16 SCS:SUPPLY CHAIN TRANSFORMATION SEPTEMBER 2008 SUPPLY CHAIN STANDARD
IN ASSOCIATION WITH UNIPART LOGISTICS
www.supplychainstandard.com
RETAILING
CUTTING WASTE OUT
OF RETAIL LOGISTICS
With lean times affecting the purchasing behaviour of
the consumer, retailers are going to have to embrace
‘lean thinking’ and adopt a long-term view to partnership
if they are going to maintain their margins. NICK ALLEN
High Street retailers are coming under
increasing pressure as consumers cut
back on discretionary spend, leading
many retailers to slash prices in order to attract
trade. However, winning sales under these
conditions has its impact on margins with the
consequence that costs, and in particular,
operational costs associated with preparing
orders and servicing retail outlets, are coming
under much closer scrutiny. Cutting out waste
in logistics activities has become central to
many a retailer’s strategy for retaining a
competitive advantage.
Understanding the full implications of running
a distribution operation to maximum efficiency
requires a systematic approach known as ‘Lean’.
And although Lean has been a term widely used
in manufacturing circles to define the removal of
waste from a production process, its application
to the logistics operations centred around the
warehouse is relatively new, having untold
benefits for those who have mastered the central
processes and techniques of lean logistics.
Logistics services provider, Unipart Logistics,
has invested heavily over the years in lean
thinking, embedding the core principles and
philosophies in its operating processes in order to
maximise the creation of value to the customer.
Value streams
To improve service levels for its customers, a
company needs to see its key processes as
adding value, as value streams. To work
efficiently these value streams must not operate
in lumps or batches but must continuously flow
at a rate which meets customer demand, and
to meet customer demand exactly, products
or services should be pulled through the
process, not pushed by manufacturing or
inventory. Importantly, companies should
strive for perfection by continuously
improving their approach.
All these values need to be absorbed and
embedded into the working culture of the
organisation in order to derive the full benefits of
a lean philosophy – it’s a matter of educating the
work force, which is a lengthy undertaking.
When a service provider such as Unipart
Logistics enters into a relationship with a client
it’s therefore essential that a commitment be
made for the long-term development of that
partnership. Paul Brooks, Unipart Logistics’
divisional director explains: “You develop a higher
quality partnership the more openness and trust
the partners have. In any commercial or working
partnership, you have to build it, so that it
reaches its highest level of potential, resulting in
the sharing of strategic information and
operational information - both KPIs that you have
under your control and those you don’t.” In effect,
the greater the commitment to the partnership
from both parties the greater the
rewards for both sides.
“Once you get to a level of
true strategic partnership
then the partners act in
concert and you begin
to act on a
subconscious level in
exactly the same
manner as you would if
you were the retailer
yourself,” says Brooks.
But he believes that you
need to “hardcode the
benefits into the start of any
partnership and then evolve the
rest, the high-end benefits, or more
strategic benefits, as you go on”.
Brooks understands the value of lean. “If you
focus on the true meaning of lean then it will
deliver the customer experience in the most
effective way. The whole essence of lean is
focusing on customer need , incorporating the
value-add component ,and removing all other
waste in order to create the best customer
experience - when the customer wants it rather
than when we care to produce it.
“We understand how that works for
manufacturing, so how does it work for the retail
supply chain? What we’ve discovered is that
when you’ve got large scale operations the
engagement of people into business processes
allows you to be more flexible around the hourly
and daily flex requirements of multi-channel
solutions. If you can align that with store based
solutions you have a productivity model that
allows you to flex resources across the 24 hour
period to meet your customer needs better than
anyone else – and that’s the aim of the Unipart
Way: To deliver lean better than anyone else.”
Tough trading conditions are creating some
real challenges for retailers and the need to
change rapidly has been thrust upon the whole
operational team. But nobody knows how long
these conditions will last, so the immediate
necessity is to build in flexibility.
Alignment
“Even though we have worked hard to build
enough flexibility into the system, if you deliver
to a store every day whether you take ten items
or nine, it’s the same cost,” says Brooks. “The
challenge here is, if it’s that cost, how do I
manage it more effectively? That requires a
constant dialogue with your client to ensure that
the processes are streamlined. It needs a
structured process for both continuous
improvement and capacity management. That’s
why lean is now more accepted as a core part
of retail methodology, because what we can
do is align our cost base to meet exactly the
needs of the customer – in this instance the
customer being the store. Automatically you
minimise the cost base and that’s why we have
been successful, because we only deploy
resources against exactly the
requirements of the customer
pull every day.”
At Unipart Logistics’
multi-client facility in
Cowley, where orders for
Homebase, Halfords
and Unipart’s own
automotive business
are processed, picking
teams, dispatch teams
and goods inwards
teams, have been crosstrained
for maximum
flexibility across the centre.
As peaks and troughs hit the
operation, Unipart is able to deploy
resources across each area of the business
accordingly. “We’ve had to cross-train the staff
because each client operates different systems.
Although it’s all on one site, three different
systems and three different business processes
are involved.” Brooks emphasises that this allows
Unipart to underwrite the quality of what they
do, “each of those operations has the same level
of picking quality, although it’s the same people
on different processes and systems - and that
includes different types and ways of picking
as well. That’s a benefit of having consistent
ways of working.”
If retailers are serious about taking cost out of
their logistics operations then a Lean approach is
the only way to go.
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