M&S drives down road costs

27 August 2010

31 August 2010 | Angeline Albert

Marks & Spencer (M&S) says it is finding efficiency savings to absorb the rapid increase in international transport costs that have arisen since the end of the recession.

The price of European road transport rose by 13.5 per cent in the second quarter of this year, research from Capgemini Consulting has found.

Costs increased dramatically in quarter two compared with the first three months of this year, Capgemini's Transport Market Monitor shows.

The figures show the price of transport services has equalled pre‑recession levels for the first time since the economic downturn.

M&S has stores in 30 countries. A spokeswoman said it was working with suppliers to understand how “we can improve the efficiency of their deliveries to our distribution centres, including increasing the use of rail by 2012”.

“We’ve set up a team dedicated to helping food suppliers improve efficiency and reduce costs when they re-tender transport contracts.”

“In the financial year 2009-10 we delivered 9.8 million items of general merchandise directly to our international businesses to reduce unnecessary transport,” she added.

A significant increase in demand is one of the main reasons for the rise in costs, Capgemini said.

Figures show that higher sales, increasing production volumes and shippers restocking their supply chains led to a 44 per cent fall in the capacity index – which measures the number of bids made in response to transport tenders – in quarter two compared with quarter one.

Steve Wilson, UK vice-president of supply chain and logistics at Capgemini Consulting, said: “We expect rates to continue to rise in response to both tightening supply and input cost inflation percolating through – mainly from driver wage increases and fuel cost inflation.

“Increased transport costs from third-party logistics firms will raise prices for companies shipping goods without a dedicated fleet,” he said.

“We’d expect a particular effect on construction firms and air freight. After years of falling costs, reduced capacity from third-party shipping firms could see the price per tonne of goods shipped in the UK rise by as much as 4 to 6 per cent by the end of the year.”

In June, US supermarket giant Walmart said it planned to overhaul the way suppliers deliver to its stores.

The retailer said it would increase the use of its own fleet of trucks and contractors to transport goods from vendor farms and factories to its outlets, rather than the suppliers taking responsibility for transport.

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