Wednesday 28th Sep 2016 - Logistics Manager

Driving logistics up the agenda

Logistics Manager celebrates its Silver Anniversary this month. Malory Davies looks back.

Imagine a world without the World Wide Web or, for that matter, mobile phones. That was the world that most of us lived in a quarter of a century ago. Not only that, the concept of logistics was only just starting to make the transition from academia to business. This was the moment at which Logistics Manager was born.

In fact, it wasn’t even called Logistics Manager – the magazine that first saw the light of day in July 1988 was called Distribution Business.

And the scale of the change that we have witnessed over the past 25 years is highlighted by an article written by David Quarmby in that first issue. In 1988 Quarmby was distribution director of Sainsbury’s and he focused on two key developments in the retail distribution market: the move away from supplier-controlled distribution networks towards retailer controlled networks; and the shift from own-account to contract distribution.

In 1982, retailers only controlled about 35 per cent of their own distribution. The rest was split between supplier and wholesaler deliveries. Quarmby forecast that by 1990, 50 per cent of retail distribution would be controlled by the retailers at the expense of the suppliers.

Quarmby also saw the move from own account to contract distribution as a reflection of the retailers’ desire to concentrate investment in their mainstream business of retailing rather than warehousing and transport infrastructure.

But some things don’t change. The need to increase supply chain efficiency was high on the agenda. Quarmby said: “The conventional wisdom is that to increase service levels, more stock has to be held – buffer stock to minimise the chance of an individual line being out of stock. The trick is to reduce them both together – to grab the curve of the graph and move it sideways.”
The strategy was clearly successful because later that year Quarmby became joint managing director of Sainsbury’s – one of the first logisticians to become a CEO of a major corporation.
In 1988, the World Wide Web was still a twinkle in the eye of Tim Berners-Lee. Mobile phones existed but were too expensive for most people.

When it was launched, Distribution Business represented a major shift in the way companies viewed their businesses.

Before that, there had been transport, and there had been warehousing. They were seen as inevitable but unwelcome additions to the main function – making or selling goods.

As a result, there was little strategic thought about warehousing and transport and equally little integration. Many manufacturers had their own fleet of trucks for delivering to customers. Alternatively, they used one of the big common user networks – low cost but variable quality.

The 1980s saw the rise of contract distribution – with a number of specialist companies offering dedicated warehousing and transport services.

There were many reasons for companies to transfer distribution to a third party specialist- some of which were obvious. Often, companies could save money by using a contractor, even taking into account its profit margin, simply because transport and warehousing costs were not well controlled.

Commonly, elements of transport and warehousing costs were simply lumped in with the general overheads so there was little visibility of the real logistics cost.

But, there were also cases where distribution activities were outsourced to solve an HR problem – or simply to get the wages bill down. Some manufacturers found that they were paying drivers the same as their skilled production staff – and significantly more than road hauliers paid their drivers.

In the 1980s the only publications catering for this market were transport orientated such as “Motor Transport”, the weekly newspaper for road hauliers, or materials handling orientated such as MHN.

So perhaps it is no surprise that Distribution Business was launched by a former editor of “Motor Transport”, Peter Acton.

Writing in the first issue, Acton said: “Recent studies show that up to 11 per cent of the final price of a product is locked up in transport and distribution. Releasing just one per cent of this figure can have a dramatic effect on the performance of the bottom line of manufacturing and retailing companies.”

Over the following years more and more organisations went down the contract distribution path, with dedicated distribution being the order of the day. Dedicated was sold as the best way to maintain control of service levels and provide transparency of costs. Just as big shoulder pads went out of fashion as the 1980s gave way to the 1990s, so the concept of distribution was increasingly replaced by that of logistics.

And in 1994, the magazine Logistics Manager was launched by Seven Kings Publications. The two, Logistics Manager and Distribution Business, maintained a friendly rivalry for  a decade before they were brought together by Centaur Media to create the modern Logistics Manager in 2005.

