Friday 30th Sep 2016 - Logistics Manager

Top retailers go portcentric

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Swapping the south for the north is proving highly profitable in supply chain terms. Liza Helps investigates.

In 2011 a logistics survey undertaken by warehouse developer Gazeley and the UK Logistics Fund found that 83 per cent of respondents stated portcentric operations were set to increase. Further analysis of the data revealed that 70 per cent of respondents saw this increase being focused on the East Coast ports in the South East of England, such as the London Gateway, Tilbury and Felixstowe, with only 53 per cent of respondents pointing to ports in the North East.

The results of this survey were not surprising and reflect the sourcing of many products in the Far East, the shipping routes through the English Channel to serve the UK and European ports and the location of the UK’s existing main deep sea terminals at Southampton and Felixstowe.

However with a growing need to reduce costs as well as reduce carbon emissions those companies serving Birmingham and areas northwards would be minded to consider the North East ports as part of their overall supply chain.

Professor David Menachof who holds the Peter Thompson Chair in Port Logistics at Hull University Business School explains: “Bringing goods into the port nearest the chosen distribution centre – near-porting – minimises the number of carbon heavy road miles that firms are required to make in order to transport the goods.

“It has been calculated that ocean shipping is six times friendlier per tonne-mile than carrying those goods by lorry.”

Although this may sound like common sense, it is amazing the number of businesses that land goods at the first port they hit, rather than travelling further by sea via feeder services.

In the UK, over 60 per cent of the containers ending up north of the Humber/M62 corridor were brought into the southern ports of Felixstowe and Southampton, according to DfT figures.

Taking goods to the nearest port also saves a lot of money. According to Geoff Lippitt, business development director of PD Ports, which owns Teesport the North East’s pre-eminent container port, companies can get significant savings per TEU.

He cites a leading UK retailer which had been trucking containers from Felixstowe to its distribution centre in West Yorkshire at a cost of £590 per TEU, saving £80 per TEU by using the short sea LO-LO to Teesport combined with a short trunk to the DC at a cost of £510 per TEU. In addition the company saved  353 kg in carbon emissions.

Carbon saving

A similar carbon saving is recorded by Professor Menachof. He says: “If you take a 20 metric tonne shipment from China that would normally be discharged in Southampton and taken by lorry to Leeds if that container was transported onwards by sea to Immingham on the Humber, and then driven to Leeds, the effects would be an additional 317 nautical miles by sea, however, road transport would be reduced from 240 miles to just 73 miles, which is a reduction of 167 road miles.

“Because ocean shipping puts out approximately six times less CO2 per tonne-kilometre, the net effect for this shipment is a 200 kg reduction in CO2 output,” he says.

A growing number of companies are latching onto the savings to be had by switching from the Southern and South East ports to those in the North. Both Asda and Tesco have portcentric facilities at Teesport.

Tesco has a one million sq ft facility while Asda a 300,000 sq ft one where goods are deconsolidated before  being shipped directly to store or for onward delivery to other RDCs.

ASDA is recorded as having saved something like two million road miles since opening  at Teesport equating to a £12 million saving.

The growth in TEU volume has been greater in the north than the south by a factor of nearly three per cent. Northern ports TEU volume has grown 7.9 per cent since 2009 while southern ports volume growth comes in at five per cent.

According to Lippitt: “Teesport has achieved 70 per cent growth in container volumes in the last five years and has now been developed to become the northern gateway for container traffic handling over 420,000 TEU every year and is positioned for further significant growth.”

PD Ports has sunk £16.7 million into upgrading its facilities, including the complete reconstruction of more than 12.35 acres of the container terminal area, four new rubber tyre gantry cranes, a change to narrow stacks and the implementation of a Navis Terminal Operating System increasing the efficiency of the port and increasing its capacity to circa 500,000 TEU a year.

Other northern ports have not been slow to invest in order to take advantage of the growth. ABP has invested £26 million at the Port of Grimsby  in the Humber with the newly opened Grimsby River Terminal and Able UK is looking to develop out its 1,229.5-acre Able Logistics Park north of Immingham. When completed the Able Humber Port Logistics Park is set to extend along 4 km of river front, providing some 10.76 million sq ft of warehousing space creating some 3,000 jobs.

Tenants of the Logistics Park will benefit from close proximity to 1,389m of deep-water quays offering the potential for port-centric logistics operations.

The area’s high density of flexible port terminals combined with its already strong supply chain network means cargo can be unloaded, stored and distributed from ALP and be speedily dispatched to its end destination.

Cascade effect

Looking to the future, Menachof says: “The UK trend as a whole is to have more and more trade and the big ports cannot expand much more. Southampton and Felixstowe are already challenged so the use of smaller ports will take the pressure off the main ports.”

Lippitt agrees adding that the use of larger and larger deep sea vessels has a cascade effect on feeder vessel size with smaller ships being scrapped as inefficient. “Ten years ago the average feeder vessel capacity was 400 TEU now it is 1,300 – 1,500 TEU, it is likely to get bigger possibly as large as 2-2500 TEU.”

