CEVA’s CEO gives upbeat assessment of logistics market prospects

At the Summit, Pattullo spoke on stage with Jon Bumstead of Neutral Consulting about his views on the state of the industry and its prospects for the future.

Bumstead opened the interview by asking CEVA’s CEO how his business was performing. Pattullo commented that he was very pleased with how things were progressing and pointed to record profitability in the last quarter – he was certainly happier than a year before.

In fact, overall Pattullo gave a very upbeat assessment of the market environment. He said the economy was no longer in recession. although few CEOs or analysts had the courage to speak positively for fear of ‘talking up‘ companies. He made reference to recent encouraging economic data from the United States and highlighted the roles of China and India in driving the global economy.

He went on to say that he anticipated growth in the year ahead for the logistics market, albeit at a steady rather than dramatic rate. In his opinion, high levels of debt, which many countries had built up, would not inhibit growth, although it would make the global economy more vulnerable to threats posed by crises in markets such as Ireland and Greece.

When asked whether general economic development would be sufficient to power growth in his company, he replied positively. He believes that this growth would be driven by continued out-sourcing of logistics services, trade liberalisation and global sourcing. However, he warned that increasing levels of protectionism in some markets could inhibit this growth.

Turning to mergers and acquisitions, he said that he believed that, in theory, the logistics industry should see increased consolidation due to existing high levels of fragmentation. However, he commented that many acquisitions in the past had not delivered shareholder value, and he thought that as a result there would not be much activity in the next two to three years.

The exception to this would be the development of Asian companies into global players, led by the Australia-based logistics provider Toll, followed by Chinese-owned companies. There may also be acquisitions that added real end-to-end supply chain capabilities to existing logistics products.

Turning his attention to the issue of innovation, he admitted that there was a perception that logistics providers lacked the ability to develop new ideas which added value to their clients‘ supply chain operations. He countered that low margins and ‘open book‘ contracts were a barrier to innovation – the latter providing a disincentive to logistics companies as all benefits were passed on to the client.

He also stated that there was a risk that providers could become ‘cheap labour shops‘ as their services became increasingly commoditised.

One way of preventing this would be to encourage a higher calibre of employee to the industry. Pattullo suggested that the creation of a new profession, ‘Supply Chain Engineer‘, would have a better chance of attracting and keeping top talent. However, he commented that it was easier getting finance for mergers and acquisitions than obtaining investment for research and development.

In conclusion, Pattullo stated that he was very upbeat about the prospects – not just for his own company but also for the sector as a whole. He believed that the market would grow again in 2011.