Friday, September 17, 2010
Special Report: Efficiency, Efficiency, Efficiency
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The Food & Drink Supply Chain Health Index report, produced by Culina Logistics, flags up the potential for greater efficiencies in the food and drink sector's supply chain. Food & Drink Logistics Review talks to the industry about the challenges of, and opportunities for, driving new efficiencies in the supply chain.
The Index revealed that more than 1 in 4 (43.8%) of logistics management interviewed presented a mixed picture of efficiency performance with some areas of the supply chain on target/above target but some below, suggesting room for improvement.
For James Lancaster, Supply Chain Director at Lactalis Nestlé, the three key challenges and therefore opportunities for additional efficiency gains in the supply chain for the business are in the areas of waste management, warehousing and primary transport.
On waste management, James says: "Our supply chain is constrained by shelf life and in the current highly challenging retail environment, with the demands of promotions, pricing and lead-time to name a few, managing waste levels is a significant challenge and potentially a big cost drain if not managed effectively. In tackling this challenge we have focussed on retailer collaboration to ensure the best possible forecasting so as to improve service and minimise waste."
"We are also trying to focus on flexible manufacturing to reduce waste. Manufacturing historically has been about optimising efficiencies — whilst this certainly improves efficiency in the factories, it is not aligned to the needs of the commercial teams who need flexibility and quick response times to increase, reduce or cut production at very short notice. The balance between efficiency and flexibility is one that will take time to establish and in the short term it is about ensuring we raise awareness across the supply chain of current retailer practices and the consequences of inflexibilty.”
With regards to warehousing efficiencies, James believes that the key to optimisation is moving full pallets where appropriate, even if retailers do not want to hold stock. "The fewer times your case or tray is touched, the more efficient your supply chain is," James points out.
This is a point echoed by Kevin Williams, Supply Chain Director at Müller Dairy, who believes unfilled pallet cubes is one of the key inefficiencies in the supply chain. He's currently addressing this issue by working with retailers to find a mutual solution.
He says: "Retailers are holding less stock in their supply chains, which can result in smaller deliveries for suppliers. This means that logistics providers are having to manually pick cases off full pallets and then transport less than the cube potential to meet retailers’ requirements. Müller believes a collaborative approach is the key to driving such waste out of the overall supply chain with knowledgeable people throughout the chain — suppliers, logistics providers and retailers — talking to each other regularly."
James also calls for a unified type of pallet across Europe to enhance warehousing efficiencies. He says: "Currently we have a multitude of pallet types and as a result our product requires intervention before it is fit for trade. This is a drain of resource that is frustrating."
On primary transport, James sees the key factors which will lead to greater efficiencies as better vehicle utilisation, the use of double deck trailers and enhanced cooperation between non-competing organisations who are bringing in volumes from similar geographic areas to share efficiencies. As for alternative transport solutions, he says: "Road trains operate across other countries and enable more cost effective transport solutions. In the UK we are limited by legislation that restricts vehicle size but a more pragmatic approach here would enable large efficiencies to be harnessed."
Thomas van Mourik, Chief Executive of Culina Logistics, says: "There is no doubt that we are all operating in a very tough economic climate, and it appears that uncertainty and austerity are going to be with us for the foreseeable future. This in turn is and will put more pressure on the supply chains of the food and drink industry to perform and for logistics providers to come up with the answers. Our Index survey showed that those in supply chain management are responding to the challenging environment with one in five respondents (20.8%) indicating that the outcomes of their efficiency drives over the last year were above target and that around a third had reported efficiency gains of between 6 and 15%. Moreover the majority of respondents were looking for efficiency gains of between 6-10% over the coming year."
With regards to opportunities for efficiency improvement in the future, Thomas singles out contract packing and reworking as a key area that he believes has been traditionally overlooked.
He says: "Bringing contract packing activities to the warehouse rather than having it undertaken off site can provide significant efficiencies as it reduces 'food miles'. Also international food and drink suppliers can benefit from having their contract packing undertaken in the UK, closer to the final delivery point rather than doing at their own sites and using up vital capacity in their vehicles."
