The logistics of the grocery business has never been under closer scrutiny. Home deliveries have transformed grocery logistics into a customer-facing role and breaches of health and safety make compelling headlines. The sector has been making massive transformations to keep up with the changing demands of the consumer, but recent research into wastage and security has revealed significant concerns, says Johanna Parsons.
The grocery sector accounts for 54.9p in every £1 of UK retail spending, and omni-channel retail revolution has taken a firm hold. Online food shopping in the UK – which ranks first in Europe – is forecast to be worth €13.7bn by 2016. And the UK food and grocery convenience market is set to be worth £46.2bn by 2018, increasing by 29.8 per cent from its current value of £35.6bn, according to the IGD.
2014 has seen Tesco and Waitrose follow in the footsteps of Asda to offer click and collect services from London Underground stations. And having been one of the last to come to the party, Morrisons has launched its online grocery offering which its chief executive Dalton Phillips claims would be worth the wait, “leapfrogging” the early adopters.
Morrisons’ somewhat late start was described by Philips as a strategy to learn from the mistakes of the trailblazers, take a better judged approach and sweep up.
Indeed, there is a dichotomy of approaches.
Stuart Higgins, retail partner at LCP Consulting, explains: “For online, the combined pressures of managing reducing customer order lead times and the responsiveness required to manage short life fresh product ranges has led most retailers to focus on local picking and delivery solutions based within existing stores.”
This of course allows for click and collect services that have the added bonus of increasing footfall in the store. And an interesting new concept in France known as “hypermarchés drive” is effectively drive-through click and collect with the option of ordering on site via electronic terminals before having the order delivered to the car.
“However, as online grocery volumes have grown, the importance of providing low cost, highly productive, order picking solutions has resulted in the concept of dark stores,” points out Higgins.
And online delivery methods and services are something of a battleground at the moment, with marketing from the likes of Waitrose focusing heavily on the quality of its picking and delivery service, and with free gifts and competitively priced delivery “passes” to get customers engaged and invested with particular retailers. This rapidly evolving market certainly makes it an exciting field to work in.
But it could be these new models that are throwing up some real problems. According to a recent report by the World Economic Forum in collaboration with Bain and Company, entitled Enabling Trade: From Valuation to Action, supply chain inefficiency contributes significantly to the 1.3 billion tonnes of food that is lost each year worldwide, and in poorer regions, 94 per cent of food loss and waste is down to the supply chain.
The report asserts that lost or wasted food costs over $750 billion per year.
And flaws in the supply chain closer to home hit the headlines last year with the discovery of unaccounted for horsemeat. Retailers responded fast, with Tesco for one sacking one of its suppliers and promising to introduce DNA testing for all meat products.
And the government commissioned Professor Chris Elliott to conduct a review, which found in its interim report in December that the food supply chain is worryingly vulnerable to criminal abuse.
“I believe criminal networks have begun to see the potential for huge profits and low risks in this area,” said Elliot in his report.
“The food industry and thus consumers are currently vulnerable. We need a culture within businesses involved in supplying food that focuses on depriving those who seek to deceive consumers. A food supply system which is much more difficult for criminals to operate in is urgently required.”
But in reality, what is changing?
Not a lot, according to a recent survey by IFF for Achilles, which found that four out of five large UK food manufacturers say that even the horsemeat scandal has made no difference to the way they manage information about their suppliers.
The crux of the problem may be that robust systems of regulation, certification and information management are already in place and perfectly fitted to prevent honest mistakes.
To tackle the determined criminals who seem to have inexhaustible ways of getting around such systems, Christ Sturman, chief executive of the Food Storage and Distribution Federation says that there is research being done into establishing and reinforcing chains of information within the supply chain in such a way as to flag up irregularities, and tip off Defra and the authorities.
There are already some tools that can be used to keep a closer watch on products and their integrity. Tracking systems that ease distribution could of course be used for more detailed processes, and rolled back to tier one, two or three suppliers, if the price is right.
“The transparency of supply chain processes provides additional means to take corrective measures while the process is still active. It also enables retrospective audits with all the information available, eg in cases where batches of goods need to be traced and withdrawn from the market for safety, health or other reasons, allowing damage to be limited,” said Mikko Soirola VP of IT integration specialists Liaison Technologies.
