Singled out by many in the industry as a leader in omnichannel, the John Lewis Partnership recently celebrated its 150th anniversary. That in itself is quite some achievement. That the brand continues to grow, develop and lead in many key areas, is evidence that something is clearly working at John Lewis.
In 2014 it invested £92.5 million in IT and systems, and every channel and category of its business grew last year. It operates 43 John Lewis shops across the UK (31 department stores, 10 John Lewis at Home and shops at St Pancras International and Heathrow Terminal 2), and 336 branches of Waitrose across England, Scotland, Wales and the Channel Islands, including 60 convenience branches, plus another 29 shops at Welcome Break locations.
Gross sales at John Lewis were £4.43 billion last year, and £6.51 billion at Waitrose.
John Munnelly is Head of Operations for John Lewis, and runs the group’s National Distribution Centre at Magna Park, in Milton Keynes. He will be speaking at EDX 2015 and here he talks to eDelivery about his role, his thoughts on the state of the industry, and how John Lewis manages to keep ahead of the pack.
eD: Tell us a bit about your role
JM: I’m the head of operations and I’ve had the pleasure and privilege of looking after the development of our automated National Distribution Centre in Milton Keynes since it was first conceived, nine or so years ago.
I was brought into the business to help design and implement automation in John Lewis, because at that time there really wasn’t a great deal of technology in use – our distribution centres had the sole purpose of getting stock into the shops. Back in 2005 we had a grand total of 26 department stores and were doing a very small amount of online business. The view back then, in terms of where online might go, was that maybe one day it would grow to the size of an average department store. It was a modest expectation and, as we all know, things turned out to be completely different.
My role consist of two main components. Between January and September it’s really all about the strategic view of where the business is going – working on planning with our partners to make sure we are set well for the next two or three years or so. And then for three months of the year it’s a case of rolling your sleeves up and getting stuck in, to make sure we get through things like Black Friday.
In the early days when the online business was around £300 million in turnover it was relatively easy. Back then, if you were 10% out that just meant a few more packing stations. It’s a different story now however. With an online business with turnover of more than £1 billion a 10% variance to the forecast can be critical when scaling the number of pack benches for the D2C operation.
The amount of planning and due diligence that goes into it all is obvious. It is an 18 month lead time from defining the requirements to handing the equipment over to the operation. The level of detail and the number of testing stages we go through are of the highest order to make sure we don’t get that part wrong.
We started with a 650,000 square foot warehouse, with the ambition that it would be big enough to cater for our 2017 predictions and we’d build in flexibility and agility so that if the online side of things grew more than expected we’d have somewhere to expand into. We went live in 2009, and in January 2011 we started our first set of installation extensions; every single year, bar none, we’ve extended the solution to accommodate the growth of the business. At the same time, the scope of the automation has grown and grown.
This year we’re embarking on another extension. We’ve brought the site next door into play and joined the two together with a bridge link, so the campus now stands at just over 2 million square feet of working floor space.
eD: Do you see yourselves as being one of those businesses that’s leading?
JM: I think we do. We do see ourselves as ahead of the curve. But we know we’re not at the finishing line and we certainly don’t rest on our laurels.
Some of the decisions made in the early days are key to that. We decided on our supplier, Knapp, for the automated system at Magna Park, which really is the foundation of the whole omnichannel thing and it was a strategic long-term decision.
If you go back 8-10 years ago the emphasis and expectation was that we’d open 10 more department stores in 10 years. Back in those days we had quite a narrow multichannel view of the world and our emphasis was on bricks and mortar. A key example is that click and collect didn’t exist back then and it now represents more than half of our online offer.
In 2012 a new supply chain strategy was developed – an eight year plan that takes us to 2020. It consists of four key themes and covers everything from the point at which the product leaves a supplier, no matter where in the world they might be, to the point that product arrives at the consumer or into a department store.
eD: What does the future look like?
JM: It’s still very much bricks-and-clicks.
We’re opening a number of big developments on the high street this year and next year – we’ve got the Birmingham store at New Street opening this year, and then stores in Leeds and Westfield opening in the following two years, plus a scattering of our other key proposition – John Lewis At Home.
Online represents close on 35% of the business now. Which is currently 15 times the size of an average department store. To be able to cope with that kind of shift has been the real value of the Magna Park facility. This leads me onto one key area we think we lead in – the growth of click and collect. In the early days no one thought it would take off, after all why would people order something online and then go to a shop to collect it? The John Lewis department stores were the natural first place for people to come and collect things, which gave us the opportunity of that extra footfall. And then, in 2012, we rolled it out to all the Waitrose shops.
eD: How significant is a successful click and collect proposition?
JM: If we were a pureplay and all our orders were heading out to a carrier, when you look at the likes of Black Friday last year, when we saw something like 2.6 orders per second, that would start to be a problem. The thing about retail is, when it comes to carriers, we’re all sharing the same resources. In my opinion, the carrier network is the Achilles Heel of the industry. It’s under invested, yet customers still expect more for less. In terms of the value chain, that particular sponge is almost dry.
We’re all going to have to think quite differently about the way we do things, because it’s not going to get any easier.
It costs more to send a parcel to a customer than to put goods on the shelf in a store. With things like consumer electronics, you find yourself in a situation where you have a lot of low margin goods being sent through a high cost delivery channel. It’s a challenge.
The thing with Black Friday is that it’s never going away now, in my opinion, and we’ve all got to make sure the supply chain is joined up like never before, because more than ever you’re only as strong as the weakest link.
eD: What are you looking forward to at EDX?
JM: I’ve a general interest in everything that’ll be going on across the two days of EDX. But there are a couple of speakers that stand out because their approach is so different to ours.
I’ll be talking about our experiences with Magna Park and while it’ll be impossible for me to cover the whole case study, I’ll focus on the journey we’ve been on and I’ll talk about the flexibility aspect and possibly looking forward at the challenges ahead.
John will be giving the Keynote Address (Automation in a D2C omnichannel world) on Day Two of EDX 2015, on 26 March, in the Retail Logistics stream in the EDX Theatre. You can register for EDX here.
