The group’s distribution and logistics team is responsible for the management of stock received from suppliers and distributing it to stores efficiently and productively. This year 44,2 million units were distributed.
The two new distribution centres (DCs) built in 2005 provided better space utilisation and supported @home’s growth. A further 18 000 square metres of land, owned by the group, is available for development when required.
The DCs, based near the group’s head office in Parow East, Cape Town, handle the entire group’s stock distribution, including receiving, storage, picking, packing and despatching of stock. There are seven DCs in total, each responsible for the following business areas:
The Cloth Store was moved from Montague Gardens to Epping during 2007 in order to improve logistics between CMTs and head office, as well as providing more space.
The group continues to utilise HRP Distribution Services’ hubs to cross-dock all stock, other than jewellery and @homelivingspace furniture, to stores in the various regions across South Africa, Swaziland, Namibia and Botswana. This outsourced contract expires in March 2008. For our jewellery business we utilise RAM Hand-to-Hand Couriers, who also have a contract that expires in March 2008. For @homelivingspace we extended our contract with Boltt to March 2008. The group will go out to tender for the clothing, jewellery and @home transport contracts towards the end of the 2007 calendar year.
A dedicated systems development team, which maintains and develops systems that ensure higher levels of productivity, supports this area.
The supply chain and logistical demands from our trading divisions have necessitated a review of our logistics systems. We have gone out to tender to replace our current warehouse management systems, that have been modified substantially since initially being implemented in 1999. Better process flexibility to support our changing supply chains is envisaged.
The DCs are further supported through materials handling systems that are continuously being redesigned, developed and implemented to support quicker throughput times. Our replenishment businesses utilise radio frequency (RF) picking, which we have found to be more productive and flexible in this scenario.
Productivity figures in the various distribution centres are world-class. Cost per unit and units per man-hour are closely measured and benchmarked against the best retailers in the world. The cost of distribution as a percentage of group turnover for 2007 is 1,57%. This figure is slightly higher than the 1,53% in 2006 mainly due to the higher contribution of @home and @homelivingspace, both being more logistically expensive than clothing and footwear. This figure includes depreciation, industrial engineering, management costs, labour, packaging and outbound transport.
Our group utilises in excess of 30 local CMT factories in order to manufacture merchandise for our various trading divisions. Stock that is manufactured by these factories is accumulated at our Ndabeni DC, allowing CMTs to maximise their production space. Fabric stock is procured by the group and housed at the Cloth Store prior to being delivered to the CMTs through our small in-house fleet.
In 2006 we indicated that we would begin a process of supply chain improvement. A formal steering committee was established, chaired by the group CEO designate. A number of projects were identified to address areas of improvement and these projects are currently being set up. We envisage long-term benefits being derived from these initiatives, notably improved stock turn. Further discussion can be found in the risk management section of the Corporate Governance report.
Our major DC risk is fire. Fire-fighting training, maintenance of fire-fighting equipment, atmospheric detection, and inter-rack sprinkler systems mitigate the risk of fire.We have generators at each DC to avoid power interruptions.
Security is an important element of our distribution and transport operation. The group’s DCs are equipped with CCTV cameras and are guarded 24 hours a day. As part of our stringent security procedures, an access control system is in place. Our security procedures are extended to our transport partners who have comprehensive security through a combination of secured premises and satellite-tracked vehicles.
Business continuity plans are in place and are regularly tested and reviewed by the risk committee.
