Jitters that bug the market

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In this issue we publish our review of the major third party logistics contracts signed over the previous 12 months and, as always, it highlights some significant trends in the market.

Perhaps most eye-catching is the size of some of the contracts: the £1.6bn DHL Logistics deal with the National Health Service and Wincanton’s £900m Somerfield contract leap to mind. There have been a number of other contracts worth more than £20m – and all in a year when many companies have been consolidating following the mergers and takeovers of 2005-6.

Another clear trend is the growth in international supply chain contracts. There are a number of factors affecting this. Globalisation of industry is continuing apace and shows no sign of slowing down. But improving control of the resultant extended supply chains is a critical issue highlighted by the fact that last month saw toy giant Mattel recalling millions of pounds worth of stock because of quality failures in products sourced in the Far East.

Clearly some companies still have something to learn about managing extended supply chains.

Looking at the domestic market, I have commented before on the fact that market consolidation among the bigger players appears to be opening up niches for smaller operators. Certainly, companies like Ramage, Cert, and TM Logistics can boast some sizeable contract wins over the past year.

Looking ahead, operators appear quite bullish about the prospects for winning new business over the next year or so. Growth rates of eight per cent and more are forecast for the third party logistics market. And, while margin pressure is unlikely to ease much domestically, there is less pressure on rates in the growth markets of the Far East where access to market is more important than cutting cost to the bone.

The fly in the ointment is, incongruously, bad debt in the American home-lending market – a source of recent financial jitters. The hope is that it is just a summer bug. Anything more could seriously dent those growth predictions.

Malory Davies FCILT, Editor

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