LOGISTICS SUPPLY CHAIN: Partners in wine

From improved shipping routes to bonded warehousing, Gayle Sullivan considers how drinks companies are working with logistics firms to create value-adding efficiencies along the supply chain

Almost everyone working in the drinks industry has a vested interest in the supply chain and in getting the best logistics solution for themselves. The need to get the logistics right has resulted in the gradual evolution of suppliers from logistics providers to strategic partners, managing the complete process from end to end.

Industry-wide, companies are realising that they need specialist expertise, and logistics companies are determined to add value where possible to assist drinks companies and streamline the supply chain.

Buckinghamshire-based Geodis UK has extended its wine shipping product offering from its traditional European base to the international marketplace. With a strong supply chain heritage in the Old World, Geodis UK is making significant investment in developing new routes between the UK and South America, Australasia and South Africa. Working alongside the company’s global shipping partner, Rohde & Liesenfeld, which handles its third-party requirements in the New World, Geodis covers some 120 countries worldwide. But Geodis is by no means complacent in its bid for new business and the future is all about partnerships.

“As an organisation, we have built up a market-leading wealth of experience in the transportation of wines from Europe,” says Jamie Cuthbert, MD, Geodis UK. “We intend to use this expertise to create a service offering that befits the wider international marketplace. By working with a provider who fully understands a client’s business, strategic partnerships can be formed and efficiencies identified throughout the supply chain.”

Working together
KN Drinks Logistics – formed from the collaboration of Scottish & Newcastle UK and Kuehne & Nagel – has the reputation and the links to develop its focus on distributing beverages and striving to become a platform for all drinks suppliers and retailers in the UK. Commercial director Geoff Lippitt is clearly enthusiastic about progress so far and the company’s new contracts to come. “We deliver about six and a half million barrels of beer a year and over 70 million cases of product a year to the on- and off trade, to 30,000 outlets.

“We have just won new business with Anheuser-Busch and we are also finalising an on-trade and full service vending contract with Britvic. Our key focus for last year was to ensure we delivered Christmas peak for the trade and make sure we got the new company bedded in. The business wins have followed as a result of a strong company performance following the transition period.”

Collaborative partnerships are also a key focus for David Mawer, joint managing director of FFG Hillebrand, who believes that improved supply chains come as a result of a total synergy and collaboration between suppliers who can be based hundreds or even thousands of miles away.

“Together with their major clients, JF Hillebrand has developed systems and processes that have facilitated an unprecedented level of collaboration and partnership between customers, JF Hillebrand, suppliers and importers,” explains Mawer. The company’s order management tool, Axis, has undergone extensive development over recent years and provides all parties with complete supply chain visibility and access to powerful supply chain management tools.

Improved Electronic Data Interchange (EDI) has helped data quality and communication between all parties in the supply chain. This helps to speed up and standardise the shipment cycle, leading to better customer service and efficiency.

“All divisions of JF Hillebrand work closely with customers and suppliers to provide advice on all aspects of the supply chain, from container packing and shipment to customs clearance and stock control,” continues Mawer. Furthermore, the company has established JF Hillebrand Supply Chain Management to provide customers with 4PL services, responsibility for ordering stock, reducing inventory, maintaining safety stock and guaranteeing service to stores.

Environmental concerns
FFG Hillebrand has also taken steps to develop new initiatives to reduce carbon emissions. Developments include a new initiative in cooperation with a major UK retailer to reduce road miles by utilising the Manchester Ship Canal and working with the ports of Liverpool and Bristol. “The use of regional ports has enabled us to further reduce our reliance on road transport,” says Mawer.

Hungary provides another example of FFG Hillebrand’s commitment to environmentally friendly transport solutions. Mawer explains: “Hungary is an emerging market with great potential and, although Hungarian wines have long been available in the UK, growers in this region have previously suffered from limited transport options to the UK market. Until now, the only option for export from Hungary was by an overland trailer service.”

With this in mind, FFG Hillebrand has developed a brand new, environmentally-friendly container service from Hungary, using rail transport to move s from across Hungary to continental ports and onward movement by sea to the UK. This service is cost-effective compared to using roads, and is significantly better environmentally.

Independent traders are constantly battling the advantages that economies of scale give to importers with larger volumes. However, the specialist Porter & Laker division of FFG Hillebrand can give smaller traders access to the same economies of scale for the transportation of their products.

