The global logistics industry is “unsophisticated” and due for a major shake-up, according to the boss of a cargo-handling giant.
Mika Vehvilainen, chief executive of Finnish company Cargotec, expects autonomous vehicles and artificial intelligence to disrupt the market in coming years.
Speaking to City A.M. on a visit to London for the firm’s capital markets day, he said: “If you look at the logistics industry, compared to many other industries, it is frankly quite unsophisticated. The level of digitalisation, automation… is still very low.
“This industry will significantly change in the coming years. I think pressure from customers, regulation, environmental requirements, sustainability, safety, etc, will drive this.”
He added: “We are in a fantastic place to take advantage of that transformation that will be taking place in our industries.”
Cargotec, which currently claims group revenues of €3.5bn (£3.2bn), is aiming in particular to grow in the areas of software and automation, where it believes it can make significant savings on labour costs.
Vehvilainen is aware that Cargotec, which employs more than 11,000 people and operates in over 100 countries, will face opposition when this leads to job cuts, but believes automation can have great benefits.
“One great example is the ports,” he said. “Unions in the ports tend to be quite strong.
“I think the most important [thing to note] is that an automated port is considerably safer, so you don’t have people on the ground any more to have an accident.
“It’s a lot more sustainable and environmentally friendly in terms of CO2 footprint and other issues.
“But it’s also, from an operating cost point-of-view, clearly [beneficial] – about 40 per cent of port operating costs today in the Western world are labour costs. If you automate that, you can get half or more of that labour cost out.”
Meanwhile, the chief executive said his business had been negatively affected by the UK’s Brexit vote last year. “What we saw immediately after the Brexit vote was a slowdown in order intake [on] the equipment and transportation and logistics side,” he said. “That has picked up again, so the last 12 months have been quite strong for us.
“We still see more hesitancy from larger accounts and bigger companies. But the mid-sized, smaller segment is going very strongly at the moment.”
Vehvilainen added that the softer Brexit is, and the more access the UK retains to the EU market, the better for his firm and for the UK itself.