Food Australia Map. nsert image here OVERVIEW OF FOOD WAREHOUSING AND STORAGE SERVICES IN AUSTRALIA. November 2014

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1 Food Australia Map OVERVIEW OF FOOD WAREHOUSING AND STORAGE SERVICES IN AUSTRALIA November 2014 nsert image here Prepared by The Institute for Supply Chain and Logistics Victoria University, Melbourne

2 Disclaimer This is a proprietary Victoria University (VU) document and is not to be relied upon by any person other than VU and its employees, contractors and authorised representatives. VU makes no express or implied guarantees, representations or warranties to any third party as to whether the requirements of this document will be fulfilled by VU, its employees, agents or contractors or anyone else to whom the document relates. VU accepts no liability for any reliance by any third party on the procedures detailed in this document. Copyright This document is a proprietary document and the property of VU. Page 1

3 1. INTRODUCTION Food Australia Map is a project of the Victoria University Institute for Supply Chain and Logistics in collaboration with Food Innovation Australia Ltd. The project will create a repository of information on food transport, distribution and storage across Australia, detailing supply chain services available to food producers, manufacturers and suppliers. The information will be available as a searchable on-line tool capable of displaying food industry supply chain services across the country by features such as location, temperature requirements, specialisation (eg wine, confectionery) and geography serviced (eg. metropolitan, import-export). In the case of warehousing and storage, a food manufacturer or producer seeking short term seasonal or overflow storage can search and make contact with suppliers of this form of storage in proximity to manufacturing, distribution and retail sites. The data is hosted by the Victoria University Supply Chain Information Unit. The pilot database is classified by ANZSIC code 5309: Warehousing/Storage Services and in this case, applies only to food quality warehousing and storage. For this category of food supply chain service, a range of data has been collated as follows: Temperature ambient; chilled; frozen Warehouse size this may be recorded as square metres, cubic metres in the case of frozen product held in rooms or bays; or pallet capacity available Specialisation if a warehouse has a specific product speciality it is recorded e-commerce the warehouse services e-commerce activity Consignment size this may range from items, cartons, pallets, containers or truckloads Company Name and contact details, including and website address Coverage some 3PL suppliers have warehousing available nationally, other provide short terms storage for import or export activity Unpack and receipting container unload; product receipt; including proof of delivery (POD); BBD stickers and product codes; client IT interface Quality assurance fumigation; pest control; insulation; retention samples; retention laboratory Storage security; short or long term; rack or block; stock rotation; stocktake and cycle controls; re-work and re-pack; returns Order assembly EDI capable; integrated order process; pick and pack; labelling; creation of delivery documentation; organise transport; container load; cross docking Page 2

4 Reporting stock in hand; stock movements; replenishment reports; forecasting Other services detail of additional offerings is recorded Food consumption in Australia occurs through a number of channels, as follows: Master channel Sub-channel retail grocery convenience specialised Full-service supermarkets 2,285 Independent supermarkets 1,950 Independent stores 3,600 Convenience stores 2,100 Bakery, cake and pastry 6,450 Delicatessen 1,760 Butcher, poultry, seafood 5,800 Fruit & vegetables 2,400 Liquor merchants 4,700 takeaway Sandwich bars Independent takeaway Quick-serve restaurants (QSR) 12,800 6,400 dining out Restaurants & cafes Pubs, clubs & function centres 20,450 2,700 foodservice event/leisure Event, leisure & travel Accommodation 2,500 6,950 institutional Hospitals 1,300 Aged care 2,400 Defence 80 Correctional 125 Corporate (workplace) 1,350 Education 9,500 Source: Australian Government, Dept of Agriculture, Forestry & Fisheries, 2012 Page 3

