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Drinks wholesaling is not an easy area in which to operate and recent increases in duty on alcoholic products have only added to the pressure in what is already a challenging environment. For one leading player, WaverleyTBS, there is a constant quest to perform more efficiently. In the past 18 months, the company has moved to a single operator, Kuehne+Nagel Drinks Logistics (KNDL), for its trunking movements, has outsourced bottling to free up warehouse space, and introduced consolidation in country  of origin for wine consignments from Italy to reduce stockholdings and transport costs. Operations director Bob Wrigglesworth says: "As a wholesaler, our margins are not as large as those for brand owners, so cost control is paramount. Our supply chain costs £40m a year to run and we are constantly looking at ways to reduce its impact."

Overcoming obstacles

Improvements have taken place against a backdrop of disruption caused by the Buncefield Fuel Terminal explosion in December 2005, which happened a stone's throw from WaverleyTBS's Hemel Hempstead distribution centre. The facility had to be rebuilt and only became operational again last summer, forcing the company to operate from temporary accommodation in the meantime. WaverleyTBS was formed in 2005 when its owner, Scottish & Newcastle, purchased Bulmer's and decided to merge the former Waverley Group and The Beer Seller businesses. It supplies soft drinks, bottled and keg beers, along with wines and  spirits to 34,000 customers, ranging from pub groups, restaurant and hotel chains through to small independent businesses.

The company has two main warehouses - Hemel Hempstead and Felling, near Gateshead - and 20 smaller depots around the country. For larger customers, deliveries can be made to distribution centres or to individual outlets. "Our aim is to be fully flexible and have the ability to mix and match our offering to meet our customers needs," says Wrigglesworth. KNDL was selected to carry out distribution from Hemel Hempstead and Felling to the 20 satellite depots through a competitive tender process. This produced a shortlist of four logistics providers, plus an in-house entry previously the work had been carried out by two smaller, independent firms.

Although KNDL is a joint venture between Scottish & Newcastle and Kuehne+Nagel, this did not sway the decision at all, says Wrigglesworth. "KNDL won the contract on merit. There was no pressure on us to select them, it came down to what was right for WaverleyTBS," he comments. The contract started in September and KNDL has the opportunity under the terms of the contract to fill trailers on empty return legs. This has no detrimental effect on performance of the main contract, Wrigglesworth says, as there are KPIs in place to ensure service levels are maintained. "Some of our deliveries could be managed on a one-way basis, so KNDL can maximise opportunities for the empty-leg return journey," he explains.

Partnership working

The link-up with KNDL, which has achieved a 23% reduction in costs, is considered to be a strategic partnership rather than a short-term contract and WaverleyTBS intends to create shared benefits. The same is true with other partners, including DHL subsidiary Giorgio Gori, which is responsible for managing the consolidation point in Italy. Another partner, Kingsland Wines and Spirits (KWS), carries out bottling of wine brought into the UK as bulk liquid and then holds four weeks' worth of product. This has allowed an additional 25,000ft2 of space to be released at the Felling distribution centre, which was originally 130,000ft2 in size. Combined with the Italian consolidation, which further reduces pressure on storage space, Wrigglesworth believes that for the first time it will be unnecessary to take on temporary storage in the run-up to Christmas.

The Hemel Hempstead facility is also 130,000ft2 in size and handles 2,500 stock-keeping units (SKUs). When the warehouse was out of action, WaverleyTBS took on temporary space in Luton and then partially occupied a 250,000ft2 warehouse that had been constructed speculatively in Hemel Hempstead by distribution developer Gazeley. When the original facility was rebuilt after the blast, some improvements were introduced, although it is largely similar to the damaged warehouse that first opened in 2001. It uses a flow-through system, where stock comes in one side of the warehouse and exits from the other. In between there is racking space both for full cases and individual items - if they want, customers can buy single bottles.

Technology

The warehouse is controlled by a Calidus e-warehouse management system from Open Business Solutions and the bottle picking line, which accounts for 15% of the volume, is partly automated using equipment from European Conveyor Systems and software from Escada. Radio data terminals are used to control product movement and, during this year, voice-activated trials will commence to allow pickers to use both hands to work. The trucks used in the warehouses, which are supplied by Toyota and Linde, are being upgraded. Hemel Hempstead has taken on 29 new fork-lifts and order pickers, and a new fleet will be introduced this month in Felling. Around 80% of the equipment in the local depots will also be replaced this year.

All wine and spirit bottled stock is kept at either the Felling or Hemel Hempstead distribution centres, which are responsible for picking it into orders for the different customers. When the product arrives at the local depots and is consolidated with locally-stocked SKUs, it is then delivered on an in-house fleet of 230 vehicles, ranging from 3.5-tonne vans to 21-tonne trucks and urban artic units. The company's drivers all completed defensive driving training during 2007 and it is investing in four employees as part of a Skills for Logistics initiative to encourage young drivers.

The primary transport network operated by KNDL enables WaverleyTBS to run an inter-company stock deployment service. This allows local breweries to distribute product nationally and each depot has a cold store where cask ale can be stored at the correct temperature. WaverleyTBS is currently carrying out a trial for Pub Group where the stock is held centrally before being distributed - replicating the model used for the wines and spirits products to cut overall inventory levels. Despite the company's use of KNDL, KWS and Giorgio Gori, there are no plans to outsource the local fleet or warehouse operations. Wrigglesworth says: "I'd be disappointed if someone could operate our network more efficiently while having to make a profit." Where it does use outsourcing, Wrigglesworth is a firm believer in co-operation rather than conflict to enhance performance. "We want to have a positive relationship with our suppliers where they help us to improve and vice versa," he says.

Improvements

Given the competitive nature of the market, WaverleyTBS intends to introduce further enhancements to its operations. Paragon software is already used to optimise secondary delivery movements out of Hemel Hempstead and its use is now likely to be extended to other local depots. This will also help improve its environmental performance, along with switching to Euro 4 engines when replacing vehicles in its in-house fleet. In addition, the firm is finding ways to reduce energy consumption and has introduced recycling of both cardboard and plastic. Such measures have the dual benefit of reducing costs, something that Wrigglesworth says needs to continue to be at the forefront of WaverleyTBS's thinking. "Our challenge is to reduce our cost base without compromising service," he states.