Operations and cost efficiency
We have made significant progress in improving our operational efficiency as a result of the MSGA recovery plan. Major projects were completed to improve the performance of our supply chain and information technology infrastructure and there was significant investment to realign the customer offer. Ongoing operational improvements now ensure we continue to do a great job for customers in terms of product availability and service and are also delivering cost savings.
During the year, cost efficiency programmes have offset over 75 per cent of total cost inflation. Cost inflation was at the top end of our medium-term expectations of between two and three per cent and largely driven by increases in wages, property and energy costs despite hedging to help smooth the impact of the latter area of expenditure.
Efficiency programmes are focused on continued simplification of operations to deliver better processes and lower costs. Initiatives across all areas of our business are supporting sustained investment in the customer offer. New checkout equipment means faster scanning of items and new printers producing double-sided receipts are quicker and also provide environmental benefits. Over 100 stores now have self-scan tills providing customers with a choice of check-out options and this year we plan to roll-out self-scan tills to around 100 additional stores. Shelf-ready packaging continues to improve replenishment and further enhancements to store labour scheduling have been completed.
In August 2008 Sainsbury’s opened its flagship ‘green’ store in Dartmouth, Devon. This has reduced its overall CO2 emissions by 54 per cent through the use of renewable energy and has reduced energy consumed from the national grid by over 50 per cent. Rainwater harvesting has reduced mains water usage by 60 per cent saving around one million litres of mains water every year. Most of the energy-saving features identified in Dartmouth are now being replicated in new stores.
A project was launched in 2007 to further improve the energy efficiency of existing stores. This comprised the roll-out of new technology and enhanced ‘housekeeping’ initiatives and is delivering good pay-back. Over 200 stores have been completed, saving over 53,000 tonnes of CO2 every year as a result. Stock loss has also been reduced through investment in security, management information and training and further improvements have been made in product availability.
During 2008 we redefined the role of deputy store managers eliminating duplicated activities and setting out new accountabilities and reporting lines. Comprehensive training is supporting the change so that we continue to grow while maintaining our customer focus and flexibility. The store HR structure has also been streamlined following the introduction of a shared HR service centre in Manchester in 2008. The centre assumes some administrative tasks previously undertaken within store and provides an online recruitment service allowing store HR colleagues to focus more time on mentoring, training and leadership.
In January 2009 we announced plans to restructure our store support centre in London, cutting out duplication of activities and simplifying structures across our Holborn, Manchester and Coventry support teams, aligning them for the future growth of the business. The new structures were in place by the start of the 2009/10 financial year.
There have been significant improvements within the distribution network which are delivering cost savings. The introduction of a new transport management system and processes are helping improve overall supply chain efficiency, reducing the requirement for temporary facilities at peak trading periods, and the benefits of investments made in the previous financial year are now coming through in lower costs. Our Waltham Point depot has now been reconfigured and new facilities have been opened in North Yorkshire and Kent to support our ongoing growth. To keep pace with the development of non-food, distribution of these ranges has transferred to a 350,000 sq ft site at Tamworth. Our depot in Corby, Northamptonshire, is currently undergoing refurbishment and will support the online non-food operation.
The full-year benefit of many of the initiatives to improve operations and drive cost efficiency will continue to come through in the current year and similar programmes are being introduced on an ongoing basis.