Result? Shorter supply chains and improved on-shelf availability

Tesco, the UK’s biggest retailer, is asking its suppliers to shorten their supply chains by introducing “next day” deliveries for ambient products. In industry parlance this is known as “Day One for Day Two” which perhaps more accurately describes how the process works; orders received before a predetermined time on the first day are delivered within an agreed window on the second. Order picking and transportation typically takes place during the evening and overnight.

In fact this is a tried and tested process for chilled and fresh products where items need to be delivered in the shortest possible times so that retailers can offer consumers the best possible combination of service, quality and availability. The perceived wisdom has for some time been that ambient - in other words, non perishable - items did not need to be delivered as quickly. Instead the ambient grocery sector has historically operated with orders being placed on Day 1 for delivery on Day 3 across a Monday to Friday cycle.

But times are changing and retailers recognise that stock tied up in the supply chain - in the warehouse or on the road - requires more capital and generates costs that can be reduced. Moreover, aligning processes for chilled and ambient should in the long run provide synergies and efficiencies for retailers, suppliers and supply chain operators.

A number of major multiples have been driving demand for a Day 1 for Day 2 deliveries for ambient products to reduce working capital tied up in their supply chains and to improve on-shelf availability to enhance their customer service. Tesco has stated its desire to reduce ambient lead times and has been working with its suppliers and third party logistics providers to introduce this new way of working on a cost-neutral basis across its distribution network. Initial implementations of this service, including one managed by Culina Logistics, will cover a six-day, Monday to Saturday cycle.

This new operation commenced at the end of January 2012 and has been operating successfully since then, achieving these benefits for Tesco and its suppliers. The infrastructure and processes in place to support next day deliveries from Monday to Saturday mean the option to expand to full seven-day service is available if required by Tesco and its suppliers.

Although the lead time requirements of the ambient and chilled grocery markets are converging the profile and sensitivities of the products and the processes within many supplier and retailer distribution networks mean that the respective supply chains will remain largely independent for the foreseeable future. However, supply chain service providers who have significant operations in both sectors will be well placed to identify and take advantage of opportunities and synergies that lead to more efficient supply chains.