2. Anything else is a compromise
Unlock supply chain
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cost savings
Atlas Universal is the strategic B2B platform for the retail
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boost your environmental credentials
A complete ebusiness solution,
Universal has the ability to manage:
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2. Information sharing with all
appropriate parties
3. Processes across corporate and
geographic boundaries
Its applications include:
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(GFR and GNFR)
• Automated invoice matching
• Supplier management
• Distribution of product specifications
• Global Data Synchronisation
• Real time Electronic Point of Sale
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suppliers
• Multi-channel systems integration
• EDI and web-EDI
Available in licensed or managed service
models, Atlas Universal offers low cost
entry and a return on investment within
12 months.
To find out more about Atlas and how
we could help you, contact
Alan Winsbury on 01942 252000 or
email alan.winsbury@atlasproducts.com
“We have
selected Atlas
because we trust
them to provide
the full ebusiness
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essential for us to deliver the
demanding service standards that
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IT Director
NFT
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Head of IT
Radley and Company
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BWG Foods
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Comet
LONDON
www.atlasproducts.com
Atlas UK
Tel: +44 (0)1942 252000
Atlas Ireland
Tel: +353 1 511 1263
Atlas North America
Tel: (416) 214-4278
3. October 2012 Retail Week IIIwww.retail-week.com
SUPPLY CHAIN
W
ithglobalsourcingandextendedsupplychains,it’slikely
thereareseveralpointsofmarginhidinginyourbuying,
supplychainandfinancefunctions.B2Btechnology
couldreleasethoseprofitsforyou,buthow?
Manyorganisations’experienceofB2BhasbeenlimitedtoEDI,
andperhapsadalliancewithasupplychainportal.Strategiesfor
B2Buseinthesupplychainarerare,withtechnologiesoften
identifiedseparately,acquiredfromdifferentvendorsandoperatedinisolation.
Traditionalthinkinghasn’tbeenaboutaholisticsolutionwherethewholeisgreater
thanthesumoftheparts.
However,someforward-thinkingorganisationsareleveragingsupplychain
solutionswithallthreeoftheB2Bcapabilitiesessentialtomanage:
• Transactionsbetweentradingpartners
• Informationsharingwithallappropriateparties
• Processesacrosscorporateandgeographicboundaries
AtlasisacompleteB2Bsolutionproviderwiththeretailsupplychainexpertiseto
employalloftheseessentialcapabilitiesinstrategicsolutionsthatdeliveroperational
costsavings,productivityimprovements,higherrevenuesandimprovedmargins.
Ourcustomershavegainedcompetitiveedgebyharnessingthesethreecompeten-
ciesintheirsupplychainoperations.Theymanagetransactionssuchasorders,
invoices,shippingnotesandgoodsreceivednotes.Theysynchronisesupplier,
product,priceandpromotionsinformation.Theyautomatebusinessprocessessuch
asinvoicevalidation,approvalandproblemresolution.
AllareusingtheAtlasUniversalB2Bplatformtouncovermillionsofpoundsin
additionalannualmargins.
Alan Winsbury,Commercial Director,Atlas
SUPPLY CHAIN SUPPLEMENT
Supplement Editor
Anna Richardson Taylor 020 7728 3590
Contributors
Alison Clements, Gina Lovett,
Liz Morrell, Matthew Valentine
Supplements Production Editor
Tracey Gardner 020 7728 4129
Art Director
Jon Hart 020 7728 3519
Production Manager
Paddy Orchard 020 7728 4111
Display Account Manager
Jennifer Saunders 020 7728 3849
Commercial Director
Mandy Cluskey 020 7728 3586
Managing Director, Retail
Tracey Davies 020 7728 3567
T
he pressures that supply chain directors constantly face are
notorious. No matter whether in boom or bust, the supply
chain is always subject to the most intense scrutiny to ensure
it runs smoothly, nimbly and flexibly to minimise waste and risk
and overcome logistical challenges.
Even if systems are well devised and efficiently run, there always
seems to be room for improvement. And with new challenges
springing up unrelentingly – such as the integration of multiple retail channels
and international expansion – there is always the need to innovate and evolve.
Environmentalimpactissomethingsupplychain leadershave hadtograpplewith
forsometime,andasourfeatureshows(page IX),sustainablethinkingisbeing
applied toeverythingfromtransporttotechnology,sourcing,andthefinaldelivery
mile.Butmostimportantly,itislinkedtotangiblecostsavings.Therequirementsof
multichannelretailareequallycomplex,andrequirescrutinyofeveryaspectofthe
supplychain (pageXVII).
But a recurring theme that supply chain chiefs are talking about is collaboration
– teaming up with suppliers or competitors to pool resources, reduce environmental
impact and cost, and save time in reaching the all-important consumers.
If one thing is evident, supply chain leaders are keen to keep on innovating. And as
one of the mightiest logistics operations in the world, the London 2012 Olympics, has
come to a successful end, many will be looking eagerly to lessons learnt (page IV).
Anna Richardson Taylor,Supplement Editor
Innovateandcollaborate CONTENTS
Logistics IV
Lessons learnt from the Olympics
Sustainability IX
How to adopt an environmentally
friendly supply chain
International XIII
Retailers’ sourcing strategies
Multichannel XVII
The effect of multichannel on
retailers’ supply chains
In association with
4. SUPPly chain
logiSticS
n
ight-time deliveries, consoli-
dated transport, river trans-
port, increased collaboration
between businesses, and
extensive logistics modelling all
helpedtackleroadrestrictionstoensure
a safe and well-served London 2012
Olympic Games.
