Innovation 'Stifled by Efforts to Cut Costs' in Logistics Field; PRESSURE ON MARGINS PROVES TO BE THE BIGGEST CHALLENGE
Byline: SION BARRY
WELSH logistics businesses say they are feeling generally optimistic but a focus on cost-cutting and sticking to core business is restricting innovation in the sector, according to research from Grant Thornton and Barclays.
The new UK Logistics Confidence Index shows that although the majority of businesses will invest over the next six months, they continue to tackle the same ongoing issues, leaving innovation to take a back seat.
When asked about the biggest concern facing logistics businesses over the next half year, a third cite pressure on margins as the greatest challenge in their business, followed by fuel costs (20%). Only 15% of respondents said they were concerned by eurozone uncertainty.
Mark Naughton, corporate finance director at Grant Thornton in Wales, said: "The logistics industry has always been an early indicator of the state of the wider economy.
"This sensitivity makes it wiser to the ways that it can thrive in the lean years. There is, however, only so far that costs can be taken out of a business, and margins cut, and only so many contracts that can be won. The next 12 months will likely be a period of consolidation in this sector, creating more companies of scale who are able to invest in innovation and diversification, as continuing to do more of the same is simply not an option. We also believe that the really successful companies will be operating on an 'asset light' basis and co-ordinating the provision of services across the supply chain." Although faced with cost pressures, there is optimism in the industry. More than three-quarters of businesses surveyed view current business conditions as "somewhat difficult" (65%) or "very difficult" (13%), with 48% foreseeing conditions to be the same over the next six months. …