5 Supermarkets, 62.8% Specialist Food Stores, 12.0% Breakfast, 1.4% Lunch, 8.2% Dinner, 11.5% Snacks, 4.2% Source: Freshlogic 2011 Food supply channels are largely dominated by supermarket volumes, with almost two thirds of supply moving through this FMCG retail mode and it s warehousing and storage system. However, the dominance of multi-user, outsourced warehousing over dedicated warehousing indicates the trend towards a more flexible model of 3PL warehousing for the large food retail sector. Food warehousing and storage composition in Australia Dedicated FMCG Foodservice & catering 3PL Source: VU ISCL, 2014 Page 4

6 2. FOOD WAREHOUSING AND STORAGE MODELS Source: Supply Chain Guide Warehousing and storage can perform a range of functions in the supply chain. Warehouses may be operated to store inbound product and raw materials for food manufacturing or for outbound finished product destined for retail distribution, export or increasingly, direct to consumer delivery. Warehousing generally costs between 1.25 and 2.25% of the value of sales. A highperforming warehouse solution should be at the lower end of this cost envelope. Warehousing is provided on the basis of: Fixed price A percentage of sales or goods value Based on activity rates set for SKUs; stock movements; services provided A mix of fixed and variable costs Free of charge, with other services imbedded in the storage costs. Food quality storage and warehousing is provided using the following models: 2.1 On-site storage facilities at food manufacturing plants An example of this model is Tatura Milk, where significant investment has been made in an on-site warehouse with a 15,000 pallet capacity co-located with the dairy manufacturing operation. Page 5

7 Murray Goulburn Cooperative Co Ltd. has leased a major Integrated Logistics Centre located at Laverton North in Victoria and a Global Distribution Centre at the Port of Melbourne. The centres receive products from coop processing plants and prepare them for distribution and export. A major new processing plant is being built alongside the Laverton North logistics centre. From these warehouses, distributors are serviced and arrangements are made for transport to FMCG retail distribution centres or outlets. 2.2 Major and composite distribution centres The largest format storage for food is in distribution centres leased or outsourced to 3PL suppliers by major food retailers. Distribution centres are operated directly by food manufacturers or producers or more commonly outsourced to a 3 rd party logistics supplier, termed a 3PL. For example, Arnotts has 5 distribution centres across Australia, under the contract management of Linfox. The newest is located at Bungarribee Industrial Estate on the Great Western Highway in Huntingwood, NSW. Martin Brower undertakes distribution for the Mcdonalds fast food restaurant chain. It operates 7 distribution centres across Australia in Dandenong South (3164); Rocklea (4106); Kings Park and Blacktown (2148); Heatherbrae (2324); Banjup (6164) and Gepps Cross (5094). National distribution centres are typically large footprint warehouses of 30,000 90,000m2 on sites ranging from 8 to 12 hectares with good access to major road arterials and often inter-capital rail lines. They commonly offer composite or multitemperature storage areas, rack and block storage and sophisticated warehouse management systems that integrate with retailer and supplier enterprise resource planning systems. They receive product from suppliers to be re-configured and distributed to a network of retail outlets/supermarkets. National Distribution Centres service the larger metropolitan regions, and Regional Distribution Centres tend to service the regional areas and smaller capital cities. The following summary of retail food distribution centres indicates the size and spread of these facilities: Page 6

