Room to grow
There’s a quiet revolution going on in warehousing, writes Stevie Knight
“Like most others we originally pursued port-centric logistics to help make sure of volumes coming over the quay while reducing our customers’ haulage,” says Stephen Carr of Peel Ports. “That turned out to be an over-simplistic idea.”
In short, its take up was slow. Then Peel Ports did something fairly novel, it didn’t just communicate with existing customers but put a lot of effort in talking to all kinds of cargo owners - especially those who were not getting involved in the port’s warehousing business - in order to understand what was missing.
The results proved interesting: the largest issue centred on the scale of the commitment explains Mr Carr: “Most cargo owners in our hinterland can’t justify taking on a whole warehouse in their own right. Especially not on a three-year lease.”
“So we opened a multi-user warehouse ourselves. That removed the minimum commitment from shippers, making it available to even small-scale importers and exporters,” he says.
For some, the attraction is simply cutting out unnecessary journey legs while others are avoiding congestion in their own warehouses. A number may need seasonal space but do not want round-the-year warehousing for just six weeks of activity. Interestingly, Mr Carr adds that having a multi-user facility helps mitigate seasonality: “The peaks and troughs start to even out if you have customers with different businesses.” And it also actually reduces the requisite space.
“One of our importers used to import a range of goods individually branded for three to five retail customers. Containers would come in, prepackaged to go out to each of the big stores. Now he can import a single, unbranded batch and it gets repackaged in the warehouse in the style of the store it’s going to,” says Mr Carr. “It’s not just about having a big shed to take out a few miles of truck transport – the value is that there’s a single stock to manage, one stock keeping unit instead of five.” More, goods don’t get committed to a particular retailer or channel of sale until necessary, so the whole operation stays flexible.
Certainly Peel Ports’ offering is proving popular: it started out with 9,290 m2 in 2011 but now the space has risen five times to over 46,400 m2. Mr Carr adds that the facility has sometimes acted “as a business incubator... customers have often scaled up along with us”.
However, there is another element that is changing the dynamic at its core: the internet.
There are a lot more goods flowing internationally now that everyone can have a global shop window, explains Damian Harrington of Colliers: “UK customers are buying from Scandinavia and the US, the US is buying from China and Japan and so on.” Further, old-school retail where cargo comes into the warehouse in bulk and goes out again to the store in large cartons is being steadily eroded by direct buy, individual orders, and of course people want it faster than ever. While this evolution is by no means evenly distributed, it is, he says, a rising trend.
This puts ports, once again, in pole position to join the dots. While big stores might still demand their own warehouses to accommodate stock and manage the frenetic activity, multi-user sites could prove attractive homes for mid-sized internet businesses, logistics companies and even small scale delivery companies who prefer more flexible, shorter-term leases.
This could iron out one or two kinks: “The biggest challenge is always the last mile; instead of a couple of lorries, we now have maybe fifty vans coming into urban areas with one or two parcels each – as it stands it’s really inefficient.” Therefore, he explains a drop-off and pickup point could be useful for everyone and might help consolidate operations. Mr Harrington adds: “We’ve seen serviced offices evolve, so why not serviced logistics space in future?”
Finally, Mr Carr has a word of advice for other ports thinking along ‘multi-user warehouse’ lines: “Get specialist support. And find someone who can grow with you.” Peel Ports itself looked for a specialist partner and found one almost under its nose: Denholm Handling was already a long-standing port customer.
Push and pull
It’s not always ‘market pull’ that involves a port in warehousing, sometimes it’s definitely ‘push’. For Florida operator GT USA, the multi-user warehouse has been driven by necessity, says Joe Cruise: “We did it to keep our customers happy... or they’d look elsewhere.”
Like Peel, GT USA has teamed up with experience: the partnership benefitting from AWFS’ two decades of domestic and international operations and the pair are providing a lot of support to underpin the business. The warehouse has cross docking to allow truck-to-truck transfer and there will soon be a chilled storage facility – this “will be the next big ticket item”, he says, second only to the lease itself. It also has an inventory management system and last but not least it’s pursuing bonded status.
To an extent, this is all about starting up a very new operation inside a mature economy. Mr Cruise explains it’s largely been about “selling a better mousetrap”; getting lines to switch over from their usual route into central Florida to GT USA. He explains: “Port Canaveral is the world’s second largest cruise port and handles 4m tonnes of general cargo a year, but when we started it was the first true container facility here, so we needed to start from scratch.”
It follows that it is not all about the revenue stream: “Although we are looking to make income from the warehouse facility, we are more in this to support the ocean side of our business,” says Mr Cruise.
Therefore GT USA’s offering of a complete, discounted package to customers is a selling point: “Many times we bundle together a rate that includes everything from quayside to storage to last-mile logistics to the door of the stores,” he says.
However, technology is about to push the envelope further. While the need for speed has already resulted in a few high-rise warehouses in particularly pressured areas, automation – à la Amazon - is proving the most effective way to squeeze more productivity out of the footprint “especially as it helps to manage operating costs”. More, Mr Harrington says: “Companies will find it easier expanding or contracting output, or even moving from one facility to another if more of the process is automated. In today's tight labour markets that’s a big operational advantage.”
Although Mr Carr believes long-term leases are the more obvious initial target, he says it’s worthwhile " embracing automation when economically viable”. Mr Harrington adds the technology will eventually trickle down to the smaller, multi-user operations, making automation kit as integral to the supply chain as chilled storage has proved to be for foodstuffs.
However, Mr Carr believes there are so many emerging trends on a collision course – take automation, drone deliveries and the rise of ‘click-and-collect’ points – that the industry is suffering a certain reticence: “The model isn’t fully evolved yet. People aren’t committing to long term infrastructure – often because they don’t know what the future holds.”
Port-run, short-term facilities could provide the wary with a necessary stepping stone.
GO WITH THE FLOW
Warehouses don’t need to be physically near the terminals, “but the more a port can turn a site into an intermodal node point, the more successful it’s going to be,” says Colliers' Damian Harrington. Road haulage is still dominant in most countries, though rail and inland waterways are being pushed more and more – but as Peel Ports found out, turning back the clock can unlock efficiency.
Recently, Peel Ports set up a 26,000 m2 warehousing site for foods logistics giant Culina Group to run. The first tenant is General Mills UK, the name behind a number of household brands like Green Giant, Nature Valley, Betty Crocker and Old El Paso.
However, the warehouse is right in the heart of the country. While its inland position near the M60 and M62 is useful, fetching the cargo from the quay was another story. The solution “was a case of noticing the blindingly obvious”, says Mr Carr. “There was an under-used waterway – the Manchester Ship Canal.” This particular port link is now saving around 600,000 truck miles a year.
It’s not, in any way, a new idea says Mr Carr. “In fact we were trawling through old documents and came across two from the 1920s, one said ‘Save time, save money, save risk’. And the other was, ‘Place your mill at the waterline’. What we are doing with the canal right now is exactly the same as they were doing a century ago.”
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