Freight by Water - Peter Ward
For some years now the major retailers and FMCG companies have been chasing low cost sourcing around the world, and managing the risks associated with extended supply chains, namely longer response times, the consequent impact on sales and increased vulnerability to disruption.
Such risks have traditionally been mitigated by importing and assembling stock in the consumption territory, within a timeframe to provide adequate buffers against unforeseen delays; hence the development and growth over the last two decades of large distribution centres around the country.
Any improvements to supply chain performance have been driven through various modifications of destination logistics, with different combinations of national and regional distribution networks. Much of this re-configuration of destination market logistics may well eliminate waste and possibly even improve performance – but often fails to capture the more significant benefits that can be derived from optimising supply chains on an end-to-end basis, taking into account the upstream process of procurement and origin inventory management.
Driven by the recession, the challenge to retailers now is how to manage availability versus cost trade-offs, with lower levels of inventory. Maintaining high levels of inventory on a ‘just in case’ basis, and running the risks of big markdowns to clear old stock, is no longer sustainable.
Another major challenge facing the retailers and the FMCG companies is the need to build more sustainable supply chains. Against a background of increasing fuel and bunkering prices, the upward trend in transportation costs is evident. Thankfully most companies now recognise that improving efficiency of transportation also leads to environmental benefit, and at last are starting to recognise the link between and sustainability and profitability.
What all of this adds up to is a pressing need for change, and the current crisis may provide the necessary catalyst. At Freight by Water, we believe there is now a unique opportunity to make radical and ambitious change within supply chains, creating the virtuous circle of the future via modal shift.
The case for modal shift – namely increased use of waterborne freight transportation – is well documented and has attracted widespread support, particularly from the FMCG sector. Supermarket giants Tesco, Asda and Sainsbury’s are amongst those quite literally ‘dipping their toes in the water’, to test the viability of moving stock using the UK’s major estuaries and coastal waterways.
Moreover, the Institute of Grocery Distribution (IGD), the leading industry body for food and grocery retailing and supply chain has lent its strong support for change; Senior Supply Chain Analyst for IGD Karen Chalmers, has said: “In today’s complex and extended grocery supply chains, companies are recognising the environmental benefits that can be achieved by integrating alternative transport modes into lower environmental impact transport solutions.”
Our role at Freight by Water is to facilitate and help drive such change. To that end, we have launched a series of Modal Shift Forums nationwide, as part of an ambitious project to create a viable UK wide network of services, aimed at taking freight off the roads, reducing congestion and carbon emissions, as well as delivering a cost-effective sustainable solution for major businesses.
The worst of times is creating a demonstrable demand from end users. Now the freight industry has the opportunity to put together a truly revolutionary but workable transportation mode based around greater use of water. The case to shorten the element of road transportation in the first/last mile, and extend the reach of water closer to production and consumption markets, is compelling.
Peter Ward is Executive Director of Freight by Water. For further information, visit: www.freightbywater.org
Published: 16/07/2010
