Written by Dave Howorth, director of SCALA, a leading provider of management services for the supply chain and logistics sector.
The IGD’s annual grocery forecasts have consistently predicted strong growth for the convenience sector, most recently estimating that the sector’s value will increase by 17.6% over the next four years, reaching £47.2bn by 2023.
With the Co-op alone announcing plans to open 100 new food stores in 2019, there is a rapidly growing network of convenience stores across the UK offering potentially lucrative new business opportunities for the logistics providers that serve them.
However, in order to capitalise on this increasingly valuable market, logistics providers must be prepared to think and operate differently in order to meet the unique needs of convenience retailers. Servicing the convenience market is intrinsically more expensive than large out of town supermarkets, so it’s essential to ensure that the costs of servicing the convenience sector are fully understood and optimised. So what are the key differences and the implications of these differences for logistics providers?
The locations of convenience stores can often make delivery access for large vehicles difficult and many urban areas have time restrictions around the movements and unloading of heavy goods vehicles. Logistics providers must therefore consider the likelihood of needing to use smaller vehicles when making deliveries, as well as possible delivery window restrictions. These vehicles might also have to be capable of multi-temperature delivery, which, together with the smaller delivery sizes, contributes to a very different distribution cost and complexity profile.
Fewer store staff can also make delivery windows much tighter than with larger supermarkets, so precision is therefore key. However, with the smaller delivery sizes leading to a higher multi-drop environment, it can be difficult for logistics providers to maintain a consistently time-sensitive service. Those that can meet these challenges will benefit from repeat custom as the market continues to grow.
In order to guarantee they have the capability to offer this high level of reliability, logistics providers need to be prudent when planning their distribution centre locations. They should invest in regional centres that are close to as many stores as possible, as well as consider opening urban ‘campuses’ that are equipped to service multiple customers.
The rise of the convenience sector offers a wealth of new business opportunities for savvy logistics providers. Those that successfully adapt their services to match the unique challenges of the sector have the potential to become valued and trusted partners, but it’s crucial that they monitor their own cost-to-serve, to ensure that the new relationships are beneficial to both businesses.