03 November 2005 | Anusha Bradley
The Boots Group has cut supply chain costs by £80 million after a year-long efficiency project.
The firm saved £65 million in inventory costs and £15 million in labour by changing to a demand-based system.
Craig Farina, head of supply chain development, said a study had revealed how under the previous scheme goods were delivered every other day, resulting in excess stock.
Now Boots delivers its own brands directly to stores every day. It has also changed its packaging so products can be put on shelves more easily, saving staff time.
Daily deliveries have reduced dependency on forecasting and improved availability. They have also shaved 1p off the total price of each item. Farina said it required huge rescheduling work and collaboration with suppliers, but there was little extra cost because pharmaceuticals were already being delivered daily to most stores.
"There is opportunity to work more with suppliers on reducing cost in the future," he said. The savings come despite a 9.6 per cent fall in Boots' pre-tax profits, which were £163 million for the six months to September.