8 COLES NSW Eastern Creek (2766 NSW) NDC ambient & liquor 73,256m2 and Chilled/Frozen DC 36,890m2; Smeaton Grange (2567) ambient 62,407m2; Goulburn (2580) Regional DC 42,500m2 on 13.6 ha VIC Somerton (3062) ambient & liquor (operated by Toll Group) 70,000m2; Truganina (3029) NDC ambient (operated by Linfox) 80,000m2 QLD Forest Lake-Heathwood (4110) ambient/liquor 50,000m2; Parkinson (4115) chilled & frozen 45,000m2 SA Edinburgh Park, Salisbury (5111) RDC ambient, liquor, chilled, frozen 67,944m2 WA - Kewdale (6105) NDC 87,241m2. Polarfresh is a joint venture between Costa Logistics and Swire which operates fresh produce DCs for Coles in Truganina (3029 VIC) handling 1.4 million cartons of product per week to 216 stores in Victoria and Tasmania; Eastern Creek (2766 NSW) and Parkinson (4115 QLD). Carter and Spencer operate the fresh produce DC in Townsville for Coles in Bohle (4818 QLD). In WA and TAS, Costa Logistics operates the fresh produce DCs at Jandakot (6164 WA) and Quoiba (7310 TAS). In SA, St George Produce operates the fresh produce DC for Coles servicing SA and NT in Burton (5110 SA). WOOLWORTHS Woolworths generates 20 million cartons of product each week and 3,000 truck movements per day. Woolworths is implementing its Mercury 2 logistics strategy. Woolworths has a 75% share in Australian Leisure & Hospitality Group, which operates 320 licensed venues and gaming operations across Australia. In addition to its supermarket network Woolworths has Big W, BWS, Dan Murphys, Wine Market, Cellarmasters, Langton s and Thomas Dux. Woolworths also has an on-line grocer site with next day delivery in Melbourne and Sydney. Woolworths has 7 national distribution centres supported by smaller facilities: NSW Warnervale (2259) 54,533m2; Yennora (2161) 74,000m2; Minchinbury (2770) 80,000m2; Erskine Park (2759) ambient & liquor 51,830m2 handling 30,000 pallets and with 60 docks. Page 7

9 QLD Murarrie (4172) 187,058m3 chilled/frozen operated by Americold; Bohle (4818); Churchill (4305); Acacia Ridge (4110); Stapylton (4207) liquor 22,000m2; Larapinta (4110) ambient & refrigerated 72,000m2; Fishermans Islands (4178). VIC Broadmeadows (3047) 48,000m2; Laverton North (3026) ambient, liquor 70,500m2; Mulgrave (3170) 70,000m2; Barnawartha (3691) 80,000m2; Somerton (3062) 70,000m2 WA- Spearwood (6163) frozen; Perth International Airport (6105) 34,000m2 multitemperature; Bunbury (6230) 4,000m2/2,000 pallet chilled meat SA Dry Creek (5094) x 2 frozen; Gepps Cross (5094) TAS East Devonport (7310); Breadalbane (7258) meat; Western Junction (7212). Kerry Logistics, headquartered in Hong Kong, won the contract to supply landside logistics and supermarket general merchandise for southern Australia in Kerry is a major F&B 3PL supplying omni-channel markets in China. Kerry owns and operates an intermodal terminal and container park in Gillman (SA) and Melbourne (VIC) and a cold chain logistics warehouse in Maidstone. The intermodal operations handle wine, auto and FMCG. ALDI ALDI has 300 stores in Eastern Australia. ALDI s logistics model is an integrated regional model, with one regional management of stores, warehousing and distribution/transport for around 100 stores. The warehouses are large and multi-temperature. In recent years, ALDI has spread from the Eastern States to WA and SA. A new warehouse is being built in Jandakot (WA) to open in 2016, on a 13.5 hectare site with a warehouse of 48,000m2. In SA, the DC is 30,000m2 located at Regency Park. VIC - Dandenong 56,000m2; Derrimut 43,000m2 ; NSW - Prestons 36,213m2; Minchinbury 40,000m2 with a 5,400m2 cold storage annexe and 3,000m2 office; QLD - Staplyton 53,000m2 Page 8