The landmark event enabled large-
scale supply chain pilots to run their
course, with considerable progress
made, according to Richard Wilding,
professor of supply chain strategy at
Cranfield School of Management.
The acknowledged success of the
Games’logisticsoperationsisstillbeing
evaluated, although many are already
drawing key lessons from them. The
Chartered Institute of Logistics and
Transport (CILT) is compiling a report
on the learnings, organising a working
group – The Olympic Legacy Group for
Logistics and Transport – to assess how
effective various initiatives were.
Results will be published in the first
three months of 2013.
Chairman of the institute Graham
Inglis, who is also chief executive
EMEA of DHL Supply Chain, is making
‘legacy of the Olympics’ a focus theme
of his year-long presidency. “Require-
ments for increased security and fewer
deliveries into parts of London during
the Games proved the catalyst for
smarter operations,” says Inglis. “By
working closely with local authorities
and the transport agencies, issues like
out-of-hours deliveries could be pro-
gressed significantly.”
Transport for London, LOCOG, offi-
cial London 2012 supply chain partner
UPS and logistics academics spent
several years looking for ways to inno-
vate when supplying the Olympics,
and keeping London and other affected
locations functioning normally during
the Games.
“During the Olympics retail supply
chaindirectorswillhavelookedclosely
at how their business is run and carried
out their own very specific modelling
and forecasting,” says Steve Agg, chief
executive of the CILT. “Others will per-
haps hear of initiatives tried out during
the Olympics, and ask, could we
IV Retail Week October 2012 www.retail-week.com
OlympiclegacyNewsupplychainideastriedoutattheLondon2012Olympics
couldchangethewayretailersoperateintheUK.AlisonClements
findsoutwhatlessonshavebeenlearnt
sharpen our forecasting and planning
further?Shouldwelookmorecloselyat
patterns of customer behaviour and
adapt accordingly; shorten lead times
for key products; know how to work
more closely with suppliers during
peaks and troughs? If the Olympics
has inspired retailers to look at their
businesses in a different way, that’s
great, and we should continue to build
on that.”
Sainsbury’s senior supply chain
manager Stephen Hayward says plan-
ning and execution proved to be key to
successforthegroupduringtheGames.
“We took the time to establish the
impact, both positives and negatives,
right across the business from product
supply, logistics, retail, IT and facilities
management,” he says. “These were
then closely managed by senior man-
agement through four weekly steering
and working groups. Teams were asked
to provide evidence of their plans,
rehearse those plans and to update
those plans as we got closer to the
events and or when new information
came to light.”
Hayward feels the Olympics showed
“that if you govern and plan key events
properly, working together internally
across all divisions in conjunction with
external parties such as suppliers, the
impact of any event can be mitigated,
even optimised”.
New and improved
There was plenty of advice from the
Games organisers. The mantra put out
by TfL and LOCOG was ‘reduce, re-
route, re-time, and revise mode’ (see
box). Now evidence is emerging that
innovative ways of working were borne
out of the guidelines.
A prime example is out-of-hours
deliveries, says Agg. “There was relaxa-
tion of out-of-hours delivery restric-
tions into the London boroughs and
other Olympic sites around the coun-
try,” he says. “Anecdotally this went
very well. There have always been con-
cerns about noise and disturbance to
residents, but the Olympics has given
us the opportunity to show this needn’t
be the case. Today vehicles are quieter
“vehicles aRe
quieteR aNd
Night-time
deliveRies
caN be doNe
efficieNtly
aNd quickly
if maNaged
Well”
Steve Agg, CILT
CitySprint introduced a
rollerblading fleet during
the 2012 Olympics
SUPPly chain
logiSticS
Olympiclegacy
5. thinKingoUtSiDEthEBoX
Whenconsideringthemovementof
goods,deliveriesandcollectionsduring
theGames,TransportforLondonand
LOCOGadvisedtoReduce,Re-route,
Re-TimeandRevise.Thesearenow
consideredbestpracticeareasthat
retailerscanapplytotheirsupply
chainoperations.
■ ReduceRetailersshouldcollaborate
andco-ordinatewithneighbouring
businessestosharedeliveries,with
theincentivetosavecostsandreduce
C02 emissions.Westfieldshopping
centreshowedhowconsolidation
canworkduringtheOlympics.
■ Re-routeIdentifytraffichotspotsand
re-routedeliveriesifnecessary.Using
differentdepotstosupplyfromor
differentsupplierssavestimeand
CO2.RiverrouteswerepilotedbyUPS
fordeliveriesintotheOlympicvillage.
■ Re-timeArrangeout-of-hours
deliverieswhenroadsarequieter,and
receivedeliveriesoutsidethebusiest
times.Stockuponnon-perishable
itemsbeforebigevents,andcarryout
maintenanceonvehiclesinadvanceto
preventproblemsduringpeaktimes.
