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Week of contract wins brings profits caution

19th November 2009
Page 6
Page 6, 19th November 2009 — Week of contract wins brings profits caution
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Which of the following most accurately describes the problem?

By Chrtstopher Walton

A DELUGE OF contract wins and renewals has given operators hope that the road transport industry could be emerging from recession.

However, there is caution that with operators fighting over a reduced level of work in the economy as a whole, there might be overcapacity that could drive contract prices down.

Eddie Stobart has led the way, securing a three-year, £60m ambient transport contract for the majority of Unilever's UK manufacturing and distribution activities.

Unilever's agreement with Stobart is the first time the UK arm has awarded such a significant amount of its ambient transport needs to a single haulier.

It comes just a week after Kimberly-Clark spread its distribution across 14 haulage and logistic companies, with incumbent supplier TDG managing the contract on a 4PL basis.

Unilever has plants at Port Sunlight, Merseyside, and Warrington, Cheshire, close to Stobart Group's road, rail and port hubs in the North-West.

Mark O'Bomick, director of research and analysis at Analytiqa, says: "As Unilever takes the deci sion to award such a significant amount of its ambient transport needs to a single provider for the first time, we see Kimberly-Clark switching to use a group of hauliers operating on a regional basis to cut its UK road transport costs by 10%. These strategies demon strate the variable outsourcing dynamics in contract logistics between a customer and their logistics providers where 'one-size fits all' rarely works for either."

The deal was just the tip of the iceberg for contract wins and extensions over the past seven days... • BAA Heathrow Airport has awarded DHL Supply Chain a £22.5m, two-and-a-half-year contract extension to run the Heathrow Consolidation Centre until late 2012.

• Parcel carrier Hermes won a fiveyear, multi-million-pound contract with television shopping firm SitUp channels. The contract was previously held by Home Delivery Network Limited (HDNL).

• HDNL won a contract to distribute more than 6,500 product lines for bathroom retailer Plumbworld.

• Nightfreight won a home-delivery distribution deal with bed manufacturer Rest Assured.

However, the profitability of a recovery has been called into question. In documents filed at Companies House this week by Kentbased S&S Distribution Ltd chairman David Sanderson says: "The current economic cycle will force national companies to review their cost structures."

But he warns: "Due to the level of reduced work in the industry as a whole, there is now over-capacity in the marketplace, which is increasing the competition and driving prices downwards."


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