U.K. Logistics Providers Say Collaboration with Customers is Key to Growth

Although business confidence among U.K. logistics providers has fallen, many cite innovation and closer ties with clients as mutually beneficial.

Many logistics service providers based in the United Kingdom expect a worsening business climate, according to the latest Barclays and Grant Thornton U.K. Logistics Confidence Index.

The second half 2012 Index of 52.5 is down 10 per cent from the first half of 2012, showing a decline in confidence as consumer demand, margin pressure and fuel costs continue to be major areas of concern. A continued challenging outlook is also predicted with the majority (42%) of those surveyed stating they do not foresee business conditions changing over the next six months; and a further 41% expect conditions to be somewhat more difficult or much more difficult – a 58% increase from the first half year.

Despite the challenges the Index survey results show that there is still hope for 2013. The majority expect an increase in profits (52%), headcount (37%) and CAPEX spend (57%) over the next six months.

In order to achieve future growth plans, almost half (49%) will focus on winning new contracts and maintaining their existing client base (48%), followed by cost control (39%). A major element in achieving these goals will need to be a focus on real value-added opportunities in the long-term, such as innovative and differentiated services.

Innovation is a key differentiator in the industry, and many logistics providers are starting to put this high on their agendas. Over half (55%) will be implementing new innovative supply chain solutions over the next six months with a further 19% actively reviewing options. The two main areas of focus identified will be investment in IT (28%) followed by collaborative solutions (24%).

The majority of respondents believe there is still efficiency to be achieved through greater collaboration, however it is a lack of understanding by their customers that is restricting real progress in this area. Sixty-six percent of respondents believe manufacturers and retailers only understand to a limited extent the benefits of supply chain collaboration, while 23 per cent state they don’t fully understand at all.

Rob Riddleston, Head of Transport and Logistics at Barclays said; “Logistics businesses have often been viewed as “commodity” type providers by their customers, and therefore the development and offering of new services across the entire supply chain will help to change this perception. Greater opportunities in collaboration exist, but the challenge is getting the much needed buy-in and change amongst all customers.”

Contract terms is also an area of concern for logistics providers. 62 per cent believe commercial terms on contracts in the last six months for new business won, lost or tendered are somewhat less favorable or much less favorable when compared to previous, existing or similar contracts. This therefore adds further pressure to logistics providers’ margins. 

Many service providers view greater consolidation in the industry as needed. Of those surveyed, 27% are either likely to make or will be making acquisitions over the next six months, while 13% per cent are either actively reviewing or will make disposals.

Philip Bird, Director, Corporate Finance at Grant Thornton said; “We anticipate further mergers and acquisitions activity in the logistics sector in the short-term driven by several factors—the need to achieve scale, geographic expansion and further service offerings in order to be able to offer end-to-end solutions for customers."

 

TAGS: Warehousing
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