In 1988, companies still had to plan for the arrival of the single European market in 1992. Lord Young, secretary of state for trade and industry, told readers of Distribution Business that the single market would present “unprecedented challenges”. And he went on: “Distribution management services will be increasingly significant to manufacturers and retailers who really want to make the most of the single market…”

The succeeding years have seen not only the arrival of the single European market, but the opening up of trade with China which has had such a dramatic impact on supply chains not only in the UK but across the western world.  Logistics is now seen as part of a broader supply chain function, which also encompasses sourcing and procurement.

And its importance to both manufacturers and retailers is reflected in the fact that supply chain is increasingly seen as a boardroom function.

The aim of Logistics Manager has always been to push logistics and supply chain up the corporate agenda. We are making progress.

Where are they now?

The first issue of Distribution Business contains a host of names that are unfamiliar today. The fate of these organisations reflects the changes that have taken place in the industry over the past 25 years.

Institute of Logistics and Distribution Management
The institute started life as part of the British Institute of Management in the 1970s – its original name was the Centre for Physical Distribution Management. It became independent as Institute of Physical Distribution Management, and went on to become the Institute of Logistics. Following a merger with the Chartered Institute of Transport it became the Chartered Institute of Logistics and Transport.

The National Freight Consortium
The NFC was the UK’s biggest distribution company in 1988. It was created in 1982 from the nationalised road transport business in an employee buyout led by Sir Peter Thompson. The group, which included British Road Services, National Carriers and Pickfords, expanded rapidly buying Unilever’s in-house distribution operation, SPD. The group was rebranded as Exel and went on to take over Tibbett & Britten before itself being absorbed by the German post office. The business is now branded DHL.

Beck & Pollitzer, Harris Distribution
These were two of the major businesses in the Transport Development Group, the UK’s second largest distribution company in 1988. TDG was largely a holding company with more than 100 small transport and distribution businesses. Each business operated independently often in competition with other TDG companies. While encouraging entrepreneurial spirit, this structure made it difficult for TDG to mobilise resources to bid for big national contracts. It took several years to create a single unified business from this diverse group. Ultimately, of course, TDG was taken over by Norbert Dentressangle.

TNT
Ramsbottom in Lancashire was the unlikely European point of arrival for Australian carrier Thomas Nationwide Transport when it bought Intercounty Express in the late 1970s. TNT can reasonably claim to have brought overnight parcel delivery to the UK market – until then the standard was 2-3 day delivery. Rapid growth was driven by managing director Alan Jones, and by 1988 it was turning over £300m a year and laying plans to buy £1bn of British Aerospace 146 aircraft. It was also expanding into contract distribution. TNT went on to become part of the Dutch Post Office, but has since been separated out. The logistics division became Ceva Logistics.

Ryder Distribution Services
Ryder is well know as a giant of the truck rental business. But in 1988, it was expanding into the distribution market. Its ad in the first issue of Distribution Business asks: “What makes Ryder so proud of its new contract distribution company?” Supply chain solutions are still an important part of the Ryder product mix.

Federal Express Systemline
Federal Express expanded rapidly in the UK in the 1980s building a large express delivery network complete with a logistics division named Systemline. However, it decided to exit the domestic UK parcels market in the early 1990s.  It sold Systemline to Ryder in 1994. FedEx started to rebuild its UK domestic operations in 2006 when it bought parcel carrier ANC.

Transfleet Services
Transfleet was mainly a leasing and contract hire company. Contract hire and other off-balance-sheet finance schemes got a boost when the government put an end to 100 per cent capital allowances. The old capital allowance regime encouraged companies to spend their profits on new capital equipment, thus “robbing” the Exchequer of what it regarded as its rightful cut. The company became part of the Lex Group. In 2006 the commercial fleet division was taken over by Fraikin, while Lex Vehicle Solutions was taken over by the VT Group.