Steve Winwood, Commercial Director, Culina UK Ltd
Posted: Tuesday, August 31, 2010 3:50 pm

The food and drink sector is continually keeping up with an ever changing business and consumer landscape, particularly as the retailer and consumer become ever more demanding - expecting much more from the manufacturers. Combined with short lead times, multi-temperature storage, the constant replenishment of goods, high levels of traceability and accuracy status and the growing need for customised and shelf ready products, the sector requires and expects significant logistics expertise from its supply chain providers. 

Today's economic environment also brings additional challenges. As we are now operating in a value-driven economy due to the current period of austerity, all businesses have had to respond in one way or another. In particular, the highly competitive grocery sector is now more than ever striving to optimise cost efficiencies, with a particular focus on the supply chain. This requires logistics providers to look at new approaches to supply chain management in order to survive.

As David Cameron makes himself at home at Number 10, policy makers are beavering away on how to stabilise and bring the economy to rights. A continued increase in fuel prices and a probable hike in VAT are just two other ways that the sector and supply chain providers could be affected. Business leaders, including Sainsbury’s Chief Executive Justin King, have been quick to warn the Government that a VAT rise will hit the industry with dramatic effects.

Alongside these pressures is a drive towards sustainable supply chains as manufacturers and retailers look to win market share through demonstrating green credentials to their customers. Retailers are recognised as leading the way on several sustainability issues, such as reducing packaging and communicating carbon footprints to consumers. For example, Marks and Spencer launched ‘Plan A’ in January 2007, setting out 100 commitments to achieve in five years. Initiatives such as these create opportunities for logistics providers as procurement and supply chain management are becoming increasingly central to achieving sustainability ambitions. 

Rising to the Challenge
These challenges do offer valuable opportunities for logistics providers and, as a result, we are seeing an increase in demand for shared user operations. Manufacturers and retailers are reducing or getting rid of their own transport fleets as they do not want to be tied to the associated costs and vehicle leases. Those who do not run their own fleets are reviewing their existing outsourced logistics arrangements to ensure they are maximising cost efficiencies and getting a value for money service. 

The rising demand for shared user operations does not mean we can rest on our laurels – far from it. We are now operating in a business world where maximising value-for-money to create cost efficiencies and heightened competitiveness has become key. 

Here at Culina, we have invested time and money in several new services that enhance our customer proposition. We have embarked on a joint venture with specialist food contract packing company IPS LLP to offer specialist contract packing services at all of our ten warehousing sites, removing the need for goods to be transported to and from another location for packing. This service is helping several of our customers make their supply chains even more cost efficient and sustainable.  

We have also addressed one of the inefficient geographical logistics gaps – Ireland – by creating a joint venture with the SHS Group to provide food, drink and grocery manufacturers in Britain with a seamless supply chain solution into, out of and across the whole of Ireland. For the first time, the operation provides the sector with a cost efficient supply chain infrastructure to fully exploit the potential in Ireland. Culina SHS will also provide a highly efficient logistics operation in the other direction for goods leaving Ireland for the UK markets.  

During the last two decades, supply chain management has become more and more sophisticated, driven largely by leading edge technology. Online tracking is expected, and customers are now looking at additional ways in which IT can help quicken the supply chain, such as systems that can help optimise transport routes and maximise vehicle utilisation. Despatching nine million cases a week across ten distribution centres with average stock turnarounds of eight days for chilled products and 20 days for ambient, is no easy feat, and at Culina we have invested in an innovative IT infrastructure to underpin such a demanding operation. A bespoke warehouse management system that ensures automatic stock replenishment and complete visibility of order status throughout the entire supply chain is just one example of the highly sophisticated technology we currently provide our customers.  

Responding to the sustainability challenge is a tricky one for logistics providers that rely on fleets of lorries moving across the road networks. However, there are ways of tackling this. Investment in new technologies and a strategic geographical network of depots is paramount. Optimising transport planning, sophisticated reverse logistics operations and improving backhaul opportunities to ensure minimum food miles travelled, are just some examples of how providers can help customers meet the sustainability challenge. 

The Future
The current economic climate has been testing for all business sectors, the food and drink sector is no exception. There is every indication that the next 12 months will continue to be challenging, which means the logistics sector has to respond by providing customers with a highly efficient, sustainable and cost effective supply chain solution.