Friday, May 8, 2015

More logistics customers ready to switch 3PL

More than half (53 per cent) of the business wins reported by UK logistics companies in the past six months have come from customers switching logistics providers, according Barclays’ latest UK Logistics Confidence Index.
Just nine per cent of operators claim that their main source of new business has come from customers renewing existing contracts, according to the report commissioned by Barclays and Moore Stephens. This represents a drop of ten per cent since the last survey conducted in the second half of 2014. While a third of the firms questioned said that the expansion of existing clients has been a primary source of new contracts.
Many respondents point to over-capacity in the market, combined with price challenges from larger multi-national providers for the increase in competition. Operators also point to a continuing squeeze on prices by customers as well as competitors. According to the results of the survey, major retailers and manufacturers are increasingly likely to shop around to meet their price and service expectations, rather than renewing contracts automatically with the result, that for many respondents, customers’ pricing expectations are becoming increasingly demanding.
However, despite these pressures, confidence in the sector remains steady with 37 per cent saying that business conditions are somewhat more favourable compared to the previous six months; an increase of 25 per cent since the beginning of 2012. The outlook for the next six months is similarly confident with 79 per cent expecting the outlook to improve or stay the same and 55 per cent of firms are looking to increase headcount.
This confidence is translating itself into higher turnover expectations, with 81 per cent of businesses expecting an increase over the coming year, with almost 16 per cent looking at a rise of ten per cent or more. Two-thirds of operators are expecting an increase in their profitability and three-quarters believe it likely that their company will make significant capital expenditure over the next six months with just over 40 per cent saying that this is very likely.
Rob Riddleston, head of transport & logistics at Barclays, said: “The high level of planned capital expenditure is welcome news for the industry and reflects the sector’s pressing need for investment in technology, particularly IT, to drive greater efficiencies, productivity and to improve service.
“Such investment is critical to winning new business and with margins increasingly being squeezed, the survey would suggest that operators are looking to invest now to realise the rewards to be had in this vitally important business sector.”

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