A better place to do logistics?

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Denmark’s AP Moller-Maersk has also been in the news, ahead of plans to purchase international terminals in an effort to ease shipping congestion and obtain dedicated facilities for its increasing number of vessels.

With the sudden and continuing impact of China on the global market, deep-sea container traffic is expected to more than double in the next ten years. In its Quarterly Transport Activity Survey, the Freight Transport Association points out that imports to the UK from the Far East continue to rise steadily with no signs of slowing down. UK ports are starting to be seen as untapped opportunities for hubs of logistics operations.

Hutchison Ports (UK), owner of the Port of Felixstowe, Harwich International Port and Thamesport, was recently given the go-ahead from the government to begin reconfiguration of Felixstowe south and Bathside Bay, Harwich, to create the largest deep-sea container handling complex in the UK within the Haven ports.

Work is expected to start on the Felixstowe South project in early 2007. Development of Bathside Bay is subject to securing the necessary approvals for the upgrade of the A120 and work needs to have begun on road improvements before the construction of the first phase of the project is allowed to commence. This is not expected before 2009.

Murray Gibson, general manager of logistics development for HPUK, was given a challenge of leveraging the assets at his disposal at the Port of Felixstowe and creating a new logistics operation.

“Why haul a container 100 miles inland to unload and then have the cost and inconvenience of hauling the empty box all the way back, when a port can be a specialist storage and distribution centre?”

Gibson says that, in the beginning, the company’s message to him was not to compete with the existing distribution companies, but rather to leverage the assets already at the port’s disposal.

The term “Port-centric” is being used to describe this approach. Gibson says: “When you think about the traditional supply chain model, containers move inland and then have to find their way back to the port empty, the restitution costs for a container from Felixstowe to Colchester, for example, is between £135 and £140.”

Port-centric offers users a step back to when ports were very much the single point of access for goods coming into the country, and businesses worked solely from the quayside, loading/unloading and shipping out goods inland.

Port-centric logistics is challenging the traditional model by offering a supply chain solution for goods arriving at the port. Using the advantage of all goods coming through one point, It works by offering de-vanning, consolidation and bonding solutions all within the existing security of the complex. The system enables whole sections of the supply chain to be removed, increasing efficiency and early visibility, while claiming to eliminate demurrage and helping to drive down inventory levels.

Gibson says: “In effect, we offer an alternative to the conventional distribution centre model, with a highly responsive service which cuts out wasteful legs of the supply chain and saves time and money.”

HPUK has recently signed a further extension to its contract with LDH (La Doria) Ltd to handle a target number of 10,200 containers a year by 2008 using the Port-centric system.

Simon Fraser, chairman of the Felixstowe Port Users Association, points out that international companies in particular, can be naturally drawn to build facilities in the centre of the country without really considering the possibilities of using the ports to their full potential. He said that the big retailers are getting more involved but he said that using the ports as logistics hubs “is an education thing”.

Fraser says that being near a port allows a much greater flexibility and response time to attend to problems with deliveries, late arrivals and so on. “I don’t think that we’ll ever see the end of the regional distribution centre because a lot of money has already been committed to them.”

But, he says: “I think that we’ve got to get a bit smarter really, we have all these pre-conceived ideas that if you plonk it in the middle of the country, it’s got to be better because we can feed out from it, but if your source is in one place (ie a port) then why have your RDC 200 miles away?”

The BAP Group uses Port-centric to provide bond administration. Phil Bass, senior logistics operations manager, says: “BAP has been established for the past quarter of a century working with import agents handling imported canned goods, forest products, and bonded sugar, beers wines and spirits.

“We saw an opportunity for an on-port warehouse back in 2000, and established our current bonded operation on the Port of Felixstowe in 2002, as a supplementary wines and spirits operation for Sainsbury’s. Since that time we have established a full 250,000 sq ft on-port logistics operation at Felixstowe and Thamesport for Sainsbury’s, Somerfield, Gallo wines, & Majestic wines. Stock is administered on customers’ in-house systems with all bonded product being stock managed on a fully integrated WMS and bonded administration system duty master.

Ronnie Brooks, chief executive officer for BAP group says: “Our partnership has enabled us to focus on an analytical approach, backed by the latest supply chain modelling techniques. Although experience has shown an increase in the beers, wines & spirits sector, our expertise does not end there – other consolidation service examples include electronics, grocery items, general foodstuffs and seasonal/promotional goods and gifts. We have worked closely with major UK retailers for the past 27 years. The main thrust of the retailers is to reduce supply chain costs while continuing to improve service to their customers, and Hutchison’s Port-centric logistics services provide exactly that.”

