While Fowler Welch-Coolchain (FWC) has built a successful business in chilled distribution, the company is now looking to expand into bigger – and arguably more profitable – ambient markets. A glance at the business card handed over by Nick Hay – installed as MD in November 2010 – reveals the ‘Coolchain’ has been quietly dropped, although the logo still resembles a basket of fruit and flowers.
“We are a lot more than just fresh produce and flowers, which is the image a lot of people still have of us,” Hay says.
FWC moved into the ambient market back in 2006 with the purchase of failed Stockport haulier RF Fielding, but Hay’s background is in chilled distribution, having come to FWC from temperature controlled specialist Samworth Brothers.
Hay started his career as a graduate trainee with Exel, moving from there to Arla Foods, giving him a good grounding on both third party logistics and own account sides of the fence. “That gave me an appreciation of what manufacturers are after and the difficulties of operating as a 3PL,” he says. “Arla’s milk transport was very much inhouse while it contracted out most of the rest, mainly to Wincanton.”
From there Hay went to one of the companies, Solar Cold Services, that were later brought together in 2003 to form Innovate Logistics, though he moved on to Frigoscandia before the ill-fated merger (Innovate went bust in 2008, its business divided up between Stobart and Yearsley).
After taking part in the MBO at Frigoscandia, Hay was headhunted for the MD’s job at Samworth, and was there just over five years before getting the call from FWC. “Having done own account with Arla, and worked for a big 3PL in Exel, a smaller 3PL in Solar and a family business in Samworth, I am bringing all this experience to Fowler Welch,” he explains. “What attracted me to this company is the ownership structure. I wanted to get back into a listed company, and with the chairman Philip [Meeson, chairman of both FWC and its listed parent Dart Group] both a shareholder and such a big character, it is something of a hybrid between a listed business and a family concern. That really appeals to me.”
Hay has appointed former JDF Logistics MD Paul Milnes to spearhead the growth of FWC’s ambient operation, which currently represents 25% of the firm’s £150m annual turnover. Fowler Welch’s operating profit dipped 60% to £2.8m in the year to March 31, partly because rates in the temperature-controlled sector have been badly depressed since the recession struck in 2008, and Hay believes there are profitable opportunities in ambient distribution.
“The cost of entry into the ambient market is lower so there are a lot of smaller players,” says Hay. “If you take a consolidation model which we have in chill and apply some of the same principles – such as BRC [British Retail Consortium] accreditation - there aren’t many ambient operators who can offer that. If we can add value there is a market to be made.”
Hay also believes FWC has to expand its range of services if it is to continue to grow, though he is cagey on which markets FWC will be targeting.
“We can’t carry on growing in one sector forever,” he says. “We need to broaden our offer to the full range of services. Our focus will remain on retail and consumer markets.”
Running cold stores and refrigerated vehicles used to be a fairly specialised market, but more operators are now operating multi-temperature warehousing and fleets on the same site.
“There are some synergies between chill and ambient, but we will be looking to replicate in ambient the model we have built successfully in chill,” says Hay. “There will be some co-location of network hubs but they are likely to be predominantly separate certainly from a warehouse perspective.”
The ambient side of FWC’s business is based around a hub in Heywood near Manchester while the firm’s Spalding headquarters acts as a national hub for the chilled network and a transshipment centre for flowers and other products coming in from the Dutch operation.
Hay says FWC can bring some valuable skills learnt in chilled distribution to a moribund ambient market.
“I think the whole ambient sector needs to speed up,” he asserts. “Our aim is to take what we do on chill and apply it to ambient, to drive out stock and improve availability. On-shelf availability on those products with a long shelf-life is ironically worse than on chilled.”
Since he started in logistics in 1995, Hay has seen the rise and fall of the 3PL empire in FMCG markets.
“From my perspective, in the 1990s a lot of people moved to 3PLs as the experts in logistics,” he says. “These ‘experts’ were incredibly arrogant, rested on their laurels and still captured a lot of work. Around 2000, it was realised that they weren’t adding any value and so we saw an erosion of the power of the big 3PLs.
“Their reaction was to try to offer an end-to-end service to be everything to everybody but in reality do they still add much value? Yes they can pull out some examples where they do but they are usually dedicated contracts. We are of a scale where we can combine large dedicated contracts with consolidation in a unique offer. There are other companies of a similar scale to us such as Stobart, Culina and Turners (Soham) doing that but do the big 3PLs like Norbert Dentressangle, Wincanton and DHL really offer a consolidation service? Are they really close to the detail?”
