More than half (51%) of UK third-party logistics (3PL) companies expect to invest more in equipment, people and premises in 2014 than they did in 2013.
This was one of the findings of 3PL 2013, a recent survey of warehouse operators conducted by the United Kingdom Warehousing Association (UKWA), the trade association representing about 700 UK-based third-party logistics specialists.
The majority of respondents (53%) expect to see their investment in information technology increase next year, while 49% of those surveyed are preparing to spend more on their vehicle fleets. Extra staff (47%), bigger premises (47%) and materials handling equipment (39%) are other areas where respondents predicted that they would spend more. Only 10% foresaw a decline in their year-on-year spending.
About 55% of respondents are anticipating an increase in 2014 turnover and 33% thought their turnover was likely to remain unchanged, while 12% are expecting a fall.
The survey also showed that in 2013, most workers (61%) employed in the 3PL sector received a modest pay rise. The majority (67%) was awarded an increase of 3% or less, while 33% enjoyed an above-inflation salary boost of between 3 and 5%.
Nearly half of the companies surveyed (47%) expect to be able to give a general pay rise to all staff in 2014.
The 3PLs surveyed have worked with their clients for an average of 8.77 years, although the majority (59%) reported that their relationships with established customers stretch back 10 years or more.
When it comes to new business wins, the average length of the most recent new contracts gained by respondents to the survey was 2.41 years. For the overwhelming majority of those questioned (80%), new contracts tend to be for between one and three years, while 20% stated that, on average, clients were prepared to commit to three- to five-year deals.
In some instances, the amount of time taken up by the tendering process that 3PLs must undertake before they successfully land new business is almost as long as the contract itself.
About 4% of respondents reported that the average length of a new business bid process is over 18 months, but for most (45%), the flash to bang time between the initial business pitch and the signing of an agreement is between three and six months.
While the majority of respondents to UKWAs 3PL 2013 report appear buoyant going into 2014, the sector faces challenges. When asked to rate the greatest threats to their business, respondents identified increased price competition, cost inflation (particularly fuel) and regulations and legal issues among the most critical issues.
In the past year, 82% of respondents had increased the cost of their services by up to 5% to cover rising fuel charges. A small number (5%) had been compelled to raise their prices by more than 10% to offset the rising price of fuel.
Respondents had other ways of countering fuel costs in addition to price hikes. About 35% had introduced fuel monitoring technology and put more emphasis on better driver training; while some companies (12%) had sought to mitigate the impact of fuel price rises by negotiating fixed rate deals from their suppliers, and others (12%) had switched fuel suppliers.
Training was rated poorly by respondents. While 45% reported that staff receive training on an ad-hoc basis, only 18% have any kind of formal staff or management training program in place; and 37% reported that their company offers very little or no formal training to key workers.
Also disappointing was the approach to apprenticeship schemes. About 69% of respondents have no formal apprenticeship scheme (ie, one that is run with formal recognition from the National Apprenticeship Service) in place. Of the 24% that do operate such schemes, the majority is in warehousing and storage (50%) and logistics operations management (25%).
The influx of potentially more cost-efficient immigrant labour to the UK does not appear to have had much impact on the 3PL sector. The majority of respondents stated that less than 10% of their workforce consists of people whose first language is not English, while 29% claimed that their workforce is made up entirely of English speakers.
Commenting on the findings of the survey, UKWA CEO Roger Williams says: "UKWAs 3PL 2103 survey provides a useful snapshot of our industry as it emerges from one of the longest and most difficult economic downturns many people can remember. It shows an industry that is well placed to face the challenges of the future and one that is quite rightly looking forward with no small degree of optimism."
The survey by Redshift Research was conducted in September among nearly 60 UKWA members ranging from firms with less than 20 employees to companies with a workforce of over 500.