Investment in the latest inventory management and supply chain tracking technology is essential. In keeping with most recent demands from the retail industry, HPUK operates the latest RFID systems, with experience and the development of bar-coding and data tagging solutions since the late 1980s. Demand has increased steadily throughout 2004 and at the same time dedicated racked warehousing has been introduced at both Felixstowe and Thamesport.

In the North East, PD Ports has been working hard to promote the concept of the port as a logistics centre. The strategy started to pay off last year when Asda announced a landmark deal with PD Teesport to develop a £20 million import centre, initially creating up to 300 new jobs. The facility, based at Teesport in Middlesbrough was completed in March 2006 and is now fully operational, just four months after construction commenced.

The project has provided Asda with an international logistics operation in the North East for the first time. Containers carrying products from a variety of international origins are being delivered to the port, enabling the supermarket to distribute general merchandise to its stores throughout Britain.

Asda estimates it will save over two million road miles a year by shipping 70 per cent of its total distribution direct to Teesport rather than delivering it to southern UK ports then transporting it by road to its northern based distribution centres.

The new building is a 360,000 sq ft warehouse built on an 18 acre site. A further phase of another 150,000 sq ft is planned on an additional 5.6 acres later this year.

Asda is clearly committed to the project and has signed a 30 year lease with an option to extend for a further 20.

Tony Page, non-food director at Asda said: “This is great news for the economy in the North East. Not only are we creating 300 new jobs but we are also paving the way for other retailers to follow our lead. This facility will enable us to dramatically reduce our impact on the environment. We will save two million road miles a year – equivalent to four trips to the moon and back.”

David Robinson, managing director for PD Teesport said: “This is a landmark deal for the ports industry. We are clearly delighted to have secured the world’s largest retailer as a major new customer. The presence of Asda will help us attract further deep-sea container shipping lines to deliver via Teesport.”

£10m investment on Tyneside

The Port of Tyne has recently announced a £10 million investment in its bulk cargo business. The investment program will extend the port’s cargo handling facilities and is due to begin in April 2006, expecting to take 12 months to implement.

Plans intend to enhance the port’s bulk handling capability at the Riverside Quay cargo facility; driven by the growing bulk import and export business, which they say includes significant tonnages of coal. The expansion plans include the deepening of the berth and channel. The investment will also cover more operating equipment and the creation of a second rail siding.

Managing director Keith Wilson says: “The port has undergone tremendous change over the last ten years to diversify and strengthen the business. Change and evolution are essential ingredients in taking the port’s business forward and these expansion plans will continue to do just that.”

The main river channel from just outside the piers to Tyne Dock will be deepened from 8.6m to 9.1m and Riverside Quay will be dredged. The deeper channel and berth along with the 60m extension to Riverside Quay, lengthening the quay to 580m, will enable the port to accommodate larger ships up to handymax and panamax-sized vessels.

The port has already placed an order for a fourth Liebherr LHM 320 mobile harbour crane, 23.5 cu m grab and mobile hopper totalling £1.65m. The new crane, due to become operational in May, will add flexibility to the port’s operations as it will handle a wide variety of bulk and general cargo commodities, including ferrous scrap, coal, forest and steel products.

The new rail siding will incorporate 1,120m of track, feeding directly into the 15 acre coal stocking ground. Tyne’s new siding will also provide additional capacity to handle increased tonnages of bulk materials.

Until 2004, the focus was on exporting coal and at its peak in the mid 1800s 23.6m tonnes was exported in one year. Even as late as 1995 about 3.5m tonnes was being shipped from the Tyne to the Thames based power stations of Kingsnorth and Tilbury. Coal exports ceased from the river in 1998 following the demise of the North East deep mining industry and the coal loading equipment was subsequently sold to the Lyttleton Port Company of New Zealand, in 2002.

The current imported coal business through the port started in 2004 with a first shipment of 19,000 tonnes of Russian coal. Thereafter, a further four ships and over 115,500 tonnes of coal were handled in 2004, increasing to almost 630,000 tonnes in 2005, an increase of over 540 per cent in 12 months. Volumes are expected to double in 2006. The port handles a wide variety of cargoes.

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