This seems like a win-win situation. Certainly in the US, retailers have been moving their distribution centres close to ports for some time. And the trend has sparked a major rejuvenation in the fortunes of certain ports like Savannah.
At an international maritime forum in 2003, Charles Sheldon, Seaport managing director for the port of Seattle, spelt out his vision for international container ports. “The successful container port of the future must evolve from a stand-alone port into a distribution centre that is an integral component of an international transportation system. Ports must be part of a high-capacity international freight transport system. This system must include feeder ports, distribution ports across the ocean, strings of huge ships in regular rotations, and adequate handling, storage, transshipment, and distribution centres close to US ports.”
Until now European retailers and ports have not made much of a move in this direction but there are signs that this is about to change.
DIY chain B&Q was the first UK retailer to open a DC at a port when it set up a facility near Immingham for importing much of its range of DIY and gardening products.
And PD Teesport, part of PD Ports, has signed a deal with Asda to develop a £20M import centre. Both parties believe it will cut down congestion at container ports such as Felixstowe and Southampton, while Asda will be able to save an estimated two million road miles by shipping 70% of its distribution direct to Teesport.
The move will remove the need to transport goods by road from the southern ports to its northern-based DCs. This is estimated to save Asda more than £2M (assuming heavy goods vehicle costs exceed £1 per mile) before other significant savings such as lower land costs and lower salary costs are also taken into account.
PD Teesport believes that the deal will open up new opportunities for the port.
Martyn Pellew, development director of PD Teesport, explains that Asda uses several shipping lines and Teesport expects a strong build up of container flows in through the Tees as future volumes of shipments are designated for delivery to Teesport. The containers will arrive at Teesport via feeder vessels from deep sea container ports elsewhere in Northern Europe.
PD Teesport is hoping that the Asda import centre warehouse announcement may attract existing and new shipping lines to increase their call frequency, and/or ship sizes. “Other retailers and importers may follow the Asda example and recognise that there are benefits from reduced UK road miles by using a northern port to serve the needs of northern-based retailers and consumers,” says Pellew.
By reducing road miles and using a northern port a retailer can improve the reliability of deliveries by avoiding the congested ports and roads of southern England, adds Pellew. He points out that there are also sound environmental reasons for using the sea rather than roads to move goods closer to their markets as the level of CO2 emissions is cut. “It may well be that others will follow the lead set by Asda and B&Q and similarly look to move their warehouses away from the crowded south and away from the traditional ‘golden triangle’ around the east Midlands where labour and land costs are expensive.”
Pellew believes that retailers might want to follow the example of others and relocate on brownfield sites of ports where the road and rail infrastructure is very good. So what does B&Q think of its decision to open an import centre close to a port?
A spokesman for Asda says one reason for the decision was because of the congestion at Southampton and Felixstowe. “Keeping over 300 stores stocked with 40,000 products is extremely complex and inevitably much of the supply chain depends on road transport. As well as actively managing our fleet to reduce fuel consumption and emissions, B&Q has adopted short-sea shipping from Rotterdam for directly sourced products from overseas.
The scheme has reduced more than a million road miles during its first year of operation alone. It works with a bespoke B&Q boat transporting containers to Immingham. By bringing everything in at a single UK port of entry, rather than docking at Southampton or Felixstowe, it brings cargo 150 miles – or three hours’ drive – closer to B&Q’s main import distribution centres.”
P&O Ports has secured conditional approval from the government to build a £1.4Bn container terminal in Thurrock on the Thames Estuary by 2008, including a business park for logistics companies. According to a spokeswoman, the company will build what is needed based on demand.
She says: “If a retailer comes to us and asks for a distribution centre that is something we can do as there will be a lot of flexibility, being such a large and fresh site.”
Richard Ellithorne, logistics policy manager for the Chartered Institute of Logistics and Transport (CILT), says he thought retailers were being forced to think more widely about their distribution needs as both Felixstowe and Southampton had reached a ‘bottleneck’ in terms of congestion. At the same time, smaller regional ports are growing. The growth of imports from the Far East in the face of a decline in manufacturing is fuelling the need for increased capacity at container ports, adds Ellithorne.
As well as checking the goods on arrival, other distribution import jobs can include added-value activities such as barcoding. In this case it makes sense for a distribution or import centre to be close to the port, according to Ellithorne.
Retailers like Argos are known to be keen on having dedicated import centres close to ports and away from the traditional motorway networks. It has built a state-of-the-art automated Direct Import Centre at Barton-under-Needwood in Staffordshire. This facility uses automation to reduce the amount of manual handling involved in the company’s growing direct import activity and ensures a reliable flow of product through to the Argos regional distribution centre (RDC) network Some experts believe that Europe has lagged behind the US in building distribution centres close to ports because of the pressure on land space and the inevitable protracted negotiations over planning permission.
It may be early days in the UK, but the examples of B&Q and Asda show that both retailers and port companies are keen to work together to simplify distribution and increase business.