Tuesday, 27 June 2017

Big retailers still hammering suppliers

For some years the consequences of intensifying competition among big retailers have been visited on their hapless, bullied suppliers but now the decline of the pound Sterling since the Brexit vote has been added to the retailers' bullying techniques and excuses, which number at least 60 odious ploys to squeeze the last drop from suppliers. The latest retail giant to be accused by an anonymous supplier letter is Boots, the retail chemist, now part of the American Wallgreens Boots Alliance, whose UK arm is struggling with faltering sales, leaving it under pressure to cut costs, including the culling of 500 HQ jobs.  

The supplier accused Boots of dictating "draconian" terms to small businesses, but in its defence Boots said it laid out all its terms clearly in agreements with suppliers. Among the exactions allegedly imposed by Boots the supplier claimed Boots levied a 2.5% "prompt payment" charge on all invoices it settled within 106 days. The company seems to have a curious notion of "prompt," given that the norm of invoice settlement should be 30 days. The Federation of Small Businesses said payment times of 75 days or more "cannot be described as prompt, while paying less than the invoice total cannot be described as fair." The supplier also said the chemist chain applied a £300 "non-compliance" charge for "the slightest error in paperwork" or "using the wrong type of pallet."

Going beyond the Boot's experience, it is clear that the major food supermarket retailers, in particular, have still not heeded the lessons from previous supplier bullying complaints, and the worsening extent of their practices will be unveiled by a new survey this year. Struggling Asda, Britain's third largest food retailer, has just been named as the worst of the UK's major supermarkets in its treatment of suppliers. About 12% of the suppliers said Asda rarely or never complied with the Grocery Supply Code of Practice. These chutzpa ploys, when applied across the board, even include implied blackmailing threats which have nothing to do with the small print terms framed by big retailers. One such example is demanding £25,000 for charity dinner tickets run by the retailers with the implied threat that no ticket purchase could mean de-listing of suppliers' products.

As I pointed out in my blog of March 12th, 2017, headed: "Retailers' odious supplier treatments risk disintermediation," if the big retailers fail to behave honourably with their suppliers they could find themselves being bypassed by supplier alliances building their own giant order picking warehouses to supply consumers directly, now that the disruptive technology of online shopping allows that and is growing like a weed. With Amazon now parking its tanks on food retailers lawns the latter should start showing some respect to its suppliers.

Sunday, 9 April 2017

 Diesel forklifts' days numbered?

Has the final call on dirty diesel in the warehouse been made? Warehouse operators have long known that they have a legal responsibility to protect their warehouse staff from the deleterious effects of diesel forklift fumes inside warehouses but only now has it been made clear to them that firms could be sued over cancer long after their staff have left them. IOSH and the Health & Safety Executive have issued recent warnings because diesel fumes have been reclassified as a grade 1 carcinogen, meaning they are a definite cause of cancer. This reclassification by a branch of the World Health Organization came after it found that people exposed to diesel fumes at work were up to 40% more likely to develop lung cancer. In Britain, over 650 people die of lung or bladder cancer following exposure to diesel fumes at work and about 800 new cases of cancer linked to diesel exhaust are registered each year.

The fears of warehouse operators, however, do not necessarily end there because it has been known that diesel exhaust fumes, in particular, are linked to pulmonary diseases like asthma, which costs Britain's national health service (NHS) huge sums in medical treatment every year and the problem is worsening. It is estimated that up to 60,000 British people die prematurely from air pollution, 80% of which is caused by road transport fuel exhausts and about half of all vehicles on the road today are diesel powered. There is no reason, in theory at least, why warehouse operators who have been insouciant over the diesel issue in their warehouses should not be sued for pulmonary diseases, too.

