How will the London Olympics affect transport and distribution across the country?

With less than a year to go, excitement about the Olympics is gradually mounting. But what does the largest sporting event ever held mean for businesses and the supply chain?

First, there is going to be a huge increase in visitors to London and the surrounding area. Some, including Lord Coe, have suggested up to a million extra but more realistically - based on recent games - it is likely to be in the order of two to three hundred thousand who will be coming to stay in London specifically for the event. On top of this are people from the UK living close enough to make day trips and the several thousand athletes, supporters and officials who are more directly involved.

This is going to increase demands on food and general retailers, food service businesses, hotels and other businesses. All of these, to some degree or another, rely on the supply chain to maintain business continuity. This is predictable and many of these businesses will already be preparing for the upsurge they expect to see during the build-up to the games and the likely peak during July and early August.

Hotels can plan with some confidence that occupancy rates will be near to 100 per cent during the games and schedule their deliveries accordingly. But what about food retailers and food service? The volume of customers will increase for sure but by how much and what will they want to buy, and when? Will they prefer to sit down for a meal in a restaurant or will they buy snacks from a nearby take-away, supermarket or convenience store? Those outlets that maintain stock availability will do good business but those that plan badly will miss the opportunities that come their way. Suppliers may need to schedule deliveries more frequently or at different times of the day to fulfil the increased demand.

The Olympic site will also present some interesting logistics challenges. This is a new venue that will probably be at its busiest at the time when it has only just fully opened. This is not normal for most developments which gradually build up to peak capacity over many weeks or months. Some of the country’s largest and best known retailers will be opening stores in and around the site over the coming months and planning their logistics operations will be a key part of their launch phase. Getting it right first time will be the only chance to maximise the business potential.

The second key issue for the supply chain is how this unprecedented event will impact ongoing operations. Traffic levels in and around the main venues are likely to be much higher than usual which will affect scheduling and planning or normal deliveries. Everyone involved with the supply chain will need to take this into account. Open access events such as the marathons, triathlons and cycling road races and time trials will inevitably lead to road closures, large crowds and increased traffic. This has already been shown by the success of recent “trial” events such as the cycle road race in August. Most of these events are scheduled for the weekend but anyone making or taking deliveries on the days affected will need to plan well in advance.

The authorities are not complacent and have been planning for most of this since 2005. Infrastructure has been upgraded and the various bodies involved, including LOCOG, Transport for London and so on, are putting plans in place to cope with increases in train passengers and road traffic. TfL said it had spent more than £6bn upgrading the network for the Olympics. LOCOG is aiming for 100 per cent of spectators to travel to venues by public transport, cycling or walking. It has also published lots of information on road closures and other changes during the games.

Some commentators are suggesting that traditional tourist numbers in London will be lower than normal. Indeed, studies of the recent games in Sydney, Athens and Beijing have suggested that tourism numbers over the whole year might be down slightly. London may be different because of its location and size but even so everyone expects the number of visitors during July and August to be much higher than normal. So, with less than a year to go the venues are open, the trial events are taking place and the athletes are gearing up for their final push towards their dream of gold. The only question that remains is “are you ready too”?

Food kilometres — it’s a big subject and not an easy one to cover in a short article like this. Some industry estimates reckon that food in the UK is transported for a total of nearly 30 billion kilometres each year between producer and retailer. Around 80% of this is inside the UK. Leaving aside arguments about where food is produced for a moment, it is clear that once that food is in the UK supply chain there are good business reasons to reduce the number of kilometres travelled to reduce the carbon footprint, minimise fuel costs and save time.

Defra estimates that HGVs and LGVs together account for over one third of all UK food kilometres. Indeed, food transport accounts for 25% of all HGV vehicle kilometres in the UK. But while the annual amount of food moved in the UK by HGV has increased by almost a quarter since 1978 the average distance for each trip has increased by half. This is due in no small part to the changes in retail that have taken place during the same period with the growth of the major supermarkets. This has a major impact on the amount of fuel being used and the number of vehicles on the roads. And it all costs money.

The industry has responded well to these changes. The IGD recently announced that the food and grocery sector has saved 163 million HGV miles through a series of initiatives which have ensured excellent progress towards its voluntary target — supported by Culina Group - of removing 200 million food miles from the country’s roads by the end of this year. This is the equivalent of 2600 fewer vehicles on the roads.

There is more to do and any business involved in the food supply chain can contribute. Logistics operations should be planned carefully to minimise the number of food kilometres without adding undue burden onto the business or compromising its ability to service its customers. Careful load planning and route scheduling help to minimise the distance travelled and optimise loads for maximum vehicle efficiency and productivity. This is more than using the satnav on “minimum distance” setting - many operators now use sophisticated software applications that optimise orders, loading and delivery routes. In fact, HGV tonne kms have increased by 36% since 1991 and by over 100% since 1974, according to DEFRA, which means vehicles and journeys are more efficient than ever before.

