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PORTCENTRIC LOGISTICS


Can ports find space for a supply chain revolution?


A spike in warehouse lease renewals and rethinking of supply chain strategy could lead to a dramatic change in the UK’s logistics


landscape, a leading


property export told delegates to the Port Centric Logistics conference in Birmingham on 2 March.


Jon Sleeman, partner and


chief economist at international property consultants King Sturge said that many of the developments such as Magna Park in the Midlands date back as far as the 1980s and a large proportion of the leases signed over the years will be due for renewal in about the middle of the next decade. Many companies may reconfigure their supply chains towards a more ‘port centric’ model with more


earlier speaker Mike Garratt’s analysis (see below) that the supply of land and buildings at many of the UK’s major container gateways was quite limited.


King Sturge’s own Plenty of space in Thamesport but South-East ports are constrained


warehousing activity in the ports. However, it was very unlikely that the large distribution sites in the Midlands region would become ghost towns overnight, although it was possible that


they would concentrate more on domestic distribution than before. The supply of port-side warehousing was limited and this could also be a constraint. Sleeman however confirmed


research showed that, of the 650 or so significant warehouse developments between 1995 and 2010, the vast majority had been near the motorway system with few taking place in or near seaports. “This suggests that port centric activity hasn’t been that significant, though some activity may have taken place within existing port estates,” he told the conference. At


Felixstowe, or example,


there was one logistics park of around 2.6 sq ft being developed within the existing dock estate. Outside the estate, there were


a couple of major schemes but these had not yet gained planning permission.


Nevertheless, many companies are operating a range of services in Felixstowe. Steve Cuff, MD of SCC Associates, listed over half a dozen companies ranging from wet bond operators to organic food firms that were currently running add-value operations in the port, he said.


Southampton, the UK’s second busiest container hub, was even more constrained and would remain so unless the Dibden Bay scheme – thrown out by the Government in 2004 – was resurrected, Sleeman continued. Tilbury also was restrained by urban development and road and rail lines. While it did have the 1m sq ft NEXT (Northern Expansion at Tilbury) development, planning applications suggest that much of this would be taken up by relocated existing operations from elsewhere in the port. Perhaps the southern port the


with most development


potential was Thamesport on the Isle of Grain in north Kent, said Sleeman. Here there were a


ISSUE 2 2011


number of major developments both within the port and immediately outside it, including the Kingsnorth Commercial park.


Also in the South DP World’s Thames Gateway scheme, which would offer 9m sq ft of distribution space, larger than Magna Park’s 7.5 sq m, as well as a 3.5m teu a year port, all within the country’s biggest consuming region. However, no definite completion date for even the first phase of this ambitious scheme has yet been given. Outside south-east England, the land and property situation eases considerably, Sleeman continued. While a property audit carried out for the Merseyside Partnership last year revealed relatively limited opportunities within the Liverpool dock estate, there were sizeable developments along the banks of the Manchester Ship Canal. In the North-east, Teesport has plenty of land remaining – around 120 acres – and more that could be brought into use with a little reconfiguration of existing activities.


Portcentric logistics is not a one size fits all says M&S


Could a portcentric logistics solution work for a major retailer like Marks & Spencer? It depends on what you are moving, where you re moving it to and where and how you are planning to sell it, says head of logistics strategy, Emile Naus. Very crudely, moving to a portcentric solution increases the lead time required for distribution by about 1-2 hours because your DC will be on the edge rather than in the middle of the country. But does the extra time matter? “It all depends on the product,”


Naus explains. “For e-commerce items it could be a real problem because it will advance your cut- off time for next day delivery by 1-2 hours. But if the product is only going into storage, it’s not significant. For food it’s different again. If it’s a short shelf-life item, 1-2 hours really could matter.” There are potential operating cost gains to be had from a portcentric solution, but again you need to have a good handle on your end to end costs, Naus believes. Transport costs from port to warehouse should be


substantially lower, as might terminal handling charges .Against this must be balanced higher delivery to retail store costs.


But there are a lot of other factors to consider including the cost of distributing any UK- sourced goods through the same system – generally, such costs will increase with a port centric model and it can become less cost effective where the proportion of domestic goods is around a quarter or more.


One issue that has not been


highlighted is that the cost savings may be gained by different sectors within the retailer’s own organisation. This could be a serious obstacle.