The only way for warehouse operators to ensure that they do not face prosecution from the authorities and have the ass sued off them by employee cancer and other disease victims is to ban all diesel trucks inside their warehouses, and make every reasonable effort to minimise diesel exhausts out in the yard. There are, of course, cleaner alternatives to diesel, especially electric forklifts, and the good news here is that one of the main reasons why diesel was preferred over electric, i.e. greater performance in all weathers, no longer applies thanks to big advances in battery and charger technologies which deliver a performance punch equal with diesel.

Sunday, 12 March 2017

Retailers' odious supplier treatments risk disintermediation

When just four UK food retailers control over 70% of an industry you have a problem in the supply chain --- unfair  bullying of suppliers. Other risks, of course, stem from monopoly practices, like price fixing cartels working against the public interest. The latter risk, however, has been diminished by the meteoric rise of the deep discounters like Lidl and Aldi who now control 12% of the UK grocery market. It is this intensifying competition which lies behind many of the recent supplier complaints about big retailers' bullying practices, sometimes tantamount to blackmail and fraud. There is a way for suppliers to fight back but it would take an enormous degree of cooperation among suppliers, but before coming to that let's examine some of the latest wheezes that big retailers are using and which could discommode them if they persist.

Supplier complaints against the dominant retailers are nothing new, they go back 20 years, but some of the wheezes used against them are. One is for supermarkets to demand suppliers pay up to £25,000 for charity dinner tickets, according to a Government watchdog. Another of the estimated 60 odious ploys is the claim that delivered goods never arrived and retailers refuse to pay for them. The sums involved are substantial.  A preliminary investigations of only 20 suppliers found that they lost £15 million a year to "drop and drive" deliveries, implying the total amount lost to the 8,000-9,000 supplier firms must be huge. "The supermarkets are genuinely not paying for goods that they are selling," says Christine Tacon, the groceries' code adjudicator. By any other name that is fraud.

Blackmail is not beneath the retailers either. To return to the charity dinner tickets caper, one supplier complained of being asked to pay £25,000 for a table at a charity ball who came under pressure, like being told: 'Well if you don't buy a table your name will be on a list of people to the chief executive that are not supporting our charity.' Yet another innovation involves supermarkets charging suppliers up to £55 if customers complain about anything, including not liking a ready meal, and the more bizarre, like finding a teabag inside an egg. All these and many other tactics, like the old favourites of extending payment periods from one month to three and charging for favourable shelf positions, are designed to boost profits unfairly. The worsening extent of this will be unveiled by a new survey of supply firms being launched this month to uncover abuses.

Meanwhile, what can suppliers do to fight back and what risks are there for the big retailers if they do not change their bullying ways?  Already, some retailers are suffering from disintermediation by people setting up impressive websites which channel orders directly to manufacturers for delivery directly to buyers' homes, thus cutting out the bricks and mortar retailers. Moreover, one can source products from home, comparing prices in different countries for the same product to get the best deal.

The potentially greatest threat to retailers, however, lies with the capability of major and medium-sized food suppliers banding together to finance giant order picking fulfilment centres that would act like a shared user facility which some third party logistics (3PLs) suppliers already offer for their clients and who, like the food suppliers, are suffering from tough contract deals with big retailers. The foundation for that scenario is already being laid by Amazon, who are going into the food selling business to supply customers directly from their distribution centres. If enough of the major food suppliers can be signed up for such ventures it would be difficult to see how the grocery retailers could fight back, since delisting all the suppliers' items would leave them with nothing on their shelves to sell.

Now is the time for retailing's bully boys to wake up and smell the coffee before it could be too late and the 3.6 million people employed in the UK food supply chains see their ranks much diminished.

Thursday, 19 January 2017

London faces urban logistics crisis?