Load planning is important. This can cover everything from assembling and loading orders in the correct sequence for efficiency and economy so that the first to be delivered are loaded last. Additional economies can be achieved in third party operations by sharing loads between different customers. This will help to ensure that each pallet or roll cage is loaded near to its full capacity so that the maximum available space is utilised inside the vehicle. The vehicle operates at or near to its maximum carrying capacity which is good for efficiency and minimised food kilometres.

Good load planning and scheduling also help to reduce or even eliminate the need for empty vehicle movements. Third party logistics companies with network operations often transfer products from one warehouse to the other on the “return” journey to maximise the efficiency of their operations. The location and number of distribution centres is also a factor. Too many may add complexity and inefficiency into the operation but too few may lead to overly long delivery distances.

Another way to reduce food kilometres, and costs, is to consolidate processes into fewer sites or even a single operation. On-site copacking or similar rework, for example, reduces vehicle movements associated with collecting items and delivering them to third parties - which could avoid four journeys in total - saving time, money, and management overheads.

Of course, each operator and contract will have an optimum balance between these and other factors. And while these may change depending on the day-by-day circumstances the operational efficiencies created by good planning, scheduling and application of supporting tools all remain very important.

At the same time there are other efficiencies that reduce the impact of road haulage. This can include selecting energy-efficient vehicles and scheduling deliveries for times of the day or week when there is likely to be less congestion on the roads, reducing the time spent idling rather than travelling. Both will contribute to the reduction in the fuel used even when the actual distance driven stays the same.

More generally discussions about food miles often include where the food is produced and whether switching to more local suppliers is more sustainable. Whichever way the argument falls, the distribution industry has a role to play by making sure that its operations are as efficient and well-organised as possible.

Tom Middlemiss, Head of Projects at Culina Logistics, who has been instrumental in the set up of the supply chain packaging joint venture, Culina IPS, believes that suppliers could be missing a trick when it comes to meeting the trend towards retail ready packaging.

I was interested to read recently about a new report published by the Institute of Grocery Distribution (IGD) entitled: Global Retail Ready Packaging and how suppliers are responding to this new challenge to increase their competitiveness. In drawing upon those who have already responded to the challenge, the report seeks to provide insights on approaches to retail ready packaging (RRP).

This included:

Deciding whether it was for them from the outset — in his analysis of the report Stewart Samuel, Senior Business Analyst — Market Intelligence at the IGD, commented that suppliers needed to consider the merits of RRP from a “more ideological or strategic standpoint”, including:

• What is the scale of the change being proposed?

• Can we work to the timelines that have been outlined?

• What degree of internal change will this process drive?

• How does this initiative fit in with other plans that my company is working on?

• What is the business risk of not being part of this programme?

• How are my competitors likely to respond?

 
Level of engagement — the research revealed that suppliers typically adopt one of six different engagement levels when faced with a request to convert their products to RRP. Even for those which are fairly resistant, many continue to maintain some form of engagement in order to understand how roll-out plans are progressing and to better understand the implications for their businesses. Samuel in his analysis concluded that over time, it is likely that many suppliers will develop a different response to the initiative, partly due to their experiences (e.g. gaining benefits and overcoming challenges), and partly due to the response of their competitors.

Offsetting costs: to address increased costs, according to the research suppliers have shown that a range of tactics can be adopted to minimise the overall impact, including

• RRP maximisation — designing solutions to enhance brand appearance in the category, functionality and customer communication 

• Efficiency measures — including converting all customers to the RRP solution and driving procurement savings  

• Negotiation strategies — increase product listing or distribution, increase share of space within the category.

Reviewing supply chain management

Whilst the above are all key insights into ensuring a successful RRP strategy, the report does not cover the importance of food manufacturers reviewing their supply chain management strategies.
Currently there is very little consideration amongst suppliers of integrating supply chain and co-packing activities. This can lead to two highly inefficient and costly scenarios. Firstly, an international supplier of food and drink products could co-pack at source before exporting them to the UK. This means that due to packaging type, efficiency may be lost in the supply chain in pallet and vehicle fill; also where multiple SKUs and clients are involved, the final decision regarding product destination or specialisation needs to be made earlier which can result in higher wastage.

Secondly, suppliers tend to outsource to an independent co-packer which means that product has to be transported between a stockholding facility and a co-packing operation, thereby increasing food miles and inefficiencies. Both of these scenarios and associated inefficiencies can be avoided by selecting a logistics provider that can provide a co-packing solution at their stockholding facility.

This was one of the key reasons behind the formation of Culina IPS. Culina IPS provides true collaboration and integration in the supply chain in order to deliver an RRP solution. This development means that we now offer specialist contract packaging services within our warehouses, negating the need for goods to be transported to and from another location for packing.