Retailers' smaller stock orders cause supply problems

20 August 2010

20 August 2010 | Angeline Albert

Food and drinks manufacturers are reporting inefficiencies in their supply chains caused by the cost-cutting measures of retailers.

Some 50 firms from the sector contributed to the Food & Drink Supply Chain Health Index survey conducted this summer by Culina Logistics.

Manufacturers said retailers were pushing costs further down the supply chain and creating inefficiencies by making more frequent but smaller stock orders.

Retailers are avoiding tying up cash by holding less stock to save on resources. As a result manufacturers are holding stock for longer which requires more warehouse facilities.

Small order sizes means there are likely to be fewer full pallet deliveries of products. This in turn means manufacturers incur the extra time and cost it takes to manually pick cases off full pallets to meet smaller orders. Meanwhile the partially full pallets themselves occupy the same space as a full pallet would in the vehicle which leads to wasted space.

Steve Winwood, commercial director at Culina Logistics, said: “We are seeing that manufacturers are having to spend more time and money picking and delivering smaller orders and are facing these inefficiencies more frequently every week.”

Warehousing was seen as the biggest under-achiever when it came to efficiencies. Fort-two per cent of respondents said this could be improved. Thirty per cent said secondary transport, the movement from distribution centres to retailers, could be made more efficient.

Maintaining competitiveness in the marketplace was seen as the biggest factor for driving efficiencies in the supply chain, followed by continued pressure from retailers, downward pressure on prices and the economic climate.

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