Sainsbury's seeks £300m savings via supply review

16 November 2000
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16 November 2000 | Cathy Hayward

Supermarket chain Sainsbury's is reviewing its supply chains to save £300 million after recent poor performances.

A company-wide review was announced by the beleaguered retailer's chief executive, Sir Peter Davis, last month. "Our objective is to have operating margins comparable to the industry leaders within three years," he said.

He predicted that Sainsbury's could save £600 million, half of which would come through improved purchasing and supply chain operations. Davis initiated a review last May which found that Sainsbury's supply chain costs were considerably higher as a percentage of sales than its competitors - 12.9 per cent compared with 12.1 per cent.

Key areas in the supply chain were out of date. On average, Sainsbury's depots were 19 years old compared with seven for Tesco and nine for Asda. Its warehousing systems were twice as old and not as efficient.

"Our supply chain was severely disadvantaged," said Martin White, Sainsbury's supply chain director, "and we are replacing our core systems." The aim was a more transparent supply chain to cut costs and better integrate suppliers, he said.

Sainsbury's plans to build several new depots, introduce new warehousing and transport management systems. A new code of practice has also been introduced to improve supplier relations.

But analysts claim that Sainsbury's plan is too little, too late. Tesco continually monitors its supply chain, said food retail analyst Andrew Kasoulis. He also questioned whether Sainsbury's would reach its targets and predicted that most of the investment would just disappear.


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