A major report commissioned by the United Kingdom Warehouse Association (UKWA) and delivered by the research consultancy, Global 78, entitled Feeding London 2030, warns that an urban logistics crisis is looming which if not addressed now could even lead to a shortage of essential food supplies on shelves both for grocery retailers and other food outlets. "Things are becoming stretched across London's food and drinks supply chains and current logistics thinking is no longer fit for purpose," says the report's lead author, Andrew Morgan. He continues: "New trends in the way food and drinks are bought and consumed, added to the capital's changing population profile and a transport infrastructure that is already creaking, are bringing significant challenges to food and drinks manufacturers, wholesalers, retailers, caterers, transport and logistics companies. Supply in food and drink that is both safe and delivered on time to London's retail and food service outlets at an appropriate cost will become increasingly difficult unless steps are taken to address issues highlighted in the report," he warns.

Some of the issues examined in detail include:

  1. The impact of the increasingly congested urban environment
  2. New consumer demand profiles for food and drink
  3. Current trends in delivery frequencies, times and volumes
  4. Changes in the grocery retail sector that impact supply chains
  5. Significance of the hospitality and food sector
  6. Maintenance of hygiene and food safety through the supply chain
  7. The logistical pressures associated with food waste and other waste systems

The report's researchers engaged about 100 stakeholders and to give an idea of the logistics complexities in London it looked at Greenwich as a microcosm reflecting the challenges right across London. It focussed on Greenwich's 125 food outlets, where one restaurant could have 13 deliveries a day. But like any other report's predictive value, especially one covering 13 years, they are only as good as the assumptions on which their analyses are based.

One of the report's key assumptions is that London's population will grow from its present record 8.4 million by another million come 2030. Much of London's population growth in recent years has been driven by immigration but post Brexit such inflows may be sharply curtailed as Britain takes back control of its borders. Other population growth dampeners could include pressures and irritants from living in London, where housing costs, whether to buy or rent, are forcing many people to consider moving out, an easier option today thanks to IT developments that allow many more people to work from home.

Among the major irritants is the much-vexed issue of air pollution levels, 80% of which derives from road transport, routinely exceeded daily by a wide margin and leading to an estimated annual 9,000 premature London deaths and many thousands more with serious pulmonary diseases which is putting the NHS under intolerable strain. Many major cities in Europe and elsewhere are now proposing to ban diesel vehicles entirely by 2025 but Britain's logistics transport companies, at least half of whose vehicles are diesel, seem unprepared for the obvious emission controls that must come into force and which could seriously impact the report's pointers to help stakeholders "get on the right foot," to quote the report's authors. '

With those caveats in mind, the 100-page report should "provide essential intelligence for all stakeholders for successful forward planning," says UKWA's chief executive officer.
Available from UKWA at £790 or £395 for UKWA members.


UKWA's CEO, Peter Ward  


Thursday, 24 November 2016

New forklift attachment breakthrough transforms warehouse costs

 As all warehouse operators know, the cost of space has many facets and so is not confined to fixed costs like rent/rates, maintenance and security. Space can also affect forklift productivity in terms of pallets moved per hour and even road transport. With that in mind, the British forklift innovator, Translift Bendi, developed its mould-breaking articulated forklift in the 1980s that transformed warehouse economics like no other but there was always a perceived barrier in the minds of some users who were subject to large swings in truck usage and therefore felt they could not justify the cost of articulated trucks full-time owing to their significantly higher initial cost compared with counterbalance and reach trucks.

To resolve that issue Translift Bendi has patented what they claim is a unique breakthrough, called the SpaceMate, which is an attachment like no other that fits any forklift with no modification and without compromising the truck's sideways' stability. This means that potential buyers could use the SpaceMate to reduce operating aisle widths to 1.8 mt at one third of the cost of an articulated truck or one fifth of a conventional VNA truck.

The SpaceMate would allow conventional forklifts to provide back-up in narrow aisles during busy, seasonal periods or as a standby if a truck breaks down. It is not meant to replace the articulated forklifts but rather complement them because many potential users are deterred from narrowing their aisles by the perceived high initial cost of an articulated truck. Thus, SpaceMate is an entry level solution, with the additional benefit for some users who can only afford one narrow aisle machine and may feel too vulnerable to depend on one machine and so stay with reach or counterbalance trucks.

