High fuel costs are forcing retailers to rethink distribution processes, as three experts explain

High fuel costs are forcing retailers to rethink distribution processes, as three experts explain
Philip Bracken, Director of professional services, TNT Fashion Group
What impact are the rocketing fuel prices having on your business?
Fuel cost is something we don't have control of and the current escalation is something that we can't take on the chin. As much as possible we try to offset costs but it is hard to absorb much more. It is an unattractive subject but we have to pass on some costs. We are doing this on a variable basis, ensuring that our pricing mechanism is directly linked to the cost of fuel.
How are you dealing with the increased costs?
We are working on getting distribution into stores with less diesel being used and minimising land mileage. We have long had a programme to implement environmental benefits so have been doing a lot to reduce our consumption and emissions. We have invested in some electric vehicles. These are pretty successful but have a limited range.
How are your retail customers reacting to the issue?
The wider economic report is gloomy and we don't want to add to customers' woes. The mood among customers is pretty sober but it is from a whole basket of issues, not just fuel costs. We are always looking at ways to cut costs for retailers. We don't take advantage of this type of situation and we are going for a fair and transparent approach.
What long-term impact will the fuel prices have on distribution?
It is difficult to know how long it will last. We have our own views and listen to those of our commentators. But I think the reality is that this is not a temporary blip.
Martyn Pellew, Group development director, PD Ports
What impact are the rocketing fuel prices having on your business?
Fuel prices are escalating so badly and this directly effects the cost of distribution. You have to pay for fuel in advance at the higher prices, while customers pay bills in arrears, so sometimes you might have a lag of 30 days. This can create cash flow issues, so the smaller businesses may be struggling badly.
How are you dealing with the increased costs?
We encourage companies to make better use of the sea and to locate import centres at the port to save unnecessary road mileage. People should not bring items into a southern port that are destined for northern distribution. We are using smaller vessels to get imported containers as close as practical to the end UK destination. We also need to improve the use of rail for inland journeys.
How are your retail customers reacting to the issue?
Most people in big businesses are very innovative and creative with their supply methods as they realise the competitive advantage they can gain by attacking their supply chain. What the fuel costs do is put pressure on them to think of new ways of doing things. Anyone in the logistics game needs to recognise that this is here to stay and unnecessary mileage must be cut out.
What long-term impact will the fuel prices have on distribution?
There are so many inventive things on the agenda. People are experimenting with bio fuels and ways of creating energy from different sources. It is a challenge – it is driving sophisticated, innovative people to look for alternatives.
Rene Falch Olesen, General manager, DSV
What impact are the rocketing fuel prices having on your business?
There are two significant elements affecting supply businesses and retailers – the weakening of the UK pound and the rising cost of fuel. The industry has always run on low margins, as we need to be as cost-efficient as possible, but people have to recognise that rising costs have to be met to facilitate service.
How are you dealing with the increased costs?
You want the cheapest, greenest and quickest solution. However, the greenest and most fuel-efficient ways are not necessarily the quickest. So we need to be creative and look at different alternatives. We are focusing on equipment utilisation and efficiency and are conducting tests on how drivers are actually driving the trucks, so we can find efficient ways of using the vehicles.
How are your retail customers reacting to the issue?
Retailers can't just pass on the costs to their customers, they have to look at how to do things smarter. We look at how they could do things differently. Could we run things via a mix of sea, rail and road? We are always looking at alternatives, and assessing the benefits of each.
What long-term impact will the fuel prices have on distribution?
I don't want to make any predictions, but it seems that prices will continue to go up. However, if the pound gets stronger that will help to ameliorate some of the increases.
Source: Drapers, www.drapersonline.com