Seeking ambidexterity through hyperautomation: What next for GBA logistics in their evolution from local labour entrepreneurs to global players in logistics

Abstract

Based in the Northwest of England, GBA Logistics (GBA) is a global logistics provider focussing on the transportation of goods. Founded in 1987 as GBA Services, this family firm has transformed from being a provider of labour for local companies, to a major player within the national and international logistics sector, now ranking in the top 50 operators in the UK. Starting as a sole trader, GBA became a limited company in 2000 and now employs around 400 staff across 16 locations in the UK and Europe. Working in a highly competitive, dynamic environment, the company constantly faces the challenge of optimising its existing services whilst needing to explore new opportunities to meet the changing demands of its clients. Balancing these two opposing requirements is known as organisational ambidexterity. Part of GBA’s strategic response to this challenge, is to explore how it can employ advanced technologies such as artificial intelligence and robotic process automation to enhance its efficiency and effectiveness, whilst identifying novel ways to adapt to market conditions. The application of these emerging technologies to automate and optimise operations is known as hyperautomation. For GBA, striking a balance between offering standardisation versus a customised service to customers is increasingly crucial to its success. However, this family firm’s underlying culture of entrepreneurial spirit and adaptability together with its commitment to remain relevant and competitive in logistical services means it is keen to explore how it can exploit hyperautomation to achieve its aim of organisational ambidexterity.

Introduction and history

The story of GBA begins with an entrepreneur called David, the second of four siblings. Growing up in the 1980s in the village of Hesketh Bank in West Lancashire, which is a substantial market gardening region in the northwest of England producing a wide range of agricultural crops, David embraced the opportunities that existed around him. His earliest venture at the age of 16 involved making roped onions; he would buy onions by the tonne from local farmers, plait the onions onto canes and sell them directly to local greengrocers, market traders and supermarkets. By the age of 19, David had established GBA Services, the company from which GBA Logistics Ltd ultimately emerged.

GBA has since grown to become a significant provider of logistics services within the UK and is presently recognised as one of the top 50 operators (Motor Transport, 2023), from a very crowded field of over 82 thousand competitors (Bureau Van Dijk, 2023). The story of GBA’s inception and growth as a family business is one of entrepreneurship and opportunity. As is the case with many businesses, GBA did not commence its operation in the sector that it has progressed to, that of an international provider of warehousing and multi-modal logistical services. David managed to establish labour contracts with some of the local growers, providing seasonal labour from the surrounding large towns. The provision of this labour necessitated obtaining crew vans to collect the workers from their homes and drop them off at their place of work, usually fields or packing houses.

However, whilst this model was profitable during the summer months, the need for labour diminished significantly during the winter months. To mitigate the impact of the seasonality on his business, David established contacts within the freight forwarding industry and removed the seats from his crew vans, turning them into transport vans. He then used his small fleet to make deliveries and collections throughout the UK and mainland Europe. Other business ideas such as recycling, and light manufacturing were trialled at various points, however, it quickly became clear that the freight forwarding industry was not only the most profitable, but also the most sustainable business model. Whilst GBA Services continued agricultural contracting into the 1990s, it became increasingly evident that road haulage was not only far more robust as a business opportunity, but it also provided greater protection against seasonal variation. As a result, it quickly became GBA Services’ core business which was consolidated by the introduction of large goods vehicles enabling GBA to operate more broadly as a road haulier.

GBA developed from being a sole trader into a fully fledged family business between 1998 and 2012. Up until then, the functional boundaries were somewhat blurred with the management of Payroll, HR, Compliance, Quality, etc., being combined as sub-roles within wider job remits. However, as GBA grew, these roles started to be separated out into distinct functions. At the end of the 1990s, David’s father and brother, David Snr. and Andrew, joined the business. David Snr, a chartered engineer who had spent much of his earlier career as a senior manager, invested in the business becoming a 50% shareholder. He later took on the role of a company director overseeing the Finance function. Prior to joining in 1998, Andrew had graduated in Electronic Engineering, worked in the engineering industry for a few years then completed a Postgraduate Diploma in Computing for Commerce and Industry. On joining the firm, Andrew initially completed his class one driving licence and transport management qualifications before establishing the IT function. Around 2002, Andrew’s wife Emma joined the business to oversee the Credit Control function, then in 2005, David’s sister Jane joined the business to lead the HR function. Finally in 2012, Paul, David’s other brother and last sibling, joined the business after having spent almost 20 years in the banking industry.

