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Viewpoint - 19/09/2011

Port Centric operations: an increasing trend in the UK logistics market

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Structural economic changes in the UK have seen the decline of manufacturing and increase in the consumer-led society.

Consumer goods are increasingly being manufactured and sourced from abroad particularly the Far East and then imported into the UK. This has resulted in a significant import trade through the major UK ports. This is one of the principal reasons why Port Centric has become a key issue in UK logistics today and is regarded as the next “big thing” in supply chain. It is often referred to in conjunction with “multi modal distribution”.

Port centric defined

Port centric logistics is defined as: “A distribution centre (DC) that is located at a port as opposed to inland bringing companies closer to the markets they serve and decreasing freight miles.” Clipper Group. In essence, Port Centric logistics is about saving money, reducing costs, increasing efficiency, reduced lead times and also achieving “green” objectives.

Research shows port centric operations set to increase

Interest and consideration by retailers and third party logistics providers in port centric logistics has increased significantly in the last 10 years.  A recent logistics survey undertaken by Gazeley and the UK Logistics Fund found that 83% of respondents stated port centric operations were set to increase. Further analysis of the data revealed that 70% of respondents saw this increase being focused on the East Coast ports in the South East of England, such as the London Gateway, Tilbury and Felixstowe, with only 53% of respondents pointing to ports in the North East.  The results were less positive for the North West ports albeit volumes have increased. The results of this survey are not surprising and reflect the sourcing of many products in the Far East, the shipping routes through the English Channel to serve the UK and European ports and the location of the UK’s existing main deep sea terminals at Southampton and Felixstowe.

Major retailers build dedicated port side facilities

Some major retailers have already established dedicated port side import facilities. For example Tesco has a 1m sq ft facility at Teesport and Asda also occupy a 300,000 sq ft facility. There is no doubt that these and other major retailers will seek similar facilities at other UK ports, most notably in the South East and importantly at ports that can accommodate the largest Super Post Panamax ships. 

Portside import centre help retailers with stock management

Apart from the fiscal aspect there are non fiscal benefits to retailers of retaining greater control throughout the supply chain to ensure and maintain product availability. In many instances the retailers will also utilise their portside import centre as a “buffer store” where they can hold sufficient stock for periods of time to ensure product availability. With the goods being held in a UK import centre they can ensure 24 hour delivery to DC, stores or direct to customers. Some are considering building major DCs overseas in their source countries to hold stock - potentially at lower cost than UK - however the issue and concern here is the time lines and potential delays required to transport goods held in a DC in the Far East to the UK especially with “slow steaming of ships”. These time lags may cause problems especially with fashion and clothing where shelf life can be very limited.

This trend is set to continue as other key retailers are already in discussions for the development of dedicated import centres at logistics parks adjacent to port facilities. These facilities will also enable the occupiers to utilise feeder / barge services to other UK ports, such as Teesport and Tilbury, to potentially serve other DC facilities.

Many retailers are not of sufficient size to want or warrant their own dedicated portside import facility. In these circumstances we expect to see 3PL operators, such as DHL and Eddie Stobart, acquiring and operating shared user facilities for several occupiers.

We predict import centres will be a continuing trend in the marketplace and expect them to be of a scale over 500,000 sq ft as retailers expand product ranges and diversity of goods sold, while also seeking and needing to hold larger buffer stocks to ensure stock availability.


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