Weighing 450 kg, with plans to make it lighter, the SpaceMate will take up only one pallet position in the racking, while waiting for breakdowns or on standby for busy periods. The Spacemate is not just designed for end users. It is also aimed at truck manufacturers and dealers who now have a low-cost "off-the-shelf" VNA solution, that can fit in the back of a service van, and be fitted by the end user with a bare minimum of training.

In operation, lasers visually positon the forklift in the ideal spot. The truck's sideshift function extends two bridge arms out of the SpaceMate into the pallet racking either side of the pallet location. The arms are tilted down slightly and placed anywhere from two to 700 mm above the racking beams. The arms are lowered until they rest with four points in contact with the racking. The "bridge" positon actuates the fork carriage, allowing it to travel out in between the bridge arms and lower the pallet into position on the racking beams.

Also suited to both gas and diesel, the SpaceMate's electrical requirement is provided by a rechargeable battery, so electrical supply from the truck is not needed. Having consulted with SEMA, Britain's experts on safety standards for pallet racking, Translift Bendi built in safety features which they believe make it far safer than conventional trucks in a number of areas. The SpaceMate's working height is only limited by the truck's maximum working height, and is easier to use at height than conventional forklifts because height selection is designed out of the system.

As any user of articulated forklifts knows the mast arrangement can swivel to either side when within racking aisles, thus enabling them to deposit and retrieve a pallet load on different sides of the aisle without having to leave the aisle and then turn around for access re-entry. This is not possible with SpaceMate, but probably more than half of all forklift pallet movements do not require that function.

Verdict: Certainly worth a second look for certain operating scenarios.

SpaceMate in action

Friday, 11 November 2016

Will Trump learn history's lessons?

Whenever making statements at the hustings Presidential candidates often make political promises that remain unfulfilled after being elected. Hopefully, we can expect the same from Donald Trump in certain arenas, provided his advisers' words are heeded, and where they must be heeded most of all is in the field of economics. It is here that he will stand or fall in any post Trump presidency assessment and it is here, if all his pre and  post election promises are carried out, the greatest dangers lurk for all Americans and the world beyond.

Not all of Trump's pledges are unsound. The promise to shore up America's parlous, crumbling infrastructure will go down well with job-strapped voters. His economic policies with a foreign element to them, however, leave much to be desired, and could even lead to unrest at home. Take, for example, his promise to slap a 45% tariff on Chinese imports as part of a home jobs protection move. Trump should remember that according to the US Treasury the largest foreign holder of US debt is China, which owns more than $1.24 trillion in bills, notes and bonds, or about 30% of the over $4 trillion in Treasury bills, etc, held by foreign countries. In total, China owns about 7.2% of publicly- held US debt. If China stops buying America's IOUs then interest rates could rise, with knock-on effects for inflation.

China's trade with America over the last 20 years or so has been of enormous benefit to both countries, especially in helping to keep America's inflation down. Slapping huge tariff rises on Chinese imports in general would be another inflationary move that would hit the poor much harder than the rich and plunge an already battered merchant marine into greater despair. China is now ostensibly switching its economy away from an export-oriented one to a home consumer-led one and so the last thing America needs is to suffer retaliatory tariff measures. Trump's tariffs would be blatantly WTO inconsistent and so China could go straight to the WTO and would easily win the right to impose retaliatory tariffs on US exports.

In the political arena, Trump has threatened to rip up America's commitment to protect smaller NATO nations. One of the figures wrongly bandied about is that of NATO's 2015 total spending of about $900 billion the US share was $650 billion, or 72%. When looked at in detail, however, the US share is only about 22%, a good example of deception by omission, so favoured by many politicians. Weakening NATO now would not be a smart move.