GBA Services became a limited liability company, GBA Services Ltd, in 2000. Soon afterwards, it started expanding by setting up locations first in the Northeast of England, then around Heathrow in the Southeast and then in the Midlands. At the same time, it started to diversify and expand its business services into high security transportation, air freight, sea-freight, trans-shipments, and warehousing. As part of this strategy, GBA established contracts with large automotive manufacturers and first tier suppliers predominantly located in the UK and Europe. This proved so successful it soon became core to GBA’s strategic business model.

The nature of some of the new business services it was providing such as just-in-time, express transportation, pharmaceuticals, and high security work, required GBA to invest in specialised vehicles and professional expertise. For example, to service high security work, GBA needed to adhere to a high level of compliance, including adding various security measures to its vehicles and gaining Transported Asset Protection Association (TAPA) certification which sets out strict guidelines for the transportation of theft attractive goods. GBA also opened a depot in Ashford, Kent, to facilitate the movement of pharmaceutical products. To facilitate the high degree of specialist knowledge needed, a pharmaceutical team was established to oversee the provision of clean, temperature-controlled vehicles, operating under the pharmaceutical industry’s good distribution practice (GDP) externally audited guidelines. The high security and pharmaceutical examples given are just two of the services GBA has provided during its lifetime. Others include recycling, furniture removal, shop-fitting support, waste disposal, final mile deliveries, business to customer delivery and event logistics, although some of these are no longer provided.

From its inception, the firm has been both blessed and cursed by its entrepreneurial spirit. The innovative culture fostered at GBA has allowed it to identify and embrace some great opportunities; however, it has sometimes also resulted in it not focussing enough attention on the core services which are most profitable to the business. Whilst there is a strong desire within GBA to be as pro-active and responsive as possible to customer needs to enable it to differentiate itself from the larger global logistics providers, it is far more expensive to offer a wide variety and variation of logistical services rather than standard services. A recent evaluation exercise conducted by the firm identified that current offering of 28 logistical services could be reduced to around six core services, with additional elements such as ‘dangerous goods’ added where appropriate.

Although GBA provides services to a broad range of industries, the conflict between offering a full range of logistical services against focussing on discreet offerings, such as express dedicated transport, can be illustrated by the challenge of carefully positioning itself against the competition in the automotive industry. Here, GBA has undertaken a substantial amount of work in this sector, either directly or indirectly with automotive suppliers and with tier 1 suppliers who manufacture, for example, wiring looms, seats, interior linings, etc. This work is of similar interest to global providers, who often provide third-party logistics (3PL), and sometimes fourth-party logistics (4PL). These ‘full-service’ competitors offer to become highly embedded within the customer’s logistical fulfilment model, sometimes providing broader support within the manufacturer’s overall supply chain, including warehousing, transport, order selection and subcontracting to second party logistics (2PL) providers, which may sometimes be GBA. So, whilst these other 3PL and 4PL providers are often GBA’s competitors, they are also sometimes its customer.

Other competition in this sector has come from large European-based providers, who have traditionally focussed on just-in-time express transport. These companies have access to very large vehicle fleets, either directly owned, or via close supplier relationships, and can provide ad hoc just-in-time transport at short notice across large geographical areas. Lastly, competition in this sector can come from regional providers who often have a very close relationship with a particular plant. Whilst these competitors are not able to service broader, multi-location contracts for large manufacturers, they are often very difficult to compete against because of the close relationships that have been established over a long time with local plants, who sometimes ignore centrally awarded contracts in favour of keeping their favourite local supplier.

GBA’s current position

Currently, GBA employs around 400 people across 16 operating locations throughout the UK and Europe, including Portugal, Austria and Poland. Over the last 20 years, the business has experienced sustained growth averaging around 14% each year, expanding by over a factor of 10, resulting in an increase in revenue from £7M in 2003 to over £75M in 2022 (see Figure 1).

Figure 1.

GBA’s revenue from 2003 to 2022.

