The introduction of new supply chain systems and the start of a warehouse consolidation programme help Marks & Spencer (M&S) cut net waste by 10% and boost food availability by 2%.
Increased capital expenditure and cost control produces results
Releasing its annual results, M&S reported an increase in capital expenditure in the year to 31 March as the company invested in infrastructure to support future business growth. Spending on supply chain and technology increased from £191.4m in 2010/11 to £212.4m in 2011/12. Investments included the implementation of new store stock management systems and trials of a new warehouse management system.
At the same time, M&S also tightly managed costs. Despite inflationary pressures and volume increases in food and multi-channel, distribution costs rose by only 1.2% to £398.1m.
New supply chain systems lead to improved availability
During 2011/12 M&S completed implementation of a new stock management system, which is providing more accurate real-time stock level information and has contributed to a 2% improvement in food availability.
The company has also started to trial elements of a new warehouse management system, Red Prairie, and associated processes in its ambient food warehouse in Bradford and its national distribution centres (NDCs). The new systems are expected to increase efficiency in M&S's distribution centres (DCs) and mitigate the risk associated with the launch of a planned new combined e-commerce and national distribution centre in the east Midlands.
The roll-out of SAP in M&S is also now complete, including a new stock ledger, which will provide improved management information including product level profitability. The company also reported continued progress with the development of a new forecasting and ordering system, which is expected to deliver further improvements in availability and waste management.
The ongoing implementation of new IT systems, including a space range and display solution, have enabled M&S to improve planning and merchandising, which has led to improved on-shelf availability and reduced waste.
Supply chain restructure
M&S continued to make progress with its plan to restructure its supply chain, implement new information systems and improve operational execution.
The retailer's network reconfiguration is now well underway. Following the opening of a new 93,000 sq m DC in Bradford, construction of a combined NDC and dedicated e-commerce facility is underway in the east Midlands. The new DC is due to open in early 2013. The NDC model has already been trialled in two other M&S DCs in order to smooth the transition when the new site goes live.
Ambient food distribution at M&S is also changing, with its ambient food stockholding from four existing centres being consolidated into one DC in Bradford. This has allowed the retailer to take greater control over the supply chain and associated cost base, increase visibility of its ambient stocks and improve fulfilment to store.
For more about M&S's supply chain please click here.
Staff and store reorganisation help cut waste
In September 2011 M&S introduced staff zoning across its food halls, making each member of staff responsible for a specific area of the store. This allowed staff to provide customers with better service though improved on-shelf availability and more product knowledge. The retailer reported these initiatives contributed to a 10% reduction in net waste.
Better management of waste and promotions in-store, as well as the implementation of new IT systems, helped to support gross margins on food and offset commodity price increases.
UK food performance underpins results
For the business as a whole, sales grew by 2.0% from £9.74bn to £9.93bn. UK sales grew by 1.5% but general merchandise sales in the UK were down 0.9% and like-for-like sales fell 1.8%. M&S now operates in 43 territories and saw its international sales grow by 5.8%.
M&S's UK food division performed strongly, with total sales up 3.9% to £4.7bn and like-for-like sales up 2.1%. As well as operational efficiencies, new store openings and refreshments and range expansion and overhauls supported this performance.
Christmas food ranges were made available to order online for the first time. M&S's multi-channel business grew by 18% in 2011/12, and the retailer plans to launch versions of its website worldwide to bolster its international business.