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  • 1. SUPPLY CHAIN OCTOBER 2012 Theeffectofmultichannel onretailsupplychains Multichannel, pXVII Whyretailersneedtorevisit theirsourcingstrategies International, pXIII Reducing environmental impact reduces cost Sustainability, pIX In association with RAPID RESPONSEThe importance of flexibility and agility in retail supply chains
  • 2. Anything else is a compromise Unlock supply chain efficiencies and cost savings Atlas Universal is the strategic B2B platform for the retail supply chain that enables you to: • Achieve efficiencies and improve productivity in your buying, supply chain and finance functions • Make significant and tangible savings on your existing ebusiness costs • Expose invaluable supply chain information to your management team • Reduce your carbon footprint and boost your environmental credentials A complete ebusiness solution, Universal has the ability to manage: 1. Transactions between trading partners 2. Information sharing with all appropriate parties 3. Processes across corporate and geographic boundaries Its applications include: • Ordering and invoicing portal (GFR and GNFR) • Automated invoice matching • Supplier management • Distribution of product specifications • Global Data Synchronisation • Real time Electronic Point of Sale (EPOS) data to retail HQ and 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 capability essential for us to deliver the demanding service standards that we set ourselves.” Stephen Szikora IT Director NFT “With Atlas we have an excellent solution supported by great technical expertise. They understand our commercial imperatives too - it’s a great combination.” Francis Rodrigues Head of IT Radley and Company “Atlas has helped BWG to make substantial savings since installation and continues to deliver cost savings every day across the buying, supply chain and finance functions.” Aidan Keane Financial Director BWG Foods “With Atlas we are improving the reliability of our ebusiness systems and driving cost savings.” Bob Darke Managing Director 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. Yusen Logistics works with retailers large and small, both well established and new to the market, providing supply chains from origin to destination. LAND, SEA & AIR. DELIVERING YOUR BRANDS Tel +44 (0)20 7090 2300 Email: Retail@eul.yusen-logistics.com www.eur.yusen-logistics.com/retail Follow us on twitter
  • 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
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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
  • 19. BRITAIN’S NEW PORT OPENING Q4 2013 9.25 million sq ft available on 560 acre logistics park • Located in the UK’s largest consumer market • Integrated with Britain’s new hub port • Exceptional sea, road and rail connectivity • Increased speed to market at reduced cost • Plots ready for build to suit development Don’t miss out optimising your global supply chain, speak to us today… Re-draw your global supply chain map... www.LondonGateway.com Tim Johnson tim.johnson@eu.jll.com 0207 087 5300 Richard Evans richard.evans@eu.jll.com 0207 399 5223 Chris Knight chris.c.knight@eu.jll.com 0207 399 5402 Jeremy Cracknell jeremy.cracknell@dpworld.com 01375 648305 Peter Mitchell peter.mitchell@dpworld.com 01375 648357 Peter Ward peter.ward@dpworld.com 01375 648342 020 7493 4933
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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.”
  • 23. Evolving logistics. Because the retail environment never stands still, neither do we. We’re constantly evolving and our unique consultative approach lets us get close to your business and seamlessly implement bespoke solutions to solve your logistics challenges. With the size and ability to tackle any project, plus the speed and agility to strike quickly, it’s easy to see why we’re trusted by some of the nation’s most respected retailers including ASDA, Aurora, George, Harvey Nichols, John Lewis, New Look, Morrisons and Tesco to deliver their customer promise on time, every time. It's why we're considered to be the UK's specialist when it comes to retail logistics. Welcome to Clipper. Logistics evolved. To find out more visit www.clippergroup.co.uk or call our Managing Director, Tony Mannix on 0113 204 2050 today. MULTICHANNEL WAREHOUSING CONSOLIDATION CENTRES CUSTOMS WAREHOUSING ADDED VALUE SERVICES PORT DECONSOLIDATION LOGISTICS SECURE LOGISTICS UK & EUROPEAN TRANSPORT
  • 24. Award-winning supply chain software from Atlas www.atlasproducts.com Atlas’ work with a leading retailer has been recognised with a prestigious European Software Excellence Award. The judges said: Atlas helps you streamline your supply chain and gain competitive advantage when trading with business partners anywhere in the world. With Atlas you can: • Achieve efficiencies and improve productivity in the buying, supply chain and finance functions • Make significant and tangible savings on your existing ebusiness costs • Expose invaluable supply chain information to your management team • Reduce your carbon footprint and boost your environmental credentials 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 were particularly impressed with Atlas for its Supply Chain Solution, not only for the way it streamlined operations and procedures, but also the tremendous savings it delivered for the customer. It was implemented in close partnership with the customer which ensured the solution delivered impressive results and made Atlas a clear winner in this category. “ ” Anything else is a compromise Atlas UK Tel: +44 (0)1942 252000 Atlas Ireland Tel: +353 1 511 1263 Atlas North America Tel: (416) 214-4278