Contracts from competitors

Logistics operators seek contracts from competitors

The acquisitioning of customers from other service providers is the main source of new business for over half of logistics operators, according to the latest UK Logistics Confidence Index from Barclays and Moore Stephens.

For the first time since the index has been published, operators have reported that maintaining their existing customer base is now the top focus for logistics companies.

Over half, or 57%, of operators have stated that their main source of new business over the past six months has come from “switchers” from other LSPs, while less than one in ten said that their main source of new business came from customers renewing existing contracts.

Rob Riddleston, Head of Transport & Logistics at Barclays, noted that the focus of the logistics industry is, among other things, on the “ever-increasing competition to win and retain customers.”

He also noted that much of the sectors focus is now very much about finding solutions to longer-term problems such as driver and skills shortages and “relentless pressure on margins.”

Respondents of the survey said contracts could be won by moving away from the more traditional service offering to working in partnership with customers to reduce their overall distribution costs.

The index reports that 29.6% of respondents consider value-added services as the most critical factor for contract wins by logistics businesses. In a fast-moving environment, innovation and better use of technology are seen as essential to driving efficiency and pushing down costs.

However, the report also noted that “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.”

According to 21.8% of operators, one of the key drivers behind contract wins is keeping up personal relationships, which can often mean “going the extra mile” to deliver beyond the terms of a contract.

While unsurprisingly, over a quarter of respondents still see price competitiveness as one of the most important drivers in new contract wins.