■ RevisemodeUsedifferenttransport
anddeliverymodes.Forexample,
courierscouldcycleorwalkforsmall
deliveries,andrailorrivertransport
couldbeanoptiontoavoidcongested
roads.CitySprint,fulfilmentpartnerfor
AsosandHouseofFraser,had
contingencyplansforhomedeliveries
duringtheOlympics,including
increasingitspush-bikefleet,
introducingajoggingandrollerblading
teamandequippingcourierswith
routingtechnology.Thisenableditto
plannewroutesandavoidtraffichot
spots.DPDused‘runners’fromvans
forproblematicparceldeliveries.
October 2012 Retail Week Vwww.retail-week.com
future over a particular store we have
evidence and experience to report on.”
Meanwhile, direct delivery routes
alleviated problems for Waterstones.
The book retailer worked with its
supplychainpartner,UnipartLogistics,
to ensure store deliveries from its
Burton distribution hub overcame any
Games-related hurdles. Waterstones
supply chain director Simon Davidson
says: “When all the planning informa-
tion became available it was clear that
for a dozen stores in London the likeli-
hood was there would be severe deliv-
ery restrictions during normal working
hours. It would be impossible for our
transport provider, DPD, to guarantee
Vehicle movement has
been reduced by up to
80% at Westfield Stratford
➤
and night-time deliveries can be done
efficiently and quickly if managed well.
IfitworkedinLondonthere’snoreason
why it can’t work in Cardiff, Glasgow,
Birmingham and so on.”
Marks & Spencer took part in TfL’s
quieter out-of-hours delivery trials for
the Olympics, working closely with
LOCOG and the police to implement
“robust plans at our warehouses”.
Michael Watkins, head of operations
of food logistics at M&S, says 67
London M&S stores received overnight
deliveries during Olympic restrictions.
“In-take into Faversham and Hemel
Hempstead DCs was brought forward
by three hours. We managed shift
patterns among drivers, warehouse
staff and store colleagues as a result,”
says Watkins.
He says M&S was keen to see the
impactofchangestodeliveryschedules
onstaffingrequirements,andfeelsthere
isnowatemplatetoworkto.“Thereare
very few stores within the M&S estate
where it would work for us on a perma-
nent basis, so we’re not calling for
wholesale changes to delivery times,
but we have now proven it can work.
So if there is a question mark in the
In association with
6. closely with the British Association of
Pharmaceutical Wholesalers and other
suppliers to ensure a high level of serv-
ice to pharmacies in the London areas,”
says Simon MacDonald, distribution
contract manager at Boots. “A key
learning was to always have clear, open
lines of communication externally
and internally to ensure that the
process ran smoothly.”
Another key supply chain strategy
during the Olympics was to encourage
competitors to work together. Consoli-
dation centres are already delivering
greater efficiencies for retailers. For
instance, DHL has partnered with
Westfield shopping centre to provide
a consolidation delivery system to
Westfield Stratford City, improving
efficiency for about 250 retailers. All
store deliveries go to a consolidation
centre eight miles from the shopping
centre, and are then delivered in one
vehicle to the shops – one vehicle
between them instead of one vehicle
each. DHL Supply Chain says this has
reduced vehicle movements to West-
field Stratford City by up to 80%.
“Planning better and sharing facili-
ties can really deliver excellent results,
but it needs to be done well,” says Agg.
“The Olympics has taken the idea of
consolidation, shown what can be
achieved, and made it a talking point. If
we’ve demonstrated that consolidation
effort means fewer road journeys, fewer
vehicles and lower emissions then it’s
a great strategy to pursue.”
He says that trust has been an issue
in the past, as competing grocers and
fashion retailers worried that pricing
and promotional strategies might be
undermined if they worked closely
with competitors.
However, if retailers see the benefits
from consolidating through the supply
chain, they will be more likely to
take the plunge. “A lot more is starting
to happen around consolidation,
fuelled by Olympic success stories, and
surely that’s to everyone’s advantage,”
says Agg.
The Olympics has proved to be a
massive catalyst for supply chain inno-
vation, providing a stage on which to
demonstrate what can be achieved.
The disruption of the Games forced
many people to look at new ways to
operate, according to Wilding. “There
was proof that these ideas do deliver
results,” he says. “Many of the new
initiatives that we saw during the
Games did reduce costs, cut journey
times and cut the amount of CO2
used, so now we have a duty to pass
on that legacy.”
VI Retail Week October 2012 www.retail-week.com
SUPPly chain
logiSticS
“the olympics
has helped
bRiNg us
eveN closeR
togetheR
With ouR
RetaileRs”
Steve Woodman, DPD
daily deliveries to branches in those
areas of London. So we decided we
wanted a bespoke service set up for
these 12 stores and the delivery was to
operate overnight.”
During the games, freight service
Pall-Ex also launched an overnight
service for those postcode areas likely
to be affected, among other initiatives.
Mark Screen, transport manager at
Unipart Logistics, says two specific
direct delivery routes were created
for Waterstones, which completely
bypassed the usual hub and local depot
operation. This proved successful. For
example, the chain’s Kingston store,
which was particularly badly affected
by the cycle road racing, would not
have been able to receive deliveries for
several days without the arrangement.
Davidson says the slightly higher
cost of the direct service means it won’t
be widely adopted by Waterstones, but
he believes there may be specific appli-
cations for direct delivery in the future
– particularly during peak November
and December trading.