Recently, the firm’s senior leadership team elected to separate the core service areas into strategic business units (SBUs) supported through a set of centralised support functions (e.g. HR, Finance etc.). The rationale for changing its organisational structure was to enable GBA to focus more attention on the core service areas generating the greatest revenue for the business.

• The Freight Services business unit is the largest and most complex SBU and is responsible for most of the services offered by GBA. It predominantly focuses on subcontracted road freight spread across UK and mainland Europe. Whilst the automotive industry has traditionally been the largest sector, this SBU is able to support many different industries across the manufacturing and production sector.

• The Dedicated Fleet business unit operates a fleet of tractor units. This SBU predominantly services the UK supermarket industry although it does support other industries. Whilst trailers can be provided, the service is normally ‘traction only’ involving pulling the customer’s trailers. The transport fleet consists of a mix of Euro 6 diesels, presently the cleanest diesel engines, compressed natural gas (CNG) trucks, which produce considerably less carbon dioxide than diesel engine; and some of the first electric trucks in the UK. The company maintains a strong focus on reducing its carbon emissions.

• The Global business unit provides services to the aerospace industry, providing aircraft-on-ground logistical support. This SBU also services air and sea-freight, as well as providing customs clearance and transit documentation, which has become even more important in the post-Brexit environment.

GBA and agency risk

A potential tension arising from the creation of a divisional structure is that of agency risk between the SBUs (Jeong, 2003) particularly if some form of incentivisation system exists which benefits one SBU at the expense of another. For example, if an internal cost recharge directly impacts the bottom-line profit for a particular SBU, then there is a real risk it will try to divert this cost onto another SBU. If this agency risk is not managed carefully and sensitively, it is likely to encourage a silo mentality where SBUs view each other as competition for money and resources, so work against one another rather than together if this is perceived to be to their advantage. This has the potential of encouraging GBA’s focus to become increasingly inwardly oriented, managing conflicts between SBUs, at the expense of focussing outwards and working together to meet the expectations of its clients.

Notwithstanding, the creation of a divisional structure enables each SBU to have a much clearer focus on its respective markets and service offerings. Further, to help minimise possible agency risk, GBA has implemented certain measures aimed at incentivising employees to focus their attention towards both their SBU and the firm. Indeed, research exists which shows that the introduction of common incentive schemes can be a contributing factor to the development of business unity (O’Reilly and Tushman, 2008). However, despite such incentives, and consistent with other divisionalised companies, it remains an ongoing challenge to ensure potential internal conflicts that may arise from a divisional structure do not undermine the aims and objectives of the whole organisation.

GBA and organisational ambidexterity

Another tension is the need to focus on optimising its existing business operations to remain competitive today, whilst at the same time focussing on identifying and investing in potential new opportunities for business growth and sustainability whether these be new business models or services or introducing radical changes to existing operations. The level of ability organisations has to balance the needs of the present whilst at the same time identifying and investing in the future is known as organisational ambidexterity. March (1991) provides a seminal definition of organisational ambidexterity as ‘the exploitation of old certainties’, balanced with ‘the exploration of new possibilities’ (pg. 71). The tension in reaching an appropriate balance between exploitation and exploration to ensure an organisation’s continuing relevance within the markets it operates in, is central to ambidexterity theory (O'Reilly and Tushman, 2013). As such, whilst this challenge is not unique to GBA, achieving a high level of ambidexterity is crucial to it remaining sustainable.

Desire to improve efficiency (exploitation)

Reorganising its primary operations into divisions has enabled GBA to focus on its core businesses. However, it recognises that further standardisation is needed to generate further efficiencies within each core service area. Further improvement to standards will permit greater process clarity and more rigidly defined work-instructions, which will permit further process optimisation and automation.

As part of its strategy to differentiate itself from other global competitors, GBA offers some logistics service that are highly flexible, interactive, and responsive as well as some which are heavily standardised and rigid. However, highly versatile, customer-driven services can be more complex and costly for the provider than ones which are standardised. Whilst some of these additional costs may be passed onto the customer if they can identify additional value, there is a point where the cost may become too high, causing the customer to go elsewhere. The challenge GBA faces is to find the right balance between providing services that allow some flexibility and tailoring to meet customer needs, whilst at the same time, incorporating standardised, repetitive processes that are more cost effective.

