Background & Brief
This long-established High Street retailer with a turnover of £125m and 237 stores in the UK recently took over another retailer (turnover £110m) with a view to leveraging synergies within the Supply Chain. The company had established a number of options and wished to test these scenarios to provide a cost-efficient future strategy for warehousing and distribution.
SCALA was invited to consider the optimum strategy based on arrange of options and provide advice on inbound and outbound transport scenarios.
The key elements of our approach were to:
Carry out an initial analysis of the locations of the combined retail stores and establish potential synergies for day or night-time deliveries.
- Model the Centre of Gravity and compare with current infrastructure
- Establish a range of potential options – including multiple sites
- Consider the impact of inbound supplies and other trunking activities
- Produce a summarised cost comparison model – showing the relative cost implications of each scenario
We used Transportation cost modelling tools to consider different strategic options and prepare the high each option. We then assessed the relative advantages and costs of each scenario, bearing in mind level cost implication of current and future growth potential.
Benefits & Results
- The initial results showed that the options ranged from a 30% increase to a 6% saving in transportation costs alone.
- Over 50% of the combined stores were identified as being within the M25
- The high proportion of London-region stores inevitably meant that a London-region DC would reduce transportation costs, although warehouse and labour costs would be increased
Further attention on the preferred options allowed the company to focus on a DC development in a specific geographical area.
The results were discussed with local management and summarised in a format that was used for board-level strategic decision making.