TESCO'S HOLIDAY CHEER

John Dawson

URM is not the only food distributor taking matters into its own hands.

Six thousand miles to the east, Cheshunt, England-based Tesco has adopted a self-reliant approach to inbound shipping that resulted in a record 12,500 deliveries per week to its 26 regional distribution centers (RDCs) during the 2002 holidays -- a sixfold year-over-year increase, said Tesco.

Tesco's holiday success stems from a decision made a year earlier to take responsibility for transporting goods from the moment they leave the manufacturer's factory, rather than depend on the manufacturer to deliver them to the RDCs, which was costing Tesco around $750 million annually.

In adopting this new approach, called primary distribution, Tesco, the U.K.'s leading supermarket chain with over 700 stores, is using factory gate pricing (FGP). As a result, while still using logistics firms to do the actual carrying, the chain asks vendors to calculate their delivery costs, which are deducted from the buying price.

This might not sound too popular with vendors, but, according to Greg Sage, Tesco's retail press officer, they generally demonstrated "a collaborative approach."

Tesco chose a Web-based tracking system, from G-Log, Guildford, U.K., to establish the most efficient method of transporting products from vendors to the RDCs.

Work on the prototype started toward the end of 2001. The initial trials were conducted with frozen foods, and the live rollout was started early last year. Currently, over 500 vendors are on board across the frozen food, ambient and dry grocery, and fresh produce sectors. This represents over 25 million cases each month.

Observed John Boulter, Tesco's primary distribution director, "Primary distribution allows us to manage our inbound freight more closely and provides much greater visibility, which benefits us, our suppliers and our customers. Over the busy Christmas period, we really reaped the rewards."