Inside the latest composite DC

1. The Co-operative’s Newhouse distribution centre Inside the latest composite DC

2. Contents • Part one – Background • About Newhouse • Facts and figures • Site layout Part two – The Newhouse operation • Project LIDIA • Warehousing processes • Transport planning Part three – Sustainability and other features • Building an energy efficiency depot • Natural light • Battery charging and rail • Banana room Part four– In conclusion • Key messages • More information

3. The Co-operative’s composite DC in Newhouse The Co-operative’s new composite distribution centre, located in Newhouse, Scotland shipped its first products in February and was officially opened in July 2011. The DC forms part of The Co-operative’s programme of work called ‘Project LIDIA’ that was established to deliver a complete overhaul of the distribution centre network. Some 30 depots have been rationalised to a network of under 10 large composite sites. Newhouse serves around 600 stores in Scotland, some in very remote locations. Source: The Co-operative

4. Facts and figures Source: The Co-operative

5. Site layout Loading bays (4 frozen, 5 chill) De-kit area Produce (8oC) Frozen chamber (-22oC) Chilled (2oC) Material handling maintenance and battery charge Vehicle wash Ambient Energy centre Chilled (2oC) Banana room Office Loading bays (20) Loading bays (20) Source: The Co-operative

6. Contents • Part one – Background • About Newhouse • Facts and figures • Site layout Part three – Sustainability and other features • Building an energy efficient depot • Natural light • Battery charging and rail • Banana room Part four– In conclusion • Key messages • More information Part two – Implementing The Co-operative’s strategy • Project LIDIA • Warehousing processes • Transport planning • Other features

7. Project LIDIA Project LIDIA’s objective is to establish a network of nine to ten large composite distribution centres across the UK. The project began in 2003 when The Co-operative was operating around 30 distribution centres. Operating a smaller network of composite sites allows the retailer to draw economies of scale in its transport operation, delivering to stores across the different temperature regimes. Currently The Co-operative’s composite network consists of five depots: • Andover (468,000 sq ft) • Birtley (280,000 sq ft) • Lea Green (587,000 sq ft) • Newhouse (504,000 sq ft) • West Thurrock (320,000 sq ft) Newhouse Birtley Lea Green A further three composite sites are planned in the North Midlands, the South West (Avonmouth) and the South Midlands. West Thurrock Andover Source: The Co-operative, IGD

8. Warehousing - goods in Open since February 2011, the final phase of the volume ramp up at Newhouse began at the start of October. Current delivered volume at the warehouse (Sept 2011) is 1.02m cases consisting of: • 50,000 frozen cases • 150,000 SMG cases are trunked from Coventry NDC • 525,000 ambient cases • 475,000 chilled cases Loads are delivered direct from suppliers or through consolidated loads from third party logistics companies. Newhouse receives 150,000 cases from The Co-operative’s NDC in Coventry, which holds SMG lines including tobacco, health & beauty and confectionery. Coventry picks store orders and trunks products to Newhouse using 7-10 double-decker vehicles daily. Source: The Co-operative, IGD

9. Warehousing – ambient and frozen The Co-operative’s intake process for its ambient and frozen operation are identical, apart from the temperature of the frozen products is maintained at -22oC. Source: The Co-operative, IGD

10. The stockless operation Newhouse operates a stockless operation for its chilled and produce products Chilled products are kept at 2oC and the majority of produce at 8oC. Bananas, being very sensitive to temperature changes are kept in a separate room that is maintained at 15oC. Day one: Stores order chill and produce by 12.30pm Day two: Newhouse starts receiving deliveries from 06.00 Day two: Pick starts at 14.00 and is store friendly, heavy to light method Day three: Delivery to store starts at 01.00. The majority of deliveries leave between 04.00 – 06.00 Source: The Co-operative, IGD

11. The stockless operation Chill and produce orders are picked and loaded to vehicles in a strict sequence: 1. Orders taken by hauliers to stores in very remote locations are transported by ferry and follow a tight schedule 2. Some ‘twilight’ deliveries are made to 12-15 stores meaning they get a delivery that day (day two) 3. Products that are trunked to an out-base in Dalcross near Inverness, serve some 60+ remote stores 4. Delivery to the core stores, which accounts for the majority of volume, starts at 01.00 on day three with the majority leaving between 04.00 and 06.00 Source: The Co-operative

12. Transport planning Transport planning from Newhouse is an extremely complex operation; the DC delivers to 600 stores the majority of which are in local, high street or village locations with some receiving as little as a cage and a half of products. The smaller stores have a variety of delivery restrictions and constraints that have to be built into the plan. Paragon is used to plan the raw transport schedule. Once this is produced, transport planners based at the depot revise the schedule using local knowledge of delivery restrictions to store. 350 vehicles based at Newhouse, consisting of: - 18 and 26 tonne rigids • - 27ft lane loader trailers • 35ft, 40ft and 45ft trailers. • Double-deckers for trunking Fleet facts Source: The Co-operative