10 METCASH Metcash services 2,400 outlets; 1,365 IGA stores, 117 Foodland stores, 484 FoodWorks stores, 245 Lucky 7 convenience stores, 18 Campbells Cash & Carry warehouses; and C- Store a bulk sales outlet which services route trade and foodservice. Metcash also has Australian Liquor Marketers, with 1,700 outlets including Harry Brown, Sip n Save, Western Cellars, Liquor legends, Urban Cellars, Thirsty Camel (140 outlets). Metcash also supplies Independent Brands Cellarbrations, IGA Liquor, Bottle O, Bottle O Neighbourhood. Metcash also exports from its QLD warehouse, over 800 brands to Asia Pacific countries. Major Metcash distribution centres are located at NSW Huntingwood 82,853m2 (2148); Macquarie Park (2113) VIC Laverton North (3026) QLD Crestmead 103,000m2 (4132) SA Kidman Park (5025) WA - Canning Vale 100,000m2 (6155) COSTCO The membership club cash and carry warehouse model of food retailing is predicated on a supply chain model of full pallet/container in - full pallet out direct to store, to limit the number of handprints on the product. 1 Rather than warehousing, a Costco Depot is a cross-docking facility, which consolidates pallets and re-routes them to the store warehouses. The product spends under 24 hours in the facility. Costco is expanding its current 6 outlets to Moorabbin Airport and Epping in VIC, Kilburn in SA. Each warehouse outlet has a footprint of around 14,000m2. SPAR An international FMCG retail franchise with 100 outlets in Australia across QLD, NSW, ACT and NT. SPAR has a DC located in Acacia Ridge (4110) of 40,000m2 and leases space for 2,500 chilled and frozen SKUs through Costa Logistics in Morningside (4170) in QLD. 1 Wulfraat, M., The Secret to Costco s Success Lies in Supply Chain Efficiency, May 12, 2014 in Page 9

11 3. MULTI-USER WAREHOUSING These facilities enable a number of clients to store product and to commonly gain advantages in tailored storage solutions, use intermittent overflow storage space and coloading savings in delivery. Major supply chain and logistics suppliers including Linfox, Toll, DHL, StarTrack, offer integrated storage, warehousing and distribution services to food companies. The storage is food quality, multi-temperature and supported by state-of-the-art warehouse management systems and distribution networks with global reach. The benefit of leasing from a 3PL supplier is largely in the mix of arrangements available. Companies can lease a set space, or an entire warehouse; or choose a mix of a fixed amount with variable pay-as-you-use space for seasonal and overflow periods. This avoids overheads and enables a level of tailoring of space. Other benefits include serviced office space and meeting rooms; stock visibility and security and reporting on stock movements and individualised KPIs. A typical warehouse profile for the major 3PL is the new Linfox facility in Kewdale, WA. This warehouse of 80,000m2 is both a distribution centre and multi-user warehouse which can hold 25,000 pallets in a temperature controlled environment, with a high security area capable of handling prescribed goods such as alcohol and pharmaceuticals. It has overflow/peak season storage, cross-docking, and is linked with rail. This format is highly sought after, as 3PL suppliers seek to optimise spaces they lease and in turn drive down costs for customers. High demand sites for this form of warehousing are on the periphery of major urban areas, eg: Minchinbury; Prestons (NSW), Edinburgh Parks (SA); Derrimut (VIC). 3PL warehousing is now worth $100 billion in revenue in Australia (IBISWorld 2013) and is growing at 3% per annum. While food grade warehousing is a subset of this activity, it is a significant investment in the food value chain. Suppliers such as Goodman, Australand, DEXUS, GPT and Charter Hall report strong demand for this large format warehousing. Page 10

12 Sectors driving demand for industrial properties in Despite subdued economic conditions in recent years, demand for large format warehousing properties is high. This demand for warehousing is being driven by a number of factors, including three key considerations The growth of imported products, estimated at 5.8% per annum (Deloitte Access Economics); 3PL suppliers and manufacturers seeking strategic locations for warehousing on outer city fringes with good arterial road and rail access to save on transport costs; and A need for scope to increase automation of warehousing systems to decrease labour costs Findings from the Australian Food and Grocery Council survey of route trade in 2012 indicated that cost savings in this segment could be gained by further consolidation of 3PL suppliers. Food companies in this segment typically have up to 5 3PL providers and 60% retain their own delivery fleet. Collaboration to increase order size and drop density through 3PL consolidation is expected to reduce costs. Page 11

