Restructuring Retail Logistics

Background
This long established Department Store chain had been subject to an MBI and taken private from being a PLC. The new owners recognised that the Logistics infrastructure was outdated and excessively costly. They also had significant concerns about the ability of the logistics operation to respond to the new initiatives they planned for the business.

The deliverable
The brief was to review the entire logistics operation to achieve significant reductions in both infrastructure and operating costs, to improve fulfilment to the retail outlets and to make a step change in the home delivery service. An additional requirement was to support the new product initiatives that the new merchandising teams developed.

Actions
An initial review revealed that the company had three warehouses of their own and a third party facility servicing the business and the home delivery operations. They also had outsourced the delivery to stores, but still ran their own home delivery operation.

·       An early decision was taken for the company to cease to undertake their own home deliveries. This was achieved by outsourcing the bed delivery operation and change the way this was being operated in store, resulting in a significant reduction in the time taken from ordering a bed in store to it being delivered to the customer. The delivery of white goods and all other furniture was pushed back to the suppliers, who all had their own home delivery solutions.

·       The space released in the Central Warehouse by removing all the home delivery operations allowed a review of the product groups being stored there. This gave the opportunity to re-rack the entire warehouse, changing from mostly double deep racking, designed to accommodate beds and other furniture, to standard pallet racking, which, in turn, enabled all of the stock being held in another one of the warehouses to be held centrally. As a direct result a decision was taken to close one of the warehouses.

·       At the time of the takeover all apparel warehousing and distribution was contracted out. The increasing volumes of apparel being required by the new merchandising teams lead to a review of the logistics strategy for this part of the business. This resulted in a decision being taken to alter the mezzanine floor within the central warehouse to enable the re-location of all boxed apparel to this area and to distribute it with the rest of the general merchandise. It was decided that it would not be cost effective in the short term to invest in the specialised equipment necessary to store and distribute hanging garments. Consequently they continued to be distributed by a third party, but moving the distribution from dedicated to shared user fleet.

·       The changes in the operation, product mix and layout of the central warehouse, together with the closure of one warehouse and partial withdrawal from the third party apparel warehouse, necessitated significant changes in both Management and Operational Staffing levels and skills. It also resulted in the change from a three shift to two shift operation. It was felt that the existing Management Team would not be the right people to implement such wide ranging changes. There were, therefore, a number of redundancies, which necessitated working very closely with the client’s excellent HR Team. During the transition period the operation was managed largely by a team of Interim Managers, until a new team was recruited and trained.

·       In order to accommodate the changes in operation and product mix the Warehouse Management System used by the client needed to be re-configured.

The outcome

·       Outsourcing of all of the home delivery operations to third parties.

·       The closure of one warehouse and partial withdrawal from a third party operation.

·       Complete re-structure of the Client’s logistics, management, methodology and operations, to better service the requirements of the business.

·       All of these changes were undertaken without adversely impacting the service either to the retail outlets or the home delivery customers.

·       As the changes took effect the service levels to both internal and external customers were improved markedly.

·       The re-use of existing racking and mezzanine ensured that no capital expenditure was required in order to make these changes.

·       A significant reduction was made in the cost that logistics represented as a percentage of turnover.

·       The client was able to reduce distribution costs by over £1m within 6 months.

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