Supply Chain Strategy – End-to-end design (network, imports & online)

Client: Retail – Apparel, Homewares and Manchester
Background

A multi-billion dollar investment holdings company had acquired several large Australian retailers with a network of more than 300 stores across the country. They engaged GRA to review the discrete supply chains of each brand and design a Group-wide supply chain strategy to minimise costs and enable growth through to 2020. 

The investment holdings company sought assistance in putting together a business case for the board to optimise the supply chain footprint, network and import methods as well as committing to a scalable, shared supply chain strategy moving forward. 

Challenge

The fundamental principles of the shared supply chain strategy had to support the following (cost-effectively):

  • Growth in online fulfilment channels 
  • Geographic growth aspirations in WA and QLD
  • Growth via acquisition – scalability required in strategy
  • Leveraging of assets and owned supply chain infrastructure
  • Optimisation of import channels

In addition to this, it was important to acknowledge in the shared strategy the uniqueness of the individual business units and the needs of their customers. GRA thereby dedicated considerable effort and time into understanding:

  • Broader business strategies and customer value propositions
  • Retailers strategies, store network, product sourcing and e-commerce strategies
  • Product distribution/transport, stocking strategies (flow-through vs. put-away) 
  • Operational assets, DCs number, location, ownership structure
  • Off shore consolidation, store ready builds etc. including leverage of unit volumes
  • E-Commerce Fulfilment operations 
Approach

GRA worked closely with the senior leadership team to leverage commercial & supply chain expertise as well as to ensure appropriateness, buy-in and accountability in the ‘to be’ strategy. 

A 3-phased approach (as-is review, design & test) was adopted by GRA to:

1. Conduct a detailed ‘As-is’ review of the key business supply chains that would ultimately shape the overall strategy.

2. Design work-streams to test a series of proposed hypothesise. Work Streams in this instance included:

  • Physical Network Model – to determine the optimal physical footprint for the retail conglomerate, balancing freight, fixed and variable costs to achieve a desired service offer. 
  • Upstream/Downstream Model – to determine the appropriate import flow mix. That is, to design which activities to perform at off-shore consolidation points vs. locally (packing, labelling, store-ready, etc.) 
  • Integration Model – to analyse the capital costs, efforts and requirements of the proposed scenarios to determine the return of investment. 
  • Online-fulfilment Model – to test the trade-off between store fulfilment vs. dedicated fulfilment for online channels. This would analyse the cost to serve of each model and highlight labour picking costs, inventory obsolescence risk, freight and responsiveness. 
  • Hanging Goods Model – a specific strategic question for this supply chain group was to determine the cost benefit of moving towards hanging infrastructure vs. cartonised infrastructure.
  • International study tour to gather and test strategies used by similar international businesses in Europe and Asia.

3. Each of the above work streams were modelled and the findings were tested and validated by both operational and senior staff for the relevant businesses. 

Outcome

The strategy developed provided opportunities for the business to reduce costs, improve service levels to stores and drive greater utilisation of company owned assets. It also delivered a strategy to establish common infrastructure and enable future acquisitions to be integrated into a common supply chain. 

Financially, the strategy enabled around $14m in cost reduction in the first 5 years at a net present value of $6m after taking into consideration the required investment.  A detailed implementation plan as well as key prioritised recommendations and accountability timelines were also provide to help ensure target are achieved. 

A study tour to London and China was undertaken to both involve and educate the executive team in supply chain best practice whilst highlighting constraints specific to the Australian market.

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Testimonials

"GRA have helped lift our vision from our shoe laces toward a north star best practice approach in both IBP and Demand & Supply planning processes."

– Ryan Dhondy, IBP Capability & Development Leader Vic, Lion Dairy & Drinks

Typical results

  • 20-40% inventory investment reduction
  • increased service levels ranging up to 99.9%
  • 10%-15% reduction in supply chain operating costs
  • 5%-20% spend management savings
  • the ability to fund business initiatives from operating cash flow (OCF) improvements
  • improved return on capital employed (ROCE)
  • a minimum 3:1 ROI (10:1 to 30:1 typical)