Increasing operational costs
The transport & cargo market is one of the most sensitive industries to the economic challenges as it is also influenced by the business performances of producers and suppliers. The business of logistic operators are influenced by a sum of factors as infrastructure, fuel price, the unpredictability of law environment, exchange rates, the strategy of local and central authorities for attracting and stimulating foreign and Romanian investors, evolution of consumer market.
Being a freight forwarder and logistics provider our main cost is the cost of haulers, and this is closely linked to the evolution of fuel price. During last years, the fuel price has constantly increased. Three or four years ago, the fuel price represented about 30 percent of the total transportation price. Today, it is more than 50 percent. This is related to the domestic transportation market, the proportion is slightly different for international transportation, where the fuel price weights lower in the total transportation price.
Other major components of the cost are the staff costs and, of course, the logistics terminals costs. Basically those 3 main components cover more than 90 percent of the operations costs. The staff costs also increased, the only decrease was related to the warehouse terminals rent, that today reached at the level of 4 or even less than 4 euro/sqm.
The pursuit of growth on a fragmented market
One aspect of the market will be that existing players will enhance some specific services within their portfolio, some of us being focused more on forwarding rather than logistics or vice versa. Also, it is possible that some Romanian haulers will face downturns or even closure of the business due to the lack of cash flow and external financing. M&A would be possible in the near future, because the forwarding market is fragmented.
Most of the big names in forwarding are present on the Romanian market and for sure, they want to grow their business. This will be done both organic and by acquisition. DSV is also aiming to keep pace with the double digits growth, and our strategy will include both options. Even if today the market is fragmented, on long and medium-range forecast it will be “dominated” by the same big names because of their experience and know-how and also their resources, which afford them to invest year after year, and they will be able to offer services to any kind of customer.
The local logistics market is not as transparent as it is flexible, but it still has a significant growth potential. The outsourcing of logistics services towards specialized companies makes from this segment to be a fast developing one, as it still has to catch up with the level registered on the European markets. For Danish mother company of DSV Solutions, running offices in 60 countries, Romania is a hot spot due to the increasing potential and the generous offer of large growth rate. The mature markets are also delivering growth rates but in a smaller and slower pace, while Romania still has the features of a fast-growing market.
A sneak peek towards the clients
Within the last few years, all logistics solutions providers have observed a tendency in the clients’ business to optimize stocks, sell warehoused goods fast and rotate merchandise in the deposits more quickly, through cross docking. Regarding the volumes of transported goods, we have noticed an increase of the transported automotive spare parts, like tires, while the FMCG segment has shrunk. But, in the same time, clients coming from growing industries such as pharmaceutical and automotive sectors are compensating for the variability of the other businesses.