improving tracking, reporting and overall efficiency.

Meanwhile, enterprise resource planning (ERP) and customer relationship management (CRM) systems have become commonplace, helping companies to be slicker and more productive too. If you were to liken a logistics business to the human body, then ERP and CRM systems have come to be the bloodstream connecting different organs, or departments, and helping the body to function properly.

And as customer expectations continue to increase, technology is no longer an option, but a necessity. It’s no secret that customers demand speed, visibility, transparency and efficiency from their logistics providers. If a company isn’t providing ETA, wait-times and an easy-to-use application, it’s already way behind the curve.

Having said this, the sector still suffers from a lack of innovation in technology compared to others. It can be a huge investment for organisations which often operate on comparatively low margins. Furthermore, there is often resistance among a traditional workforce, which tends to be lower skilled and often highly dispersed.

Size matters
Another challenge is the common belief that cutting-edge technology is exclusive to larger businesses, as they usually have bigger budgets, their own proprietary platforms or software, and adaptability is often embedded into the company’s culture. However, this simply isn’t true.

It’s actually much easier for smaller operations to implement new systems with agility. While larger and older companies do have added infrastructure, internal platforms and employees, they also have added complexities with technical debt – so their appetite for change is lower. What’s more, if smaller companies do find a way to implement technology successfully, there’s a real chance this could be a key differentiator and help them earn a wealth of new customers from their competitors.

We’re seeing this take place in other industries. Take the banking sector, and specifically FinTech, for example. In the last couple of years, a number of smaller banks – such as Atom, Starling and Monzo – have emerged onto the scene and quickly introduced new systems, leapfrogging the more established players. In doing so, they’ve disrupted larger banks – which are only now moving to update their digital solutions – and poached some of their customers too. It’s a trend that has rapidly modernised the landscape, and it won’t be long before it hits logistics too.

The real challenge – especially among smaller firms – is therefore understanding how to gain greater investment and accelerate the pace of change at a difficult time. The sector’s businesses don’t have much longer to ready themselves for some of the greatest challenges in a generation and need all the help they can get.

Identifying innovation
This is where research and development (R&D) tax credits come in. They’re one of the best-kept secrets in tax legislation and are often overlooked, especially by logistics firms. This incentive could provide the sorely needed funding required by cash-strapped logistics businesses looking to invest in technology.

These often misunderstood tax credits reward innovation and fuel growth. The criteria for claiming is purposefully broad. And whether companies are creating new products, processes and services or adapting existing ones, the rebates are a valuable source of cash for them to reinvest towards accelerating their R&D, hiring new staff and ultimately growing despite the challenges ahead.

As a sector with many moving parts, logistics has naturally high levels of innovation and R&D. There are countless businesses investing time and money into implementing new systems, improving existing ones, and developing a joined-up solution. Yet they often remain out of the loop and unaware that a good deal of their investment can be recouped.

If awareness of the incentive was greater, we’d undoubtedly see a lot more logistics, warehousing and e-commerce operations furthering their R&D activities, allowing them to get the technology they need to meet the demands of the future.

What is R&D in logistics?
We’ve helped many successful clients gain access to R&D incentives. This includes a cold-chain logistics business which developed a first-of-its-kind software platform to track the movements of perishable items against flight times. Another example is a production-line specialist that worked with a print magazine distributor to automate several heavy-lifting and loading processes. We’ve also supported a precision engineering firm, which created an industrial sorting machine for small products within a weight range of just 0-8 grams.

The key to a successful claim is to approach it in a measured way and understand the boundaries of what to include so as to maximise the return without overstepping the line. It requires a rigorous process, which is best outsourced to an R&D tax specialist.

Now is the time to act
Adopting new systems and technologies will always be a daunting prospect. But it’s important for decision makers in the logistics sector to overcome their reluctance to change if they’re to keep their business moving forwards.

It’s been a challenging year, but exciting opportunities still lie in wait – and I have no doubt that innovation, fuelled by R&D and the funding that comes with it, is the key to success.

Rob Lowe is one of the senior specialists in digital technology at ForrestBrown. He supports chartered tax advisers in identifying and articulating the technological advances thatclients make in this sphere.His background is in digital agencies.

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