Supply chain strategy: How WHSmith, Co-op and Inditex found their missing links

First-mile friendships 

Outsourced distribution and logistics is a notable direction of travel for several long-established UK retailers, with both Currys and WHSmith choosing this route in the past few years. 
 
Most recently, in January 2024, Retail Week exclusively revealed that WHSmith had teamed up with GXO in the name of efficiency and effectiveness.

Ownership of all three of WHSmith’s in-house distribution centres and its 440 staff – in Swindon, Birmingham, and Dunstable – are transferring across to GXO.

Transport operations have also been outsourced to the same logistics provider, with the retailer keen to optimise its network and leverage shared transport facilities. 
 
WHSmith supply chain director Sean Feeney said this would help create “a modern and efficient supply chain, which delivers for our UK businesses and customers,” acknowledging that the business needs a structure to keep pace with its growing travel retail operation. 
 
The expertise that comes with a dedicated logistics provider is one thing that drew Currys towards launching an outsourced partnership back in 2021.

Simon Boss, director of home delivery at Currys, says working with a third-party distribution company allows the electricals retailer to tap into its knowledge of automation and tech innovation. 

Smarter shoring

Another factor impacting partnerships in first-mile logistics is near-shoring (outsourcing logistics to suppliers in neighbouring countries, as opposed to countries much further away) and on-shoring (domestic outsourcing). 

As supply chain disruption becomes more common, businesses, including retailers and consumer goods firms, are realising that the cost advantages of a “buy-centric and/or offshore-focused supply chain” are decreasing, according to consultancy AlixPartners, which has tracked a move away from reliance on China. 
 
AlixPartners said in December 2023 that it is no longer a given that China is the cheapest for labour, and costs related to environmental, social and governance (ESG) and growing automation in warehouses globally mean manufacturing in Asia does not always bring the savings it once did.

The consultancy said it surveyed 115 Europe-based executives across industries and nearly all respondents have developed actions to reduce dependency on China. A quarter said they had already reduced their exposure by 10%, while an additional third said they would hit that threshold in 2024. 

While the intent exists to accelerate near-shoring, it does not happen overnight, but there are signs of an evolution.

Since the pandemic, for example, Inditex has been purchasing more goods from local markets in Spain, Portugal, Turkey and Morocco, and Marc O’Polo and Mango are among a cohort of retailers less reliant on China for sourcing. 
 
Elsewhere, in February 2024, it was revealed that Boohoo and Asos had turned to near-shoring from suppliers to mitigate disruption from the Red Sea crisis.

The fashion retailers have begun ramping up the sourcing of products from countries such as Turkey and Morocco, as well as domestically in the UK, to avoid the longer lead times and inflated prices associated with shipping from Asia. 
 
As the shift to near-shoring develops, new partnerships will emerge and, with that, new development centres, material supply chains, manufacturing methods and machinery will be required. 

Last-mile link-ups 

In January 2024, THG announced that Holland & Barrett would be using its Ingenuity Commerce platform to run direct-to-consumer services as part of a wider shake-up of distribution at the health food and supplements retailer. 
 
Holland & Barrett chief operating officer Anthony Houghton said the retailer’s digital sales operations were at 95% capacity.

“We need to invest now in a new digital outbound system to meet the future demands of our customers,” he added. 
 
A three-year outsourcing deal will allow the business to “continue to grow at pace with a partner who is an industry expert in direct-to-consumer fulfilment,” Houghton continued. 
 
Holland & Barrett is now undergoing a multimillion-pound redevelopment of its Burton distribution centre as it seeks “a new state-of-the-art fulfilment system”. 

Other notable new partnerships in last-mile include the Co-op’s burgeoning collaboration with autonomous robot company Starship Technologies and Amazon’s work with several e-cargo bike manufacturers as it continues to open “micromobility hubs” in urban areas. 
 
Co-op rolled out delivery via Starship robots to a total of four districts in Leeds in 2023. The grocer had already brought the technology, which delivers groceries to consumers in under an hour tracked via an interactive map, to the streets of Wakefield, Trafford, Milton Keynes, Northampton, Bedford and Cambridge. 
 
Amazon, meanwhile, is opening hubs from which it and its partners will fulfil parcels to people’s homes by foot or cargo bike.

The retail giant is targeting these hubs for circa 40 European cities by the end of 2025 to help take more vans off the road and reduce urban pollution.