At ecommerce operators, home
deliveries had to adapt too. DPD Lon-
don regional manager Steve Woodman
says: “Overall we’re delighted with
how the Games have gone. We were
able to agree earlier collection times
with most major etailers and we believe
this is a solution that we can employ
during the annual Christmas peak – a
period which places a very similar
strainonthenetwork.Intheend,earlier
collections helped us solve most issues
for etailers.”
DPD invested £1.3m in preparation
for the Games, employing 200 extra
staffandopeninganadditionaldepotin
central London, increasing the number
of routes operating from all its London
depots and extending its early delivery
times. Collection hours were extended
and DPD provided a ‘runner’ for drivers
on routes with restrictions on stopping
and parking to make the final delivery
on foot.
communicate and collaborate
Woodmansaysthebiggestlegacymight
end up being improved communica-
tion. “We want to work with retailers to
keep on improving the information we
are able to supply to their end-custom-
ers about their parcels. The Olympics
hashelpedbringusevenclosertogether
with our retailers. We’re not just the
company that delivers their parcels,
we’re very much part of their team.”
Collaboration and communication
worked for Boots too. “We worked
Deployment of runners for
shorter journeys helps
avoid traffic hot spots
➤
In association with
M&S received
overnight deliveries
during the Olympics
7. Retail logistics –
open around the clock,
around the world
We appreciate how competitive and demanding retail
really is, so we push harder to deliver more
www.kuehne–nagel.com/retail
Kuehne + Nagel
1 Union Business Park
Uxbridge UB8 2LS
United Kingdom
Tel: +44–1895–552000
info.london@kuehne-nagel.com
8. 9633-Yusen_Sector_PO_A1 22/3/11 15:05 Page 3
We understand the tough sourcing and fulfilment challenges in
retailing today, the need for visibility, predictability and data quality
to support decision making throughout the global supply chain.
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9. suppLY CHAIN
sustAINAbILItY
I
f there is one area where retailers
have been almost universally
keen to adopt environmentally
friendly practices, it is in their
supply chains. The reason could not
be simpler: improving efficiency to
reduce environmental impact also
reduces costs.
More efficient vehicles, through mod-
ern engines or improved aerodynamics,
or more efficient route planning, mean
less money is spent on fuel. And Rich-
ard Wilding, professor of supply chain
strategy at Cranfield School of Manage-
ment, points out that fuel is only one of
manyresourcesusedintheretailsupply
chain.Time,people,materials,facilities,
energy and money are among the other
resources employed, and all must be
managed to ensure optimum efficiency
and minimal environmental impact.
“Water is becoming a really big
issue, for example,” says Wilding.
Regional distribution centres may
increasingly capture rainwater to avoid
problems such as the drought that
threatened much of the southeast of
More efficient distribution centres
are certainly on the cards at discounter
Poundland.Theretailerhasatemporary
distribution centre to provide
products for its stores in the Southeast.
But rapid expansion – Poundland is
currently opening more than 60 new
stores every year – means a larger
facility will be needed within two or
three years, says supply chain director
Andy Monk.
“We are thinking about planning a
new distribution centre, and if we build
that, one of the things on the agenda is
thatithastobeenvironmentallyfriendly
– how we make it carbon neutral and
get the lowest energy consumption and
so forth. We will build all of those
things in as and when the time is right,”
says Monk.
Self-sufficient
But with the firm control on costs that
Poundland exerts, environmental effi-
ciencies must pay for themselves, adds
Monk: “We are looking at ‘re-lamping’
oneofourwarehousesandputtingmore
efficient lights in. I would say that cost
savings are a major motivation for us,
and if something is environmentally
friendly too, that’s even better.”
Poundland is in a good position to
build in environmental efficiencies as it
Thesuperenergysavers
Creatingamoreenvironmentallyfriendlysupplychaincangohand
inhandwithreducingcosts,asretailersfindnewwaystodrive
efficiencies.MatthewValentinelooksatsomeinnovativeapproaches
➤
England earlier in 2012, he says. The
water can be used for flushing toilets
and cleaning vehicles.
As energy costs rise, wind turbines
and solar panels to power distribution
facilities will also become more attrac-
tive to retailers, despite the upfront cost,
suggests Wilding. And some retailers
might go even further. Green roofs
provide excellent insulation to make
warehouses cheaper to heat or cool. If
used on stores too, these earth-covered
roof spaces could be used to grow fresh
produce at the point of sale, he says –
adding that supermarket chains are
actively discussing that idea.
October 2012 Retail Week IXwww.retail-week.com
“coSt SavingS
aRe a majoR
motivation
foR uS”
Andy Monk, Poundland
In association with
Electric vehicles
deliver goods
to Regent Street
Poundland is planning
for a more efficient
distribution centre
10. ImprovINg tHe servICe
Pall-Exhasoperatedanominatedcarrier
serviceforAsdaforfiveyears.Itcollects
freightfromambientgroceryandgeneral
merchandisesuppliersthenconsolidates
itatacentralhubbeforedeliveringittothe
grocer’sdistributioncentresinLutterworth
andDoncaster.
Havingonepointofcontactformultiple
suppliersmakesiteasiertotrack
deliveries,andreducesadministration
andvehiclejourneysbecauseeachtruck
carriesmore.Pall-Excalculatesthatit
reducedthedistancetravelledby340,000
milesin2011.Supplierssavedmoney
too,byreducingthelocationsthey
deliveredto,accordingtoPall-Ex.
