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- Logistics Definition
- Logistics in the Food & Grocery Industry
- Findings of IGD research
- Average Retailer Stock Levels by Product Category 2008
A definition of supply chain
Supply chain management focuses on the movement of goods and the flow of information from one point in the supply chain to another, with the aim of meeting the demand requirements of the end customer. This equates to getting the right product to the right place when the customer wants it and in the right quantities.
Supply chain in the food & grocery industry
The food and grocery industry is one of the most demanding sectors for supply chain, and the UK is recognised for its leading edge performance across the world.
Supply chain incorporates the following activities:
- Warehousing
- Transportation
- Inventory Management
- Systems Control
- Strategic Management
Supply chain activities are either managed "in-house" by grocery retailers and manufacturers, or is “out-sourced” to third party logistics providers (3PL’s), such as DHL-Exel Supply Chain or Wincanton. There has been significant consolidation in the 3rd party logistics sector over recent years, although as a whole the sector remains highly fragmented, both in the UK and internationally.
Logistics activities in food & grocery operate across temperature bands:
- Ambient - canned foods, jars of coffee, bags of sugar
- Produce - fruits and vegetables
- Chill – dairy products and ready-meals
- Frozen – various frozen goods
Warehouses (called “composite” distribution centres) and multi-temperature delivery vehicles have been developed to meet these requirements and provide a continuous supplyof fresh product into stores, ensuring strong on-shelf availability whilst minimising wastage.
Findings of IGD research
(Taken from Supply Chain Analysis, IGD's online guide to the FMCG supply chain, the below results are based on data from 12 major UK retailers and wholesalers)
- Over 5.3 billion cases of products are distributed through 35.8 million sq.ft. of warehouse space.
- There are 142 depots with an average size of over 252,000 sq.ft., representing a reduction in the total number of depots but with an increasing average size.
- 94.3% of stock is supplied via centralised distribution through a retail warehouse rather than direct from the supplier to store (Direct Store Delivery). This can be a more cost-effective and controlled method of distribution and helps to reduce town centre congestion and streamlines in-store operations.
Percentage of Goods Distributed from a Central Depot, 1998-2008
IGD Research, 2008
- The average distribution cost for retailers as a % of turnover is 4.7%, with a range of between 7.7% and 3.5% for the highest and lowest cost positions.
- Warehousing contributes 55.7% and transport 43% of distribution costs. Other central overhead costs make up the remainder.
- The average number of vehicle journeys has been stable between 2007 and 2008 at 464, 019; with the average distance per journey stable at 191kms.
- Total distance travelled by secondary transport fleets (distribution centres to stores) was 945.0 million kms.
- Retailers use a variety of transit materials to replenish stores, including pallets, roll cages, plastic crates and merchandisable units.
Average Retailer Stock Levels by Product Category 2008
- Overall average warehouse inventory levels in 2008 decreased slightly to 12.6 days' cover, excluding produce and chilled lines which are usually pick-to-zero operations.
- The highest stock levels continue to be for Non-Foods at 21.5 days’ cover, and beers, wines and spirits (BWS) at 18.8 days’ cover, where overall stockholding remains erratic, due to the difficulty in accurately forecasting customer behaviour in these categories and the generally longer in-transit lead-times.
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