1. 1
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Project Blue V (0.6)
Update: 17 November 2008
2. 2
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Progress since last meeting
Project is on track and a number of key activities have been initiated since last week’s
announcement:
1. The business case has been further refined to reflect latest cost estimates and potential
revenue benefits arising from trading improvements once B&M is consolidated,
2. Initial recruitment screening has commenced:
- 2 agencies have been engaged to fill B&M roles in Watford
- 8 suitable candidates have been sourced for agency pre-screening interviews
3. IT have engaged with the project to identify savings, costs and initial systems-related
dependencies in respect of knowledge transfer for key B&M tasks such as polling & retail
planning.
3. 3
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Project Approach
1. Period from 13th
November through to 31st
May 2009 (completion date).
2. Project Blue to have two distinct workstreams, each to be tightly coupled at the point of delivery:
- Workstream 1. Covers all the day to day trading activities of ELC. This will be specifically focused on the
trading success of season AW08. Alongside the planning, ranging and sourcing activities for AW09.
- Workstream 2. Includes the management of all the business change activities that are required to
successfully transition the ELC organisation from the current state to that which is required for the future.
3. Merchandise planning for SS10 to be performed by ELC BMR teams located at Watford, scheduled start Jan. 09.
4. Workstream 2 will be responsible for managing the implementation of changes and ensuring that the transition of ELC
is successfully completed, this will include the the following:
- Human Resources. Retention, redundancy, recruitment (interim and permanent), organisational change,
training & development, communications etc.
- Property. This covers setting up the Watford office to accommodate the increases to BMR and the general
office infrastructure; making the necessary changes prior to the closure of the Swindon operation.
- Information Technology. The commissioning and de-commissioning of IT services covering Swindon/Hong
Kong and Watford.
- Core BMR. A team which captures the current working practices/activities and business processes, tools
and techniques, procedures, policy, supplier management, relationships, allocation, marketing.
- Finance. Ensuring that all remaining Swindon financial management activities are transitioned to Group
Finance. In addition ensuring that Programme financial spend has the necessary financial controls.
5. Payroll services to be located in a serviced office close to existing Swindon office.
6. Project financials to be developed in two phases: 1) Initial business case; 2) Additional staffing and capital spend.
4. 4
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Project Approach Continued.
7. Project Blue objectives, approach and timeline to be communicated to all (MC & ELC) staff W/C 2nd
February 09
once planning for AW2009 and the Franchisee event has been completed.
8. Key Mothercare BMR (if possible Toys) staff to form the basis of the Core BMR team.
9. Project Blue team to based in Swindon, led by a suitably skilled full time Project Manager Conrad Rafik.
10. Organisational design of the ELC BMR model to have several transitional stages, covering the next 9/12 months
- Stage 1. Relocate the workload from Swindon to Watford (no planned headcount reduction), introduce
performance improvement initiatives and skill up the ELC team.
- Stage 2. Introduce further improvement thru strategic review of the Hong Kong and Watford operating models
and align to the International Project.
Critical Success Factors
1. Ensuring that the decision making process is made on a timely basis and within the project governance.
2. Ability to recruit (train) suitably skilled B&M resources in Watford.
3. The planning and execution of the Consultation (30 days) process in Swindon.
4. Retention of key staff beyond their notice period.
5. Depth and extent of knowledge transfer of ELC B&M practices, procedures and workarounds to Watford.
6. Identifying and securing the Core BMR team members from Watford to work in Swindon for a period of 3 to 4 months.
7. Ensuring that the appropriate structures/resources are in place to manage the BAU activities.
5. 5
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Transition Structures
ELC Trading: C Lee
1. Christmas Trading Performance
2. Promotions
3. Stock Management
4. Post Peak sales plans
Transition State 1: 13th
Nov. 08 to 31st Jan. 09
ELC SS09 & AW09: N Cliffe
1. Sourcing Operations
2. Protecting the Toys margin
3. Seasonal planning SS09 & AW09
Project Management: Blue
1. Planning & Reporting
2. Retention/Consultation &Recruit
3. Swindon/Watford Office
4. IT & Finance
5. Core BMR transition
6. Restructure teams MC & ELC
7. Brand Development & Marketing
Transition State 2: 1st Feb. 09 to 30th
Jun. 09
ELC Trading: N Cliffe
1. Trading SS09
2. Finalise AW09 plans
3. Stock Management for SS09
4. Seasonal Promotions
5. Operational Accountabilities
• Stock Management
• Logistics Planning
Sourcing: G Berkman
1. Sourcing Operations
2. Protecting the Toys margin
3. Supplier Planning AW09
4. Product Design & Development
5. Financial Management
Project Management: Blue
1. Planning & Reporting
2. Retention/Consultation &Recruit
3. Swindon/Watford Office
4. IT & Finance
5. Core BMR transition
6. 6
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Project Manager
Conrad Rafik
Human Resources
Linda Meade
Workstreams
Project Structure
Swindon
Watford
Consultation Retention Payroll
Recruitment Induction Structures
Comms.
