E-commerce will not affect logistics for daily consumer goods
The logistics for daily consumer goods will not change despite the expansion of e-commerce, as logistics are based on existing stores networks. There will simply be one more link in the logistics chain: delivery from the store to the home.
Online foods sales are growing rapidly. Both Kesko and S Group have said that sales of food ordered online increased by 40 per cent year-on-year. However, the volumes are still low.
“In Finland, online food sales are now at the level seen in Sweden in 2009,” says Jyrki Tomminen, Kesko’s Supply Chain and Logistics Director.
The global pioneer in terms of online sales of daily consumer goods is South Korea, where 16 per cent of sales take place online. The leading European countries are the United Kingdom and Belgium.
“In Finland, the market is now worth approximately EUR 48 million. S Group’s online food sales amounted to approximately EUR 30 million last year,” says Matti Torniainen, SOK’s Digital Services Manager.
For both chains, online foods sales lean on the existing store network. When products are ordered online, they are picked in normal stores ready for delivery to customers.
“There are a lot of fresh products involved. Storing them and ensuring an unbroken cold chain is a local matter,” says Torniainen.
HOK-Elanto has a dark store in Tammisto, Vantaa that is not open to customers – it exists solely for picking products for the online store. The food for Alepa’s online store is picked there for customers in Greater Helsinki.
“One reason for setting up the dark store was that small Alepa stores often sold out of many products after the morning picking round, so the products were not available to customers in-store.”
E-commerce in the largest towns and cities
S Group allows customers to buy online from more than 20 stores. The regional cooperatives can independently decide whether to get involved.
“They look at the situation in relation to their own needs,” says Torniainen.
In practice, having 20 stores means the same number of residents as in the largest towns and cities. The cooperatives have their own partners for home deliveries, varying from the national Posti company to small local haulage firms.
“In Finland, online food sales are now at the level seen in Sweden in 2009.”
– Jyrki Tomminen
In addition to online food sales, S Group has online stores for its hardware and department stores, while Prisma stores also offer online sales of non-food items.
The largest digitalisation project in S Group’s logistics chain is the new logistics centre for daily consumer goods in Sipoo, constructed next to the highly automated non-food logistics centre. S Group’s own logistics company, Inex Partners, will close its site in Kilo this year and move to Sipoo by February next year. Some non-food products are delivered from Sipoo directly to customers.
According to Inex Partners’ Logistics Manager, Mikko Kymäläinen, a quarter of the sales of daily consumer goods consist of imported products. The main harbour is Vuosaari in Helsinki.
“A small amount arrives from Asia by air freight.”
S Group has ten regional terminals in various parts of Finland.
All of Kesko’s imports arrive by sea
Kesko has 109 stores offering online store services. All of them have a click-and-collect option, and approximately 60 stores also offer home delivery. Kesko arranges haulage services at some of its Citymarkets, but the vast majority of retailers organise services themselves.
According to Jyrki Tomminen, no special infrastructure is required for the online store – all that is needed is sufficient cold storage space to keep products fresh until the customer comes to collect them.
“The store-specific operating model is cost-efficient and enables rapid deliveries. It is important that customers can obtain information about the delivery time,” he says.
For Kesko, the local distribution network is the only new element on top of the other components of store logistics. All haulage within Finland takes place by road.
Forwarding Manager Vesa Tuuri says that the only thing that could change this would be an additional track between Helsinki and Oulu.
Kesko’s logistics centre for daily consumer goods is in Hakkila, Vantaa. The centre serves as the central warehouse for K food stores, and it also houses a separate central warehouse for Kespro’s food service business. Kesko has nine regional terminals.
“Almost all of our imports arrive by sea, and the vast majority of them come to the Port of Helsinki. The connections between Vuosaari and Hakkila are good,” says Tuuri.
Tomminen says that the lorry shipments departing from Vantaa will be handled by larger units.
“We are experimenting with larger vehicles to make haulage more efficient and reduce our impact on the environment.”
For shipments between Vantaa and Oulu, Kesko has been granted a special permit to experiment with a 34-metre lorry that has space for roller cages on two levels. A 31-metre vehicle has been taken into use for shipments from Vantaa to Turku and to the individual stores in the region. A similar experiment began in the Vaasa and Seinäjoki areas this spring.
“Time will tell whether road trains will ever be used in Finland, and whether they can operate without drivers,” Tomminen says.
Making cross-town traffic more efficient
If Tomminen could choose how the transport system is developed, he would improve non-radial connections within Greater Helsinki.
“A fourth ring road from the Lahti road via Korso to the Tuusula and Tampere roads would be welcome, and it would improve the options available to freight traffic. At the moment, the most direct routes are not suitable. A fifth ring road may be necessary later on,” Tomminen says.
Tomminen does not believe that maritime traffic will decrease in importance to the retail trade, even if the planned railway tunnel between Tallinn and Helsinki is built.
“Maritime transportation will retain its role for shipments from Central Europe to Finland. The tunnel would mainly be for passenger traffic. As an alternative for freight traffic, it would be dependent on pricing, and it may be suitable for very fast shipments.”
This spring, Kesko has experimented with single-container shipments by rail from China, with a weekly train arriving in Kouvola.
“This will also not replace maritime traffic, and it is more expensive.”