Food supply chain collaboration pays off
Greater co-operation in transport and warehousing operations can raise efficiency along the supply chain.
“Collaboration can be done by retailers, manufacturers, distributors, between logistics companies, final mile agents and between manufacturer and retailer. All work successfully when the end customer needs sit at the heart of the operation,” said Alastair Isbister, vice president for consumer at logistics firm DHL.
Nevertheless, the majority of overtly co-operative deals tend to fall into one of three camps. The first two are between the manufacturer and third-party logistics (3PL) provider or the retailer and 3PL, which are both essentially customer/supplier relationships.
The third is where warehousing-only specialists team up with transport-only companies to compete more effectively against full-service 3PL providers.
In the case of customer/supplier relationships, Hugh Williams, md with Hughenden Consulting, suggests that old habits of trying to get something for nothing can make it tricky to achieve closer co-operation.
“There’s a very common view among customers that the transport/logistics provider is not innovative enough for them, while transport and logistics companies say you don’t pay us enough to be innovative,” said Williams. “It’s a Mexican stand-off.”
Reaching the level of trust needed to achieve a more open relationship can be hampered if the businesses involved are too focused on a traditional, cost-based approach, which entrenches competing goals among potential partners.
What’s needed, argues Williams, is an alternative approach in which reduced costs and other potential benefits of co-operation are shared.
Mike Flynn, business solutions director with 3PL provider Gist, agrees that the mind-set of traditional logistics relationships can be a barrier to co-operation.
“The primary logistics industry [ie manufacturer-to-retailer] has a tendency to be very transactional, with companies looking for the cheapest way to move a pallet from A to B,” said Flynn.
‘Cheapest way to move a pallet’ (Back to top)
In contrast, if the 3PL is permitted to develop the relationship to the point where it can understand the customer’s business more deeply, then it may be able to suggest potentially transformative improvements.
For instance, introducing an interim warehousing step between A and B that shifts stock from the production site more quickly could free up space to expand production.
“You can’t just have a transactional relationship. We need to build trust so we can make the changes to deliver value,” said Flynn. “We’re seeing more and more companies that want to engage with us on that level.”
One good example is a deal announced last year with Marks & Spencer that entails Gist delivering both primary (from suppliers to regional distribution centres (RDCs)) and secondary (from RDCs to stores) logistics services worth around £300M in the first year.
The contract is expected to run till 2027. “Typically, the more sophisticated the solution, the longer-term it will be,” said Flynn.
David Frankish, chief executive of NFT Distribution Operations confirms that commercial pressure on costs will continue to be a strong driver for greater collaboration.
However, he echoes a note of caution voiced by several observers: “The industry needs to acknowledge that there is a point where margins on certain aspects of the supply chain can’t be squeezed any further without a breakdown of service and/or suppliers due to financial unsustainability.”
Frankish said that NFT is fully committed to greater co-operation as a way of improving services, as well as optimising costs:
“Optimisation is key in providing efficiencies throughout the supply chain,” said Frankish. “True optimisation can only be achieved through collaboration, where all partners are aligned in achieving the same goal.”
‘Achieving the same goal’ (Back to top)
Reducing part-loads is a related benefit, and Magnavale (parent company of temperature-controlled storage specialist Rick Bestwick) has managed to drive it down by teaming up with DFDS Logistics.
“Magnavale has a seamless offering when it comes to vehicle utilisation thanks to our partnership with DFDS Logistics, Europe’s largest logistics provider,” said Kevin Hancock, md of Rick Bestwick.
“We are now able to reduce part-loads on the road, which not only has a positive economic impact but an environmental one too.
“Pallet space is used more effectively by consolidating various manufacturers’ products on the same journey and maximising loads on return journeys.”
DHL’s Isbister said that the sheer scale of major 3PL logistics operations – such as DHL’s network of more than 60 food and drink bases and 7,500-strong fleet in the UK – is central to unlocking many of the advantages of collaborative working.
A 3PL can also act as a broker, enabling specific partnerships between manufacturers and/or retailers.
“One of the most successful partnerships DHL has brokered is between BP and Nisa,” said Isbister.
“The BP national distribution centre is based in Lutterworth and Nisa in Harlow. By using the cross-dock at Harlow, BP is achieving secondary distribution using Nisa vehicles, which deliver to both Nisa stores and BP forecourt shops in a single delivery run, enabling significant savings for both companies in terms of reduced empty running and fuel costs.”
‘Reduced empty running’ (Back to top)
Meanwhile, Partner Logistics is trialling a system that works in the same way as carpooling.
“If one of our customers is delivering five pallets to a retailer in London at 8am and another customer is delivering 10 pallets to the same retailer at 9am, Partner Logistics can liaise with all parties to arrange one delivery at 8.30am,” said commercial director Eelco Schnabel.
“By combining shipments, there can be a significant reduction in carbon emissions by reducing the number of freezer trailers on the road, while also lowering operating costs.”
As a frozen food warehousing specialist, Partner Logistics is also among those formerly ‘horizontal’ providers now teaming up with transport specialists to provide ‘vertical’ one-stop-shop logistics support.
It’s more than just a matter of cost, explained Schabel: “With today’s market, manufacturers are not just competing with their products so must ensure that their supply chain gives them a competitive advantage too.”
Technology is an important enabler of complex co-operative schemes. For example, DHL has an electronic freight exchange (EFX) transport system that offers visibility across sectors and customers nationally, enabling its central transport team to fill loads at short notice.
“The EFX works in real-time and loads can be filled with as little as four hours’ notice,” said Isbister.
Elsewhere, warehouse Management System (WMS) supplier Indigo Software reckons the rise of track-and-trace standards has been a critical factor in shared storage facilities.
Meanwhile, telematics on vehicles have also proved game-changing, said Hancock: “Vehicles are linked by telematics to give customers real-time information, electronic proof of delivery, analytics and direct electronic data interchange links to the warehouse.
“This allows for paperless communication between companies that keeps workflow fluid.”
