M&S said its forecasting, ordering and stock allocation systems for food were “dated” and were being upgraded © Photo by Chesnot/Getty Images
M&S said its forecasting, ordering and stock allocation systems for food were “dated” and were being upgraded © Photo by Chesnot/Getty Images

How M&S will save millions by 'taking control' of its supply chain

Will Green is news editor of Supply Management
22 July 2022

Marks and Spencer (M&S) has said the vertical integration of its food logistics operation will cut costs by tens of millions of pounds.

Under a deal M&S will buy Gist Ltd, the principal contract logistics provider to M&S Food, for up to £255m.

In the year ending December 2021 Gist earned profits of around £55m, “with the majority of profit reflecting management fees recharged to M&S under contractual arrangements, which will be eliminated upon consolidation to M&S”, said the retailer.

In full year results released in May M&S said its food supply chain “remains less efficient and, we believe, higher cost to serve than our competitors”.

“This is a result of a complex store and logistics network, a high level of chilled product mix and a costly supply chain contract with our partners, Gist.”

Gist provides the majority of services to M&S through a network of eight primary and 10 secondary distribution centres across the UK and Republic of Ireland, under a contract that expires in 2027.

Stuart Machin, chief executive at M&S, said: “M&S has been tied to a higher cost legacy contract, limiting both our incentive to invest and our growth. The last two years have shown what can be achieved by working collaboratively alongside our partners at Gist. 

“This has given me confidence that now is the time to take action and remove an impediment to our growth. We have therefore acted decisively to acquire Gist, taking control of our food supply chain for the first time in our history. This is the first step in a multi-year plan which will transform the entire supply chain.”  

In May M&S said its forecasting, ordering and stock allocation systems for food were “dated” and were being upgraded. 

The company’s “Vangarde” supply chain programme, launched in 2020, aims to create more efficient processes for stock management and replenishment of stores, which helped sustain availability through the pandemic supply chain disruption of 2021.

“However, waste and stock loss remain above target levels,” M&S said.

“In the next stage we will roll out new forecasting, ordering, and space, range and display systems to better match catalogue and product display to customer demand, with the objective of realising a substantial reduction in food waste.”

The company said costs and tariffs of £29.6m and an estimated trading impact of £15m due to EU border issues would be mitigated through measures including local sourcing and automating processes.

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