Irish Logistics & Supply Chain Confidence Index released

By James Buckley - Wednesday, April 11, 2018 8:36

CBRE and FTAI have 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’s headquarters in Dublin.

The third CBRE Ireland Logistics & Supply Chain Confidence Index was undertaken by specialist research agency Analytica, 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 this year’s survey include: The CBRE Ireland Logistics and Supply Chain Index for 2018 shows an overall confidence score of 63.3 - up from 60.4 in 2017, but still below the 72.7 figure reported in 2016, demonstrating the extent to which issues such as Brexit are exercising minds in this sector of the economy.

Interestingly, this year’s survey shows that there has been a significant divergence of confidence between the two sets of respondents, logistics operators and shippers.  Last year, shippers were marginally more confident (61.2) than logistics operators (59.7).  This year, we see confidence amongst logistics operators increase to 75.4 and shippers reduce to a 50.0 measure.

Despite a positive economic outlook, the deterioration in shippers’ confidence year-on-year is perhaps not surprising, considering that the prices of raw materials and inputs are increasing at a faster rate than it is possible to pass on to customers in the current environment.

When asked how confident they are about business conditions over the next 12 months, 28% of respondents say that conditions will be ‘somewhat more difficult’, which is down 12% on last year. 10% of respondents say that conditions are likely to be ‘much more difficult’ next year. However, 28% of respondents expect business conditions to be the same as last year while 30% expect conditions to be ‘somewhat more favourable’ over the next 12 months. Only 4% of respondents are expecting business conditions to be ‘much more favourable’ over the next 12 months.

It was encouraging to note that 85% of respondents said they expected turnover in their organisation to increase over the next year, a 5% improvement year-on-year. 46% of respondents expect a relatively modest increase of between 2% and 5% in turnover over the next 12-month period, with 17% anticipating an increase of between 5% and 8% in turnover in the period.

11% of respondents forecast an even higher increase in year-on-year turnover of between 8% and 10%, while another 11% expect turnover in their business to increase by more than 10% over the next 12 months. 7% of respondents expect turnover to deteriorate in 2018 although no respondents are expecting turnover to decline by more than 5% in the period.

60% of respondents expect increased profitability over the next 12 months - up from 57% in 2017.

It is encouraging to note that despite the significant challenges across supply chains, 52% of respondents intend to increase their logistics-related headcount to some extent over the next 12-month period (up from 46% last year) with the largest cohort (34%) expecting to increase their headcount by between 2% and 5% year-on-year.

That said, 12% of respondents expect to see a reduction in headcount over the next 12 months (up from 6% last year) with most of these expecting to reduce headcount by between 2% and 5%.

When asked about their change in attitude towards the Eircode system in the last 12 months, compared to their opinion at the same time last year, the majority of respondents (66%) said there had been no change in their attitude. However, 30% of respondents said they were more positively disposed towards the Eircode system than they were 12 months ago (up from 20% last year). Just 4% of respondents describe themselves as more negative towards Eircode than they were 12 months ago.

82% reported growth in ecommerce activity of up to 5% over the last 12 months.  7% of respondents reported growth of between 6% and 10%, whilst the remaining 11% saw growth of between 10% and 15%.

49% of respondents said their Ecommerce activity has the island of Ireland as its basis, with the UK accounting for a further 20%. The remaining share of activity is segmented quite evenly between the European Union (16%) and the rest of the World (15%).

When asked how their companies would accommodate further growth in Ecommerce in 2018, 44% of respondents said that they would do this by improving technology in their organisations. A further 22% said they would do so by better collaboration between customers and service providers while 22% also stated that investment in warehousing and / or fleet operations would be required. 9% said that they would have to recruit additional resources to accommodate Ecommerce growth.

2017 was characterised by shortages of modern industrial and logistics stock to satisfy demand across the island of Ireland, which in turn fuelled rental growth and impacted negatively on take-up volumes. 71% of respondents to this survey expect an increase in demand for logistics property in 2018 (up from 56% last year), with logistics operators once again considerably more bullish than shipper’s in this respect, mirroring trends in surveys in 2016 and 2017. 93% of respondents from the logistics industry expect to see an increase in demand for logistics properties in 2018 (up from 77% last year) compared to only 43% of shippers.

Overall, 23% of respondents nominated ‘Brexit uncertainty’ as one of the biggest challenges facing their business in 2018. Other concerns that ranked highly in this year’s survey included ‘a shortage of drivers and other key skilled employees’ as well as ‘economic conditions’ and ‘increasing employee wage pressures’.

When asked to identify key opportunities for their business over the next 12 months, ‘achieving market growth internationally’ has increased in importance relative to the 2017 survey, with 22% of respondents now identifying this as a key area for the year ahead. ‘Offering value added services to customers’ and ‘capitalising on domestic market growth’ are also among the leading opportunities identified by respondents.

Garrett McClean, Executive Director and Head of Industrial & Logistics at CBRE in Ireland commented “Since the inaugural CBRE Ireland Logistics & Supply Chain Index was conducted in 2016, it is fair to say that the landscape for logistics operators and shippers has changed immeasurably, not least because of uncertainties caused by Brexit, which has the potential to significantly change this sector.

It is encouraging that both shippers and logistics operators remain confident regardless of the many challenges facing the industry. From a real estate perspective, the scarcity of modern accommodation has long been identified as a concern and was again highlighted in this year’s survey. With some new speculative development now coming on stream, this should be alleviated somewhat over the course of the next 12 months”.

Also speaking at today’s launch was Des Travers, CEO of DPD Ireland who gave a very interesting speech on the future direction of city logistics and the final mile delivery.

He said: “Like 59% of respondents… DPD Ireland will continue to invest heavily in technology over the coming 12 months. With b2c deliveries making up almost 50% of our delivery business, as a result of the continuing growth in e-commerce, simplifying the consumer journey is crucial in terms of improving operational efficiencies and service overall. For online shoppers, their interaction with the parcel carrier is frequently the only human interaction they make throughout the purchasing journey. Making that interaction count is critical.”

jbuckley@costar.co.uk

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