Group Logistics

Structure and functions

The Group Logistics division is responsible for managing stock received from suppliers and for distributing it to stores efficiently and on time.

The group has eight distribution centres (DCs) based near the head office in Cape Town. From them takes place the group’s entire stock distribution function, including receiving, storage, picking, packing and despatching.

The DCs together with the divisions or operations they serve are as follows:

  • Tygerberg DC: Foschini, Donna-claire, Fashíonexpress footwear,
    @ home and returned goods;
  • @homelivingspace DC: a new site for furniture;
  • Ndabeni DC: Exact!, Markham and Style Accumulation (comprising certain partly-completed orders);
  • Sports DC: Totalsports, Sportscene and DueSouth;
  • Foschini DC: Foschini, Donna-claire and Fashíonexpress apparel;
  • Jewellery DC: American Swiss, Sterns, Matrix and Foschini Jewellery;
  • Cloth Store: Fabric for local production of apparel; and
  • Shopfitting DC: Shopfitting stock for the group.

Review of the year

In the past year the DCs handled 44,0 million units (i.e. individual items of stock), reflecting a drop of 0,5% in unit volumes from the previous year.

The cost per unit to process stock through the DCs was 4,6% higher than last year, which was well below the CPIX rate notwithstanding significant increases in diesel fuel prices. Without the fuel price increases the cost per unit would have remained at last year’s figure. This reflects a substantial improvement in productivity.

Productivity figures in the form of cost per unit and units per man-hour are closely measured and benchmarked against corresponding figures of the world’s leading retailers.

The cost of logistics as a percentage of group turnover was 1,55%, representing a slight improvement on the 1,57% achieved in the previous year. This figure includes depreciation, industrial engineering, management costs, labour, packaging and outbound transport.

The materials handling improvement programme was completed by the installation of the final RapidPac materials handling system. This equipment was acquired to provide better efficiency in the handling of flow-through products. The DCs that support replenishment continue to operate by the use of radio frequency devices, which have greater flexibility.

With the aim of improving stock turn, the division will in the next year make a start on replacing Nautilus, the current warehouse management software, with Manhattan, which is the leading software in this field. The change-over will be implemented throughout the DCs over the next three to four years. There will be a simultaneous critical review of business processes in order to maximise supply chain effectiveness. This replacement will be important in supporting the group’s supply chain initiative which is referred to below.

During the year the division put out to tender the outbound transport business, with the result that new contracts were signed with HRP, RAM and Grindrod Logistics (Boltt).

The major risk associated with the DCs is fire. Fire-fighting training, maintenance of fire-fighting equipment, atmospheric detection and inter-rack sprinkler systems mitigate the risk of fire or at least of extensive fire damage, and close attention was again given to these issues.

Generators have been provided at all the DCs in order to avoid or minimise the ill effects of electricity interruptions.

Security is an important element of the distribution operation, particularly at and near the time of transportation. The group’s DCs are equipped with CCTV cameras and are guarded 24 hours a day. As part of the security procedures, access control systems are in place. The group’s security procedures are extended to its transport partners, who have comprehensive security through a combination of secured premises and satellite-tracked vehicles. Security measures again received close attention in the past year in view of the high incidence of crime in South Africa.

Business continuity plans are in place and they were again regularly tested and reviewed by the group’s risk committee.

Supply chain initiative

Mention has been made in the previous annual report and in various reports in this document of the group’s supply chain initiative, an extensive and ongoing review of the group’s supply chain practices. Its objective is to develop a sustainable and world-class model of supply chain management that enhances the group’s capabilities in the fast fashion retail business.

There are four projects within this initiative, namely:

  • Supplier relationship management.
  • Lead time.
  • Replenishment.
  • Foschini and Exact! pipeline management.

The plan for all the projects has been scoped to include the following targets, which are deemed to be critical to the success of the initiative:

  • defined standard operating procedures;
  • shorter lead times;
  • guaranteed quality;
  • enhanced reliability;
  • reduced waste within the supply chain; and
  • decreased inventory holding, hence more rapid stock turn.

There has been pleasing progress with the initiative and it is expected that significant early benefits will be realised in the next year.