Confidence In The Logistics & Supply Chain Sector Strong But Down Year-On-Year Due To More Uncertain Backdrop
2nd Annual Irish Logistics & Supply Chain Confidence Index Released
Dublin, March 28th 2017 - Commercial property specialists CBRE in association with KPMG today released the latest survey of confidence and expectations in the Irish logistics sector of the economy, which was launched at an event at CBRE headquarters in Dublin.
The second Ireland Logistics & Supply Chain Confidence Index was undertaken by specialist research agency Analytiqa who undertake a series of similar surveys across a number of jurisdictions. More than 50 senior decision makers from across the logistics and shipping sectors in Ireland participated in the survey. Respondents included CEO’s, Managing Directors and senior management of some of the largest logistics providers, firms and buyers in the State.
Some of the key findings of the research are as follows:
- Confidence amongst both logistics operators and shippers in the Irish market is down year-on-year as a result of economic uncertainty with the index coming in at 60.4 compared to 72.7 in 2016. In 2016, logistics operators (81.1) were considerably more confident than shippers (64.0). This year there is little variance between both, with confidence amongst logistics operators at 59.7 and shippers showing 61.2.
- 50% of respondents to the Irish survey this year say they are more confident about business conditions in the logistics and supply chain sector than they were 12 months previous, down 16% on last year. The number of respondents who said that conditions were ‘somewhat more difficult’ compared to 12 months ago was up 10% year-on-year.
- When asked how confident they are about business conditions over the next 12 months, 40% of respondents say that conditions will be ‘somewhat more difficult’ which is perhaps not surprising. A further 6% of respondents say that conditions are likely to be ‘much more difficult’ next year. 21% of respondents expect business conditions to be the same while 31% expect conditions to be ‘somewhat more favourable’ over the next 12 months. Only 2% of respondents are expecting business conditions to be ‘much more favourable’ over the next 12 months.
- The responses differ somewhat between the logistics sector and shippers, with logistics operators in general being more pessimistic this year. 44% of logistics operators say that conditions over the next 12 months are likely to be ‘somewhat more difficult’ compared to the same period last year compared to 36% of shippers. Meanwhile, 36% of shippers say that conditions are likely to be ‘much more favourable’ over the next 12 months compared to 26% of logistics operators, which is interesting.
- When asked about anticipated changes in turnover over the next 12 months, it was encouraging to note that 80% of respondents said they expected turnover in their organisation to increase over the next year although this reflected an 8% deterioration year-on-year. 44% of respondents expect a relatively modest increase of between 2% and 5% in turnover over the next 12 month period, with 19% anticipating an increase of between 5% and 8% in turnover in the period. More than 7% of respondents forecast an even higher increase in year-on-year turnover of between 8% and 10%, while almost 10% of respondents to the survey expect turnover in their business to increase by more than 10% over the next 12 months.
- When asked about anticipated changes in profitability over the next 12 months, it was encouraging that respondents were also generally positive, with almost 58% of respondents expecting increased profitability over the next 12 months. More than a third of respondents expected no change in profitability this year and while almost 8% expected deterioration in profitability this year, all of these respondents expect profitability to decline by between 2% and 5% with no respondents expecting a higher deterioration in profitability.
- When asked about the likelihood of their company making significant logistics and supply chain related capital expenditure over the next 12 months, responses varied. 33% of respondents said it was likely that they would make significant capital expenditure in these areas over the next 12 months while almost 22% said they were very likely to do so which is encouraging. However, respondents were in general less positive about making significant capital expenditure than they were 12 months ago.
- More than 55% of respondents in the logistics sector expect to increase headcount in their organisations in the next 12 months compared to only 36% of shippers.
- Almost 20% of respondents said they were more positively disposed towards the Eircode postcode system than they were 12 months ago.
