The once ‘buzz-word’ that took a back seat for a few years
Go back five-to-ten years or more and the term port centric logistics was a real buzzword in warehouse and supply chain management circles. Businesses, particularly larger scale businesses were flocking to locate distribution infrastructure close to inbound port of supply to take advantage of the many cost benefits offered by being close to port of entry.
Over the last few years though, this has been a term much less frequently heard when considering distribution centre location. The shift has been towards centrally located distribution facilities primarily on the basis that the growth in B2C customer direct fulfilment creates a view that to get optimised customer service and speed of delivery you need to be housing your product close to the middle of the country.
Why would this be beneficial? The most obvious answer is that being close to where the major Courier networks have their central hubs increases the potential to get later collections from those carriers and therefore the ability to offer later next day and premium service cut offs for your customer base. It was often the case that the carriers would also price the collections more competitively given the shorter distances they have to travel with the product they collect from you.
The fact that it invariably costs you more to get your product all the way from the port to your central location is often overlooked in that cost equation. Sometimes it is overlooked simply because the departmental cost budget for outbound logistics is not the same cost budget as that for inbound logistics. Quite often businesses bracket the cost of port to distribution centre logistics as part of the purchase price of the goods, and include that figure in there landed cost calculations for the product.
Budget holders responsible for outbound distribution would not want to see their costs impacted when they may perceive they get little benefit for that, thus prioritising cheaper, more centrally located collection points.
Some businesses do quite rightly calculate, that in terms of logistics vehicle fill and transport efficiency you absolutely get more product on a container being carried at full artic truck load level and you do on dispatch of individually picked customer orders. Getting that product to the middle of the country before you break bulk is indeed a positive benefit that pushes logistics operators further from the coast towards inland population densities.
The Carrier world has shifted
Over the past few years and particularly since the pandemic when e-commerce particularly boomed, the role of the parcel carriers has grown and changed shape considerably. Those carriers now conduct far more dense outbound distribution across many parts of the country then were once the case. Areas on the coast where you find UK ports will now often be covered by parcel carrier local hubs, and with the frequency of deliveries being made from central hubs to the local hubs comes the ability to haul back and make use of return miles for product collected from more remote regions.
This capacity is offering up the potential for much greater service level performance for more remote locations than would once be the case. The carrier operators all generally work on a similar model and provided your product can get into their network in time to meet the loading requirement from local hub to central hub, you have exactly the same chance of delivering your product to your customer on the same service offering from a port centric DC as you may do for many centrally located warehouses.
Of course there will be always exceptions that run against this. For the largest scale distributors who can justify the use of what is known as direct injection into the central carrier hubs, there will always be advantage in being located closer to the Midlands it stands to reason that if you can keep collections to a minimum and do not need to utilise the trunking leg in between then you can save both time and cost on outbound transportation.
Most businesses however do not fall into that bracket. Even many large scale e-commerce operators will struggle to generate enough volume to merit their own direct injection operations.
Competition is growing in more remote areas.
We are now seeing that parts of the country that may once have struggled to get a reasonable collection time from a major carrier are now finding that there can be more options at a better cost and service offer then were previously available.
We recently worked for a business in the far southwest of England who once upon a time (i.e. within the last couple of years) would need to have their orders prepared by 14:00 ready for collection for next day delivery by their carrier. In their last round of carrier selection , they actually had three carriers all prepared to offer 17:00 or later collection times and at lower cost than previously experienced.
This demonstrates that push towards the middle does not need to be quite as hard as it has traditionally been.
So what does this mean?
There are now increasing options for operators to potentially have the best of both worlds. By moving to more port-centric solutions the operators can benefit from low cost inland distribution from the ports as well as the option to more closely align the container inbound profile to their inventory and product demand requirements.
This provides opportunity to also speed up their supply chain by taking valuable hours out of the supply chain timeline. Some argue that by the time you have waited 10 weeks or more for that product to have been produced and shipped across the oceans that a short amount of additional time may make little difference, and perhaps in some cases where product is continuity based with inventory levels in stock already this may be correct.
However, the ability to get product quickly to market and to save valuable days and hours in the supply chain can prove invaluable to commercial operations.
This is of course most applicable to those businesses that import via container the vast majority of their product set. This solution may not be wholly applicable to companies where the source of supply of their product is much more mixed between domestic and international sourced. In these cases there could still be a strong argument to support port centric locations, but the answer may not be quite as clear cut.
What there is now however, is more options. Businesses do not need to simply think about going to the (costly and labour availability-challenged) Midlands in quite the same way as they used to. It is now more open and possible to select locations that may once have been out of the question, but now offer great scope to businesses both large and small.
About the Author
Craig has been a leader in logistics for over 30 years. After graduating with a degree in transport & logistics management, he has built a career working in logistics and supply chain for some of the best known companies in the UK. He has also worked with some of the best known companies in the world to develop outstanding consultancy solutions.
About ASCALi
ASCALi provides expert supply chain and logistics consultancy services with a strong emphasis and supporting companies to achieve their growth, cost and sustainability challenges. Based from our offices in Cheltenham Spa, our team supports businesses across the UK and Europe to develop the optimal supply chain, logistics and warehousing solutions.