Asdaprimarydevelopmentmanagerfor
centralsupplyAndrewRobinsonsays:
“Pall-Exhelpsustogetproductstoour
storesquicklyandefficiently,whichiskey
tomaintainingavailabilityandmaximising
sales.We’reprovidedwithafullend-to-end
servicefromcollection,toloadconsolida-
tionandbookingintotheAsdadepot.This
hashelpedtooffercostsavingsand
serviceimprovementstooursuppliers.”
suppLY CHAIN
sustAINAbILItY
develops distribution centres. But
more mature retailers which have
to retro-fit green elements might find
it harder to justify the costs involved,
says Monk.
However, when it comes to modifica-
tions to the vehicle fleet, the return on
investment can be far quicker given the
high cost of fuel. For longer journeys,
Poundland has a fleet of double-decker
trucks that can fit nearly double the
number of pallets carried by conven-
tional trailers.
“If we push out, say, 30 double-deck
trailers a night, that would have been 60
if we had stayed with the conventional
trailers,”saysMonk.“Wehavejustintro-
duced some of what we are calling
‘urban double decks’, 33 ft trailers that
again are double-decked, for store deliv-
eries. A lot of our stores are high street
➤
X Retail Week October 2012 www.retail-week.com
“With an
electRic
vehicle
emiSSionS
aRe
viRtually
zeRo”
Peter Bourne,
The Crown Estate
based, so we can’t get a 40 or 45 ft trailer
in. We’ve got five 33 ft double-deck trail-
ersbut,again,itletsusget30-oddpallets
on what would be a 16-pallet trailer.”
Targetshavebeentightenedfortheplan-
ning department, demanding that less
space be wasted by packing the trailers
more effectively. Over the last 18
months, Poundland has increased the
number of pallets carried on its trailers
by about 8%.
Collaboration and consolidation are
increasingly popular. Monk confirms
that, if economically viable, Poundland
would consider becoming involved in
consolidation schemes such as the one
that operates for stores in London’s
Regent Street, if they were launched in
other towns and cities.
The scheme, run by Clipper Logistics
Group for The Crown Estate, recently
Marks & Spencer’s eco and ethical Plan A commits
the company to becoming the most sustainable big
retailer in the market by 2015.
The retailer says its UK and Republic of Ireland
distribution systems have now achieved carbon
neutral status. New software, better planning and
more efficient vehicles have reduced fuel usage by
between 28% and 30% per product, depending on
the category.
M&S has upgraded all engines in its fleet, reducing
emissions, and introduced more than 400 teardrop
trailers, which are more aerodynamically efficient.
They reduce fuel consumption by 10% and increase
capacity by the same amount.
M&S has increased energy efficiency in its
warehouses by an average of 33% compared
with 2006/07.
Chilling and refrigeration technologies have also
been upgraded in all distribution facilities.
Trials are under way to assess dual fuel diesel and
compressed gas vehicles, and hydrogen fuel-cell
powered forklift trucks.
sustAINAbLe AmbItIoN
won the Hermes Retail Week Green
Supply Chain Initiative of the Year
award. It uses a consolidation centre in
Enfield to organise and dispatch goods
to Regent Street stores using an electric
vehicle that produces no tailpipe
emissions. The Crown Estate develop-
mentmanagerPeterBournesaysitcame
aboutbecauseofadesirebytheproperty
group to widen the pavements in the
West End. Vital to that aim was to
achieve a reduction in vehicle traffic.
“To our surprise, when we had some
surveys done, they found that actually
morethan25%oftrafficwasgoodsvehi-
cles,” says Bourne. Among the 22 shops
that use the service, vehicle visits have
fallen by 80%. “It is a phenomenal
reduction. Even if you were using diesel
vehiclesitwouldbegoodnewsonemis-
sions. With an electric vehicle they are
virtually zero,” he adds.
The scheme has proved popular with
store managers. Because the vehicle is
only delivering to Regent Street stores
the driver can make relatively accurate
predictions about when he will arrive at
each location. And retailers new to the
UK, of which the street has a growing
number, can benefit from a ready-made
logistics network.
With such an array of areas that can
be trimmed or realigned to improve
environmental efficiencies, retailers
need to explore what best applies to
their supply chains. But it can certainly
be worth the effort.
In association with
By 2015,Plan A’s aim is for
M&S to become the most
sustainable big retailer
14. M6
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17. supply chain
inTERnaTiOnal
i
n the drive to boost margins,
maximiseprofitsanddelivernew
and exciting products,
a good retail sourcing strategy
is an underlying principle for any
retailing business, but a constantly
evolving challenge.
What can start as a new, low-cost
emerging sourcing destination can
quickly lose its competitive advantage.
“As sourcing locations become more
successful, the workforce wants a better
standardofliving,whichthendrivesup
labour costs,” says Brian Templar,
chairman of supply consultancy Davies
& Robson.
The trend is largely driven by the
fashion sector in which seasons, trends
and demand influence the market and
where reasonably transferable skills –
material cutting and sewing, for exam-
ple – make switching markets easier.
