Morrisons found itself making headlines just over a year ago when it announced proposals to close its depots at Aylesford in Kent, Bristol and Warrington.
The takeover of Safeway in March 2004 had left it with two distribution networks and the capacity to serve more than 600 stores. By summer 2005, it had disposed of about 200 stores and, as a result, had over-capacity in its distribution facilities.
Senior trading director Martyn Jones explained how Morrisons approached the task of bringing together the two networks when he spoke at the Institute of Grocery Distribution’s supply chain summit in November.
Jones has seen his role expand to focus on the in-store pharmacy operation and supply chain, while retaining overall responsibility for grocery and beers wines and spirits. “Our vision is to be the best grocer in town,” he told delegates.
Morrisons viewed delivering goods to the warehouse as a trading function, and consequently the supply chain team sits alongside their trading colleagues, he said. The Safeway integration was a tremendous undertaking, but now the company was back to managing one combined offer.
Jones pointed out that the two retailers had very different approaches to the supply chain. Morrisons was people focused and flexible while Safeway had a more structured system. Morrisons had two large regional distribution centres while Safeway used a hub and spoke network.
“We set ourselves three years to combine the two networks,” he said.
There were clearly elements of the sophisticated Safeway system that Morrisons would like to have retained. However, when it came to look at the range of options to merge the networks, a number of factors had a decisive role in setting the course to be adopted. For example, Competition Commission delays prevented the business from moving forward.
The business would be headquartered in Bradford, Morrisons’ home. It was inevitable that it would lose some of the skills needed to run the Safeway systems.
In addition, both the Safeway brand and its customer loyalty were weakening and its sales were in decline. Morrisons decided that the business could not sustain a three year integration programme.
Accelerated conversion offered a number of benefits: one single Morrisons’ approach; proven methods of delivery and training; no re-engineering requirements; and investment in one single brand and message.
But as a result there was no time to merge the systems and pick out the best from each. “It was not the most efficient solution, but it was agile and easy to adapt in a period of change.”
Conversion involved not just the stores and store systems. Depots were converted in tandem with the stores, and the supply chain process to the depots were also converted. The process also demanded recruitment and training of the new central supply chain.
“All this had to be done while maintaining supply to all our stores,” said Jones.
The process was started in August 2004 and the last Safeway store was converted in November 2005.
As a result, said Jones, “we now have new offices, new production facilities, one system and one process”.
The current focus of supply chain activity was on promotions management, supplier scorecards, supplier order cycles and inbound logistics processes, network alignment (see chart) and supplier collaboration through the Morrisons Supplier Database. The MSD is now live with more than 100 suppliers.
Jones said the group had identified the areas where it wanted to adapt the supply chain for the future. The aim was to move from the purely people focused approach to a more systematised approach to add value. It also wanted to move from Morrisons’ simple approach to a more integrated one. However, the aim was to retain the responsiveness and flexibility.
Increased automation in the ambient sector was also on the list of priorities as was alignment of the network, Jones said.