The Government’s announcement on the introduction of national road pricing, coupled with rising energy prices, worsening congestion and working time restrictions will be instrumental in changing the pattern of distribution. The days of sending fleets of lorries on long distance trips are numbered. Increasingly, higher costs, operational constraints and a decrease in time-trip reliability will make road transport less attractive.
Instead, emphasis will be on alternative transport, such as rail and water, and which throughout the post war years have long played second fiddle to the dominance of road.
These transport modes are not only sustainable, less energy demanding, but as each day passes will also become more economically competitive and reliable. Companies will seek to integrate rail and water freight transport more into their supply chains.
It is already happening, with DIY retailer B&Q standing out. In a pioneering move B&Q is using short sea shipping – known as feedering – within its supply chain to stock its five distribution centres in the North
At the Freight 2005 Conference recently held in Liverpool, John Gurr, B&Q’s head of import supply chain, detailed B&Q’s philosophy on why it chose short sea shipping as a new element within its re-engineered supply chain and the resulting benefits.
B&Q is part of the Kingfisher Group, a collection of DIY companies operating in Britain, Europe and Asia. The company has nearly 670 stores in 11 countries worldwide. Kingfisher’s strategy is to increase the level of directly sourced products from manufacturers rather than sourcing through agents who do not add value. This strategy has increased the need to develop better ways for the company to manage itself. As indicated in Table 1 the level of deep sea imports across all Kingfishers’ operating companies has significantly increased. This year 40,000 TEUs (containers) have been imported and this figure is expected to more than double during the next few years.
- Gurr says B&Q’s supply chain philosophy is to:
- Deliver sustainable growth.
- Operate at very high fulfilment levels.
- Deliver in any way to the customer.
- Continuous cost reduction.
- Operate in an environmentally sustainable way.
- Create co-operative partnerships.
Gurr says this philosophy is key to the motives of why B&Q wanted to change its supply chain from relying on the deep sea ports in southern England. This begs the question as to the use of short sea shipping as an important element in B&Q’s supply chain.
Challenging traditional thinking
Introducing short sea shipping into B&Q’s supply chain can be traced back to several factors, starting in 2000. That year there were the unfortunate events, following the Hatfield disaster, which led to speed restrictions and major rail disruption. Also increasing fuel prices sparked fuel protests. Furthermore, road congestion was steadily becoming worse, leading to unpredictability in journey times.
Equally, B&Q also found it increasingly difficult to get its products from the southern ports, especially in the run up to Christmas. The congestion in the southern ports and waiting time for drivers all added to delays and costs. These were all barriers to growth. Another barrier was the availability of distribution sites at an acceptable cost and the availability of good labour resources in the South.
B&Q’s answer in overcoming this problem was to move their distribution operations in a triangle north of Birmingham to Liverpool then across to the Humber. The company points out that these are cost-effective sites, central locations and largely brownfield locations with a reliable quantity of labour. Presently, B&Q has five main sites and expects to open another in Worksop next year. With its main UK centres located in the North, coupled with road congestion and the reliability of getting products from the main UK deep sea southern-based ports, B&Q concluded that the ports were in the wrong place. A solution came from shipping firm Evergreen. This involved the use of short sea shipping (feedering) services from a major deep sea hub port to a port in the North-east.
As Gurr points out that the process to arrive at this decision involved the B&Q adjusting its operations to match the reality of available resources, challenging traditional thinking and forcing through change. In terms of the shipping element B&Q required:
- A deep sea hub port that all carriers called at.
- A local port close to its northern based distribution centres to minimise road haulage.
- A common feeder operator that sailed every day rather like a bus service.
- All its carriers signing up so that the company could maximise capacity and sailings, but minimise cost
After much searching and trailing B&Q settled on bringing all its cargo to the port of Rotterdam and off-loading and feedering to the port of Immingham, which has no congestion. The process was not without difficulties. The traditional response from the shipping companies and ports operators was that this could not be done or would cost too much. Because it was a new project no one wanted to invest in the development of the port without long term commitment from B&Q.
However, suitable partners were found in the port of Immingham and Humber sea terminals that were willing to accept that B&Q was serious and to give the project the go-ahead. In doing so B&Q changed the transport model at the same time and now uses its own fleet of trucks based at Scunthorpe to pull the containers off the port.
Gurr says this is a flexible option as B&Q can also use the trucks to deliver to stores as seasonal volume fluctuates. The move towards using short sea shipping brought clear and tangible benefits to B&Q’s operations. With B&Q using a North-east port and its distribution centres clustered in the North this immediately saved on road miles, the need for less drivers, no port congestion and of course huge benefits for the environment. In total the company estimates it requires 35 less drivers, and has saved 2.8 million road miles per year. Operationally, it has benefited from a 40-minute turnaround time at the feeder port, dropping off an empty container, picking up a full one and then leaving the gate.
Overall, the operation gives B&Q greater flexibility in its supply chain to respond to changes, such as seasonal fluctuations. In creating a more agile supply chain B&Q treats everybody in the operation as part of the same team. This includes the carriers, ports, warehouses and transport.
A fourth-party logistics provider (4PL) is responsible for co-ordinating the operation. B&Q measures performance and meets regularly to resolve issues. In the final analysis, the introduction of short sea shipping as an integral element in B&Q’s logistics operations was successful because the company challenged its supply chain colleagues to:
- Not accept the traditional structure of supply chains.
- Defy convention.
- Make service providers work together.
- Experiment with what works best.
- Save money by being innovative and efficient, not by being cheap.
For the future Gurr maintains that with the right motivation and leadership from industry and Government more use could be made of feeder shipping on a larger scale as a frequent, reliable and cost-effective transport mode. If so, this needs to be thought of as optimising the whole supply chain, not just all parties working together rather than just supporting the growth plans of individuals.
In particular, the Government could take a more proactive role in co-ordinating the strategy, on the basis of considering what is the right thing for the infrastructure of the country as a whole, rather than the profit margin of an individual company.
The end result is all round benefits in terms of increases in the reliability of movement of freight, satisfying customer needs, building trust and enabling longer tem relationships and increasing throughput capacity. Furthermore, such an approach is better for the environment, will assist towards reducing road congestion, while enabling the regeneration of Britain’s existing port infrastructure.
B&Q has saved:
- 2.8 million miles saved a year.
- 20K tonnes of CO2.
- 5% cheaper transport costs.
- 35 fewer drivers.
The benefits for B&Q’s transport:
- One container every 11 minutes at peak.
- A 40-minute turnaround time.
- A change in priorities with a few hours notice.
- Faster recovery when something goes wrong.
- Higher service levels.
- No congestion.
Frank Worsford works in the transport studies group at the University of Westminster.