A collaborative project to save new store costs has changed the way JLP works
Investment in bricks and mortar has become a tricky business for retail, with over 16% of sales going online. So when John Lewis was planning to open four new stores, it tasked its procurement team with cutting £15m out of the forecast spend.
Not only did the team achieve the cost reduction, it created a collaborative working arrangement that has spread through the business, opening up conversations and revealing further innovations and long-term savings.
Architectural plans were agreed, development was underway, and spend had already gone over budget when the heads of procurement, construction and store development met to discuss the fit-out phase. “We agreed this was a mighty task,” recalls Paul Williams, head of procurement, property, retail and distribution.
To provide a forum to discuss initiatives and innovations, a productivity steering group was et up, with senior board members from store development, construction, commercial, estates, customer, procurement and store design. It became a dynamic group, Williams says, which was able to challenge the status quo, speeding up and implementing change.
For purchasing fittings – such as tables, counters, rails and walls – the group introduced cross-function product sourcing trips, collaborative workshops and commercial competitive cross-business tenders. This led to new suppliers and, for the first time, store-fit items being sourced from the Far East.
“We are partnering with UK suppliers and sourcing from the best Far Eastern factories, producing higher quality for less,” explains Williams.
To bust silos and reap further benefits via collaboration, category working groups were set up, involving teams such as design, procurement, engineering and maintenance, and aiming to cut project costs but not quality. “It was a win/win,” says Williams, “done through subject matter experts collaborating with external suppliers.”
A new inventory management system and procurement web portal helped improve communication between functions and increase the activity running through procurement. But although Williams says the systems have made a difference, “the biggest game changer was bringing the talent together”. “World class” projects include a lighting category project that reduced energy consumption and lifecycle costs by 15%, and still created a superior effect – according to technical and customer feedback.
“Fundamentally we are working much better as an organisation to drive value,” Williams says. “And we know the customer sees it because their reaction to the new experience in branch and the sales prove it. We opened the Oxford branch in October and it has been one of our best performing branches on opening.”
The end result is a cost saving of £15m, and an expected 14% sales improvement. The new collaborative ways of working have been embedded into the organisation, and even as the fourth of the new stores prepares to open in March in London, the company is looking at introducing some of the improvements retrospectively into existing stores.
Such impressive results led to John Lewis walking away with the award for Best cross-functional teamwork at the 2017 CIPS SM Awards. Praise can’t come higher than a comment from the director of store development: “Procurement has come to the front of the business. It would now feel wrong to have development conversations without the procurement team in the room.”
Collaborative working processes enabled cost reductions totalling £15m across four new John Lewis stores, and the collaborative mindset is being shared across the company. Key savings achieved across Leeds, Chelmsford, Oxford and London’s Westfield stores are:
Value engineering: £1.5m;
Visual merchandising, furniture and fixtures: £1.3m;
Mechanical and engineering: £1.3m;
Far East sourcing: £1.25m;
Professional fees: £1.1.m;
Wall and ceilings: £0.4m