13 4. FOOD DISTRIBUTION STORAGE These are generally smaller scale storage facilities with multi-brand collections for distribution in a specified geography or service segment. There are a myriad of foodservice, convenience and route trade suppliers operating storage sized between 400m2 and 5,000m2, usually with cool rooms and freezer bays. Food distributor examples:- Bidvest is the largest foodservice supplier servicing fast food restaurants, major hospitality outlets. The company has developed Australia Independent Vendors (AIV) which supplies food from 30 distributors to smaller outlets such as school canteens and route trade. Combined Foodservices Australia (12 members servicing 33,000 outlets) Countrywide (100+ members) covering a wide range of food outlets and foodservice NAFDA (60 distribution centres servicing 53,000 outlets) Superior Food Services This distributor operates 7 warehouses on the East Coast of Australia, each around 5,000m2 Warehousing is operated in numerous locations across the country by major caterers such as Spotless; Sodexo; ISS; Transfield; Programmed; UGL; Compass and Delaware. These companies offer a range of food and catering products to remote mining sites; defence and institutional settings; convenience outlets such as service stations and major sporting and recreational venues such as stadiums and conference centres. Catering is embedded in a wider service offering including cleaning, laundry and building maintenance. A significant proportion of storage space is leased from 3PL operators. For example, Spotless leases 98 properties with warehouses across Australia. Page 12

14 5. E-FULFILMENT WAREHOUSES These are an emerging model of warehousing which are associated with on-line grocery stores and e-commerce models. While largely servicing ambient product at this stage, they are expected to emerge as multi-temperature storage facilities servicing major urban areas. Major e-fulfilment centres 50,000m2 plus, used to bypass DCs and deliver direct to retailer, sortation centre or consumer. It is anticipated that across major population centres, the trend of on-line grocery and meal delivery services will escalate as it has in the US, EU and Asia. This model requires a specific storage and distribution model focused on fresh produce, multi-temperature, short term storage. Outlets for customer pick ups are convenience stores (note Woolworths and Coles are investing in these in inner city areas) and route trade as well as in-home delivery. On-line Grocers examples: On-line meal deliveries examples: Page 13

15 6. SUMMARY OF FINDINGS Key trends in food warehousing and storage indicated in the collation of this data are: 1. The increasing use of 3PL suppliers. 2. A shift from one single contract 3PL supplier to several by major supermarket chains, reflecting more complex global procurement and more complex consumer demand patterns. 3. Multi-client composite warehousing solutions in large formats to deliver cost efficiencies and improved service levels through investment in warehouse management systems and transport articulation. 4. Consumer on-line grocery and prepared food delivery is growing from a low base and will create food e-fulfilment centre demand, with a need for multi-temperature, multi-user 3PL sites capable of delivering to convenience stores, route trade and local supermarket outlets as well as consumer homes. 5. The wholesaler is bypassed and the granularity of the supply chain is polarised to large format storage and small, consumer-focused delivery options. 6. An increasing number of large format 3PL investments are being made in railconnected locations, providing the option of intermodal transport. 7. A significant number of food suppliers are becoming importers and suppliers of storage capacity, having invested in this capacity initially for their own needs. 8. Sizeable cost savings are available to food manufacturers and producers through collaborative 3PL warehousing, storage and delivery services. Page 1

16 APPENDICES A B C Food grade warehousing by postcode Emerging new types of logistics facilities Article: Insight: emerging technology and changing consumer interface AFGC, Page 2

