Competition intensifying in logistics sector say firms

COMPETITION in the UK logistics sector is intensifying as customers look for more competitive freight deals, a new report has said.

The latest UK Logistics Confidence Index reports more than half (53%) of logistics firms secured new business in the last six months as a result of customers switching from other service providers.  

The bi-annual index, commissioned by Barclays and Moore Stephens, also shows that less than 10% of operators say their main source of new business has come from customers renewing existing contracts, a drop of 10% since the last survey in H2 2014.  

More encouragingly, a third of firms say that current customers expanding has been their primary source of new contracts.

The report has significance to the West Midlands as it is a major logistics hub due to its unique geographical position at the heart of the country.
 
The report said many respondents had pointed 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.  

The survey suggests that 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% saying that business conditions are somewhat more favourable compared to the previous six months; an increase of 25% since the beginning of 2012.  

The outlook for the next six months is similarly confident with almost eight in ten respondents (79%) expecting the outlook to improve or stay the same and over half (55%) looking to increase headcount.
 
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, in order 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 in order to realise the rewards to be had in this vitally important business sector.”