Logistics: Management – Chain Reaction

Leading logistics providers are responding to the unique requirements of the drinks industry to offer a leaner, more streamlined supply chain, says Gayle Sullivan

Speak to any retailer about the biggest challenges they face today and managing the supply chain will inevitably crop up very early in the conversation. Stock-outs are the bane of the supermarket buyer and during busy sales periods, it is imperative that retailers’ shelves are kept fully stocked.

Luckily for the UK wine trade, there is a great deal of time, effort and expertise dedicated to logistics and warehousing by both the established supply-chain providers and the newer faces on a scene that is unrecognisable from the “sheds and lorries” image of a couple of decades ago.

From the logistics providers’ point of view, companies do want to take the complexity out of the supply chain as much as is practically possible. The benefits of this for all concerned are obvious and companies are increasingly consolidating deliveries both from the shipping side to the point where pallets are put down into warehouses.

So who is doing what to improve lead times, cut costs and consolidate on the global logistics stage? Many companies are taking the initiative to streamline the supply chain from existing to emerging markets.

Take FFG Hillebrand and JF Hillebrand Supply Chain Management who have transformed the supply chain for The Thresher Group, improving stock planning and order management. The company is now operating this supply chain model for The Thresher Group across all deep-sea trade lanes and has achieved some impressive results.

Freeing up millions
“We see consolidation as a major benefit for all sizes of retailers”, explains David Mawer, joint managing director of FFG Hillebrand. “Greatly reduced stockholding has freed up millions of pounds worth of capital while improving service to stores and product availability. The Thresher Group is one of the first companies to benefit from this innovation and FFG Hillebrand is currently implementing similar systems with other major UK retailers. We are keen for retailers to order the exact quantity of stock they require and supply-chain managers in source countries can arrange consolidation of wines from various vineyards to form full container loads for large importers or as part of a less-than-container load groupage service for smaller importers,” Mawer explains.

As far as emerging markets are concerned, FFG Hillebrand has been busy in Bulgaria and Romania, introducing enhanced shipping options for Eastern European exporters to increase UK availability of Romanian and Bulgarian wines.

Several fact-finding missions in Bulgaria highlighted the key problems of port infrastructure, poor communication on the whereabouts of orders, and the issue of cargo transhipment in the eastern Mediterranean as compromising reliable exports

of Bulgarian wines. FFG Hillebrand then stepped in to offer logistics support. There is much talk of consolidation into the retail sector and it is clear that the leading logistics providers are those that are opening new depots and planning new technology as those around them catch up with the latest tracking devices or order management systems.

The Cert Group has launched the Cert drinks network and hopes that the new division will become the dominant provider of consolidated delivery services to the off-trade drinks sector.

The CERT drinks network will combine the company’s existing warehousing and hub operations in Leicester; its established transport network, which comprises some 700 vehicles and provides nationwide coverage; and a new 235,000 square foot stockholding facility in Lutterworth, which will provide additional storage for approximately 23,000 pallets. The Lutterworth location will become the network’s hub operation from mid 2006.

“The new network will complement Octavian, Cert’s fine wine storage and distribution facilities in Hoddesdon and Corsham,” explains Jeff Stanton, chief executive of The CERT Group. “We have built up an extremely strong reputation in the drinks sector over the last 20 years and our specialist approach to drinks logistics has proved to be a winning formula as we continue to win major contracts from leading brands, including most recently Red Bull.”

“Consolidation of deliveries into the on- and off-trade is one way of reducing supply-chain costs,” explains Michael Lainas, managing director of Octavian. But for Lainas the future lies in the trade ideally getting their trading stock as close as possible to the restaurants and bars they are supplying.

“Since moving their wines to Octavian, Corney & Barrow have their trading stock at Hoddesdon, close to the London market and their private clients wines in our renowned underground cellars at Corsham. This is allowing us to cut lead times and deliver trading stock quickly and effectively,” says Lainas.

The latest collaborative initiative from Cert comes in the form of an effective takeover of a well-known fine wine merchant’s own warehouse in central London. “We have taken over the warehouse and staff under a Transfer of Undertakings (Protection of Employment) Regulations (TUPE) agreement. The merchant has a small stockholding in Central London which is replenished daily from our Hoddesdon service centre,” says Lainas. “Some of these improvements clearly cost logistics companies substantial sums of money to implement.

“Octavian is part of The CERT Group and we are investing heavily for the future. We are opening new locations to address the strategic issues facing all segments of the drinks market,” he adds.

Service-led
Chris Porter of Porter & Laker, part of FFG Hillebrand, agrees that arranging consolidations for interested customers is all part of the service.

“It sounds obvious but the most important thing we deliver here is service to our customers,” says Porter. “Our relationships with our suppliers, trailer operators particularly, are crucial and we have to make sure that enough resources are given to providing the services our customers require. It is a case of treating every customer we have like they are the only customer. We will put a portfolio of prices together based on the information they give us.” It seems that consolidation from Europe is as common as it ever was, although the volumes are increasing. Consolidation from the deep-sea areas though is a more recent development.

“Hillebrand began offering container consolidation or groupage from deep sea areas such as Cape Town and Adelaide, for example, around two years ago,” says Porter. “It is designed to prevent them ordering more stock than is absolutely necessary. We were getting feedback from customers about the expense of shipping from New World areas. We now offer a bi-weekly consolidation service for customers.”

