The Longest Mile

Delivering drinks to a fragmented on-trade has its own unique set of problems.  Zealous traffic wardens and London’s congestion charge often make "the last mile" the hardest.  James Graham reports

THE DESTINATIONS for drinks to the on-trade are as varied and numerous as the types of drinks being distributed.  Pubs, gastropubs, restaurants, clubs and hotels are just some of the locations served by the providers of on-trade logistics.

To make matters worse, Britain’s increasingly congested town streets, growing parking restrictions and an increasingly fickle consumer base are just some of the reasons that delivering casks, bottles and cans of alcohol is becoming a commercial and practical challenge.

"Drinks manufacturers and retailers are increasingly finding that traditional in-house distribution facilities are no longer appropriate to meet developments in market conditions like the growth of independent pub groups," Phil Storer, Tradeteam managing director observes.

 Tradeteam harnesses the experience of the wider Exel company in supply chain management to create an effective national drinks distribution network.  However, when delivering to the on-trade, Storer is frank on what problems face his company.

"Delivering to the on-trade presents its own problems.  With the growth of the high street trade, an increasing number of outlets were not designed to receive deliveries of barrels of beer so access restrictions are becoming increasingly difficult.

Health and safety is of course also of paramount importance.  As access is increasingly restricted in city centres the opportunity to deliver moves to early morning, which can present challenges with residents and licensees alike.  Not withstanding this, congestion is increasing – the average speed of a vehicle in London was recently slower than a horse drawn dray 100 years ago – that’s progress for you! Congestion charging and zealous traffic wardens only add to the cost of doing the job," he says.

"The on-trade has changed drastically over the last few years.  This flows from the Beer Order of 1990, which broke the vertical integration in the beer/pub market and forced big brewers to dispose of pubs.

Today what were national brewers, for instance, Bass, Courage, Whitbread, are now part of global brewing businesses such as Coors and Interbrew.

Pubs are now increasingly owned by large retail companies such as Enterprise, Punch, Mitchells & Butlers and J.D. Wetherspoon," he observes.  Many of his comments are echoed by a key industry warehouse provider, London City Bond.

It is serving customers in London that gives Jeremy Pearson, sales and marketing director of the Tilbury-based organisation his greatest headaches, reflecting the problems of serving one of Europe’s largest and most congested conurbations.

"In London, we use 55 owner/drivers to deliver ‘the last mile’", he explains.  In terms of logistics, this distance is often the hardest part of the transport equation. Millions of pounds of investment in IT, storage and warehousing can be squandered if road conditions prevent the wine getting to the customer on time and in good condition.

"They know the back doors," Pearson explains.  Traditionally restaurants in London have had no storage facilities, requiring constant replenishment of stock.  "In fact, this is the original ‘just-in-time’ before the name was invented!"

Keith Marley, regional operations manager of Waverley Wines & Spirits ponders the key issues facing the on-trade logistics sector.  He sums it up simply: "I’d say that it’s about having it available, having it at the right time."  Waverley delivers weekly to its locations, he adds. 

Marley takes pride that Waverley, one of the largest specialist wine and spirits wholesaler to the on-trade in the UK with over 15% market share and part of Scottish and Newcastle, has developed a complete on-trade logistics service to serve its customers.

He can plan routes, provide optimum storage methods and keep costs squeezed out of the chain as much as possible.  However, there is one factor he has no control over, and like others in his position throughout the industry must simply predict and plan – and pray – accordingly.

"We have our core range of products and what I’d term our ‘trendy/fringe’ drinks," he says, adding that a drink that might only be in fashion for a few months and then disappear off the radar-screen of taste, presents its own logistics problems for him to tackle.

The significance of the difference between a core and fringe product is the investment that must go into on-trade logistics and whether that investment ever pays back.  A core product, with predictable demand periods, allows the establishment of regular stocking procedures, levels and regular patterns of delivery.