In response to this challenge, GBA is exploring the potential of incorporating and merging new digital technologies such as artificial intelligence (AI), machine learning (ML) and robotic process automation (RPA), to develop processes and that are not only highly efficient but also offer the degree of flexibility that will enable the business to offer a level of personalised customer value. The use of digital technology to support business in this way is known as hyperautomation. According to Haleem et al. (2021) historically, digital automation has focused on replicating simple, basic processes typically through a single digital technology. In contrast, hyperautomation involves drawing together a ‘combination of automation technologies and AI that, when combined, boost humans’ capabilities, allowing them to execute activities faster, more efficiently, and with fewer errors’ (p2). As such, through the combination of AI and other advanced digital technologies, it goes beyond the automation of operational processes to adopt a more effective systems-based approach that explores how to automate initiatives which can strike a balance between replacing manual effort, automation and optimising difficult processes (Haleem et al., 2021).

GBA aims to adopt the hyperautomation philosophy throughout the organisation, whereby all its business processes are assessed for automation where practically and economically possible. The philosophy stems from a business desire to make GBA as efficient and effective as possible, using a confluence of different modern software and computing technologies including AI and RPA to fulfil this aim (Bornet et al., 2021). GBA’s interest in hyperautomation is unsurprising given the growing attention it is receiving within the business and academic communities (Gartner, 2021).

Desire to be entrepreneurial (exploration)

In addition to GBA’s strong ethos towards providing a flexible, customer-oriented service that can result in it deviating away from its standard service offerings, a very strong culture of entrepreneurialism exists within the firm which has enabled various service offerings to be quickly established. The desire to maintain this entrepreneurial spirit however needs to be balanced against meeting the needs of the core services. Whilst entrepreneurialism may lead to the establishment of new services and business models, it also diverts valuable, finite resources away from existing income generating services. In addition, often the timescale to establish a new service can be extremely short and may be led, for example, by a customer’s tendering process. So here, a tension exists; that of focussing on existing services, versus providing new business models.

Exploring the feasibility of potential new business services and models is essential for the survival and growth of all businesses including GBA. However, the costs incurred in conducting entrepreneurial activities need to be carefully balanced against the potential impact of deviating these resources away from providing its core services. Focussing on the exploration at the expense of exploitation can be a dangerous trap for an organisation so it is crucial to attain the correct balance of focus on old certainties with new possibilities (He and Wong, 2004, March, 1991).

Exploration is also evident where radical change occurs within existing business models. A recent example of this within GBA is the introduction of hyperautomation techniques to automate invoice process workflows. It involves purchase invoices being passed through an AI image processing tool to extract pertinent data. This data is then interrogated by an authority matrix which determines how to process the invoice based on a pre-defined set of criteria. Using an authority matrix, the invoice is either passed for automated payment triggered through the enterprise resource planning (ERP) system or sent to the relevant manager to sign off before being returned to the automation queue. This has revolutionised the purchase invoice process by increasing accuracy, reducing time to pay suppliers and significantly reducing the overall processing time.

Similarly, a project to automate the collation of sales invoices has adopted hyperautomation to allow sales invoices from different jobs for the same customer to be combined, based on customer’s requirements. Upon completion of a customer job on the transport management system (TMS), providing all other necessary elements are present, any additional invoices are collated together, then emailed to the customer and made available on the customer portal. The adoption of hyperautomation to support sales invoicing has enabled more work to be fulfilled without the need to increase administrative resource.

Summary

GBA must address two core challenges to move to the next stage of its evolution.

(1) standardisation versus bespoke customer offering,

(2) exploiting current business models versus exploring new opportunities requiring radical changes to business operations.

Standardisation versus customisation

GBA views a partially tailored service as key to developing and retaining strong relationships with its customers as well as helping to differentiate itself from global competitors. However, it needs to balance this against the need to standardise its operations to reduce its costs as well as capture data more efficiently.

