Daily Research News Online no. 2953 - Trends in UK Retail Logistics, 2004

Trends in UK Retail Logistics, 2004

February 25 2004

Bigger depots and reductions in stock levels are two of the trends discussed in IGD's Retail Logistics 2004 Report, which looks at the supply chain activities of the UK's grocery retailers. The survey found that Tesco and Asda between them now account for almost half the five billion cases passing through distribution sites each year.

According to IGD's survey, the total volume travelling through retailers' centralised distribution sites is just over five billion cases a year. Tesco and Asda, each processing more than one billion cases a year, between them account for almost half (47%) of the total volume.

Average distribution costs have remained fairly stable since 1998, but increased slightly from 3.44% of total turnover in 2002 to 3.6% in 2003. However, the mean figure masks a broad range of percentages, with the gap between the lowest cost and the highest cost 3.9%. Retailers have invested heavily in their supply chains as turnover increases.

A number of retailers have succeeded in making significant reductions in stock levels since 2002:

United Co-operatives has reduced stock by nearly 28% to 15 days
Tesco has reduced stock by 9% to 9 days
Sainsbury's has reduced stock by over 3% to 9 days

Stock levels have fallen for Frozen and Non-food products. Frozen food is a relatively stable category with highly developed supply chain relationships and more than 90% delivered through FGP, whereas the Non-food category has seen stock levels rising and falling over the last seven years, and remains a difficult category to manage with undeveloped international supply chain relationships at its heart.

The average depot size has increased by 11% to 230,000 sq.ft. and continues its upward trend. The multiples are continuing to move towards larger depots with large ranges of products - Tesco's average depot size is over 290,000 sq.ft. and Sainsbury's has invested heavily in opening a series of large distribution sites (fulfilment factories) such as Hams Hall which at 700,000 sq.ft. is the largest retailer distribution centre in the UK. The average site size for convenience operators such as Londis and United Co-operatives is 141,000 sq.ft.

Logistics directors of 13 major UK retailers were interviewed between August and December 2003. The companies included were Asda, Booker (Big Food Group), The Co-operative Group, Iceland (Big Food Group), Londis, Marks & Spencer, Nisa Today's, Safeway, Sainsbury's, Somerfield Group, Tesco, United Co-operative and Waitrose.

IGD's web site is at www.igd.com

All articles 2006-23 written and edited by Mel Crowther and/or Nick Thomas unless otherwise stated.