“Alternatively, having a false certification would provide commercial/contractual means for the buying companies to sanction the suppliers, not to mention that falsifying such records is likely a criminal offence. That would put major pressure on ensuring the right information is provided for each delivery, reducing the risk of such mishaps occurring to almost nil.”
And there are new products to address the potential new market for tracking and monitoring food further along the supply chain. Yusen Logistics is expanding its operations in food and confectionery, focusing on seamless integration of transport and customs processes, and ensuring adherence to temperature requirements.
“Increasingly, food manufacturers are looking for innovative solutions to maximising stock availability, while minimising risk in the supply chain,” says Yusen’s business unit director, John Pursey.
“We’re focusing on this area in response to demand from both new and existing customers for a comprehensive range of high quality services, across geographies and temperature ranges.”
As is so often in cases of risk analysis, each firm will weigh the risk and some will find the cost of preventative measures too high, and will simply cross their fingers and hope for the best.
But while we wait for a large-scale change, steps are being taken. One small step is that the big grocers are insisting that suppliers gain British Retail Consortium food safety standards certification.
Rather more proactively, Cadbury’s owner Mondelez UK, has become the first supplier to be certified in its use of GS1 supply chain standards through the GS1 UK Certificate of Excellence programme.
The certification programme comprises more than 100 checks for best-practice compliance with GS1 standards across suppliers’ processes and product information. The aim is to drive data quality, accuracy in deliveries and trust in the trading relationship.
Rob Bullen, director customer supply & centre of excellence, Mondelez UK, said: “While we may have experienced very few issues as a result of data errors, this was still causing avoidable downstream activity. As a result of the certification process we are now easier to do business with for our retail partners.”
Tesco is one of the firm’s customers, and said it had seen benefits. “Certificate of Excellence supports many standards of our new in-bound processes,” said Jim Dickson, Tesco E2E supply chain development manager. “It allows us to reduce dwell time from vehicle arrival to the product being available to assemble. It also helps us to support other product availability initiatives.”
Other steps are focused on reducing wastage. Sainsbury’s Asda and Tesco have all got squarely behind measures to recycle food waste. Typically food is backhauled to RDCs along with other waste, where it is sorted for either food banks and charities, or anaerobic digestion, thereby saving road miles for skip lorries, and, of course making huge progress towards “no landfill” pledges.
It doesn’t come as much of a surprise that the innovations that are really taking hold on a widespread basis are the ones driven by the customer, and their customers. With the omni-channel revolution, and urbanised populations’ demands for convenience retailing, distribution and delivery are more important than ever before.
Food logistics specialist Culina reported in 2012 that it had seen a major shift to day one for day two deliveries across its ambient operations. While this was perhaps initially driven by the need for cost savings and operational efficiencies that come from aligning ambient and fresh delivery patterns, it reckons that the continued demand for “convenience” retailing, specifically smaller deliveries dispatched more often is also driving this trend.
“Convenience is a major opportunity as far as trading is concerned,” says Sturman. “It’s just a matter of re-jigging the operation to fit it in with everything else.”
While the escalation of automated projects among the leading grocers shows the way the wind is blowing for online grocery retail, Higgins points to the differences: “Convenience stores drive substantial complexity for distribution networks. In contrast to large scale superstores, they require less than full vehicle deliveries but daily deliveries are required due to fresh product requirements.
“Finally, convenience stores would suit smaller delivery quantities (pack sizes), due to rate of sale and typical use of smaller shelf space (to maximise range in the small footprint). This will however impact inbound and supplier costs.”
For retailers, this means focusing on being cleverer about distribution models. Convenience store chain One Stop recently selected Barloworld Supply Chain Software to deliver a demand, inventory and supply planning solution to improve DC and Store stock replenishment; improving the inventory mix and product availability by using advanced forecasting techniques.
But as well as sophisticated demand planning systems, automated picking and streamlined distribution models, there are also pragmatic innovations for more scalable solutions within the warehouse.
For example, Flexi Narrow Aisle has come up with a layer picking device for its trucks, to fit with the trend for more diverse SKUs at smaller volumes, as with convenience retail.
