According to IGD's annual survey in Retail Logistics 2001, published today, the variation in distribution costs between retailers has increased as they try to balance the need to decrease costs with the satisfying consumers' demands for availability and range. Increased efficiencies in the supply chain include greater use of flow-through systems, investment in technology and use of third-party distribution.

15 retailers were surveyed this year, and some of the key costs and year-on-year changes are shown below.

Distribution costs 2000
2.3%- 5%
2001
2.2% - 6%

  • The range of distribution costs has increased, showing how differently retailers have responded to market conditions. Larger multiples are increasingly engaging in additional activities e.g. Sunday deliveries, and operating consolidation centres.
Transport costs 2000
35%
2001 -
40.7%

  • As expected, increasing costs of fuel have impacted upon retailers and now represent a higher proportion of distribution costs. In addition more frequent deliveries have increased costs.
Warehouse costs 2000
51%
2001
46.8%

  • Retailers have implemented systems, which enable product to flow more efficiently through the warehouse, thereby alleviating the need to hold as much stock.
Systems costs 2000
4%
2001
3.4%

  • Although systems costs have reduced they do not reflect the total investment - many retailers have undergone substantial systems development.
Average
depot size
2000
182,975 sq. ft
2001
185,755 sq. ft

  • Retailers are continuing to seek larger sites for their larger product ranges. This improves efficiency as stores can then receive one delivery instead of several from different depots
Third party penetration 2000 2001

Warehousing

Transport

42.2%

50.4%

49.5%

54%

  • The continuing trend is an increased use of third party logistics providers. Their expertise allows retailers greater freedom to focus on other areas of the business. Wincanton handles the most warehousing space for retailers, followed by Exel.

Stock levels*

FMG - Fast Moving Goods, SMG - Slow Moving Goods, Frozen

  • A reduction of between 2% and 4% in stockholding for these categories reflects continuous improvement in the efficiency of these established supply chains.

Non-food and Beers, Wines & Spirits (BWS)

  • Overall stockholding levels have increased. These supply chains have longer lead times, strong variability in supply and goods often have to travel longer distances. The biggest increase in stockholding - 67% for non-food and BWS reflects the fact that retailers are expanding their product ranges.
Source: Retail Logistics 2001

Note: The total distribution costs in 2001 were 2.2% - 6%, and are made up of warehouse, transport and systems costs.

Retail Logistics 2001 provides an extensive review of the logistics operations of the UK's major grocery retailers.

* Stock Levels (days)

FMG

SMG

Frozen

Non-foods

BWS

2000

10

11.8

9.5

15.7

15.9

2001

9.6

11.6

9.3

26.3

17.3

EDITORS' NOTES

  1. Retail Logistics 2001 is available from IGD, priced £275 for Members and £350 for Non-members. For further details or to order please contact Michelle Jarman on 01923 851925 or email michelle.jarman@igd.com, alternatively visit the IGD website http://www.igd.com/

  2. Companies profiled in the report include Alldays, Asda, Boots, Budgens, Co-operative Group, Iceland, Jacksons, M&S, Nisa Today's, Safeway, Sainsbury, Tesco, United Norwest, Somerfield Group and Waitrose.

  3. Further results of the Retail Logistics 2001 survey will be revealed at the International Retail Logistics Conference in London on Thursday 22nd November. For further details or to book please contact the Conference Department on 01923 857141 or email conferences@igd.com Fees: IGD Members: £350. Non-members: £465, contact the conference department for details of a special offer for three or more delegates from the same company.

  4. For press queries about the conference please contact Catherine Ellwood on 01923 851916 or email catherine.ellwood@igd.com

  5. IGD is the leading research and education organisation for the food and grocery industry. Its membership is drawn from the total grocery supply chain, including retail, manufacturing, wholesale, distribution, catering, packaging companies and primary producers. IGD also has close links with consumer organisations.