"That's why we have created a specialist food contract packing company Culina IPS LLP to offer contract packing services at all of our ten warehousing sites, negating the need for goods to be transported to and from another location for packing. In doing so we are helping suppliers meet the increasing demand for products to be delivered in shelf ready formats."
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The Index revealed that more than 1 in 4 (43.8%) of logistics management interviewed presented a mixed picture of efficiency performance with some areas of the supply chain on target/above target but some below, suggesting room for improvement.
For James Lancaster, Supply Chain Director at Lactalis Nestlé, the three key challenges and therefore opportunities for additional efficiency gains in the supply chain for the business are in the areas of waste management, warehousing and primary transport.
On waste management, James says: "Our supply chain is constrained by shelf life and in the current highly challenging retail environment, with the demands of promotions, pricing and lead-time to name a few, managing waste levels is a significant challenge and potentially a big cost drain if not managed effectively. In tackling this challenge we have focussed on retailer collaboration to ensure the best possible forecasting so as to improve service and minimise waste."
"We are also trying to focus on flexible manufacturing to reduce waste. Manufacturing historically has been about optimising efficiencies — whilst this certainly improves efficiency in the factories, it is not aligned to the needs of the commercial teams who need flexibility and quick response times to increase, reduce or cut production at very short notice. The balance between efficiency and flexibility is one that will take time to establish and in the short term it is about ensuring we raise awareness across the supply chain of current retailer practices and the consequences of inflexibilty.”
With regards to warehousing efficiencies, James believes that the key to optimisation is moving full pallets where appropriate, even if retailers do not want to hold stock. "The fewer times your case or tray is touched, the more efficient your supply chain is," James points out.
This is a point echoed by Kevin Williams, Supply Chain Director at Müller Dairy, who believes unfilled pallet cubes is one of the key inefficiencies in the supply chain. He's currently addressing this issue by working with retailers to find a mutual solution.
He says: "Retailers are holding less stock in their supply chains, which can result in smaller deliveries for suppliers. This means that logistics providers are having to manually pick cases off full pallets and then transport less than the cube potential to meet retailers’ requirements. Müller believes a collaborative approach is the key to driving such waste out of the overall supply chain with knowledgeable people throughout the chain — suppliers, logistics providers and retailers — talking to each other regularly."
James also calls for a unified type of pallet across Europe to enhance warehousing efficiencies. He says: "Currently we have a multitude of pallet types and as a result our product requires intervention before it is fit for trade. This is a drain of resource that is frustrating."
On primary transport, James sees the key factors which will lead to greater efficiencies as better vehicle utilisation, the use of double deck trailers and enhanced cooperation between non-competing organisations who are bringing in volumes from similar geographic areas to share efficiencies. As for alternative transport solutions, he says: "Road trains operate across other countries and enable more cost effective transport solutions. In the UK we are limited by legislation that restricts vehicle size but a more pragmatic approach here would enable large efficiencies to be harnessed."
Thomas van Mourik, Chief Executive of Culina Logistics, says: "There is no doubt that we are all operating in a very tough economic climate, and it appears that uncertainty and austerity are going to be with us for the foreseeable future. This in turn is and will put more pressure on the supply chains of the food and drink industry to perform and for logistics providers to come up with the answers. Our Index survey showed that those in supply chain management are responding to the challenging environment with one in five respondents (20.8%) indicating that the outcomes of their efficiency drives over the last year were above target and that around a third had reported efficiency gains of between 6 and 15%. Moreover the majority of respondents were looking for efficiency gains of between 6-10% over the coming year."
With regards to opportunities for efficiency improvement in the future, Thomas singles out contract packing and reworking as a key area that he believes has been traditionally overlooked.
He says: "Bringing contract packing activities to the warehouse rather than having it undertaken off site can provide significant efficiencies as it reduces 'food miles'. Also international food and drink suppliers can benefit from having their contract packing undertaken in the UK, closer to the final delivery point rather than doing at their own sites and using up vital capacity in their vehicles."
"That's why we have created a specialist food contract packing company Culina IPS LLP to offer contract packing services at all of our ten warehousing sites, negating the need for goods to be transported to and from another location for packing. In doing so we are helping suppliers meet the increasing demand for products to be delivered in shelf ready formats."
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