Making distribution greener has become a key part of the environmental agenda, with important implications for the big sheds market. There are a number of factors involved, but for retail distribution centres a crucial question is how to keep everybody happy on the final leg of delivery to the shop itself.
Shops usually have strict time demands for their deliveries, but city councils and local residents are normally unhappy if trucks are arriving at every hour of the day and night. Pleasing residents, councils, shops and environmentalists is difficult to pull off and usually requires a series of compromises.
One way to make this final leg of distribution more environmentally acceptable is by creating delivery consolidation centres for the big shopping centres and other projects, such as major new construction sites.
For shopping centres, the idea is that, if goods for delivery to several shops on the same site can be put in fewer trucks, then congestion will be reduced. Places already using consolidation centres include Heathrow Airport, Meadowhall in Sheffield and Broadmead in Bristol.
But while this straightforward idea might seem a simple way to ensure delivery and cut the number of vehicles on the road, it is not without its challenges.
For one thing, it makes distribution more expensive. As Matthew Wright, senior director at CB Richard Ellis, points out, “it adds an extra link to the supply chain, so it increases risk and cost”.
Sometimes it can mean that retailers themselves are reluctant to sign up to consolidation schemes although, in the case of Heathrow, use of the consolidation centre is mandatory for airport retailers. This is both to enforce reduced congestion and to increase security.
Another issue that can be problematic is where to locate the consolidation centre. Wright says that it needs to be close to the delivery destination, but not too close.
He explains: “The problem is that a consolidation centre needs to be sufficiently remote from the place it is designed to serve so that it doesn’t itself create a traffic problem in the surrounding area.”
Wright adds that the bespoke nature of the buildings needed for consolidation centres and their limited secondary market makes them “challenging to fund”.
Hauliers, by and large, are in favour of consolidation centres (see panel, right) because it makes their job easier. Retailers, however, are another matter.
Lisa Fitch, supply chain analysis at BNP Paribas Real Estate, says the demands of the big supermarkets sometimes ignore all needs except their own. For example, one major chain likes its beer to be delivered at 10am and spirits at 1pm, an arrangement which can leave an alcohol-filled truck hanging around for hours just to fit in with the shop’s schedule.
Such challenges might be among the reasons why consolidation centres are not already more widespread.
Jon Sleeman, partner at King Sturge, says: “It’s true that they are not very common at the moment. Heathrow is probably the best example, and the evidence does suggest that you can significantly reduce traffic – by up to 75% in some cases.”
But Sleeman adds that funding can be a problem for consolidation centres, however tangible the benefits might be. He says: “The difficulty is that in the end it is hard to make these things profitable. Bristol was partly funded by the EU; Heathrow is a very specific case and mandatory, but sorting out the funding for most centres is challenging.”
In the end, whatever the challenges of making consolidation centres work, it is likely that large-scale traffic reductions and consequent reduction in emissions, will ensure that they do become much more widespread.
All observers agree that provided the green agenda remains a long-term priority – which seems inevitable – then consolidation centres are certain to be part of distribution’s future.
BNP PRE’s Fitch says: “If you think about it logically, then there is not really any other way to do it.”
For those consolidation centres already established the future appears to be reasonably secure. Bristol is on the brink of expansion to include Bath (see panel, below), while Heathrow awarded DHL Supply chain a £22.5m contract extension at the end of last year to run the airport’s consolidation centre until late 2012.
The two-and-a-half year renewal extends a partnership that began in 2001, with the logistics firm consolidating more than 700 inbound vehicles a week into 300 outbound. Last year, DHL said it saved 135,000 miles a year through putting deliveries into fewer vehicles. DHL distributes to well over 300 retailers and caterers in the airport.
And alongside the steady increase in the size and number of retail supply consolidation centres, there has been a corresponding growth in the number of consolidation centres serving big construction projects, such as the construction of Terminal 5 at Heathrow, and the Olympic Games building site.
BENEFITS
– Reduced congestion
– Reduced transport costs
– Lower emissions
– Potential to offer retailers more storage space
DISADVANTAGES
– Retailers can be nervous about the extra link in the supply chain
– Cost – extra expense often has to be subsidised
– Buildings need to be purpose-built and it may it be difficult to find a secondary use for them, which can cause funding problems
The attitude of hauliers towards consolidation centres is likely to be an important factor in how they develop.
Several of the big hauliers are committed to cutting the amount of truck miles every year, not necessarily by reducing how much they deliver but by making sure that every truck is full for maximum efficiency. This can involve using consolidation centres as well as persuading customers to share loads with one another.
Before the general election, the Department for Transport suggested 0there could be up to eight congestion charging zones in British cities by 2012. The coalition government’s attitude towards congestion charging may differ, but if cities do set up such zones then consolidation centres would be a natural result.
Clipper Logistics, which runs the Meadowhall consolidation centre, indicated at the end of last year that it would like to operate more consolidation centre contracts.
Clipper, like other hauliers in the same sort of work, says that consolidation centres allow it to offer its customers much more than the ability to deliver goods to a specified place at a specified time. Among other things, consolidation centres can offer retailers more secure storage – freeing up shop space for selling rather than storing – and even allow for goods to be returned to the sender.
More than 50 retailers at the Broadmead shopping centre in Bristol now receive their deliveries from the city’s consolidation centre. Since the scheme started in 2004, the number of delivery vehicles has been reduced by 75% and the number of trips has been cut by 11,000, saving 168,000 vehicle miles. In addition, CO2 emissions have been slashed by 73 tonnes.
Now there is a plan to expand the Bristol scheme through a partnership with Bath & Northeast Somerset Council. This would mean not only that the consolidation centre could serve central Bath as well, but that costs could be cut through efficiencies of scale. Other partners are also considering taking part, including the local primary care trust as part of its proposals to serve hospitals.
More than 50 retailers at the Broadmead shopping centre in Bristol now receive their deliveries from the city’s consolidation centre. Since the scheme started in 2004, the number of delivery vehicles has been reduced by 75% and the number of trips has been cut by 11,000, saving 271,000 vehicle kilometres. CO2 emissions have been slashed by 73 tonnes.
Now there is a plan to expand the Bristol scheme through a partnership with Bath & Northeast Somerset Council. This would mean not only that the consolidation centre could serve central Bath as well, but that costs could be cut through efficiencies of scale. Other partners are also considering taking part, including the local primary care trust as part of its proposals to serve hospitals.
The attitude of hauliers towards consolidation centres is likely to be an important factor in how they develop.
Several of the big hauliers are committed to cutting the amount of truck miles every year, not necessarily by reducing how much they deliver but by making sure that every truck is full for maximum efficiency. This can involve using consolidation centres as well as persuading customers to share loads with one another.
Before the general election, the Department for Transport suggested that there could be up to eight congestion charging zones in British cities by 2012. The coalition government’s attitude towards congestion charging may differ, but if cities do set up such zones then consolidation centres would be a natural result.
Clipper Logistics, which runs the Meadowhall consolidation centre, indicated at the end of last year that it would like to operate more consolidation centre contracts.
Clipper, like other hauliers in the same sort of work, says that consolidation centres allow it to offer its customers much more than the ability to deliver goods to a specified place at a specified time. Among other things, consolidation centres can offer retailers more secure storage – freeing up shop space for selling rather than storing – and even allow for goods to be returned to the sender.