17 QUEENSLAND FOOD GRADE STORAGE Page 3

18 BRISBANE FOOD GRADE STORAGE Page 4

19 NORTHERN TERRITORY FOOD GRADE STORAGE Page 5

20 WESTERN AUSTRALIA FOOD GRADE STORAGE Page 6

21 PERTH FOOD GRADE STORAGE Page 7

22 ADELAIDE FOOD GRADE STORAGE Page 8

23 MELBOURNE FOOD GRADE STORAGE Page 9

24 TASMANIA FOOD GRADE STORAGE Page 10

25 NSW EAST COAST FOOD GRADE STORAGE Page 11

26 SYDNEY FOOD GRADE STORAGE Page 12

27 Appendix B Source: ISCL based on JLL e-commerce Impact on Retail Logistics, 2013 Page 13

28 Appendix C Page 14

29 GLOSSARY Third party logistics (3PL) and fourth party logistics/lead logistics (4PL) provider services Source: Council of Supply Chain Management Professionals (CSCMP), 2010 Break bulk A shipping term indicating the product is not containerised or shipped as a dry or liquid bulk form. Generally it refers to products such as timber, steel. However, it also refers to the unpacking of groupage or FAK shipments. BBD Best before date Bulk storage Bulk or block storage is Container load/unload Also called container stuffing/de-stuffing, stripping or in the case of domestic rail containers, devanning, this term refers to the removal or loading of goods to or from the container and the receipting of the goods for the customer in preparation for delivery or storage. There are businesses skilled in rapid loading/unloading of containers that will supply a mobile team. Composite Distribution Centres Composite distribution centres have a range of temperature zones for storage of diverse food products Page 15

30 Cross Docking This terms refers to the receipt of cartons or pallets from suppliers at the dock of the warehouse. They are then loaded for distribution on transport within a 24 hour timespan for delivery to a distribution centre or they may be blended with other cartons or pallets for delivery to a retail outlet/s in one geographic area. Cross docking enables the transport to be optimised and the products to be brought closer to the distribution market. Often the products are pre-assembled in store-ready pallets, which minimises the labour required to assemble outward pallets and the use of storage space at the warehouse. DC Distribution Centre. A facility in which product from multiple suppliers is blended to the specification of retail outlets or internal business units. Kenneth B. Ackerman in Words of Warehousing defines a DC as a facility from which wholesale and retail orders are filled, adding that "the term is used to describe a high-velocity operation as opposed to a static storage warehouse." It is customer-focused, driven by technology, offers value-added services and is dependent on relationships between suppliers and customers. It is a key link in the value chain of the product. EDI Electronic data interchange, a data communications system to facilitate exchange between customer s and logistics supplier s own enterprise resource planning system. FAK Freight all Kinds. This term refers to a container or ULD assembled from goods from multiple suppliers for shipment. FIFO First in: first out stock rotation FMCG Fast moving consumer goods Groupage An alternate term for a consolidation shipment model, where shippers with less-than-a-container-load share the shipping container. LCL/FCL Less than a container load; full container load Page 16

31 Pick and pack Picking refers to the assembly of products in the warehouse in preparation for delivery. Picking systems include pick to light using LED lighting; voice picking via headsets instructing pickers; and pick to cart mobile batch picking, sorting and packing are combined. Proof of Delivery (POD) Proof of Delivery is generally a signed letter or receipt verifying the goods have arrived at the depot or warehouse in fit condition and in full. Electronic PODs now enable customers to go online and check their goods, enabling the subsequent financial transactions to proceed while the goods are in storage or being distributed. Racked storage Racking is a warehouse storage system generally designed for pallets or skids. Some racking is also designed for cartons. Racking enables products to be stored on multiple levels and increases the density and capacity of warehousing. Route trade Route trade refers to corner stores and cafes. While route trade is a small segment in the overall food supply chain, it is a significant outlet for beverages. Scanning Radio frequency (RF) scanning enables real time confirmation of movement of bar coded items, cartons and pallets in a warehouse, eliminating paper recording. Use of RF scanning eliminates errors in picking products, direct control over actions relating to stock and the ability to track and trace movement of the product. Security Warehouse security systems include back to base alarms which notify the monitoring station or the mobile security personnel if a breach has occurred. CCTV monitoring is also used in warehouses. Warehouses also have electronic keyed access to control all out of hours deliveries and entry. Additional security is supplied by locked secure areas for prescribed goods such as alcohol and pharmaceuticals, or as required by the Customs Licence that applies to bonded warehousing. Page 17