Comms.
Property
Grahame Smith
Swindon
Watford
De-commission
Refurbish
Core BMR
Kate Morris (TBD)
Swindon
Watford
Shadowing Processes
Training Structures
IT
Phil Carter
Swindon
Watford
De-commission
Networks Desk Top
Payroll
Finance
Colin Bradley
Watford Project Costs FY 08/09 FY 09/10
Workarounds
Telephony
7. 7
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Outline Timeline
Streams Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09
Human Resources
Property
Information Technology
Core BMR
Finance
Mobilise Core
Team
International
Franchise Event
Transitional
Structures Approved
Recruitment Firms
Briefed Redundancy &
Communication Plan
agreed
Consultation
Commences
Watford Staffing in Place.
Watford Refurbishment Plan
Approved
Watford Refurbishment
Starts
Watford Refurbishment Completed
Watford IT Refurbishment
Plan Approved
Watford IT
Refurbishment Starts
Watford IT Refurbishment
Completed
Knowledge
Transfer Starts
AW09 Completed
Finance
Checkpoint
Finance
Checkpoint
Finance
Checkpoint
Finance
Checkpoint
May 09
Knowledge transfer completed
Consultation finishes
8. 8
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Financial Assumptions
Closure Costs
1) People One-Off Costs - £1,892k
• Redundancy costs of £485k assuming no relocation to Watford and 3 months salary,
• Retention bonuses £400k, 25% salary for BMR and 15% for all other staff,
• Recruitment £322k, 35 staff recruited via agency and 14 thru MC network,
• Parallel running of heads £534k, assuming BMR for a period of 90 days and other staff for 45 days,
• Knowledge transfer £116k, includes travel between Swindon and Watford,
• Outplacement and communications £35k
1) Watford Fitout – Capex £300k
• Estimate from Summer 2007 for an ELC branded office based on 45 heads
1) IT Spend - £50k
• Includes cost of new desktops for Watford roles as current ELC desktops are over 4 years old
• Decommissioning and transfer of JDA (polling) and Compass (retail planning); telephony modifications
1) Core BMR Team - £tba
• A core BMR team will be created to focus on knowledge transfer, the majority of the associated shadowing & double
running costs have been included in (1) above
1) External Support - £225K
• Market Research £150K, external research on ELC brand awareness, focus groups and improvement to range
• Project Management £75K, Project Management for 6 months to drive delivery and reduce risk
9. 9
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Financial Assumptions
Ongoing (Cost)/Benefit
1) Payroll Saving £203k
• 9 heads saved: Buying £42k, Staff restaurant £88k, IT £31k, Facilities £24k & Reception £18k,
1) Cost Per Head Increase £445k
• There is a c25% salary premium in Watford vs Swindon: Buying £131k, Merchandising £121k, Quality control &
Allocators £105k, HR, IT, Audit, Finance, Customer service total £88k,
1) Occupancy & Facilities Savings £224k
• Includes £441k saving from reduced Swindon rent, rates and facilities costs & less Watford/Swindon travel
• IT savings total £100k after removal of redundant comms lines £50k, telephony £30k and data links £20k
• Assumed that 21 of the new-to-Watford roles can be accommodated whilst remainder use serviced office space until
completion of Watford fit-out at a cost of £317k (includes Payroll)
1) Trading Improvement: Margin £1.350K
• Assumed c2% sales growth on £150M and margin delivered at 45% provides £1.35M to improved ELC trading, does
not include stock availability issues and additional synergies arising from have one motivated team in one office
10. 10
Project Blue
Private & Confidential: For Discussion Purposes Only DRAFT
Project Financials
Headcount in scope 70 Latest forecast of headcount based in Swindon – P6 08/09
Net savings in heads (9) Roles removed/consolidated
Swindon heads continuing (12) Flexible Locations: 2 trainers, 3 auditors,
Heads recruited in Watford from Swindon 49
Closure Costs: (Cost)/Savings - £k
People one off costs (1892) Redundancy including retention bonus plus recruitment
costs and some parallel running of roles.
Watford Fitout – Capex (300) Estimate from summer of 2007.
Information Technology (50) Decommissioning costs plus new desktops
Core BMR Team (tba)
External Support (225) Research on ELC Brand & Improvements to range.
External PM to reduce and manage project risk.
One off total (2,467)
Ongoing (cost)/benefit:
Payroll saving – Org. Structure 203 Headcount saving of 9 heads pro rated to department
Cost per head increase (445) Salaries vs Swindon, assumed 25% higher for Watford.
Occupancy costs/facilities 224 Swindon office savings and related IT savings
Ongoing savings/(costs) (18)
Trading Improvement 1350 2% sales growth from improved ELC merchandising
Ongoing savings/(costs) inc. Trading £1,332 Represents a 53% CROI