National Retail Consumer Society Conference 2010 Welcome to Convenience Trevor Ashworth

1. National Retail Consumer Society Conference 2010 Welcome to Convenience Trevor Ashworth Food Retail Director of Supply Chain & Logistics 27 February 2010

2. The Co-operative Food Retail * Includes 1,100 Independent Co-operative Societies’ stores

3. Logistics Activity 36,000 deliveries per week throughout the whole of the UK From The Shetland Isles to the Isle of Wight From Northern Ireland to Felixstowe One delivery every 3.6 minutes on average 8,100 employees Management/clerical 1,500 Warehouse 4,100 Transport 2,500

4. Shape of The Network - 2003 Too many small DCs, in the wrong places of the wrong design reflecting the historical consolidation within the Co-operative sector Expensive and complex for Suppliers to service and burdened with overlap and duplication In reality, three separate networks – Ambient, Chill and Frozen – all acting independently

5. Expensive to Service by Suppliers Ambient suppliers delivered to up to 17 depots: 40% of supplier deliveries were for less than 5 pallets, More than 1,000 deliveries per week were for less than one pallet

6. Overlap and Duplication Ambient TCD Frozen

7. Re-engineering The Network - Objectives • Upgrade the existing facilities • A single, integrated network • Composite multi-temperature • Improve Supply Chain Performance • More efficient for Suppliers to service • Optimise stockholding costs and trading terms benefits • Create the platform for superior store service • Composite deliveries • More frequent deliveries • Store friendly and efficient for store operations

8. Re-engineering The Network - Inputs • Category Management • Total Range • Range Mix • Range Churn • Promotional Policy • Suppliers • Cost to serve • MOQs • Trading terms • Data exchange Preferred Network Design • Store Operations • Frequency of delivery • Store operating Costs • Store merchandising • Store ordering systems • Logistics Operations • Cost optimisation • Stockholding • Labour/site availability • Environmental impact

9. Re-engineering The Network NDC – Slow Moving Ambient Regional Composite Distribution Centres (Multi-temperature) Cross-dock Platforms (remote periphery of UK)

10. 6 Composite RDCs 1 Ambient NDC 4 X-dock Platforms Network Design - Endgame

11. Network Renewal 2004 - 2009 • Closed 5 Ambient RDCs • Barnsley, Swanley, Cotes Park, Eastleigh, Birtley • Closed 2 Chill RDCs • Blaydon, Gillingham • Opened the new Ambient NDC • Coventry • Opened 2 new Composite RDCs • Thurrock, New Birtley

12. Impact of Coventry NDC Kingsland Wines centralised; control and visibility of stocks instated 520 Ambient Suppliers out of 600 now deliver to a single location instead of 18 Reduction of 6,000,000 miles per annum due to use of double-deck trunk vehicles 100,000 orders p.a. eliminated (reduction of 47%) Full pallet orders moved from 62% to 90% Imports handled through a single location

13. Thurrock Regional CDC

14. Inverness Bradford Nottingham Fareham Talke Cumbernauld Chelston Coventry Plymouth Alfreton Harthill Ossett Peterborough West Thurrock New Birtley Carrickfergus Oxford Leicester Eccleshall Portbuty Halesowen Thetford Somerfield/Wincanton Distribution Centres Acquisition of Somerfield - 2009 Lea Green Lincoln Ipswich

15. Revised Network Endgame 2012 9 regional composite distribution centers (vs 6) 1 national distribution centre – slow moving ambient goods 3 regional x-dock platforms (vs 4) Scotland CDC Northeast CDC Carrickfergus CDC Northwest CDC Midlands 2 CDC Coventry NDC Midlands 1 CDC Southwest CDC Southeast CDC Southern CDC

16. Re-engineering The Network - Benefits • Upgrade the existing facilities • Significant reduction in percentage of distribution costs to sales • Improve Supply Chain Performance • Reduction in Supplier costs to serve • Significant impact on trading terms benefits • Significant reduction in stockholding costs • Create the platform for superior store service • More frequent deliveries + reduced lead times = better on shelf availability = improved sales & customer retention • Reduced store operating costs

17. WMS Background World Wide Chainstores (ambient) First implementation 1986 CorDis (chill) Developed in-house 1994 Triceps Merger with United Co-operatives 2007 Dallas Somerfield DCS 2000 Somerfield Manhattan Systems Renewal

18. The Technology • Version WMOS 2004R1 SP2 • Platform AIX 5.3, Oracle 10G, W2K3 • Symbol RF Scanners • Vocollect Vendor: Zetes

19. 8 sites currently operating Manhattan/Vocollect Achieved self-sufficiency of implementation after the second deployment Rate of implementation is determined by the logistics network development programme Some implementation into “legacy” sites due to quick payback 12 further implementations between now and 2012 Simultaneous roll-out of MicroliseTransport Execution System Deployment

20. The real benefit to a Retailer is the level of accuracy that the Manhattan /Vocollect combination, coupled with Microlise TES, delivers Impact on Store Staff Impact on in-store SBO system Impact on on-shelf availability Retail Benefits

21. Support for Corporate Re-branding 700 Co-operative Store refits completed in 2008 Previous UK record was 250 stores in one year (held by the Co-operative)

22. Support for Corporate Re-branding 586 Co-operative Store refits/re-brands (former United Co-operative stores) completed in 2009 185 Somerfield store conversions completed between October – December 2009, all remaining Somerfield stores converted in 2010

23. Support for Corporate Re-branding All refits/conversions supported by Supply Chain help-desk throughout the process with enhanced service Average of 2 store launches per day