The logistics industry has been talking about collaboration for a long time. It is well aware that the potential benefits are significant. Nevertheless progress in the UK has been slow. It shouldn’t be this way - there’s every reason for UK retailers and fmcg suppliers to think more seriously about collaboration.
The UK retail market is changing, giving consumers more options for how and when they shop. The discounters are growing, major retailers are increasing the number of convenience outlets, which require different logistics arrangements, and e-commerce is on the rise.
To respond to these trends, retailers ideally want to order what they want, when they want, seven days a week with shorter lead times and smaller orders.
All this is leaving fmcg manufacturers concerned about how they can possibly provide this sort of service without increasing the cost and impact on the environment.
Greater collaboration, I believe, must be part of the answer to these challenges. There is no ‘one size fits all’ solution, but our experience - through our Supply Chain Best Practice Forum - has taught us there are a number of critical components that vastly improve logistics collaboration.
”In Europe major collaborations led to double-digit cost reductions”
First, it takes like-minded companies - with relevant synergies - to come together and identify win-win opportunities. This needs to be led by brave and intellectually strong supply chain leaders, with top-level support from the board. We also recommend the process be supported further with detailed analysis by ‘trusted neutrals’ who can evaluate and quantify the opportunities for all involved. And - crucially - any synergy benefits must be relevant from the point of customer ordering.
In Europe, major collaboration projects using this approach have led to double-digit reductions in logistics costs, and we are seeing similar opportunities in the UK.
Some companies are already embracing collaboration as part of their UK logistics strategy. At our recent annual logistics debate, we heard from Asda, United Biscuits, Tayto, Toyota and others about how they are looking to work more collaboratively in their supply chain.
Asda, for example, told us how it is identifying manufacturers in similar geographic areas to create combined deliveries. UB spoke of how it had been collaborating with other companies for years - including direct competitors such as Nestlé - while Tayto explained its work with Asda and Bibby on vertical collaboration.
They all stressed the need to start small - Asda’s Matt Wood called on delegates ‘not to boil the ocean’ - but they were equally clear in their conviction that collaboration can unlock enormous competitive advantages.
Collaboration is essential in enabling companies to maintain cost and environmental efficiencies while improving customer service.
It’s high time for more UK companies to take the plunge and make collaboration a serious part of their logistics strategy.
The benefits are more than just logistics - the prize is enhancing customer service and sales.
John Perry is managing director of Scala Group