It’s been a rocky road for many third party logistics companies over the past 12 months, but there are still deals to be had. Lucy Tesseras reports
It has been a busy year for contracts within the third party logistics sector, Logistics Manager’s contract analysis has revealed. Despite the slowdown in the economy the number of agreements made over the past 12 months doesn’t seem to have waned, with some companies defying the recession altogether by signing some truly mega deals.
High street giant Marks & Spencer renewed its contract with Gist for a further ten years in a deal worth some £2 billion. Drinks logistics firm Tradeteam secured several contracts, including a ten-year £500 million renewal with Coors Brewers, as well as an eight-year deal with Welsh brewer SA Brain and Co worth £12 million. Its parent company DHL Supply Chain continued the trend by signing a number of multimillion pound deals, including a £500 million deal with Iceland, a £123 million contract with Openfield, and a deal with HM Prisons worth around £430 million over ten years.
Mark Parsons, vice president of business development at DHL Supply Chain, says: “Current market conditions have created challenges across all industries, however they have also provided opportunities. Every business is looking for ways to reduce its cost base and taking a strategic approach to outsourcing supply chains can both deliver bottom-line benefits and be an agent for change.”
A £400 million deal with Aggregate Industries Building Materials was among a number of deals won by TDG, while the Lloyd Fraser Group secured a £30 million transport contract with Focus DIY and Argos renewed its contract with Wincanton for three years in a deal worth £40 million.
Contract lengths seem to have shortened somewhat compared to last year however, with the number of deals of more than five years down from 25 per cent in 2008 to eight per cent this year. In line with this, the number of contracts of less than three years has risen from 17 per cent in 2008 to 35 per cent in 2009.
There also appears to have been a slight increase in UK-based contracts, which according to our findings, account for 72 per cent of the deals signed since last July.
The number of fourth party logistics contracts looks like its on the rise again following a bit of a slump during 2008, with Wincanton, DHL Supply Chain and 3P Logistics increasing their presence within the field.
The largest proportion of deals sealed in the past year have been within the food and drinks sector (27 per cent). Of the remainder of the deals we were notified about 16 per cent were signed by mixed retail and clothing and footwear businesses and seven per cent were within the electrical and electronics sector.
It has been a tough year for some though. Entertainment UK, the wholesale division of the Woolworths Group, ceased trading following the demise of its parent company. But the big news of last year was the takeover of TDG, which was bought by Douglas Bay Capital, under the name LIT for the purpose of the acquisition, in October 2008. Rival company Wincanton did put in an offer for the logistics firm, but pulled out two days before the bid deadline.
Parsons concludes: “The logistics providers that deliver the most value in the current economic climate will be those that work with their customers as partners in innovation, with each party focused on its core capabilities and a common goal.”
Download the Contract Analysis table