The problem for 3PLs running large dedicated, often open book, RDCs for major supermarkets is that, while the turnover can be impressive, margins have been eroded as the client takes back the risk and so much of the reward from the contractor.
None of FWC’s dedicated contracts are open book however as they all combine dedicated facilities with elements of FWC’s shared user network.
“It is all about providing value by integrating the work with our network volumes,” says Hay. “I think the days of open book purely dedicated transport solutions are gone.”
Many logistics firms now talk about “added value” and that means different things to different people.
“To me the first thing about added value is consistent service,” says Hay. “There are lots of companies who can give good service for elements of a contract or most of the time, but not enough are consistent enough, so there is an opportunity to differentiate ourselves there. A lot of people talk about service levels in their straplines but when you look at the stats they don’t deliver.”
Delivering a very high service level often comes as a price, as mistakes are costly to rectify, something Hay knows only too well.
“Yes but what is the cost of not achieving it?” he asks. “The trick is doing it a lower cost by not getting it wrong in the first place. It is about having people in the right place paying attention to detail and caring about the customer. Added value is about total service, quality of operation, being flexible, sharing data and about being creative in the way you provide solutions that are dedicated in parts and share overhead in others.”
This might involve basing several dedicated transport operations at a shared user DC for example.
“Sharing a site overhead across two or three dedicated contracts or across a dedicated contract and consolidation reduces the burden,” Hay says. “Too many people try to take the low risk option and keep the overhead and the cost wrapped up into one contract. Anyone can do that.”
FWC’s approach does require an element of risk taking and speculative development.
“You don’t make any money at all on that first customer in a consolidation centre; it is only when you get the fifth customer in there it becomes profitable,” Hay says. “Then it is a combination of systems and people to make it work. We are cross-docking 25,000 pallets a week in the network, and there is a lot of skill and knowledge that goes into cross-docking that sort of volume. The benefit of this consolidation is that customers get the service because we are doing single rather than multi drop and they get a low cost base too.”
Hay argues that the advantage of using a national network like FWC rather than a pallet network is the single point of responsibility across the UK.
“In a pallet network you have a number of people passing the baton,” he says. “So who owns the customer? If a pallet gets lost, who’s fault is it? There can be internal politics because ultimately it is a co-operative relying on four or five businesses working well together. A number of those networks make it work but others have fallen on their faces because someone has taken their bat and ball home.”
FWC uses a mix of inhouse and subcontract transport, with hauliers mainly used for trunking full trailer loads. “Full trailer haulage is now just a commodity,” says Hay. “The question is are ‘we balancing our network’ and there are more ways to balance it than just commoditise haulage. It is also about the speed you have to make those movements happen. If you are doing consolidation and your consolidated load is ready to go and needs to be at the factory in an hour you can’t rely on hauliers.”
This requires good planning as well as flexibility and this is something FWC has plenty of experience with on its chilled distribution.
“The ambient and frozen sides have something to learn from chill,” says Hay. “I can tell you what percentage of our chilled volumes we will move on any given day because give or take 0.2% it will be the same week on week. The actual volume may vary but 16% always goes on a Thursday for example.
“So the majority of the chilled schedule is ‘fixed’ and the skill is in flexing that last 10% to 15% of capacity. We have an incredible number of good quality transport planners and it is they who make the job happen. They will outperform a routeing system every time because an automated system can’t react quickly enough. We are dealing with 500-plus collection points going to 1,000-plus delivery points every day with volumes that could be up or down 2%.
“Ambient is slightly different because volumes are much more volatile and planning is more ‘live’ through the week.”
As national distribution companies get bigger the challenge is always to retain the flexibility and personal service while delivering a consistent level of performance across the country.
“We have to be careful as we grow is that we don’t lose our culture of knowing and understanding our customers,” Hay says. “We don’t want to become a huge monolith – one of the things this business has traditionally done incredibly well is to avoid friction and conflict within the network. It is a real team effort and that is something we will protect and guard.”
Hay admits that retaining the values that make FWC attractive to customers and staff, and so keeps the company profitable as its grows, will be tough.
“That is the big challenge for me over the next five to 10 years,” he says. “If you look at the Motor Transport Top 100, profitability drops the bigger the turnover gets. That is probably because of the increased complexity and reduced closeness with the customer. The challenge is how do we maintain a respectable level of profitability and attention to detail while growing. Fowler Welch has been successful because of it is fleet of foot and we need to maintain that for our customers as we grow. ”