Naus added that with a new rail-linked DC due to come into service at Castle Donington in the East Midlands in late 2012, Marks & Spencer was very keen to make space on the rail service available to third parties. “If you can run trains with multiple users and also generate return export volumes, everybody gains,” he explained. Portcentric logistics can also work


Fuel hikes will make port centric compulsory


Rising fuel prices could make portcentric logistics an economic necessity, warned a supply chain director at a major logistics operator. Uniserve’s Zen Yaworsky said that with the ‘peak oil’ crisis looming, the industry nevertheless


seemed to be


“married to road movements”. Uniserve claims to be the


UK’s largest direct buyer of seafreight capacity – as opposed to managing capacity bought by other companies – and this


has been further boosted by its acquisition of Birmingham-based Metro Shipping towards the end of last year.


Up till now, most logistics network


planning did had minimise been


fixated on the ‘Golden Triangle’ in the centre of the country, which to


consumption centres


distances but


overlooked the fact that the goods themselves often had to travel considerable distances to get there. Nor did current


models of supply chain planning take into account export flows – despite the fact that, contrary to most received thinking, the UK was a very low cost location for distribution into Europe. “We’ve got lazy in our thinking and entrenched in our infrastructure,” said Yaworsky. “We need to think seriously about what the future will look like.”


Uniserve for its part was investing in “at least two


million sq ft” of space in or immediately adjacent to strategic port locations by 2013. “A lot of people say that port centric logistics is just a flash in the pan, but the data shows that there is a lot of value that can be released from the supply chain immediately.” Yaworsky cited the example of one major retailer who stood to slash road miles from 6.6m a year to 4.4m and who could cut annual transport costs from £11.8m to £7.8m.


Cargo owners missing from carbon calculations


Cargo owners have been largely absent from efforts to reduce greenhouse gas emissions in the maritime supply chain, leading logistics academic Professor Alan McKinnon told the Port Centric Logistics Conference. “The focus has been very much on the shipping


lines, but very little on the cargo owner or even ports and terminals, said the director of the logistics research centre at Heriot-Watt university. However, that was about to change with a new two-year research project supported by the


new Global Shippers’ Forum, whose scope includes an examination of the extent to which carbon emissions are affected by shippers’ logistical decisions.


The project has studied a typical import movement from Wuhan, China to Scotland. One shipper action


that can significantly cut carbon is be switching the inland movement from road to rail or water.


There is also a surprisingly wide variation in the emissions performance of individual shipping lines with the best having around half the carbon output of the worst.


well for manufacturing operations, but usually the factory or plant needed to be close to the port, added Peel Ports’ head of business development, Stephen Carr. “It can be possible to use a port as a stock overflow area if it’s only 20 minutes away,” he explained.


Peel Port owns the Manchester Ship canal, which has a number of industrial sites along its banks, fed by barge from the port of Liverpool, which Peel also owns. Bringing containers into a port-side facility also means that they can be loaded beyond road weight limits.


Imports surge, but where’s warehouse capacity.


the warehousing? There is a growing mismatch between cargo


patterns and


the availability and location of warehousing in the UK, a logistics expert told the Port Centric Logistics conference. Mike Garratt, managing director of consultants MDS Transmodal told the gathering of industry experts in Birmingham on 1 March that while the tonnage of goods imported into the UK increased by 45% between 1996 and 2009 – and at the same time domestic goods traffic had fallen slightly – warehousing development was not keeping pace.


For example, the southern sector of the UK accounted for 70% of unitised traffic, but only 19% of the country’s warehousing stock. Garratt added: “Only 9% of warehousing (of 9,000sq and above) is in a county with a deepwater container port.” Later in the same conference, Uniserve’s Zen Yaworsky said that 55% of container traffic was


the Wash


concentrated but


south of only 15% of Garratt said that moreover,


if warehousing was available in port areas, it would reduce the by


average imported


distance moved goods


inland


from about 370km currently to around 280km by cutting out backhauling and to-and- fro movements. Also, because port-centric logistics would in most cases increase the length of the secondary distribution leg (while reducing the primary distribution leg between port and DC) and because movements would be consolidated more, it might be easier to switch inland movements to rail. However, the existing planning system did not encourage the development of port warehousing as it usually protected the status quo. Shipping lines also tended to base


their strategies around


existing traffic flows rather than trying to redesign them. Nor did it help that “ports are not a natural environment for traditional property developers.”


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