“It’sdifferentforthingslikeDIYprod-
some retailers. “Due to its success as an
industrial nation, China is no longer
automatically the cheapest sourcing
locationandcompanieslookingonlyfor
the lowest cost are now looking at loca-
tions like India and Sri Lanka instead,”
says Templar.
Sourcing strategies
Meanwhile, the zero duty rates of
countries such as Bangladesh and
Cambodia are encouraging more retail-
ers to source from there – especially
within the clothing industry. “A lot of
high street retailers are trying to get into
Cambodia because the Chinese are
also doing joint ventures or investing
there. So for the volume producer
Cambodia is emerging as a new
sourcing market,” says Simon Smith,
director of Discern Consulting.
Other increasingly popular markets
include Vietnam, Indonesia, Thailand,
Pakistan, Egypt and Morocco, while
some European fashion brands are
looking at Latin America in countries
such as Bolivia and Honduras.
Burmaisalsoonthehorizonasanew
sourcing destination, according to
Smith, who says retailers are already
exploring opportunities there. “It has a
cheaper labour market, very good natu-
ral resources and a government that is
keen to entice and encourage manufac-
turing. However, it is waiting for the
political situation to be cleaned up.”
With fast fashion driving the shift,
retailers such as New Look have long
been sourcing from locations including
Bangladesh, Cambodia and Vietnam.
“We have been buying in those markets
for quite some time,” says New Look
group sourcing and menswear buying
director Philip Walker. He says the
retailer will retain its focus on those
markets to gain competitive advantage.
ForNewLookthebalanceofsourcing
must also take into account the ethics
and policies of a country – and the qual-
ityofsupplierrelationships.“Welookat
speed, quality and a very strong ethical
commitment. It’s about working with
your partners and making sure you get
the best from them,” says Walker.
Perhaps one of the most surprising
trends though has been a gradual return
to UK and European sourcing, the big-
gestchangeinsourcingstrategyforNew
Look, according to Walker.
“Uncertain trading patterns mean
retailers need ‘near shore’ sources of
supply for in-season top-ups, and the
zero duty rates of Turkey, and some
centralandwesternEuropeancountries,
together with a net currency benefit
are also driving trade closer to home,”
says Cross.
BacktothesourceRetailersneedtorevisittheirsourcingstrategiesconstantly,
jugglingandrejiggingtheequationsofsupply,demandanddelivery.
LizMorrellinvestigateswhichregionstheycurrentlyfavour
➤
ucts – a screw or a hinge doesn’t change
every season and demand is relatively
constant. So the likes of B&Q can get
these products made and stored in
China and call off pallets just as though
the warehouse was in the UK, as they’re
not needed in a short-time window,”
says Templar.
Cheaper labour costs and duty rates
are increasingly driving retailers into
new markets. “The quest to maintain
product margin as commodity prices
softenslightlybutwageandfreightrates
increase means that the only real way to
reduce costs is to move to countries
where labour costs and duty rates are
lower,” explains Christine Cross, chief
retail and consumer adviser at PwC.
That means that sourcing power-
housemarketssuchasChina,wherethe
clothing duty rate is 12% and labour
costs are rising as the labour force
matures, are becoming less popular for
October 2012 Retail Week XIIIwww.retail-week.com
In association with
“theonlyReal
Way to Reduce
coStS iS to
move to
countRieS
WheRe labouR
coStS and
duty RateS
aRe loWeR”
ChristineCross,PwC
In association with
ALAMY
18. supply chain
inTERnaTiOnal
Environmental concerns are also
affecting the trend, according to Emma
Rowlands, UK sales director of Kerry
Logistics. “With the drive to be more
proactive in reducing carbon emissions
and environmental footprint, sourcing
closer to home is becoming a considera-
tion,” she says.
Walker says that in line with many in
the fast-fashion industry, New Look has
been increasing its UK sourcing for the
last year or so and retailers in other sec-
tors (see box) are also driving the trend.
“It’s about speed to market,” he adds.
a balanced approach
SueButler,directorofmanagementcon-
sultancy Kurt Salmon, says retailers are
increasingly using a stable of sourcing
still by far the most effective region for
producing toys, which have stringent
safety regulations and often many com-
ponents that can require a large labour
force to pull from. There just isn’t the
infrastructure – whether on the trans-
portsideorthesheervolumeoffactories
needed to, say, make a doll – in other
countries so probably around 95% of
whatgoesthroughmytillsisfromChina
still,” says Grant.
So while the markets may change,
the fundamental challenge of sourcing
remains, according to Templar. He
concludes: “Finding the right sourcing
location is all about the trade-off
between cheap labour, product quality
and the time and cost of transport,
especially in fashion.”
➤
ThE mOvE back hOmE
XIV Retail Week October 2012 www.retail-week.com
The UK has proved an increasingly attractive market
for sourcing, as increases in freight costs, raw
material prices and labour costs contribute to an
erosion of the overseas benefits.
In addition, the shortened lead time and the ability
to make to order – enabling a rapid response to
customer demand and therefore less capital tied up
in inventory – also attract more retailers to source
from the UK. Among them is John Lewis. “We are
seeing a gradual closing of the pricing gap that exists
between production in the Far East and Europe,
particularly as labour costs rise in markets such as
China. With this in mind, there is a continuation of the
trend for production to move to markets nearer to the
UK, and some to the UK itself,” says Sean Allam,
head of product sourcing and services at John Lewis.