- More than 87% of respondents say that Ireland is either ‘average’ or ‘better than average’ in terms of investment attractiveness compared to other EU countries, with shippers more positive than logistics companies in this area. In total, 92% of shippers said that Ireland was either ‘average’ or ‘better than average’ in terms of investment attractiveness.
- 56% of respondents expect an increase in demand for logistics property in 2017, with logistics operators considerably more bullish in this respect, mirroring trends in last year’s survey. 77% of respondents from the logistics industry expect to see an increase in demand for logistics properties in 2017 compared to only 38% of shippers.
- Over 81% of respondents plan to introduce some form of new innovation to their business over the next 12 months compared to 85% 12 months ago. Of those that intend introducing new innovation in 2017, 24% of respondents said that they intend investing in big data and analytics in 2017. A further 19% respectively said they will be investing in the ‘Internet of Things’ and automation /robotics in 2017 while almost 23% said they would be investing in cloud services this year. 3% of respondents said they will be looking to implement 3D printing this year compared to 1% of respondents last year.
- Respondents were asked to identify the key drivers influencing contract wins from customers or contract awards to service providers in the last 12 months; most respondents (29%) cited price competitiveness as being of significant importance, mirroring last year’s results. This was followed by value added services (25%). 21% said that the scale of networks played a part and 16.5% said that personal relationships were a key influence (compared to 13% 12 months ago).
- When asked what their key business priorities for the next 12 months are, the two most important issues identified by logistics operators was maintaining their existing customer base and winning new customers. In contrast, the biggest focus for 2017 for shippers was cited as cost control and optimising operational efficiencies and speed.
- Overall, 18% of respondents to the survey respectively said that economic conditions and Brexit uncertainty were the biggest challenges facing their business in 2017. Other concerns that ranked highly in this year’s survey included customer price pressures & reducing costs as well employee wage pressures.
- When asked what challenges in particular they were fearful of as a result of Brexit, the issue that resonated most with respondents was a concern about a recession or a downturn in economic performance. This was followed by an increase in financial costs and the introduction of trade tariffs and foreign currency trading. Other items which were identified included greater bureaucracy and administrative burdens, challenges in maintaining labour and an impact on the supply of talent.
- 78% of respondents to the 2017 survey say that they have undertaken activity in their companies in direct response to the Brexit issue, with 37% of those saying they have completed background research on the issue, a further 33% saying they have had informal discussions with customers, service providers and/or trade organisations while 30% say they have set up internal discussion/working groups.
Since last year’s inaugural Logistics & Supply Chain survey for Ireland was conducted, it is fair to say that the landscape has changed immeasurably, with seismic events affecting Ireland’s two largest trading partners. Concerns such as last June’s unexpected Brexit referendum result and the election of a new President in the United States have exercised the minds of respondents to this year’s survey and it is no surprise that there has been a deterioration in overall confidence in the sector year-on-year considering the more uncertain backdrop.
Speaking at the event, Fionn Uibh Eachach from KPMG said: “This year’s survey is again another detailed insight into the mind-set of the key players of the logistics and shipping industries which has shown a decline in overall confidence in the sector. It is not surprising to see this decline given that potential increases in customs duties and administrative costs could affect international trade into and out of Ireland. Hence it is particularly important for companies in the logistics and shipping industry to be undertaking planning now for a post-Brexit world.”
The guest speaker at the launch event was Pamela Quinn, MD of Kuehne & Nagle and 2017 Image Magazine Businesswoman of the Year who gave a very interesting speech on the future direction of the logistics and supply chain network.
About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2016 revenue). The company has more than 75,000 employees (excluding affiliates), and serves real estate investors and occupiers through approximately 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.
In Ireland, with offices in Dublin and Belfast, CBRE is the country’s largest commercial real estate services company, now employing over 165 employees and offering a full range of property services including property sales and acquisitions, leasing and management, investment, corporate services, debt advisory, project management, consultancy, business rates and compulsory purchase, valuations and research. Please visit our website at www.cbre.ie or www.cbre.ie/ni.