To address this, GBA wants to establish a set of standardised processes to support its core services and alongside these, develop a pre-defined list of permitted deviations. The intention is that this will allow GBA to continue offering a level of customised service whilst also benefiting from a more standardised operation. Through automation, the main services can be standardised enabling the capture of data in a more consistent and structured way. This generates information that can support decision-making processes for more niche services, even if these appear bespoke. The hope is this hybrid model will also unlock opportunities for hyperautomation to be embedded into the wider systems so that it can support decision-making across the business. The growing role and impact of hyperautomation within the logistics industry means GBA must invest in this technology to remain competitive (Birkbeck and Rowe, 2023). In addition, transitioning its core services to a more standardised model is critical if GBA is to create the right conditions for hyperautomation to be effective.

Exploitation versus exploration

Exploring new opportunities and introducing radical change is at the core of GBA’s culture, vision, and values. It attributes much of its rapid growth and development to its entrepreneurial ability to identify and explore opportunities which lead to the creation of services which may develop into part of their core business. However, this has sometimes come at the expense of not focussing enough attention or resources on its existing services.

It is widely recognised that not every idea will lead to a long-term, profitable and sustainable business opportunity (Porter, 2004). Investing time, resources and effort in exploring such initiatives is therefore both expensive and inherently risky. In addition, it deviates valuable resources away from the management of the core business. However, the rewards can be immense, resulting in a business model that provides a long-term, value adding, profitable service. An example of such an initiative is GBA’s aircraft-on-ground (AOG) support service. Whilst it required a high initial investment to establish the necessary specialist systems, customer and supplier networks, specialist vehicles, certifications, and training etc., this niche service is now core within the Global SBU which in turn is growing strongly. If GBA had not taken the risk to invest in AOG, neither it nor the Global division would have been established. As such, exploration is risky, but essential if an organisation is to not only survive but thrive in its business environment. However, its exploratory activities need to be balanced against meeting the needs of its core business.

Through reorganising its core services into divisions (SBUs) and developing its hyperautomation infrastructure and capabilities, GBA hopes to optimise the benefits arising from standardisation. In addition, GBA is also exploring the use of hyperautomation to support decision making across the whole organisation. For GBA, hyperautomation is key for both exploiting its current business and also exploring its future business.

Suggested discussion questions

(1) Resources and capability

(a) Use the VRIO model (value, inimitability, rarity and organisation) to identify what the core capabilities are which provide a competitive advantage for GBA.

(b) Use the 4Vs model (volume, variety, variation and visibility) to plot GBA’s current position and proposed future position.

(c) Drawing on the information in the case study and your analysis of the VRIO tool and 4Vs model, how would you advise GBA’s senior management team?

(2) Cost/benefit. Develop a cost/benefit analysis or balanced scorecard exercise GBA could use to assess the feasibility of different logistic services offerings to determine which ones to keep and which ones to discard.

(3) Introducing hyperautomation and ambidexterity

(a) Conduct research online and use literature resources available to you to produce a clear definition of automation and hyperautomation. Explain how these concepts relate to but differentiate from one another.

(b) Adapt Porter’s Value Chain model to illustrate GBA’s new organisational structure. Are there any issues or problems you can envisage?

(c) Discuss how hyperautomation could be used to enable GBA to optimise operational business processes, whilst also supporting a flexible service to its customers.

(d) Explore how hyperautomation could be embedded into other functional areas and levels of the business to support decision making.

(e) Consider how GBA could exploit hyperautomation and associated technologies to achieve its strategic vision of ambidexterity.

(4) Assessing risk

(a) Conduct a risk assessment to determine what risks may exist and identify potential responses which GBA could employ to help mitigate against these.

(b) As part of this risk assessment, consider what actions GBA might take regarding its mitigating any agency risk associated with the new divisional structure.

(c) Consider how GBA might exploit hyperautomation to facilitate this.

(5) Strategic analysis

(a) Drawing on the case study to identify what GBA’s vision and strategic objectives are.

(b) Using external environmental analysis tools (e.g. PESTEL, SWOT, Porters 5 Forces, Parasuraman’s Service Gap Analysis Model etc.) to analyse GBA’s environment and to identify potential opportunities which GBA may be able to exploit now, and in the future.

(c) Consider what strategies or frameworks GBA could explore to instil a culture of innovation and development that is internally as well as externally focused.