Supply Chain View

While working on a European distribution strategy assignment for a client earlier this year, I did some work on how to use lower-carbon multi-modal transport and still get goods to the customer on time. So I was interested to read about Tesco’s latest innovation – bringing imported wine down Manchester Ship Canal by barge.

My own investigations found that apart from corporate social responsibility, there were good commercial motivations to use rail, canal and short-sea shipping. Increasing oil prices and carbon taxes represent a significant risk for companies locked into carbon-inefficient strategies. In addition, increasing road congestion lengthens journey times and/or attracts road pricing policies.

On the other hand, the practical problems are significant. Infrastructure is sparsely distributed across the continent, and operating standards differ between (and even within) territories. In practice this means long interchange times between different modes and long end-to-end journey times. In a commercial environment in which customers expect responsive delivery and planners require flexibility in the supply chain, such arrangements will currently only work in very special circumstances.

The Tesco example is one of these. The company uses the canal to transport 20ft shipping containers inside which are bulk tanks of New World wine. Two years ago these used to be shipped into the UK in bottles – switching to bulk units and bottling in the UK was the first step. The barges each carry 600,000 litres of wine from Liverpool’s Pier Head (where the container ships arrive from Australia, California, Argentina and Chile) to a bottling plant in Manchester. From here, bottles are distributed to stores throughout the country, taking about 50 vehicles off the road (out of a fleet of about 2,000) and cutting carbon emissions associated with these movements by 80%.

Here’s why it works. For a start, this link in the chain represents a very small part of the total lead time on the wine. The barge trip takes nine hours – much longer than a truck would take – but even adding in load-unload times it’s fairly insignificant in comparison with the time on the water that the product has already incurred. There are thus no negative implications for supply chain flexibility.

Second, this is happening in the bulk section of the supply chain. There is a decoupling point at the bottling plant (and, I’m guessing, in the bottled wine DC it stocks) – customers don’t experience a degraded service because of the longer delivery times. If Tesco tried to deliver to its stores by water it would be a much more challenging proposition. (Although interestingly, Sainsbury has been trialling using the Thames to distribute goods in London for some time – London is a special case too, with famously poor average speeds on its roads, congestion charging notwithstanding.) Also, the change to bulk containers makes this link easier but isn’t a necessary step – we don’t all want to drink commodity wine bottled in this country. (Shipping bottles rather than bulk increases volume moved by 2.4 times, according to Tesco.)

Finally, there is good existing infrastructure. Manchester Ship Canal is no ordinary waterway – it was built at the end of the nineteenth century to provide Manchester with an sea port independent of its great rival, Liverpool. But Tesco has cleverly exploited this resource, directing goods into the deep sea port at one end and situating the bottling plant at the other.

Tesco has big plans for green logistics: it plans to halve emissions per case delivered by 2012. The wine barge represents just a salami slice of this, so expect to see many more innovations over then next five years.

Links

Guardian article – http://www.guardian.co.uk/environment/2007/oct/19/carbonemissions.uknews
Tesco press release – http://www.tescocorporate.com/page.aspx?pointerid=870D3670DCA549D9A17880B5CA48FDC7