Flexible loads
Such services now mean that if a customer wants to ship only 50 or 100 cases, they can now do this, whereas previously they would have had to ship a full container load to make it worth their while.

For David Turner, director of David Turner Fine Wine Shipping Agency, it is not so much about consolidation as customer satisfaction when shipping some of the world’s rarest wines. The company ships for two of the UK’s leading auction houses and often helps pack a vendor’s cellar and transport the fine wines back to London for auction.

“We provide a complete and unparalleled service for them,” says Turner. “This includes sourcing specific vehicle types tailored to each particular job, adhering to strict loading times and providing additional labour to help pack, label, etc. We can
also supply all packing materials and organise full HMR&C compliance.”

Logistics companies are also on the acquisition trail whether it be new warehouses or, for the largest operators, new companies.

London City Bond’s (LCB) reputation is based on its extensive experience in storage and distribution and its 20 warehouse units around the UK. “We are very close to London and make regular deliveries into the capital,” says Bob Maybank, LCB’s
business development manager. “Depending on the day, we will have some 20-plus vans, delivering predominantly to the restaurant trade.

“We continue to acquire new warehouse facilities to streamline the supply chain for our customers and now have the excellent storage and distribution hub of Vinotheque situated in Burton Upon Trent. We have also invested in a warehouse in Linwood, near Glasgow. Having 6,000-plus customers means that much business is also done between LCB’s own trade accounts, with buying and selling between accounts an effective way of managing its lists while more stock arrives from elsewhere.

Global reach
With the acquisition of ACR Logistics, a major player in contract logistics across Europe, Kuehne + Nagel now has a global reach and the capability to provide and integrate the whole range of logistics services for customers. Does such a reach mean that reduced costs are a given? According to Eric Wright, operations director of Kuehne + Nagel’s wine and spirits division, you have to balance cutting costs with the need for sufficient resources to fund an effective supply chain.

“The UK wine trade is already focused on keeping the supply chain efficient but also lean, and you have to ensure that by cutting out links you do not implode the whole chain,” explains Wright. “Suppliers know their lead times, customers know when they want their goods; the difficult balance of keeping the chain moving and lean is what we strive for.

“Through forward thinking and careful planning we are able to achieve a very high percentage of deliveries on time. While we always strive to reach 100%, we already manage to achieve on-time deliveries in the high 90s. We are always looking at new ways to ensure we constantly improve our service, and keep up with the growing volumes of wine and spirits coming into the UK.” 

Personal touch
Most would agree that technology should not take the place of the personal touch in any profession, yet logistics and warehouses now rely on their respective computer systems while having to keep an eye on the next level of communications.

According to Shaun Lord of Schenker, whatever your type of technology there will always be customers whose specific demands require enhancements over and above the standard package. “Technology, although desirable, is not the be all and end all,” explains Lord. “We find the personal touch can be more beneficial than a computer screen overflowing with information. Having said this, we operate an effective stock-tracking system which is proving to be popular among our customers.”

LCB is looking to use mobile phone technology to support systems such as its web-based customer information service.
“In future we hope our drivers will be able to make a delivery, obtain a signature and then punch a message into the phone to say that delivery has been made,” says  Maybank. “Our system could then pick this up. This has not happened yet but we are looking closely at how to eliminate the need for mobile phone calls at the point of delivery.”

EHD, an independent, privately-owned company established in 1998 by two brothers, Michael and Stuart Phelps, is proud of its secure premises and reputation for personalised service but also boasts “operational processes which frequently set the benchmark for the industry”. “EHD works proactively with HMR&C and in particular the Early Warning System (EWS) to eradicate excise fraud that plagues the industry,” says Michael Phelps. “Reacting to importers’ claims that stock was taking, in some cases, two weeks at some bonds to be consigned to the operating systems, EHD now takes all stock details prior to goods arriving, pre-advises its systems and can show stock “live”.

EHD is also utilising e-marketing techniques to communicate with clients and now holds wine auctions for EHD customers who want an alternative route to market for selling their bin-ends and surplus stock.

The computer companies that specialise in software for the drinks trade are evolving with the supply chain. Veteran company Vintner Systems Ltd has been providing specialised software for the drinks business for over 25 years, a remarkable record in a volatile industry.  “As a part of their software package, Vintner have for several years offered a bonded warehouse module for customers with their own bond,” explains Nick Gabb, managing director of Vintner Systems Ltd. “Last year, following repeated requests from the trade, Vintner decided to take this a step further and produce a package for dedicated bonded warehouses in the UK and Republic of Ireland. The specification was simple; design a system that converts the previously onerous and time-consuming tasks into quick, painless operations and at the same time reduce the cost

of ownership.”

Integrated solution
Software provider Maginus, whose customers include Sainsbury’s and Oddbins, supports the logistics chain by providing extensive functionality for all core processes in a single, integrated solution. “This end-to-end approach enables beer, wine and spirits specialists to drive revenue, optimise margins and improve customer relationships through every channel,” says Janice Mawhinney of Maginus.

Regarding consolidation and bulk transport, the logistics companies are constantly looking to innovate, which is reassuring for a drinks trade which relies on the quality of its freight forwarders and warehousing options. Hillebrand, which recently teamed up with flexitank suppliers Braid to provide the latest flexitanks that protect against contamination, is just one of the logistics providers that are joining forces with other companies or employing technology to make the supply chain leaner, less risky and less expensive for the trade. 

© db August 2006