Allam says the strategy at John Lewis has been
the result of a number of factors, including market
conditions and consumer demand. “Speed to
market is a key competitive advantage. UK
manufacturers offer a much faster route from
supplier to shop and are also synonymous with
quality and craftsmanship. The quantity of product
bought also has an impact on the country we source
from. We buy some products in small quantities, for
instance in gifting, which would not make sense to
source from overseas,” he says.
The retailer stocks UK-made brands including
Barbour, Dualit, and Darlington as well as operating
its own factory in Darwen, Lancashire, called Herbert
Parkinson, which will celebrate 60 years in the John
Lewis Partnership in 2013.
The launch of a Made in UK product identifier this
year was a direct response to a rise in customer
enquiries, according to Allam, and is on more than
4,000 products.
“china iS by faR
the moSt effective
Region foR
pRoducing toyS”
StuartGrant,TheEntertainer
In association with
New Look considers the
ethics and policies of a
country; John Lewis is
among the retailers
sourcing from the UK
In association with
locations to meet their needs. “Success-
fulcompaniesareoperatinga‘balanced’
sourcing model, that incorporates a mix
of sourcing countries, taking into
accountcost,quality,leadtimesandrisk
factor,” she says. “This means that com-
panies are probably going to retain the
bulk of their production in their tradi-
tionalmarketswheretheyhaveinvested
in the relationship with their suppliers,
but are more open to exploring new
regions for select items.”
However, retailers must balance the
benefits and pitfalls of new markets.
Stuart Grant, buying director at toy
retailerTheEntertainer,saysforthisrea-
son, despite the advantages of newer
locations, China still remains his pri-
mary sourcing destination. “China is
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21. SUPPLY CHAIN
MULTICHANNEL
Automateandcollaborate
Supplychaindirectorsneedaninnovativemindsettomeetthechallengesposedby
themultichannelretaillandscape.GinaLovettreportsonhowtheyareresponding
➤
October 2012 Retail Week XVIIwww.retail-week.com
I
n multichannel retail, where
consumer expectation demands
increasing choice of delivery and
service options, a reactive supply chain
that can turn customer promises into
reality is critical for retailers.
The growth of multichannel means
retailersareassessingeveryaspectofthe
supply chain – stock and inventory
management, inbound logistics, ship-
ping,containing,warehousing,distribu-
tion, picking, packing, right through to
delivery – based on variable customer
demand at a granular level, as well as
traditional scheduled promotions.
“In the past, the format of sales was to
bring product in for launches, stack
them up and sell through, but now cus-
tomersareorderinganywhereandatany
time,” explains Paul Miller, director of
inbound logistics at Shop Direct. “We
don’t move containers from Hong Kong
or China. We move customer orders, we
relay these customer orders and bring
that information back down the supply
chain and to the distribution centre long
before the product has landed.”
According to Martin Brickell, project
manager at supply chain consultancy
Total Logistics, now that retailers are
multichannel, they need to adapt and
innovate in the supply chain to offer the
service level required.
“When you add in cross-border and
returns, there is complexity in the
“SUPPLY CHAIN
SOLUTIONS
ARE AS UNIQUE
AS EACH
BUSINESS”
Martin Brickell,
Total Logistics
Boots are investing in dedicated ecom-
merce service centres that can deal with
the supply chain processing that online
retail requires.
The future is automation
Propelled by the growth of Boots.com,
Alliance Boots refurbished and re-
opened a £50m automated service cen-
tre in Burton-upon-Trent this February
to process orders for the retailer’s 25,000
ecommerceproductlines,Christmasgift
ranges and international distribution.
Thenewfacilityintroducedbothvery
narrow aisle racking systems that can
increase storage capacity by up to 50%
and shuttle systems, so that units can be
moved more flexibly in the warehouse
and up to 900,000 singles a day proc-
essed. The scheme also included about
100,000 sq ft of mezzanine space
to house a fully automated materials
handling equipment system by Knapp.
The automated service has increased
time efficiency by 65% and improved
ordertraceabilitythroughtrackandtrace
technology.
M&S is also in the throes of ware-
house consolidation and automation.
Theretailer,whichhad110warehouses,
is now focusing on a smaller number of
‘super warehouses’. Its first in Bradford
opened in 2010, run by logistics firm
M&S is focusing
on a smaller number of
‘super warehouses’
multichannel supply chain that needs
strategic recognition. Supply chain
solutions are as unique as each
business,” Brickell adds.
Whilepure-playsmaybeinastronger
position in that they do not have to jug-
gle the disparate supply chain require-
ments of bricks as well as clicks, a
growing number of multichannel retail-
ers including Marks & Spencer and
In association with
Boots reopened a
£50m automated service
centre in February
22. SUPPLY CHAIN
MULTICHANNEL
Wincanton, while its second, a fully
automatedsiteat1millionsqftinCastle
Donington, Derbyshire for general mer-
chandiseandecommerce,isduetoopen
early next year. It will, according to an
M&Sspokesperson,be“theengineroom
for ecommerce”.
Brickell, who works with clients
includingWalmart,TKMaxx,Argosand
Tesco, explains that retailers are increas-
inglyassessingstock-keepingunitrange,
volumeandsalesperSKUtoimplement
the right warehousing and automation
infrastructures.