With a True Radius chassis design, it has integrated hydraulic arms which carefully grip single or multiple layers of product from within the pallet storage cube to build a new pallet of products.
“The introduction of the product layer marketing concept in the USA has been developed by Flexi Narrow Aisle into a cost effective method of marketers offering retail stores a third alternative, lower cost than case quantities but less inventory commitment than full pallet,” says Flexi Narrow Aisle’s sales and marketing director John Maguire.
The grocery sector is developing at a huge pace, and scale. And its logistics processes, including a raft of new systems and strategies, are going through a period of dynamic evolution.
There’s no denying that criminality and the perishable nature of food are difficult nuts to crack. But while the headlines might paint a picture of big problems, the reality might be more that the sector itself is big, and getting bigger. So a few glitches are just an inevitable side effect of such stonking growth.
Case study: Life is sweet for honey supplier
Honey supplier Rowse based in Wallingford, Oxfordshire, reckons it is the UK’s largest supplier of honey, lemon curd and maple syrup.
It requires a tailored delivery service for its broad spectrum of customers, from leading supermarkets to caterers, manufacturers, cash and carry and health food stores.
For more than 30 years Rowse Honey has worked with H&H Distribution, part of the Fortec Distribution Network since early 2013.
H&H collects the food products, which can be sourced from anywhere in the world. The product is stored in large containers in its warehouse.
As Rowse takes its daily orders the company can call on H&H to deliver any given quantity of food items plus a specified quantity of containers. Once the product is picked by Rowse, H&H will collect and deliver to the customer.
Neil Hollis, son of H&H founder Gerald, says he had concerns over whether Fortec licensees would understand the importance of meeting his timed delivery slots, but that since joining the firm had been able to take on more contracts.
“Of course by the nature of the business we are in, there are always going to be problems that arise every now and again, but by H&H joining Fortec there has not been an adverse effect on our business and in fact it has really helped us with our smaller orders,” says June Pryce, sales administration manager of Rowse.
Case study: Chilled out mega-shed
International distributor Freezeserve has one of the UK’s most advanced food storage facilities at its secure 20-acre cold store in Liverpool.
The firm reckons the £11 million facility is the first fully automated cold store in the UK with purpose built state of the art, secure facilities including cross docking, 23,000 pallet capacity, 180 pallet movements per hour, and an automated storage system with integrated stock control.
To replace its SAP based system, the firm took on Amethyst Systems to provide a new WMS to integrate with their IT and the automated cold storage structure.
The system uses a web application with SQL server database backend, a full reporting suite and a separate scanning app.
It can interface with the OptilogX automated cold storage facility provided by ORTEC.
It links handheld devices such as the Boston 8550 and truck-mounted Vienna forklift computers that were provided by TouchStar Technologies.
The new system has already enabled Freezeserve to break their logistics records and in its first full month of operation it facilitated 23,401 pallet movements.
Richard Pollard, operations manager for Freezeserve, said: “Our overall goal was to find a system that would serve multiple clients and give them access to view information about the stock we hold on their behalf… Not only has the system improved efficiency in the warehouse, it also provides reports on stock-holding for invoicing purposes.”
Case study- McBurney gets BRC certification
UK food transport and storage company McBurney Refrigeration has taken on NW Systems Group to install an IP video surveillance system at its principle UK storage depot in Liverpool as part of a range of security and health & safety improvements required to gain British Retail Consortium food safety standards certification.
The surveillance system was taken in response to a key security and fire threat which jeopardised BRC accreditation, namely drivers not observing the site’s smoking ban and lighting up right outside doors which offer access to the chillers.
NW Systems deployed some 30 Merit LILIN IP cameras at the site, and Milestone Mobile software was deployed to provide relevant senior managers access to live and recorded images on their smart phones.
McBurney Refrigeration was keen to gain compliance with this standard before the beginning of 2014 when some of its larger customers, including ASDA, began requiring it as a condition of doing business with them.
Peter Amos, warehouse manager, McBurney Refrigeration, added: “We also distribute frozen burgers and buns for McDonalds. They are demanding a slightly more stringent food safety standard, widely adhered to in the US, called Distributors Quality Management Process.
“This standard demands highly secure access to food storage areas as well. We hope to secure accreditation with this standard also later this month.”