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Take the direct route

As retailers work to drive down their supply chain costs, many are opting to streamline the process by importing product directly from overseas

Managing the flow of imports into the UK is one of the hardest challenges retailers face. If they get it wrong, lots of product may arrive at their warehouse all in one go or, even worse, they may be faced with shortages of their best-selling lines.

In the past few years, many businesses have moved to direct importing rather than paying more to receive supplies on a 'landed' basis, where the supplier or agent is responsible for logistics. But Karen Coxall, a partner at management consultant Itim Consulting, says that retailers need to ensure they do not squander the benefits.

"Moving to direct imports is largely margin-driven and, while retailers want to get the best price for the products, they need to pay equal attention to issues such as reliability and timing in order to maximise availability," she says.

To meet these needs a number of logistics providers are offering a one-stop shop for bringing deliveries into the UK and distributing them. For example, third-party logistics contractor Christian Salvesen and international freight management firm APL Logistics have formed a joint venture called Holistica. This will offer a single contract for moving products from the country of origin, using APL Logistics' expertise and facilities, to the UK or Europe, where Christian Salvesen's strengths in contract logistics would then be used.

Holistica managing director Paul Cunningham says this enables retailers to use transport more efficiently, decide where to hold stock in the supply chain, and be in a stronger position to reduce their carbon footprint. "Firms are coping with increased collections, faster turnover of new looks and a broadening of their vendor base, and they need to keep costs down," he says.

Other logistics companies are also forming alliances. Wincanton, for example, has signed a joint venture agreement with Kerry Logistics, a China-based business with a network of facilities across Asia.

Kerry Logistics' UK managing director Gary Wilcock says: "The idea would be to take over logistics from where production takes place in Asia and deliver it to the high street, managing the inventory and reducing costs along the way."

Other logistics firms provide a range of services in-house. DHL offers a mix of express parcels, third-party logistics and freight-forwarding services co-ordinated through its 'control tower' concept, which allows a retailer to have one point of contact for the different elements of its supply process.

Retailers use logistics providers in different ways, but many have cut the number they deal with. Department store group House of Fraser directly imports about 10% of its products and uses DHL both for inbound delivery and distribution within the UK. Its imports from the Far East are predominantly moved by sea in containers, while those from Europe are delivered by way of DHL's road transport network.

House of Fraser logistics controller Devinder Chana says: "Our import volumes are relatively low and wouldn't justify putting in structures ourselves. We are getting access to the best practice, IT systems and people, but without a huge investment."

Marks & Spencer also outsources its inbound movements for direct imports, which are carried by air, sea and road. "We use a number of international freight providers such as APL, Maersk and DHL," a spokesman says.

Often retailers will use specialists according to the circumstances rather than sticking with one logistics provider. Value retailer Peacocks uses shipping line Maersk to bring products by sea from the Far East, which accounts for about 70% of its stock, but Eagle Global Logistics is used when air freight is necessary, and Anglo-Turkish International for Turkish imports.

Others will outsource only part of their inbound operations. For example, young fashion chain New Look has an in-house team to buy in space from shipping lines but uses a freight forwarder, Allport, for air movements.

Outsourcing can also help retailers to decide the correct balance between sea and air movements. Many retailers only use air for emergencies, but it can be used on a planned basis, such as topping up best-selling product during the season.

Martin Willmor, operations manager for international fashion services at DHL, says: "You need sufficient margin to justify air freight but it is also appropriate if the product is small and light or predominantly seasonal, such as swimwear," he says.

Gary Morter, executive director of freight management firm WT Sea Air, adds: "Generally, the higher the fashion element the less you can afford to have empty shelves."

Whatever mode of transport is used, UPS Europe marketing director Kathleen Marran believes that in many cases retailers can save time by avoiding sending products into their UK warehouse. The company offers a service called Trade Direct that combines movements from overseas with parcel deliveries in the UK. "You could split your load so that the more fashionable items can go straight to store, while standard products can go to the distribution centre," she explains.

Another way to increase efficiency is to consolidate freight in the country of origin. This involves collecting consignments from several suppliers into one shipping container at an overseas warehouse to avoid wasting container space or paying for a load to be combined with those of other companies.

Peacocks follows this policy, as imports manager David Kernick explains. "It is really important to make as much use as we can of the container space in order to keep freight costs down and ensure that we ship as little fresh air as possible," he says.

There are other advantages to be had from holding back some stock overseas rather than storing it in UK warehouses. Chana says: "You cut costs but you also increase control over the supply chain, because you can pull the inventory in just as you need it."

Many retailers are now committed to direct importing, but creating an efficient flow of product is what is likely to set them apart from their rivals, both in terms of cost and what they can offer their customers.

KEEPING WATCH: USING TECHNOLOGY TO TRACK THE SUPPLY CHAIN

IT systems have a vital role to play in ensuring efficient importing and can be used to track exactly where products are in the supply chain.

Speciality Retail Group, which owns businesses including Suits You and Racing Green, has managed to reduce the supply chain cycle for its products from 20 to 18 weeks by installing a system from supply consultancy Kewill Systems. This tracks the entire movement; from order acceptance by the supplier, through the manufacturing process, securing of bar codes, allocation of stock to stores, dispatch from overseas, arrival at the warehouse and delivery to the stores.

Speciality Retail Group previously picked stock in the UK, but this task is now carried out by suppliers, reducing the time products need to spend in the group's distribution centre in Borehamwood, Hertfordshire.

Systems for showing where products are in the supply chain are often operated by logistics companies. For example, DHL runs systems called SmartTrack and LogNet to track road, sea and air movements, while UPS recently announced enhancements to its WorldShip and Quantum View products for managing international movements, including a module to smooth customs clearance.

TNT Fashion Group development director Philip Bracken says it is vital for any supply chain tracking system to provide only the information relevant to a particular retailer, perhaps via exception reports, to avoid being swamped with unnecessary detail.

"It might not be important for a retailer to know that their consignment is, for example, sitting on a boat off the coast of Spain. What is important is knowing what you are going to do with the products when they arrive and how soon they are going to get into the store," he says.

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