“It is very rewarding after 125 years to be taking a traditional family business formula and applying it to today’s challenges. Plus we now have the technical and logistical advantages of being part of the Hillebrand Group,” says Chris Porter, director, Porter & Laker. “As a result, our division offers a dedicated, professional, specialised service to the independent sector, that also delivers the value and commercial benefits that more sizeable businesses may enjoy.”

Bonded warehouse companies are also keenly aware of the need to work with the drinks companies and the crucial link in the chain is increasingly technology and IT-led. Often the warehouses will outsource their IT requirement but there are also integral departments to meet clients’ supply chain needs.

London City Bond (LCB) has over 20 warehouse units around the UK and understands how important partnerships are to the increasingly pressurised logistics process. “We are finding that many of our customers are looking to work in partnership and allow us to provide them with systems. It could be something as simple as order processing from their systems straight into ours and immediately saving their administration costs,” says David Hogg, sales director of LCB.

Bonded warehouses are also continuing to refine and expand the facilities they have built up over the years to meet customer needs and exploit the potential for growth in key areas. “LCB is currently undertaking a review of all its operations,” says David. “We are moving out of some of our warehouses, starting towards the end of this year. We are in the process of setting up a new warehouse in Scotland; we already have a unit there but we are moving to a larger warehouse with additional facilities.”

Changes also continue apace at the Cert Group. “Notwithstanding current operational challenges due to a very complicated move of customer stocks, we are committed to being the best UK logistics business in the wine market,” explains Michael Lainas, MD, Octavian (part of the Cert Group). “To that end an investment has been made in researching the marketplace and our position in it and this is likely to result in  positive changes within the business.”

As well as investing in new warehousing facilities, Cert Group has improved the efficiency of its IT network and offers a 24-hour web-based information service.

The role of technolgy
Increasingly, companies are looking for management information on top of the day-to-day business of moving stock and the flow of this information is a key focus for logistics suppliers and also for computer software providers. So how are the software companies meeting the needs of the trade with regard to further streamlining the supply chain?

European market leader RedPrairie has specialist software that covers all parts of the drinks supply chain, so is in the unique position of being able to appeal to all types of companies within the trade. For Nick Love of RedPrairie, the company’s software is a tool for streamlining the supply chain and cutting costs. “From the vine to the shelf, producers, importers, bottlers, retailers and third party logistics (3PLs) harness RedPrairie’s expertise and software for critical elements of their operations.”

RedPrairie reports that it has seen a significant upsurge in the number of companies that are becoming aware of customs and excise issues when it comes to reducing costs.

“Different types of companies approach this in different ways,” says Love. “The most forward looking 3PLs are providing bonded warehousing as a vital component of their complete service offering. These 3PLs have contracts with smaller importers right up to major drinks producers, as there is a demand for the duty and VAT that they will pay to be delayed to the latest possible point – usually when it is despatched from the warehouse. With the right software to control staff and take care of all the HMRC requirements and documentation, they offer a cost-effective service that provides valuable return on investment for their customers.”

RedPrairie is finding that more companies that pay at least £2m duty per year are now opting to open their own bonded facilities and keep control of their goods and procedures “in-house”, thus minimising costs and maximising profits. These companies range from drinks importers to specialist and mainstream retailers and wholesalers. What they have in common is that they need proven and compliant software to help them meet HMRC requirements.

The majority of companies (about 85%) who do not have such facilities pay all duty and VAT at the point of import, but could be cutting costs by deferring this significant fiscal outlay until the latest point. This can be due to misconceptions regarding the difficulties in dealing with customs procedures. Throughout the year RedPrairie has been holding seminars to promote the “tax efficient supply chain” concept. These seminars are aimed at companies who have little knowledge of the significant fiscal benefits that are open to them.

“These are becoming more well attended as the message starts to spread and companies start to share their success stories with others,” explains Love. “We are beginning to see growth in the number of companies who, having exhausted the traditional routes to increased profitability, are turning to the less well known ones, such as duty management, which offer just as significant returns.”

Successful strategic partnerships are those that share the same business ideals and are working to the same purpose. By working with a provider who fully understands as many aspects as possible of a client’s business, excellent collaborative partnerships can be made and efficiencies carried out throughout the supply chain.

© db August 2007