“You need to be going into that level
of detail to build automation solutions
that are future-proof,” says Brickell.
Real-time data
According to Miller, what makes a mul-
tichannel supply chain truly efficient
and effective is not faster ships or better
utilisation, but visibility and accurate,
real-time data. He explains that in a
retail environment, where teams are
working week to week, month to month
and season to season, and the inbound
supply chain has to leverage economies
of scale to avoid costs, there has to be
flexibility and priority around shifting
products, not containers.
Shop Direct, working with supply
chain management firm Damco, has
created a supply chain portal showing
stock movement and availability that
can be accessed by all stakeholders
– booking agents, shipping lines,
forwarders, the distribution centre,
trading and finance.
“We’vealwayshadvisibilitybutwhat
itmeantwasthatthetradingteamhadto
go into a bespoke system to view the
information. Under this portal, it’s all in
one place, fed by the forwarder. It’s live,
real-time, and brings other benefits such
as reporting on how good a job people
are doing in the supply chain. It allows
you to pick out areas for improvement,”
says Miller.
As a result of increased visibility and
communication, Miller claims not to
have paid demurrage on any containers
in the last 15 months. “Because we’ve
got our visibility spot on, and we’re
workingwiththetradingandthemerch-
planningteams,wemakesurethatwe’re
all talking to each other. When we make
a decision we make it together,” he says.
Waitrose, meanwhile, introduced a
custom-built scheduling package by
logistics firm Gist last year. The system
automates the complex decisions tradi-
tionally made by planners to create
schedules in live time from huge num-
bersofcombinationsofvehicle,capacity
and timeline constraints each day.
Collaborating for efficiency
But while such technology can
streamline some of the most complex
logistical issues for retailers, perhaps
one of the biggest breakthroughs in the
supply chain in recent months is a
coming together of retailers to share
resources, infrastructure, warehousing
and transport.
According to Wincanton information
services director Simon Deane, Amazon
hassetthebarinsupplychainandfulfil-
ment so, for retailers to compete in the
online arena, joining forces is a logical
step. “Storage, warehousing and
transport can be massively inefficient
and costly, but you can make it work
economically by sharing the cost or
renting it out.”
Shop Direct is in the early stages of
collaboration with a number of UK
retailers, working on two projects relat-
ing to the European and Far East supply
chains. According to Miller, the oppor-
tunitiesare“waydownthesupplychain
to share costs, infrastructure, resources
and warehousing, making things more
efficient”.
According to value fashion retailer
M&Co head of IT and logistics Bryce
Howie, the collaborative approach is
appealing for M&Co on store deliveries.
It offers efficiency and cost saving when
volumes are combined for delivery –
especially in the more far-flung parts of
the country.
“This is especially true for a retailer
such as ourselves with store locations in
diverse locations. We also need to keep
concentrating on making the extended
supply chain, from order all the way to
store or online sale, as efficient and time
sensitive as possible,” he says.
While retailers are coy about details –
wheresynergiesare,workingoutservice
level agreements and who gets priority
on deliveries – there’s little doubt that
it is a good option to work together
behind the scenes to meet customer
expectations.
➤
XVIII Retail Week October 2012 www.retail-week.com
In association with
“UNDER THIS
PORTAL, IT’S
ALL IN ONE
PLACE, FED
BY THE
FORWARDER”
Paul Miller, Shop Direct
Logistics firm Wincanton
says consolidation
reduces costs
WHAT’S YOUR HOLY GRAIL SUPPLY CHAIN SOLUTION?
AlistairHill,headofprimarytransport(food),
Marks&Spencer:“Myholygrailsolutionwouldbetohave
anarticulatedvehiclethatcanproperlyrunonanalternative
greenfuel.We’redoingadieselgastrialbutthevehiclesare
notthecleanestintheworld.Withcarsyoucanrunthemon
hydrogenorelectricity,butarticulatedvehiclesaren’tthere
yet.Itwouldbegreattohaveafuelwhereallthatcomesout
ofthearticulatedvehicleiswater.”
BryceHowie,ITandlogisticsmanager,M&Co:
“Idon’tthinkthereisaholygrailsupplychainsolution.
Thesupplychainisbuiltfrommanyelements,manyparties
andisdynamicallychangingbasedoncircumstanceand
opportunity.Shorteningthesupplychainisalwaysthe
goal,butthatisnotalwayspossible,andinthose
circumstancesgettingthefallbackscenarioright
becomesthemostimportantelement.Itisthechallenge
thatmakeslogisticsinteresting.”
PaulMiller,directorofinboundlogisticsat
ShopDirectGroup:“Minewouldbeastableshipping
market.Theerraticnatureofthecontainershipping
marketonEast-Westtradelanesprovidesanunwelcome
degreeofinstabilityformanysupplychainswithspace
constraints,rollercoasterratesandamultitudeofonerous
andbafflingrateadjustmentacronyms.AtShopDirect
Group,wealreadyrunveryleanbutopportunitiesexist
forallpartiestoremoveunnecessarycostsonsuch
thingsasfreetimebuiltintotheratesandequipmentuse.
Morecouldalsobedonetosupporttradingteamswith
theirsourcingstrategiesthroughlongertermrealistic
ratestructures.”
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24. Award-winning
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