Free Factsheets

Logistics in the Food & Grocery Industry:

The food and grocery industry is one of the most demanding sectors for logistics, and the UK is recognised for its leading edge performance across the world.
 

Logistics incorporates the following activities:

• Warehousing
• Transportation
• Inventory Management
• Systems Control
• Strategic Management

Logistics is either handled "in-house" by grocery retailers and manufacturers, or is “out-sourced” to "Third Party" Logistics Providers (3PL’s), such as DHL-Exel or Wincanton. There has been significant consolidation in the 3rd party logistics sector between the larger players, although as a whole the sector remains highly fragmented.
 

Logistics activities in Food & Grocery operate across temperature bands:

• Ambient - canned foods, jars of coffee, bags of sugar
• Produce - fruits and vegetables
• Chill – dairy products and ready-meals
• Frozen – various frozen goods

Warehouses (called “composite” distribution centres) and multi-temperature delivery vehicles have been developed to meet these requirements and provide a continuous supply of fresh product.

Findings of IGD’s annual research:

(Taken from IGD's Retail Logistics 2007 report, results based on 12 major UK retailers and wholesalers)

• Up to 5bn cases of products are distributed through 35.4 million sq.ft. of warehouse space.
• There are 159 depots with an average size of over 222,000 sq.ft.
• 94.3% of stock is supplied via a retail warehouse rather than direct from the supplier to store. This can be a more cost-effective method and helps to reduce town centre congestion.
• The average distribution cost for retailers as a % of turnover is 4.7%, with a range of between 9% and 2.4% for the highest and lowest cost positions.
• Warehousing contributes 55.4% and transport 38.7% of distribution costs. Other overhead costs make up the remainder.
• Average vehicle journeys have decreased by 26% between 2005 and 2006 to 377,275 with the average distance per journey increasing from 133kms to 188kms. This means that deliveries are less frequent.
• Retailers use a variety of transit materials to replenish stores, including pallets, roll cages, plastic crates and merchandised units.
• Over 600,000 tonnes of packaging have been recycled by retailers in the last year.

• Overall average warehouse inventory levels in 2006 increased to 11.6 days' cover (excluding non-food, produce and chilled lines), despite reductions for individual companies.
• The highest stock levels continue to be for beers, wines and spirits (BWS) at 16.8 days’ cover, and Non-Foods at 13.4 days’ cover, where overall stockholding remains erratic, due to the difficulty in accurately forecasting customer behaviour in these categories and the generally longer in-transit lead-times.

Stock Days

Source: IGD Retail Logistics 2007 report