TechnologyAccounting SoftwareCareers: distribution & logistics – When time is of the essence

Careers: distribution & logistics - When time is of the essence

The European focus of the business world and the development of supply chain visibility and shopping via the Internet will have far-reaching effects on distribution strategies. Mary Huntington reports.

With the European focus on business brought about by EMU, and home shopping via the Internet expected to develop from a trickle to a torrent, logistics and distribution are hot topics for manufacturers and carriers.

John Kelly, a director of specialist consultancy Davies & Robson Logistics, says: “A lot of companies are reorganising across Europe, breaking it into two halves.” Healthcare supplier Smith & Nephew, for example, has outsourced its distribution, using a Low Countries location to cover Holland, Germany, Scandinavia and the UK, and a south-west France site for Spain, Italy and France.

Says Kelly: “Obviously, you have to start with a product that is conformative, with instructions in different languages, and reasonably generic. Different plugs to conform to varying standards can be put on at the warehouse, for example.” He adds: “In fact value added at warehouses is growing, as products go out with, say, a free mug or glass etc.” Cultural and nationalistic issues can cause problems, he says, but there are very big savings to be made.

Much of his firm’s work involves helping clients establish efficient distribution centres and decide whether outsourcing is the right option and, if so, how to go about it. “Negotiating and drafting those contracts is a one-sided battle in a way as companies don’t outsource very often and may not be aware of all the wrinkles. Our services are highly in demand. For example, we recently advised Shell on outsourcing the whole of its road transport.”

As far as the service suppliers themselves are concerned, pan-European deliveries present a significant challenge. Guy Adams, a consultant with CMG’s transport and logistics division, says it is a chicken and egg situation. “To cover Europe requires a huge investment in warehouses and trucks with no guarantee of a return. It is a huge risk. Many companies are setting up systems whereby they work with partners in those countries. We are also seeing bureau offerings from the likes of AT&T which offer a cheaper alternative to the establishment of expensive track and trace systems.”

Mergers are also a feature of the market, says Kelly. “The German post office, in particular, has been going crazy, buying half of DHL and half of Securicor in the last 18 months.”

Brian Scholey, principal consultant at KPMG’s world class supply chain group, sees the biggest pressure on distributors as the demand from customers for continuous improvement. “They want lower costs and higher service standards every year. And that pressure is getting more and more difficult to accommodate.”

Scholey’s supply chain group is very busy. “Our work tends to be strategic. Clients want to know how best to meet new customer pressures through existing or new distribution facilities. The whole thing is driven by customer service requirements: they are the most important thing in the equation.”

Scholey believes that home shopping via the Internet, while small now, will potentially have a dramatic impact on distribution. “Home deliveries by the grocery multiples like Iceland and Tesco are also growing apace. Such developments will alter the way distribution behaves.”

Tony Elsom, managing director of specialist Distribution Projects, says that home shopping on a large scale could play havoc with a lot of companies. “To distribute the goods efficiently they will need more depots, not less, and will need to be right in among the population they are serving.” Davies & Robson’s Kelly agrees. “People are getting more demanding and are expecting delivery within three days or less. A real problem is how to get the product through the front door – if people aren’t at home what do you do? Do you ring up beforehand, deliver in the evenings or at weekends or at customers’ places of work? Proof of delivery is important. Successful carriers like White Arrow have consolidated drops to do it economically while Next Directory have used corner shops to hold goods for collection. It all depends on the quality of service you want to offer.” Kelly’s firm has advised Parcelforce on what it could offer new entrants into the remote shopping market.

It is a short step from ordering via the Internet to make to order principles. Says Kelly: “The whole business of efficiency in supply chain is about time compression. The less time products dwell in the system the less inventory carrying costs are.” Dell Computers is an example of the make to order principle, he says, and the automotive industry looks set to follow.

According to Elsom, however, applying Just in Time principles increases transportation costs. “Customers order goods electronically, more easily and more frequently and smaller orders mean economies of scale are less easy to achieve. It is more difficult to fully utilise vehicles and more frequent deliveries have an effect on environmental issues.”

One problem for manufacturers, says Kelly, is software. “Clients want to know whether to encourage the big ERP vendors to set up decent warehouse packages, pick one which can interface to them or build their own bridges.”

For CMG’s Adams, integration is all-important. “Clients want their legacy systems to continue to work and to integrate them with modern systems, and those of their suppliers, carriers and even Customs & Excise as well. It is all about visibility – allowing managers to see where exactly the product is in the pipeline, enabling them to transfer stocks between outlets for example.” And the need for supply chain visibility means that big companies require suppliers to invest in systems to tell purchasers what is happening.

CMG, says Adams, is always looking to recruit: “At a senior level, we look for industry experience – and a lot of contacts,” he says.

Scholey’s supply chain group has 40 UK-based consultants and “looks for recruits who have held a responsible position in industry and have a history of achievement,” he says. “We look for calibre, confidence and breadth of experience.” Recruits tend to come from fast-moving industries with a consumer focus.

KPMG’s interests in Eastern Europe tend to be supported from the UK but, according to recruitment specialist Paul McIntyre, the Big Five are also recruiting in the region itself.

He says: “There is a lot going on there – for example, BOC has a purpose built distribution warehouse in Warsaw while shipping and distributors like Blue Water Shipping are doing a lot of work in the region. And as economies develop, retail players like Tesco, which rely on timely distribution, come in.” As a result consultancies are both busy and recruiting in the area.

Back in the UK, Davies & Robson Logistics employs a dozen consultants – and, like many small firms, uses associates on a subcontracting basis. “This helps the company keep costs in line with earnings,” says Kelly

Distribution Projects also uses associates or freelancers. For Elsom, a number of qualities are essential: “Senior consultants have to have energy and staying power, be able to do the job technically and have entrepreneurial flair to win business.” He thinks this is a difficult combination to find. “A lot of freelancers fail because they cannot market and sell themselves properly,” he says, “and the lack of consultants with those abilities holds back the development of small firms like ours.”

STARTING UP: GLOBAL AUTOMOTIVE UNVEILS CONSULTANCY MODEL

Global Automotive, which specialises in systems for dealers and importers, set up an as yet unnamed consultancy arm in March. Says Global MD Nick Ellis: “Our software solutions are endorsed by manufacturers, many of whom use external generalist consultancies. We saw an opportunity to differentiate ourselves in the market: we are specialists, our people have industrial experience and understand the issues managers face – and we can do the job more cost-effectively than the big firms.”

So far, the move has paid off: the consultancy already has two jobs on the go and is talking to a manufacturer about a pan-European distribution project.

Ellis identifies an industry trend towards lean distribution, where stock is held centrally and dealers call off vehicles as they are needed via PCs. “Manufacturers are looking to reduce time from order to delivery. A third of the cost of a vehicle is in distribution.” Ellis expects demand for the consultancy service to grow. “We will recruit people with industry knowledge from a distribution/retail point of view, and IT skills.”

Mary Huntington is a freelance journalist

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