For the first time in the bi-annual UK Logistics Confidence Index, operators report that maintaining
their existing customer base is now the top focus for logistics companies.
The Index, commissioned by Barclays and Moore Stephens, reports that for over half (57%) of operators, their main source of new business over the past six months has come from ‘switchers’ from other logistics service providers. Barely one in ten said that their main source of new business came from customers renewing existing contracts.
The intensely competitive nature of the sector continues to put prices under severe pressure suggesting that margins continue to be squeezed as major retailers and manufacturers look to maximise efficiencies before signing up to a new contract. In response, operators see flexibility, both in service provision and contract terms, as key to matching customers’ requirements.
The Index reports that value-added services are considered the most critical factor (29.6%) for contract wins by logistics businesses. Respondents say contracts can be won by moving away from the more traditional service offering to working in partnership with customers to reduce their overall distribution costs. In a fast-moving environment, innovation and better use of technology are seen as essential to driving efficiency and pushing down costs.
Rob Riddleston, Head of Transport & Logistics at Barclays, commented: ‘Following the feel-good factor we have witnessed in recent surveys, it appears that logistic operators are more cautious this time as the sector returns to a more normal footing. Their focus now is very much about finding solutions to longer-term problems such as driver and skills shortages, relentless pressure on margins and the ever-increasing competition to win and retain customers.
‘Yet, there is still a lot of confidence amongst operators with high levels of investment, turnover and profitability still being reported.’
Philip Bird, Senior Director at Moore Stephens, said: ‘Despite the increased caution reflected in the latest Index, optimism remains strong and is evidence of the logistics sector’s resilience in continued uncertain economic times – domestically and globally. Encouragement should also be taken from the fact that operators see innovation, partnership and increased use of technology as key to winning new contracts and ensuring long-term and profitable relationships with their customers.’