In the social arena Trump's promises will also have serious economic repercussions if carried out. He has promised to deport 12 million illegal immigrants, something many Californian employers will view with palpable alarm. Trump's na├»ve views over building a 1,000-mile long wall along the Mexican border are the stuff of cloud cuckoo land. There is no wall that could not be breached, as history shows from the Great Wall of China to Hadrian's wall.

Most of all, Trump should remember two things. In terms of votes cast, Clinton polled fractionally more than Trump and already we have seen the first of riotous rumblings in Oakland, perhaps partly showing dissatisfaction over the electoral college system, so in essence he does not carry the majority support. Secondly, trade is the handmaiden of prosperity and prosperity is the surest guarantor of peace. Failure to see that would be what the ancient Greeks called hubris --- the outrageous arrogance that leads to abuse of power.

Monday, 5 September 2016

Do Amazon et al operations worsen health risks?

Some 35 years ago I wrote in Britain's leading logistics journal about the coming boons of online shopping and how it had the potential to disintermediate bricks and mortar retailing. One boon, in particular, was environmental, and by extension health and safety. Through their TVs and computers customers could order their whole weeks shopping from one centre and specially-equipped delivery vans would deliver to home addresses, typically fulfilling up to 50 orders in one tight delivery area, and thus replacing up to 50 customer car journeys to their local superstores. That would mean far less air pollution, traffic congestion and accidents. What was there not to like? But then came Amazon, followed by Ali Baba, et al.

Now when it comes to logistics Amazon is no slouch; how could it be when this year it is estimated they are going to sell 7.2 billion items, which could hit 12.6 billion in just four years, according to one estimate. It has taken warehousing to new levels with automation and has a patent for "anticipatory package shipping" technology. When a Prime subscriber ($99 a year) orders just one item for delivery within two days at no extra charge, Amazon already has a box standing by, ready to label and ship, a service made possible by hundreds of Ph.D mathematicians concentrating on optimising logistics.

In their quest to make their service most attractive Amazon saw prompt delivery as giving competitive edge and it has worked but others are doing likewise, with Britain's leading retailer, Tesco, now promising a three-hour delivery service. The problem, however, arises over environmental risks because more customers than ever are ordering only one or two items for home delivery which previously they would have picked up on the weekly shopping trip to their superstores. That means far more road journeys and concomitant accidents and air pollution.

Air pollution is now the number one ultimate cause of death in Britain, estimated at 60,000 a year and about 80% of air pollution is road transport related. Diesel emissions are the worst single offender, primarily owing to its sub 2.5 micron oily particulates which engine filters cannot contain and which lodge permanently in the body. These particulates are known carcinogens and a major cause of pulmonary diseases like asthma, which afflicts six million persons in Britain alone and is worsening. The health bill for all this growing air pollution is rocketing into billions of pounds a year.

Now it is true that new motive power technologies are now available, like hydrogen fuel cells and electricity generated by solar, wind and hydro, which are clean at both points of production and use. But these are still likely to take many years to replace dirty oil.

There is growing pubic resentment against Amazon's surging flood of cardboard boxes spewing forth from its many distribution centres. In Hamburg, for example, city officials said Amazon withdrew its plan to put a distribution centre near a seniors' centre and kindergarten after residents, local politicians and police complained. The mayor of Paris, Anne Hidalgo, was miffed at the advent of Amazon's Prime Now centre in her city, warning that it would foul the air, snarl traffic and damage local businesses.

Now, of course, none of this is to say that Amazon, Ali Baba, et al deliberately set out to harm the environment and people's health. The early stages of online shopping must have delivered a net benefit on air pollution but by pandering to people's wants for instant gratification for just one or two products has reversed the early promise of a cleaner environment. Now that Amazon is going into home food deliveries it has a chance to dilute the air pollution issue by offering tempting discounts if buyers agree to fulfil all their household purchases in one hit, say once a week. Rushing through cities to deliver, say, just toilet paper and condoms, two popular Amazon items, is asinine.