Supply Chain Focus by Prakash Menon, Supply Chain Director for ...

PROFILE
Australia’s
Leading
Department
Store
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Myer is AustrAliA’s lArgest depArtMent
store group And the nuMber one shopping
destinAtion for More AustrAliAns thAn Any
other depArtMent store.
The privately – owned business has a turnover in
excess of $3 billion annually and offers the latest
in men’s, women’s and children’s fashion, as well
as accessories, cosmetics, homewares, furniture,
electrical goods and much more.
There are currently 65 Myer department stores
throughout metropolitan and regional Australia
and plans to open up to an additional 80 Myer stores across
Australia. Each store varies in size from smaller regional stores to
multi-level suburban and downtown stores, and aims to meet the
needs of its local market and community. Myer‘s flagship store
in Melbourne is the largest department store in the Southern
Hemisphere in turnover and size and is host to the annual Myer
Christmas Windows. The Myer business has a strong history
of community involvement and is famous for its celebration of
the festive season with its spectacular Christmas windows – an
anticipated tradition that has been attracting Christmas shoppers
from far and wide since Melbourne’s Olympic year in 1956.
Myer is at the forefront in the development of new retail
events, ideas and opportunities to enhance customers’ shopping
experiences. The company’s new and refurbished stores have
been designed to provide the ideal shopping experience,
incorporating beauty treatment rooms and comfortable, spacious
parent rooms. They also offer customers the MYER one loyalty
program and an in-store credit card program to reward their
loyal customers. With a strong focus on customer service, Myer
provides an inspirational shopping destination for all ages.
supply chain.
A key part of establishing our supply
chain strategy was consultation with
suppliers, buyers and stores. Following
a detailed network optimisation study,
we determined that our forward
strategy would include four Regional
Distribution Centres (RDCs) one each
in Brisbane, