Irish logistics businesses have seen their overhead expenses rise by 5.9% over the past 12 months, according to a report released today (8 October 2020) by the Freight Transport Association Ireland (FTAI). Produced in partnership with KPMG, BWG Group, ENPROVA and Analytiqa, The Manager’s Guide to Distribution Costs 2020 provides detailed insight into how the costs of staffing, operating vehicles, and haulage rates have changed in the past year.
Aidan Flynn, General Manager of FTAI, comments: “Between the disruption of the COVID-19 pandemic and the uncertainty surrounding the end of the Brexit transition period, the logistics sector is facing a challenging period. To stay competitive, resilient and profitable in this uncertain economic environment, businesses must have a full understanding of their day-to-day operational costs; this is critical to aid strategic thinking and planning processes. By surveying managers from across the haulage, distribution, manufacturing and retail sectors, The Manager’s Guide to Distribution Costs 2020 provides a comprehensive benchmark of average costs.”
Mr Flynn explains some of the key findings: “Irish logistics businesses have seen their overhead expenses rise by 5.9% over the past 12 months, with annual transport overhead costs increasing by 4.4%. The report also identified determination among managers to transition to alternative fuels, with 29.4% of respondents considering electrifying their fleets and 41% considering utilising either LNG (liquid natural gas) or CNG (compressed natural gas) fuels. The report also revealed that employers are taking an average 29.7 days to fill a job vacancy, with the cost of the skills shortage to a business €20,500 per annum; a real challenge to remaining competitive.”
Minister of State for Transport, Hildegarde Naughton TD, comments: “This guide is full of detailed information that will help the freight, transport and logistics sector to benchmark the costs of doing business at a time when the sector is facing unprecedented challenges posed by both COVID-19 and Brexit.”
In relation to alternative fuels, she notes: “It is most interesting to read the survey results and to see that there is now significant interest on the part of respondents in exploring the potential of alternatively-fuelled vehicles. In order to support hauliers to transition to low-emission technologies, my department is currently progressing a grant that will help to bridge the cost differential between conventional and alternatively fuelled vehicles. This grant will be made available in 2021 and will complement Government-supported programmes for the roll-out of alternative fuel infrastructures.”
Minister Naughton concludes: “The freight, transport and logistics sector has played a crucial role in responding to the COVID-19 pandemic and I wish to convey my appreciation and thanks to everyone working in the sector at this difficult time. I am looking forward to working with the FTAI and other stakeholders representing the sector”.
A new section in the 2020 report looks into financial and strategic performance: 57% of respondents highlight that January is the most crucial time of the year for fleet operators managing their cashflow and more than 27% say that delayed payments are the biggest challenge facing operators.
Andrew O’Leary, Lead Director, Working Capital Management with KPMG in Ireland adds: “With no real end in sight to the COVID-19 pandemic and the threat of a no-deal Brexit looming, managing and prioritising cashflow and optimising cash management has never been more important for the logistics sector. A concerning finding in this report is that more than half of respondents – 54.5% – indicated that they are only partly achieving joptimisation of their working capital. Our strong advice to Irish logistics businesses is to make managing cash and working capital a key boardroom priority, to monitor it closely, prepare scenario and sensitivity analyses to factor in the potential downside risks. Finally, to also remember that even if cash balances today are deemed to be secure, it is critically important to plan for the material risks potentially facing the industry in the year ahead.”
To view the report, please visit www.ftai.ie/cost-of-distribution