Over the past five years, feeder services into Teesport have grown rapidly from around six a week  to 25/26 a week now.

In order to keep up with this rate of growth PD Ports is aiming to increase its capacity further with a £55m plan of reconstruction and berth deepening works at its Quay 1 container facility which will allow larger feeder vessels to enter the dock.

PD Ports secured planning permission to create a £300 million deep sea container terminal in 2007 but with the downturn in the economy this has not as yet materialised.

“Furthermore, I expect continued growth in containers, as in spite of a very flat economy this market grew ten per cent over a two year period for the UK, and we were only one of three ports that over three years showed continued growth. That confirms to me that the portcentric concept and getting the northern-based cargo to northern ports is working.”

George at Darlington

Large retailers are looking to have portside deconsolidation centres and the trend is growing says Steve Williams of Lambert Smith Hampton. However, he notes: “Many retailers are not of sufficient size to want or warrant their own dedicated portside import facility. In these circumstances we expect to see 3PL operators, such as DHL and Eddie Stobart, acquiring and operating shared user facilities for several occupiers.

“We predict import centres will be a continuing trend in the marketplace and expect them to be of a scale over 500,000 sq ft as retailers expand product ranges and diversity of goods sold, while also seeking and needing to hold larger buffer stocks to ensure stock availability.”

A case in point in the North East is Clipper Logistics Deconsolidation Centre in Darlington. In 2011 the company signed a 17-year lease for an 840,000 sq ft cross dock facility at Wynyard Park. The building has a footplate of some 345,000 sq ft but with the addition of several mezzanine floors extended to 840,000 sq ft to accommodate a ten-year contract with George Clothing for ASDA.

Carl Muir of Clipper Logistics says: “Our journey started with anchor tenant Asda but we saw the opportunity to encourage other clients to take advantage of the significant cost savings because to the facility’s proximity to Teesport.

“One client based in Manchester was bringing product through Felixstowe via us but is now using the feeder service to Teesport with a considerable cash benefit.”

The deconsolidation centre is a mere 14 miles from the port and is bonded so goods can be stored tax free until sold.

Clipper Logistics is able to provide services to SMEs such as storing and receiving containers and split bulk cartons, or hanging goods, preparation and management of goods for arrival in store shop-floor ready, e-fulfilment from bulk order down to individual parcel units.

The Wynyard facility can be extended via use of further mezzanines to provide up to 1.2 million sq ft to accommodate clients’ needs.

Barker & Stonehouse

Family-owned furniture retailer Barker & Stonehouse agreed a deal to import its goods via Teesport instead of a rival port on the south coast.

The company – which opened its first Middlesbrough store in 1946 –announced the appointment of local supply chain business PD Ports to manage the handling and distribution of its international furniture products, which will arrive weekly on Teesside in the summer.

PD Ports will manage the handling and distribution of up to 15 containers, housing 3,000 pieces of furniture, every week.

Furniture consignments will now come into Teesport instead of Southampton which has handled Barker & Stonehouse shipments for the last two years effectively saving upwards of 160 road miles per TEU.

A selection of cabinet, bedroom and upholstery ranges will now come into the North East, instead of Southampton, before being distributed to the company’s nine stores which includes branches in Darlington, Knaresborough, Middlesbrough, Leeds, Newcastle and Nottingham.

Barker & Stonehouse’s decision to switch its shipping to Teesport fits perfectly with the company’s long term sustainability plan, which aims to reduce road miles and carbon emissions and put the company at the forefront of energy efficiency.

Barker & Stonehouse has a £45 million turnover and employs 283 staff across the group.

Taylors of Harrogate

Taylors of Harrogate is the maker of Yorkshire Tea, along with a range of  roast and ground coffees and speciality teas.

Originally containers for tea and coffee traditionally came through Felixstowe and were moved by road to Bury St Edmunds, where they were de-vanned, stored and delivered by road to the Harrogate blending site.

It was proposed to re-route containers to Teesport with a view to delivering them to Harrogate for unloading but after further discussion with PD Ports a portcentric approach was initiated.
This involved de-vanning at Teesport via a 40,000 sq ft warehouse converted to food grade standards owned and operated by PD Ports, followed by storage, sampling and delivery for blending.

The tea and coffee products arrive in containers from around the world and are unloaded by fork lift trucks with specialist attachments to move them from the container and onto pallets for storage. As part of the value added supply chain process, product samples will be taken by PD Port’s staff from the bags of coffee and tea. Taylors then uses these samples as part of its quality control process.

By directly de-vanning and storing the containers at Teesport, there has been less need for a buffer stock at Harrogate. And as a result Taylors has been able to reduce storage requirements in Harrogate from 11 days to 2-3 days, save 130.9 road miles for each vehicle moved from Teesport to Harrogate, and achieve a CO2 saving of 6.3 kg per vehicle.

David Hinks, contract manager at Taylors of Harrogate, says: “The team’s solution allowed us to completely rethink the import process. The new proposed system means less road miles and lower transportation costs, and has allowed us to significantly streamline our site in Harrogate.”