While UK food retailers are world leaders in the field of supply chain management, the logistics infrastructure of much of the manufacturing base is no longer fit for purpose, the head of Nestlé's supply chain, Europe, has claimed.
The primary distribution leg (between suppliers and retailer controlled regional distribution centres), is not as efficient as it could be, said Jonathan Pearce. "The infrastructure of major food manufacturers like Nestlé was created at a time when the requirements of retailers were different. In emerging markets such as central and eastern Europe and parts of Asia, large manufacturers like Nestlé have basically gone in as sales and marketing organisations with a clean sheet of paper when it comes to distribution.
"We sat down with other manufacturers and said do we really want to build our own depots or do we want to talk to third-party logistics providers and work with each other on a shared user basis, and deliver frequent, full, mixed truckloads to retailers?"
While so-called 'collaborative distribution' arrangements like this could cause problems if certain parties pulled out, or suddenly picked up more business, and terms had to be renegotiated all the time, they were workable if managed on a transparent basis, he said. "In Poland, Nestlé is in the same depot as rivals such as Kraft and Masterfoods, and there was some reluctance at first, but it's just a more efficient way of running a supply chain when you don't have the volume to be able to make full loads on your own." In the UK, he said, major manufacturers had too many depots. "At Nestlé, we're certainly looking at the possibility of sharing assets with other manufacturers.
Factory gate pricing was a good thing if it reduced the total cost of a supply chain relationship, he added. "We're talking to all of the major retailers about this. But you've got to ask what are the benefits to us in all of this?" Vendor managed inventory, whereby suppliers (vendors) took responsibility for managing stock levels of their products at their customers' depots, was a more interesting opportunity for Nestlé at the moment, he said. "It's worked very well for us in France with [French retailer] Carrefour... It helps us supply them in the most efficient way and stops the blame game." Trials were also being conducted with UK retailers, he confirmed.