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
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.
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.
“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 cross-trained 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.