13. Transport Execution System The TES System - Developed by Microlise, TES provides satellite tracking and monitors performance including KPIs such as unscheduled stops or over-revving - The system sets a time for each journey, aiding the planning process - Each store has an ‘geo-fence’, once a vehicle has crossed the fence, store staff know when to expect the delivery - Part of the drivers’ handheld system provides satellite navigation and aids communication with the driver The revised transport schedule is then inputted to The Co- operative’s in-house Transport Execution System (TES) that uses the information to generate the transport warehouse activity plan (TWAP). This provides the programme of work that is needed to fulfil store orders including: • Identifying what delivery routes are needed on each day • Driver resource requirements • Store orders are allocated to specific vehicles Before the delivery departs, the driver has 30 minutes to check the vehicle and the load it is carrying. Vehicles then drop products to three or four stores before returning to depot with empty cages and material from store for recycling. Source: The Co-operative

14. Transport – future developments Primary transport A team based at Newhouse look at optimising efficiency in the primary transport operation. As part of this initiative, opportunities are identified to perform supplier collections on backhaul routes of store deliveries. The initiative also sees the retailer encouraging suppliers to use The Co-operative’s vehicles or specified hauliers. Yard management Newhouse is currently using an interim yard management solution and expects to roll out a new solution in the next 12 – 18 months. The new solution will interface with the TES providing visibility of when each vehicle will be back at Newhouse. The system will direct each driver to a loading bay and once unloaded to a specific space. If there is a shortage of a certain type of vehicle for store delivery, the vehicle can go immediately to where it is required. Once vehicles have been allocated a specific space, shunters and vehicle maintenance teams can find vehicles when they are needed quickly and efficiently. Source: The Co-operative

15. Contents • Part one – Background • Composite distribution centre • Facts and figures • Site layout Part four – In conclusion • Key messages • More information Part two – Implementing The Co-operative’s strategy • Project LIDIA • Warehousing processes • Transport planning • Other features Part three – Sustainability and other features • Building an energy efficient depot • Natural light • Battery charging and rail • Banana room

16. Building an energy efficient depot • Commissioned by ProLogis and built by Winvic, Newhouse has been built to be an environmentally friendly and sustainable warehouse. • The site and all its equipment has the BREEAM rating of ‘Excellent’ – the first within The Co-operative’s network • The Co-operative’s Birtley DC is two years old and Newhouse is 23% more energy efficient • Newhouse is currently working towards achieving its zero waste to landfill target Source: The Co-operative

17. Natural light • In the ambient section of the warehouse, 25% of the roof consists of sky lights, providing a significant level of natural light in this section of the warehouse • The rest of the warehouse has T5 lighting installed • T5 lighting operates with an automatic motion-sensor, dimming when there is low activity in the warehouse • T5 lighting ensures the efficiency of energy consumption and light provision Source: The Co-operative

18. Battery charging and rail • Two battery charging areas are located at the warehouse for material handling units • One of the charging areas is located next to the freezer chamber and is specifically designed for equipment that operates in -22oC • A direct ammonia cooling system is installed that is 20% more energy efficient than previous systems • Two containers travel via rail from the Coventry NDC via the Mossend rail terminal Source: The Co-operative

19. Banana room and secure area Secure area A secure area holds tobacco, confectionery and health & beauty lines. The DC holds six-seven days cover and these goods are handled separately to other products in the warehouse; they are picked and marshalled for delivery in distinct lanes and are easily identifiable by wrapping cages in different colours. Banana room Being particularly susceptible to temperature changes, bananas have to be maintained at 15oC. To ensure the temperature chain is maintained, Newhouse has a separate room dedicated to bananas. The cages have special temperature-controlled shrouds that help maintain the temperature at 15oC. Source: The Co-operative

20. Contents • Part one – Background • About Newhouse • Facts and figures • Site layout Part two – Implementing The Co-operative’s strategy • Project LIDIA • Warehousing processes • Transport planning Part three – Sustainability and other features • Building an energy efficient depot • Natural light • Battery charging and rail • Banana room • Part four – In conclusion • Key messages • More information

21. Key messages on The Co-operative’s Newhouse DC The Co-operative’s LIDIA project is transforming the supply chain, building synergy in the warehouse and transport network Composite DCs allow The Co-operative to perform multi-temperature deliveries and with the retailer’s complex store delivery network provide the opportunity to maximise efficiency Suppliers have an opportunity to engage with The Co-operative’s primary transport operation through backhaul opportunities this will enhance your collaborative partnership Aligning your strategy to connect with The Co-operative’s CSR values will be key to engaging. Helping The Co-operative to improve its service to community stores should be a key focus Source: The Co-operative, IGD

22. More information • For further information on The Co-operative’s UK supply chain operation, access Supply Chain Analysis’ retail logistics profile that contains unique data and information on The Co-operative’s distribution centre network, transport operation, replenishment processes and much more • The Co-operative’s Project LIDIA has transformed the retailer’s network. For further information on network reconfiguration, read our presentation Redesigning a distribution network and access a case study on Nestlé's network reconfiguration • Other depot visit reports on Supply Chain Analysis include Asda’s temperature controlled DC in Wakefield and Tesco’s stockless facility in Avonmouth • If you would like to find out more about Supply Chain Analysis, please contact Nick Downing on +44 (0) 7730 822274 or email him at nick.downing@igd.com