M&S cuts distribution costs

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Marks & Spencer cut its distribution costs in the first half by £13m – ahead of its full year target of £30m of underlying savings.

The retailer has now closed 21 warehouses as part of its long term plan to consolidate its general merchandise operations into four large warehouses within the UK.

In its half year results, it said that it had moved forward with plans to restructure the supply chain and implement new IT systems.

The first of the four new warehouses, in Bradford, is under construction and is on schedule to open in 2010.

M&S has also restructured arrangements with several third party logistics operators. It has changed its furniture delivery provider to Wincanton and signed a new food contract with Gist, which it says is on track to deliver the anticipated £20m full year savings by 2011-2.

In its international business, it moved forward with direct sourcing and distribution, whereby product is sourced and distributed in region rather than via the UK. In total 16 per cent of product is now distributed directly with particular focus on territories such as India.

There are two major IT projects in the pipeline – replacement of point of sales systems within stores and implementation of SAP.

It said the pilot of the new POS system in Maidenhead was performing well and roll out to all stores would start in early 2010.

Implementation of SAP within core commercial systems in the UK also starts in early 2010, with a phased roll out through to 2012.

Growth in online sales (up 29 per cent) has meant that systems have needed to be upgraded.

In July it replaced the old in-store ordering system, with a new click and collect service called ‘Shop your Way’. This allows customers to order either at home or in store and have merchandise delivered to any location.

Sir Stuart Rose, Chairman, said: “In the longer term we have clear plans to deliver sustainable growth by driving international and multi-channel, supported by the roll out of new supply chain and systems platforms. Our positive cash flow and financial position gives us the capacity to implement our plans.”


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