TFG LOGISTICS DIVISION


STRUCTURE AND FUNCTIONS

TFG Logistics is responsible for managing stock received from suppliers and distributing it to the group’s stores efficiently and on time.

The group’s distribution centres (DCs) are based near the head office in Cape Town. The group’s entire stock distribution function, including receiving, storage, picking, packing and despatch, takes place from these DCs.

The DCs together with the divisions or operations they serve are as follows:
  • Tygerberg DC: Foschini, Donna- Claire and Fashion Express footwear; @home and returned goods
  • @homelivingspace DC: @home furniture
  • Ndabeni DC: Exact! and Markham
  • Sports DC: Totalsports, Sportscene and Duesouth
  • Foschini DC: Foschini, Donna- Claire and Fashion Express apparel
  • Jewellery DC: American Swiss, Sterns, Matrix and Foschini division jewellery
  • Cloth Store DC: Fabric for local production of apparel
  • Shopfitting DC: Shopfitting stock for the group

FEATURES OF THE PAST YEAR

In this period the DCs distributed 48,2 million units (i.e. individual items of stock), which represents an increase of 23% in unit volumes from the previous year. This is the highest unit output in the group’s history.

Improvements in the supply chain process brought about a drop of 7,6% in operational costs per unit handled by the DCs. Transportation costs per unit increased by 12,2% because of higher fuel prices and the group’s expansion into Africa. The overall cost of logistics as a percentage of the group’s revenue increased from 1,5% to 1,7%.
  • Supplier delivery conformance: The performance of the group’s suppliers of merchandise is measured in terms of the accuracy of their order bookings, the promptness and accuracy of deliveries they make, the degree of conformance of the packaging they use to applicable norms, and the accuracy of their ticketing of products. The delivery conformance of all suppliers collectively as measured against perfectly delivered orders improved in the space of a year from 77% to 91%. This is a result of benchmarking by the group of best practices and of continuous improvements brought about in the reliability of its supply chain by establishing clear norms and raising the degree of accountability to which suppliers are held.
  • Improved throughput speed: The average speed of throughput of stock in the DCs averaged 3,9 days, as against 4,9 days in the previous year. This represents a substantial gain in efficiency.
  • The group continues to fine-pick the majority of its stock, with only 8,5% of its merchandise being cross-docked through the DCs. This cross-docking can be accomplished within a single day. (Cross-docking means that a carton passes unopened through a DC to a store.) Notably the @home division cross-docked 60% of its stock, as against 47% in the previous year. Cross-docking saves costs and reduces product damage en route to stores.
  • DC accuracy: The accuracy of fine-picked stock leaving the DCs was maintained at a level of 99,9% in unit terms. This creates reliability in the supply chain ending at the stores and the level of 99,9% is consistent with best-in-class retailers around the world.



These improvements in costs and the efficiency of processes were formally recognised at the 2010 African Access National Business Awards ceremony, where TFG won the Logistics category. In addition, TFG received a gold award at the 2010 Logistics Achiever ceremony for excellence in logistics, inventory and distribution management.

INFORMATION TECHNOLOGY AND OPERATIONAL SYSTEMS

As previously reported the group acquired Manhattan Associates’ warehouse management system (WMS) to support its requirement for an agile supply chain. TFG is the first retailer to acquire this software for its operations in South Africa.

In the past year WMS was further implemented in the DCs of the Foschini and Sports divisions. WMS will be implemented in the @home DC in the new year and in the year thereafter in the Jewellery DC.

The WMS implementations have assisted in advances towards the group’s goal of having a world-class distribution model and network. Thus far the results are greater visibility of deliveries to the WMS-enabled facilities, the ability to pre-allocate stock to further decrease throughput time through DCs, and the ability to hold back a portion of stock in the DCs in order to be able to react quickly to consumer demand.

A best operating practice programme is in operation in the DCs and it has raised standards and performance levels in various ways, including bringing about greater clarity concerning accountability for various operations and generating a culture of continuous improvement. The programme covers four key performance indicators, namely visual performance management (VPM), teamwork, 6S (health, safety and shop-floor organisation) and problem-solving.

The major risk associated with the DCs is fire; this risk can be mitigated if prudent preventative action is taken. This covers the steps, inter alia, of training staff members at the warehouses in fire-fighting, undertaking systematic maintenance of fire-fighting equipment, implementing atmospheric detection systems, and installing inter-rack sprinkler systems. Close attention was again given to these issues. Historically the group has been free of fires, but there is no place for complacency.

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. Regular procedure audits ensured that there were minimal losses throughout the past year in spite of an incidence of crime which is perceived to be high in South Africa.

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

ENVIRONMENTAL IMPACTS

In reviewing the division’s impact on the environment and measuring its carbon footprint, indirect emissions from the consumption of cardboard packaging and outsourced transport were identified as the two factors accounting for the greatest impact.

To mitigate this impact the division has engaged with its merchandise suppliers to standardise their carton specification so that the group can reuse their cartons. The success of this initiative has led to a reduction in the consumption of cardboard packaging and a further 17% reduction in cardboard waste. This is a combined improvement of 71% over a two-year period. This achievement was recognised by Supply Chain Today magazine when this initiative won the "Best Greening Project" award in the R1 million to R10 million category.

The outbound transportation of merchandise to the stores is outsourced. The division collaborates with its transport partners in seeking ways to reduce the environmental impact associated with this transportation task. All new vehicles are equipped with the latest diesel technology to make engines run efficiently. A strict maintenance schedule is in place to ensure that the fleet is regularly maintained by the manufacturers’ agents, so maximising its operational efficiency. All transport partners utilise the latest routing and fleet management technology in order to minimise the number of kilometres travelled.

LOGISTICS OUTLOOK

As the group’s supply chain processes continue to mature and respond to challenges there will be continued gains in stock handling and operational efficiency. The implementation of the new WMS programme will enhance the efficiency of picking processes and bring about greater flexibility and further process improvements.

In the next year the division will optimise its existing furniture network by opening a DC in Johannesburg which will not only reduce distribution costs but also reduce lead times to customers. Further benefits from its opening include lower exposure to the consequences of fuel price increases and a reduction in the group’s carbon footprint.