Mythical animals and romantic capital cities are two of the ingredients that have helped turn logistics company Wincanton into one of the UK’s biggest operators. Over the past 18 months, with strategies such as Pegasus and Paris, it has achieved a turnover of £1.5bn. The Wiltshire-based company is now number two in terms of turnover in the UK behind Excel, and in the top three in Europe.
Of the company’s progress over recent months, Giles Thomas, head of industrial at Strutt & Parker, says Wincanton is now “at the sharp end of retail distribution”. Paul Baker, partner of industrial agency at King Sturge in Bristol, says a look at the blue-chip clients the company has contracts with is evidence alone of its success. Somerfield, Argos, Waitrose and Marks & Spencer have all signed up to Wincanton’s operations.
It is the need of these retailers to cut costs without harming their customers that is driving the distribution market and the development of new initiatives.
Supply chains
According to Martin Taylor, managing director of Wincanton’s retail arm, most companies are now looking at the cost of their sales, and what proportion of sales comprise the cost of distribution. They have come to appreciate that savings on logistics can have a big effect on profits. As a result, retailers are refining their distribution networks. Taylor estimates that supply chains cost the equivalent of around 4% to 5% of most retailers’ total sales.
To help retailers reduce distribution costs, as well as boosting its own business, Wincanton has created two logistics strategies, Project Pegasus and Paris. Along with an increased use of voice picking, whereby warehouse workers equipped with headsets can assemble orders rapidly, the two strategies have already saved retailers millions of pounds.
Pegasus took flight in April when Wincanton teamed up with Argos. The official blurb states that Pegasus “operates as a two-part strategy, backhauling collections from suppliers and maximising network optimisation through revised routing and scheduling”.
Taylor explains that the strategy was a logical step toward the use of spare capacity. “It’s using what we call spare miles,” he says. “After delivery, the vans were coming back empty, and that’s a huge waste. So, what we are trying to do is use that spare capacity to bring products back.”
Taylor says Wincanton put eight people onto the Argos project to improve backhaul – the transportation of goods back to depots. “They have become our backhaul kings. Pegasus has already started saving Argos millions of pounds,” says Taylor. The process will be used in Argos’s new 500,000 sq ft depot at Corby. But, although it has been reported in the press, Wincanton is still not talking about the site because, says a spokeswoman “the deal has yet to be signed off”.
Customer switch
While Pegasus is specific to Argos, Paris is a more general strategy. “We will be looking at the whole of our network and looking at using ‘customer switch’,” says Taylor, whereby clothing and household retailer Matalan’s trucks could be used to shift Tesco’s products.
However, the scheme will have its own restrictions. “Obviously we couldn’t use a Tesco’s vehicle to move Sainsbury’s goods,” says Taylor. But, he says, customer switching between companies in different sectors, such as the Matalan/Sainsbury’s example, is feasible because it is not a competitor to the grocery sector. And, says Taylor “at the end of the day, it will save everybody money”.
Voice picking is another favourite of Taylor’s, and one the company introduced into Somerfield’s warehouses. “Pickers have ear phones and they can be told what to pick. It’s all based on speech rather than paper.” In some cases it can improve warehouse workers’ productivity by 10% to 20%.
Considering Wincanton’s history, it is not surprising the company has developed into a retail logistics expert. Starting as a subsidiary of the West Surrey Central Dairy Company — now known as Cow & Gate — Wincanton went on to merge with Unigate in 1992.
“The company’s background is one of the reasons they have got so many of the top retail companies on their books,” says Baker.
It is also the company’s size that has had an effect, not only on blue-chip companies, but on the market as a whole – a position that was greatly boosted when Wincanton bought P&O Trans European two years ago.
The company now has more than 100 regional distribution facilities, covering more than 21m sq ft of warehouse space. “I am sure other logistics companies are doing what we are doing, but our size is our advantage,” says Taylor. He adds that small logistic companies would not have the capacity to instigate a project such as Paris because they do not have contracts with as large a variety of companies as Wincanton’s.
As well as looking at logistics, Wincanton is also developing the concept of shared warehouses. A 500,000 sq ft site in Greenford, west London has become a prototype, handling the goods of four separate companies – Harvey Nichols, Waitrose, Pernod Ricard and Gucci. Taylor says the idea makes perfect sense because “you will often find customers have different busy peaks when warehousing facilities are being used at different times.”
Being able to get several customers under one roof means finding the right warehouse in the right location with big enough floorplates. But, as Taylor admits, this is becoming a problem for the company.
“Getting big sites is difficult, especially in the Midlands, and looking outside the Golden Triangle becomes difficult.” Taylor says this is why the sites in Corby have become popular because they are big enough and have a good supply of labour nearby.
Getting large sites may be a problem, but the push to keep improving services continues. “We have got to keep bringing forth new initiatives,” says Taylor. “Automation has its place in the modernisation of distribution, but it also depends on a number of other factors .” Taylor says the company wants to keep on improving its reputation because that is how it gets the big contracts with firms such as Tesco and Sainsbury’s.
He adds: “I would say that, as a company, we do the normal things, but we look at them from different angles.”
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Wincanton 2002 Buys P&O Trans European 1993 Buys Glass Glover Group 1992 WCD merges with Unigate Chilled Distribution 1970s Splits into two companies – Wincanton Transport (responsible for petro-chemical and milk haulage) and Wincanton Engineering, which further diversifies into Wincanton Chilled Distribution (WCD) 1950s WT&E becomes an independent firm 1925 Wincanton Transport & Engineering(WT&E) founded as a subsidiary of theWest Surrey Central Dairy Company (which changed its name to Cow & Gate) The company now: Is the second-largest distribution firm in the UK Is one of the top three in Europe Has a turnover of £1.5bn Has 25,000 employees in 360 locations Is based in 15 European countries Has more than 100 regional distribution facilities |
