Most people only buy large domestic appliances every few years but when they do they demand a lot from manufacturers. Not only do they want new features compared with the last product they owned, there is an expectation that prices will have gone down. Joe O'Sullivan, group logistics manager of BSH Home Appliances, says that this creates a huge challenge for the supply chain. "Transport costs in the UK are heading in one direction and consumer prices in the other, which means we are constantly striving to find cost savings. Every penny we save goes straight onto the bottom line," he says.
Add in a product that is high-value but easily damaged and the need to cope with 10% annual growth and it is no surprise that the company has focused heavily on its supply chain in recent years. It is in the process of creating a new national transport network to serve smaller retailers in conjunction with NYK Logistics and is seeing the benefits of moving to a 390,000sq ft distribution centre in Kettering.
BSH Home Appliances is the UK arm of a global joint venture between German giants Bosch and Siemens. Its products include dishwashers, ovens, hobs and laundry equipment, as well as a range of smaller kitchen items. In addition to Bosch and Siemens, its brands include Neff - the UK market leader in cookers - and the upmarket Gaggenau range of equipment.
Outsourcing transport
All the company's UK transport is outsourced. The new NYK Logistics network for serving smaller customers such as independent retailers, kitchen showrooms and installers, will come into operation on July 1 and will replace a series of regional platforms, run by a variety of operators. The existing platforms, some of which are operated by NYK, are run as dedicated operations but the new network of six platforms will eventually operate as a shared-user service with BSH as the first customer.
"That will allow us to benefit from economies of scale and give NYK the scope to invest in new technology and added-value services such as an improved system for tracking orders," O'Sullivan explains. As part of the move to a single provider for the network, BSH has reviewed its delivery programme, which is worked out according to demand and a postcode matrix, and achieved a reduction in the miles travelled. By doing so it will reduce its carbon footprint from such deliveries by 14%.
Although each delivery might only consist of a few appliances, the smaller customers account for around 45% of the volumes. A similar amount is bought by large retailers and this part of the market is served by NYK Logistics and Mayling Transport which are responsible for movements from BSH's warehouses to the retailers' distribution centres. Some larger retailers also receive full loads directly from BSH's overseas factories. With the major electrical retailers such as Curry's, Comet and John Lewis, full vehicles carrying multiple quantities of only a few models are transported but with kitchen suppliers such as MFI or Magnet a greater variety of product is needed so loads tend to be more mixed.
In addition to the retail trade, some products are bought by consumers online. BSH does not run a transactional website but undertakes the delivery on behalf of retailers. Wincanton is used to carry out these deliveries following its purchase of Lane Group last year. Only 3-4% of the volume is accounted for via this route but it is a growing part of the business.
Although it is keen to control costs, the delicate nature of the product means that BSH looks at far more than just price when choosing transport firms for any of the delivery channels. "It's not solely about price. If it was we would simply auction all of our deliveries to the cheapest bidder. We are willing to pay a premium to have quality drivers and vehicles working for us," O'Sullivan explains.
Close relationships
The company tries to build close relationships where it can, for example with Mayling Transport with whom it has worked for many years. This includes providing training for drivers, if necessary. All the BSH products sold in the UK are manufactured overseas. The largest volumes come from Germany, Spain, Poland and Turkey, although consignments also come in from China, the US and Greece. Around half the products arrive by road and half by sea freight through the ports of Felixstowe and Tilbury.
The products are handled by two in-house warehouses: the Kettering facility and a 250,000sq ft distribution centre in Milton Keynes, where BSH's headquarters is based. Smaller kitchen appliances are kept at Milton Keynes but its main function is to act as an overflow for Kettering, where 90% of the products including all cooking equipment, is stored. In all the company employs 135 staff in warehousing, transport planning, stock planning and administration.
There is spare space across the two facilities and O'Sullivan says: "We believe we will be able to support our growth for several years to come." The extra capacity also helps BSH to cope with seasonal peaks. These run from October until January, when several retailers offer promotions, and during the summer, when many consumers replace fridges and freezers. Part of the Milton Keynes warehouse is let to Wincanton, which uses it for a home delivery service.
Although BSH has so far kept its warehouse operations in-house it periodically reviews whether this is the best policy - the last major examination of the idea took place before Kettering opened 18 months ago. One of the factors influencing the decision is the specialist nature of the product handling techniques, which O'Sullivan believes would represent a new way of operating for many third parties.
For example, instead of using racking 95% of the product is block-stacked with several products placed on top of one another. In order to keep these stable, sheets of cardboard - effectively acting as a floor - are placed underneath boxes at strategic points. The products are then moved using clamp trucks which work by pressing together hydraulic panels at either side, pre-set for each product to create just the right amount of pressure to pick up the product without damaging it. Up to eight appliances can be picked up in a single movement using this method.
O'Sullivan believes that increased legislation and taxation of road freight and the need to improve environmental performance will create further challenges for the supply chain - and the need to enhance its operations further. "As a support service we have to continue to find improvements while meeting the expectations of our customers," he says.
A green view on the distribution centre environment
The Kettering distribution centre replaced four buffer units operated by third parties in Milton Keynes, which supported the main warehouse nearby. Kettering operates on a 24-hour basis, five days a week, and is capable of receiving and despatching 180 vehicles a day and two million appliances a year.
The layout of the warehouse, which was designed in-house, is highly structured with fast sellers nearer the despatch doors and boxes stacked according to product type. Movements around the building are controlled by a warehouse management system from SAP, which is also used in Milton Keynes. RF data capture is used to let the system know exactly where the stock is.
BSH signed up for the warehouse as it was being built speculatively by distribution developer ProLogis and was able to influence many of its features. One example is the 30 loading doors which come in different heights to accommodate a variety of vehicles.
Environmental features have also been incorporated including limits on noise and light output, along with high standards of waste disposal and energy conservation, agreed as part of the planning process. In addition, BSH has a green travel plan, which encourages employees to car share or cycle to work and has involved helping to set up a new bus route in conjunction with the local authority and nearby firms including Wincanton.
O'Sullivan says that one of the advantages of moving to Kettering has been a good supply of suitable staff. "Our turnover in Kettering has been only 4% in the last 18 months. That is a huge benefit because we are not constantly having to retrain and our damages are reduced," he says.
For more in-depth interviews with industry figures, visit Roadtransport.com's interviews page.
