Port-side storage is growing in popularity among retailers frustrated by an expensive, crowded transport network. Alison Clements explains how it is cutting regional distribution centres out of the supply chain altogether
Our hopelessly congested road network and rising transport costs are making port-side storage and handling facilities look increasingly attractive to UK retailers and their suppliers. As more and more products flood in from overseas, it can make sense to sort containers before onward delivery. In some instances, retailers are using port-centric distribution centres to bypass regional distribution centres altogether, removing a leg of the delivery supply chain.
“One big win here is that retailers and suppliers avoid having to transport three or four tonnes of metal – the containers – along with their goods from port to distribution centre, and paying for the containers’ journey back to port empty,” explains Ian Veitch, chief executive at NYK Logistics, which operates a port-centric import centre at Thamesport, Kent, on behalf of Samsung Electronics. He adds: “The cost of container hire – several hundred pounds per load – is also reduced because it is in use for less time.”
A key objective for Samsung and its retail customers, including Comet and DSGi, has been to realise sales revenue from products as quickly as possible, while minimising transport and handling costs, explains Veitch. “Anecdotally, going direct from port and cutting out the regional distribution centre can get products into shops a week or even two weeks quicker,” he says.
Another benefit is that goods are unloaded from containers but not eligible for excise duty until they leave the port area, so importers can defer payments to the taxman for a week or two while goods make a short journey to a storage facility within the port.
For Asda, which opened its own 350,000 sq ft import centre at Teesport in the Northeast in 2006, the biggest advantage has been saving more than 2 million road miles.
Asda supply chain director Andy Ellis says that, since its introduction, the centre has enabled further growth in imports for the retailer’s rapidly expanding non-food business, both in stores and online.
“It has improved the flow of our imported goods from their point of origin to our stores,” says Ellis. “Teesport has significantly improved the way we handle large consignments of stock, being stored in a purpose-built facility rather than our distribution centres. This has also enabled us to plan and manage depot occupancy levels much more accurately.”
Asda says that this results in more accurate and timely replenishment of imported items in stores. “We are also introducing a pre-retail operation
with Teesport that will allow us to implement new ranges more easily,” says Ellis. “All of this has a distinct cost-advantage.”
What’s good for Asda…
It is no surprise that Tesco is also building a state-of-the-art, 1.2 million sq ft import centre at Teesport, due to open in autumn next year. The supermarket will be utilising undeveloped brownfield land within PD Ports’ Tees Dock estate, beside the future Northern Gateway Container Terminal. It is expected to be operational by 2010.
A Tesco spokeswoman says the group’s non-food business is expanding each year. “We need to increase our storage capacity to deal with the increased levels of imported containerised goods,” she says. “Building a port storage facility removes the need to move stock from the port to a storage facility inland. As well as reducing the double handling of imported stock, this will help reduce the road miles that products travel.”
However, port-centric operations are only feasible if shipping lines run to a retailer’s chosen port in the first place. Another drawback is that facilities on the south coast, for instance, might be more convenient geographically, but will be more expensive to use than those in the north.
Chris Richardson, sales manager at Import
Services in Southampton, which supplies toys, gifts and cards to Clintons Cards, Toys R Us, Argos and John Lewis, says the benefits outweigh the disadvantages. “Port-based logistics is about streamlining and shortening the supply chain,” he says. “We can bring goods from sea containers into our distribution centre 10 minutes from the port and deliver next day to retailers. Cutting a week out of the supply chain is an option most retailers would find hard to resist.”
- Can eradicate the need to transport goods to an inland import centre. Goods can be cross-docked at the port for direct store delivery
- Greatly reduces UK road mileage, cutting fuel use
- Avoids the slow handling and return of empty containers back to the port for restitution, cutting costs
- Can shave several days off transit time
- Takes carbon out of the supply chain
- Payment of excise duty and VAT can be deferred
- Order processing, pick and pack, and replenishment activities can be carried out, so goods go direct to stores
- Port-centric facilities in the South are likely to be more expensive than storing and consolidating goods in a distribution centres in the Midlands or the North
- Only suitable for long shelf-life product categories
- Not every shipping company uses every port, so retailers need to think carefully about where to locate port-centric operations
- Best suited to high-volume goods going to regular outlets, with predictable demand