An idea whose time has come?

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There’s a lot of talk about supply chain collaboration but not nearly as much action.  But rising fuel costs and growing environmental pressures are making it increasingly attractive.  Malory Davies considers some of the latest thinking.

For convenience, flexibility and sheer cheapness you can’t beat that workhorse of European logistics, the humble and all too often unloved lorry.

The lorry brings breakfast, lunch and dinner. It brings the essentials and the luxuries. Without it, Britain’s favourite past-time, shopping, would be as devoid of pleasure as the shelves of goods.

But every year, life gets tougher. Fuel prices are going up and up. Introduction of the Working Time Directive a couple of years ago turned working out when a driver can work into a nightmare. In London, life has become particularly tough with the congestion charge and the low emission zone.

And now the European commission is planning to open the way for a whole new set of taxes on lorries. It recently published a green paper extending its “polluter pays” legislation to enable governments to charge tolls for costs related to noise, air pollution and traffic congestion from 2011. At the moment commercial vehicles travelling within the EU can only be charged for wear and tear on roads.

The commission argues that lorries carry 73 per cent of the goods transported by land in the European Union, but are harder on the environment than trains or barges, accounting for 90 per cent of the environmental costs of all transport, which the commission estimates at about 100bn euros a year.

With all these factors coming into play, it is perhaps not surprising that companies are looking again at ways of collaborating on transport and distribution operations. Collaboration is one of those things that arouses plenty of discussion but all too little action.

Of course, there have been some high profile examples of collaboration in the distribution area. There is the often-quoted Bristol freight consolidation scheme. It is run by DHL Exel Supply Chain and involves consolidating goods on the outskirts of the city for delivery to stores in the Broadmead shopping centre. It is estimated that this has eliminated some 75 per cent of lorry movements for participating retailers.

And, in Ireland, the trade and business development organisation InterTradeIreland has been promoting collaboration in freight transport through a programme run in co-operation with Food Strategy Implementation Partnership and Enterprise Ireland. The Logistics XP programme is designed to highlight opportunities for collaboration between companies across the island of Ireland, that will reduce distribution and supply chain costs and improve both customer service and competitive advantage for the project partners.

But perhaps the most wide-ranging developments are coming through the Efficient Consumer Response programme led by the Institute of Grocery Distribution. It recently announced that, as part of its Sustainable Distribution initiative, 37 of the UK’s leading food and consumer goods companies have started work on major transport collaboration designed to reduce the environmental impact of transporting food and groceries in the UK.

It reckons that initiatives such as sharing vehicles and more efficient warehousing will result in the industry saving 48 million miles of travel by the end of 2008 alone – equivalent to removing 800 lorries from Britain’s roads – and conserving 23 million litres of diesel fuel per year.

There are a number of examples of working schemes. Nestlé delivers over 15 loads each day from its factories in the north of England to its distribution centre in the Midlands. Only 80 per cent of these loads could be tied to a return journey so two or three trucks each day would return empty. Nestlé took part in ECR workshops aimed at identifying opportunities for companies to collaborate. These workshops identified that United Biscuits was running empty trucks from close to Nestlé’s factories in the North to the Midlands. Nestlé and United Biscuits were therefore able to work together to create round trips which are more efficient and avoid empty truck movements. United Biscuits trucks now collect a load of Nestlé products each day from Nestlé’s factories in York and Halifax and deliver to the Midlands. The two companies demonstrated that through collaboration it is possible for competitors to generate a significant environmental and cost saving.

In another example, Unilever has worked with Tesco to share transport between Unilever’s Doncaster distribution centre and Tesco’s Goole distribution centre. Health & Beauty brands such as Dove, Lynx and Sure were previously delivered directly by Unilever to Tesco. Now, returning Tesco vehicles pass through Doncaster and pick up the products for delivery into Goole. This collaborative partnership has helped to take 500,000 miles off the road.

And Asda has been collaborating with pallet provider Chep. Chep would send vehicles to Asda’s distribution sites to pick up left over empty pallets and redistribute them for use among other customers. This meant there were certain legs of the journey where the vehicle would be empty. By matching this need with the capacity at Asda it was possible to identify the routes where transport collaboration could be applied. It led the two companies to save over 500,000 miles a year.

Alastair Sykes, president of the IGD and chief executive of Nestlé UK, says: “In a highly competitive industry getting 37 companies working together in this way is very innovative and the results so far are impressive with over 16 million miles saved in the pilot alone.”

The IGD is monitoring progress on distance travelled, fuel usage and weight of products moved. It will also capture the miles saved through partnership projects. It says the outputs of the initiative will be shared widely within the industry to encourage improvements from companies of all sizes.

Clearly, there are benefits to be had from such initiatives. At the moment, most of them seem to be happening in the retail sector which is not surprising given that retailers are particularly sensitive to public perceptions. But there must be opportunities in other sectors of industry – in fact in some ways it could be easier to collaborate. Branding is critical to a retailer and the idea of a Tesco liveried vehicle being seen delivering to an Asda site would be enough to make both managements swoon. Not all industries are so sensitive.

Rising fuel prices, congestion and congestion charges, low emission zones, pollution, tolls: collaboration starts to look very attractive.

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