A fringe product, on the other hand, might create a significant demand out of nowhere.  Almost overnight storage must be located in the supply chain and space found in transport vehicles which are restricted in capacity.

Transport planners are faced with decisions about whether to supply fringe against core products or put on extra trucking, at a significant cost.  The headache for Marley is that as quick as such demand arises, fashion changes can mean it disappears just as rapidly.

To help him in transport planning, the company has installed its Calidus-E warehouse management software which controls stock, monitors best-before dates and works with barcoding of the company’s products.

The company has two stocked Regional Distribution Centres (RDCs), one at Newcastle and the other at Hemel Hempstead.  The Newcastle RDC is adjacent to the company’s wine packaging plant. Both RDCs carry in the region of 1,500 products. Stockless depots based at Preston, Birmingham and Newark are serviced overnight from the RDC’s with picked orders for delivery on Waverley vehicles.

In addition, a fleet of Waverley vehicles is also operated from Hemel Hempstead covering the South East of England.  As the company is part of the Scottish Courage Supply Chain, customers in the rest of the country are delivered via the Scottish Courage network.

Spring 2003 saw the implementation of a semi-automatic bottle pick facility at the Newcastle RDC, while such a facility was included in the purpose built RDC at Hemel which opened as recently as the autumn of 2000.

For Michael Saunders, managing director, Bibendum Wine, there are two key problems facing wine trade logistics currently in the UK and both touch on the need to drive out costs from the supply chain while at the same time delivering services to ever-increasing demands from the on-trade.

One problem is the increasing difficulty and the cost of moving goods around the UK against a background of increased customer service expectations.  The other is the lack of economy of scale possible in wine supply in the on-trade.

He fails to see the likelihood of change in either of these.  "All businesses are trying to be as lean and efficient as possible and within the on-trade that often means holding as little stock as possible, leading to more frequent – and more time critical – deliveries," observes Saunders.

"Our customers rarely have more than an educated guess as to what they will sell – how can they? – and rightly expect us to have near full availability of all wines for any size of order at all times," he says.

Saunders admits that pricing is a key element of transport decisions for his business. "Transport costs are a huge part of what we do. The [London] congestion charge is simply a hit to our business which we will have to absorb.

"The simple fact is that to be in the game you have to have a clear vision on how to execute logistics; have a commitment to doing it well and being at the cutting edge of developments; and, get the right wine to the right place at the right time. Sounds simple, but isn’t!" he says.

Accepting that delivering to Britain’s 140,000 on-trade locations requires a specialisation and experience it neither has nor wishes to acquire, Southcorp delivers to wholesale operations in strategic locations from where deliveries are made to retail outlets by other parties.

However, according to Ian Tottman, vicepresident UK for Southcorp, it is still difficult to serve the ontrade sector. "It’s hard work," he admits.  Southcorp has recently scaled down its relationship with Bristolbased distributor Matthew Clark as that company became closely connected with Constellation, though Tottman is keen to point out that relations remain amicable.

Now Southcorp has shifted its distribution to a wider mix of in-house and third-party logistics to serve the on-trade.  In order to create sales for its brands, Southcorp has increased its sales force and uses it to create demand from on-trade locations.  It then supplies local wholesalers to satisfy this demand. 

While traditionally a few public houses have always opened early in the morning, at historic markets for example, a much wider shift has occurred that could impact on on-trade deliveries.

Very quietly a marketing move by pub chain JD Wetherspoon has added an hour to UK licensed hours, cutting into the traditional early morning delivery time. From September 2002, the chain has opened each of its outlets for breakfast and a range of nonalcoholic drinks.

More recently, the company has won approval from magistrates to allow its Wetherspoon and Lloyds No 1 chains to open from 10am and serve alcohol.

According to Wetherspoon founder and chairman, Tim Martin, the move will have wider impact on opening hours and potentially on industry logistics.  He points out that licencing approval given to one pub is always extended to others in the locale.