Halfords’ new distribution centre in Coventry will give the retailer flexibility and provide massive cost savings. Joanna Perry took a tour while the technology was being tested
Sometimes you have to spend money in order to save it. That has been the case with Halfords’ reconfiguration of its distribution network, which is under way at the moment.
Halfords estimates that its decision to consolidate two of its distribution centres into a new site in Coventry, with another existing site being reformatted to become its dedicated bicycle distribution centre, will save it about £4m a year, or 15% of its warehouse and distribution centre costs.
But, before this happens, it is investing £2.4m on automation, pick-to-light and pick-by-voice systems, and an upgraded warehouse management system from Manhattan Associates.
Halfords store operations and logistics director Andy Torrance says that there were clear opportunities to rationalise the distribution network. In early 2009 the retailer began a full strategic review, working with consultancy Solving Efeso, to look at its network. Its contract with Unipart on a facility in Cowley, Oxfordshire, was coming to an end in the summer last year, as was the lease on one of its sites at Redditch, while the automation at its other centre was coming to the end of its life.
“We have landed on a model that takes our current larger distribution centre and reconfigures it to a bicycle distribution centre,” explains Torrance.
Halfords will use a fleet of double-decker lorries to pick up goods from both the bicycle distribution centre and the new Coventry centre to reduce delivery miles and so stores will receive their orders more efficiently.
The consolidation of Halfords’ distribution sites will save an estimated 2.1 million diesel miles a year. But this is not the only cost benefit. The technology being introduced at the Coventry distribution centre and the upgrades being done to the Redditch site will make a substantial difference to productivity, too.
Halfords’ ambition is to shut down its other distribution centres without any disruption in the supply to stores. In order for this to occur, a substantial period of testing of the new systems has been factored into its plans.
“We are putting a lot of time, effort and resources into testing - it is vital that it does exactly what it should from day one,” says Torrance.
The plans have all been signed off by an external auditor for risk management purposes and Halfords has also planned to place extra stocks of its best sellers in store to prevent out-of-stocks, although Torrance is confident these stocks will not be called upon.
“During the cutover period store managers don’t care where stock comes from, as long as it comes when they expect it,” he says.
A lot is riding on the success of the new distribution centre, as it will be fulfilling orders for Halfords’ online operation, as well as store deliveries, and the facility will give Halfords greater capacity to carry ranges that it does not want to stock in store.
The Coventry centre will be fully operational from July, and the new network will be up and running by September. The first stock was due to be delivered in early May, and the first deliveries due in store in early June.
The site in Redditch is perfectly sized to distribute all bicycles - about 1 million a year. It does not need to be automated, but the warehouse management system it is running is being upgraded to run on the same version as is being introduced at Coventry.
“Best practice tells you to modify as little as possible, but an appropriate level of modification provides an appropriate balance of risk and reward,” says Torrance, explaining Halfords’ approach to the new warehouse management system.
Manhattan Associates consulting director Chris Maynard says that the majority of technical testing of the system has been completed, and it is now in the user acceptance test phase in Halfords before going live.
New and improved
Upgrades to the version of the warehouse management system that Halfords was using before mean it now has a geographical yard tool, to give complete visibility of where its trucks are in the yard, and a slotting optimisation tool, which will improve the placement of products in the warehouse.
Maynard adds that visibility and reporting within the system will allow Halfords to set key performance indicators across the operation, so that it can gauge and understand how well its supply chain is operating. This will include a high-level view, so that performance can be monitored at both the Coventry and Redditch sites.
In addition, the Coventry centre has been fitted with an automation system to help with the picking of small parts. Torrance says the 7,000 sq ft mezzanine floor where the small parts are stored could be doubled in size.
The Dematic automation system will be run at full speed for five weeks to test that it can stand up to the volumes it will process once the site is live. Torrance explains that staff from Dematic in Germany have been on site, training Halfords’ own engineers on how the system works.
The automation is combined with pick-to-light technology, which guides pickers to the appropriate products that need to picked for each case.
Each member of staff in the warehouse responsible for the pick face will be allocated about 30 feet. A light goes on in front of each product that needs to be picked, and the system can indicate the volume of each item that needs to be picked too.
Meanwhile, pickers covering the rest of the warehouse will use a pick by voice system. This is the first time this technology has been put to use by Halfords and it is expecting to see the increased productivity that other retailers have enjoyed when they first introduced it.
At the same time, Torrance notes that as the system is multilingual, so it will allow Halfords to get the best productivity rates from staff, even if their first language isn’t English.
Both the new distribution centre and the technology will be flexible enough to accommodate future changes in Halfords’ business model.
“Our requirement to hold stock flexes in and out with the seasons. This will allow us to carry our full stockholding. At other times we will be running at 75% to 80% capacity on our current configuration,” says Torrance.
“We will be picking about 12,000 SKUs initially, but we could easily double that with more automation and changes to the configuration,” he adds.
For about 10 weeks during the peak trading period, Halfords will also be able to stop deliveries from its two distribution centres arriving at stores on the same truck. Cycle deliveries will become independent, as an average of 200 bikes per store are delivered each week in the run-up to Christmas and, once they are delivered, they still have to be built in store.
It is unlikely the facility will have to support Halfords’ new Nationwide car servicing and repair business, at least in the near term. Torrance says Nationwide does not have a central distribution model, as it requires parts to be turned around in an hour, and so uses suppliers that deliver straight to its sites.
Torrance concludes that 300 jobs are being created at the Coventry distribution centre. The company is offering incentives to tempt staff from the Redditch facility that is closing to move to work there, although Torrance recognises that, as it is 40 miles away, many may not wish to.
The management team for the new site has already been recruited and Torrance says that he is pleased with the quality of the staff he has recruited. “Coventry has a great heritage for distribution services,” he says.
With the state-of-the-art technology that is being introduced to the site, the systems will, it is hoped, match his faith in the new management team.