management
Page 35
Page 36
If you've noticed an error in this article please click here to report it so we can fix it.
matters by John Darker, AMBIM
Food distribution techniques
Delayed vehicles, refused deliveries and uneconomic multiple drops are among the costly headaches which first-class planning and control can minimize
THE GROCERY trade is notable for the readiness with which some of its principal manufacturers and distributors are prepared to discuss their transport and warehousing costs. At a recent seminar arranged by the Institute of Grocery Distribution, speakers were extremely frank. Although comparisons between firms in the industry are not strictly feasible, since distribution strategies vary so much, some trends are discernible. Particularly notable are the rapid increase in delivery cost per ton as drop sizes fall to under 10 cwt and the excess costs imposed by queues of vehicles and refused deliveries.
Speaking for United Biscuits Ltd, Mr Archibald Crawford spelt out the truly remarkable service involved in delivering a total of 73m. units. This comprises nearly 2m. drops, on behalf of four sales forces selling 500 products in 33 product groups, gathered into the depot system from nine factories scattered over the UK from Glasgow to London, Liverpool to Teesside and Halifax to Ashby-de-la-Zouch.
The perishability of the products, ranging from cakes through biscuits to nuts in tins, is a major factor in the company's determination to deliver fresh products to their outlets. Although the biscuit market is worth fl 80m the volume:value ratio is among the lowest in the food industry. So distribution costs per unit of sales tend to be high, putting a premium on management efficiency within the distribution system.
Effective materials handling in depots enables United Biscuits to achieve a picking rate for cases up to 1,200 cases per hour. All van loading is done between 6 pm and 7am by conveyor right into the delivery van, so there is no need to allow space for picked stock awaiting loading, as most other systems require. Though space costs per unit of space are very low, labour at evening and nightshift rates is more expensive. But, said Mr Crawford, 24-hour operation of the trunker fleet was beneficial and lower stocks could be held throughout the whole system.
The trunking system is complex, with 1,200 maximum-size loads moving from factories to depots weekly, 60 per cent on own trunk vehicles, 25 per cent on Freightliners and the rest on hired vehicles. A considerable proportion of UB's own vehicles are back-loaded with either finished goods or production materials inwards. Some 55 per cent of the artic trailers are of maximum size and the remainder close to the maximum. Vehicle mileage per vehicle averages 61,500 per annum or 167 per shift.
Mr Crawford said his company was one of the biggest users of Freightliners because on most of the longer routes it was cheapest, fast enough and reliable enough — except when industrial action occurred. UB's traffic flows conveniently match the services offered by Freightliners and the pallet size, 39in x 44in optimized use of container floor space.
Giving some impressive details of UB's teleprocessing system which provides depot managers each mid-day with a printout of each depot's theoretical stock and a comprehensive analysis of the back-order file, Mr Crawford turned to inventory management. Greater efficiency could be achieved if the company was prepared to carry significantly higher stocks but the competitive position prevented this. "At least we know how bad we are and we have the tools in our hands for minimizing the problems," he said. Distribution costs as a percentage of sales value amounted to nearly 7 per cent, whilst the total PDC (physical distribution cost) amounted to almost 12 per cent. The interesting breakdown is shown in the table on the right.
Mr Crawford gave some other details relating to distribution costs per case. Light, bulky potato crisps, with a sales value of .£1.04 per case, and a case volume of 2106cu. in, cost 11.88p a case to deliver, on average. This compared with 6.44p for a case of nuts with a greater sales value (€1.30) and much higher density (6.59cu.in).
United Biscuits break down their distribution costs per case under the following categories: Factory warehouse, trunking, depot handling, depot space, delivery handling, delivery space, and management and training. In each product group, trunking is the highest single charge.
The careful analysis of data stands out clearly in the detailed breakdown of short deliveries due to damaged goods, faulty stock ordering or other distribution errors, by incorrect delivery instructions, refusal of part orders, sale of withdrawn lines, or completely cancelled orders. In "doing their
own thing" in distribution United Biscuits have spared no pains to provide a high level of service at a competitive cost. If every transport operation in the country was costed as thoroughly there would be more transport millionaires — at least, distribution costs would be appreciably lower than they are today in many instances.
As an alternative to undertaking the whole or major part of distribution, manufacturing companies may prefer to minimize capital outlay and use the services of a distribution contractor. With transport costs growing at the rate of 10 per cent per annum it makes sense to share distribution costs with other manufacturers — subject to service being adequate and the price reasonable.
The seminar learned that Cory Distribution Service, together with an associated container handling consortium, was now operating an international through distribution service from the Far East to the High Street as one package deal — one operator. The advantages of agreeing a delivered-in price with foreign suppliers is obvious, though there are many imponderables which may erode the ultimate profitability of the exercise.
Another piece of Cory initiative is their successful bid for bonded storage depots in England and Wales — the first time such block coverage has been granted to an independent national distribution network by Customs and Excise. Cory believe that a national bonded store adapted not only to the drinks trade but also to High Street outlets will fill a real need.
Some frightening figures were produced of the cost implications of vehicle queueing more than three times as costly to CDS as refused deliveries. The tables below are an indictment of some of the parties concerned with food distribution costs. Intelligent co-operation — staggered deliveries, perhaps through 24 hours, seven days a week — could relieve CDS and other sufferers of an unfair burden. The housewives of Britain would be grateful.
Cost implications — queueing Planned Actual Drops 22 12 Cases 440 300 Queueing time (hours) . . 4.40 7.60 Driving time (hours) . . . 5.00 2.40 Excess time (hours) 3.20 Cost/vehicle day £16.00 £16.00 Cost/drop 3.64p 5.34p Double handling cost 1p/case — £1.40 Total :ost/case 3.64p 5.80p Excess cost = 59.0% Cost implications — refused deliveries Planned Actual Outlets 100 100 Deliveries (units) 5 000 4,150 183%) Re-deliveries 799 {94%) Re-deliveries 51 51 Cost/Case delivery 8 Op 8.0p Cost/Case re-delivery 7 Op 7.0p Total Delivery Cost £400 E472 Cost/Case 8 Op 9.4p Excess cost = 17.5%