KEEP IT IN THE FAMILY
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Budgens decided to take back its distribution in-house; MFI reckons its drivers have more job security that way. Commercial Motor looks at the benefits of do-it-yourself haulage.
• Contracting out your transport is as dangerous as contracting out your accounts or your personnel department, says Budgens' John Harvey.
He was appointed by the supermarket chain just over a year ago to sort out its distribution, which was taken back inhouse after an 18-month stint with TNT.
Budgens was happy with the way that TNT handled its transport, but was dissatisfied with the running of its 26,000m2 warehouse. "Management lost faith in the contract and felt it had to make a clean break from TNT,'' says Harvey.
Since it took its transport back in-house • six months ago, Budgens has made several changes which Harvey believes would have been difficult to impose under a third-party distributor.
It has stepped up deliveries of grocery lines from two to five days a week, and fresh produce is now arriving at stores six days a week instead of five.
Budgens has also changed its drivers' working week from Monday to Friday to Tuesday to Saturday with only a small financial incentive. Nearly 70 of the 83 Budgens drivers have come from TNT, and the supernlarket chain took over the fleet of 59 tractors and 128 trailers, which are on lease from Ryder Truck Rental.
Budgens also plans to increase the amount of goods it transports from its central distribution depot at Wellingborough from 80 to 95% by the beginning of March, but perishables, like bread, will continue to be delivered direct from the suppliers to its 94 stores.
BACKLOADS
Harvey is also looking at the possibility of arranging backioads, and he is talking to several major suppliers in the hope of clinching deals by the beginning of March.
"What's the point of contracting out work to people that do not know your business as well as you do, so that they can make all the profit?" he asks.
Harvey joined Budgens as a distribution consultant and six months later he became director of distribution and information technology. He came from management consultancy firm Morton Hodson, where he worked for a year. Before this he was managing director of Pioneer Building Supplies and spent 12 years at Littlewoods, after a spell retailing in South Africa.
His main aim at Budgens is to reduce distribution costs from 5% of its total turnover to below 4%; with TNT costs reached 7%.
Harvey blames the higher costs on the slow transfer of its entire distribution to its .£20m Wellingborough site. Budgens was hoping to close its two Ruislip depots and have all of its goods transferred to Wellingborough by the beginning of 1990, but it took until September. Most of the Ruislip warehouse and transport staff were made redundant.
Budgens was facing duplicate costs because it was running three depots simultaneously, which also had an impact on sales.
The delay cost Budgen millions, says Harvey, and contributed to its poor financial figures. Group profits before tax were £500,000 for the 28 weeks to 10 November 1990, compared with £4.7m for the same period in 1989.
But duplicate costs were not the only problem facing Budgens when TNT handled the work. Goods were lost in the warehouse, which led to delivery deadlines being broken and stores having empty shelves. Budgens now has a strict delivery deadline of 08:00hrs.
"TNT misjudged the calibre of staff needed to run a semi-robotic warehouse, although the transport side was quite good," says Harvey.
Not surprisingly TNT disagrees. It says that Budgens installed automated systems at the peak of its distribution operation before it had adequately tested them, which meant that they often went wrong.
When Budgens took over the warehousing it had to advertise for a new workforce, as few of the existing 400 staff wanted to transfer. It has since stopped using 100 staff who were on short-term contracts, and has shed three drivers.
RACKING
At the same time, Ray Massey was brought in from Tesco as distribution controller to re-arrange the location of goods and introduce a racking system, and Peter Bradbury was promoted to transport manager after 23 years with the firm.
But Budgens did not dismiss the concept of contracting out following its experience with TNT.
It put the transport work out to tender again, but TNT, Tibbet & Britten, Applied Distribution and Christian Salvesen were not as competitive as in-house operation, says Harvey.
Christian Salve sen is handling the distribution and warehousing of Budgens' frozen goods from its Elstree depot, but Harvey says that he will look at the possibility of taking the controlled-temperature work in-house when the contract comes up for renewal later this year.
He believes that firms are often put off taking transport in-house because they are afraid it will be too much of a burden, but he maintains that it is the only way to have control over the operation.
Asked whether he expects more companies to take the same line as Budgens, he says: "Budgens took the work in-house because it was right at the time, whether this will set a trend I don't really care." DI by Juliet Parish