Retail supply chain faces more efficiency pressure

Service providers predict customers will push economic pain down the line to transport and logistics

Retail supply chain faces more efficiency pressure
Retail supply chain faces more efficiency pressure
October 31, 2013

With retail facing another dismal Christmas quarter and a recovery seeming as far off as ever, service providers are warning that the pressure will be felt in the supply chain and the transport and logistics sector.

Echoing CHEP Australia & New Zealand President Phillip Austin, ORTEC Australia New Zealand joint Managing Director Alan Thomas points to the latest AFGC CHEP Retail Index as highlighting the need and expectation on those involved in the movement of goods to be even more efficient.

On a quarterly basis, year-on-year, the Index was 1.8 per cent higher in the September quarter than in the same period last year and growth is expected to further ease to 1.5 per cent in the December quarter 2013.

For the month of September, the AFGC CHEP Retail Index indicates that the Australian Bureau of Statistics (ABS) is likely to report 1.9 per cent increase in year-on-year retail growth and turnover of $21.89 billion. Looking ahead, the Index forecasts November year-on-year growth at 1.5 per cent, with turnover dropping to $21.85 billion.

According to ABS data over the past year, there has been varying performance within the retail sector; with discretionary spending under pressure, food retailers are performing the best, CHEP says.

Austin believes the forecasts "highlight the criticality of effective and efficient supply chains in maximising on shelf availability and promotion in the peak Christmas period, and we will be focusing our efforts on helping retailers have product where they need it, when they need it over what is traditionally the busiest retail period of the year".

But Thomas takes the point further.

"In any uncertain market with marginal growth and fixed assets, operational efficiency is crucial," he says.

"Retailers should check that their logistics operations are as efficient as they can make them, and logistics operators should take the initiative in creating inventive new ways to become more efficient for their retail customers."

The pressure will also be on in-house logistics operations, which will have to find increased flexibility.

"Sophisticated planning and operations management systems can deliver savings, but the real benefits come from having operations that can meet the needs of the high street outlet in as many combinations as possible," Thomas says.

"This means responding to consumer trends, ensuring stock levels are high without being too high, being able to react quickly to delivery problems, oversupply or undersupply, and having consignments packed and trucks loaded as efficiently as possible, so that drivers can engage with customers and maximise the number of deliveries for any given roster.

"And outsourced logistics service providers need to ensure that their retail customers are provided with the same high level of service and flexibility."

The practices of retailers were in the spotlight this week when Small Business Minister Bruce Billson gave a speech at the Australian Food and Grocery Council Forum.

He announced a review into competition laws and specifically cited the behaviour of supermarkets.

Billson warned that "unduly harsh bargaining practices" could have a negative impact on suppliers by reducing incentives to invest and innovate.

The Transport Workers Union (TWU) says the influence of retailers extends beyond dictating terms to suppliers.

"As with the food and farming industries, the economic power of Coles and other major retailers allows them to dictate to truck drivers and the road transport industry to do more for less," TWU National Secretary Tony Sheldon says.

Sheldon referred to recent testimony Coles Transport Manager Craig Wickham gave to the Road Safety Remuneration Tribunal (RSRT) earlier this year.

Wickham told the body Coles will reduce transport costs by 5 per cent this year.

"These ‘harsh bargaining’ practices in the food industry threaten jobs and businesses - but in the road transport industry they threaten lives," he says.

Sheldon also used Billson’s comments to urge the Federal Government to rethink its plan to review the RSRT.

"If Minister Billson and the Government are serious about standing up for small businesses, and about road safety, then it is critical they continue to support this tribunal and demand Coles and the rest stop squeezing the life out of suppliers."

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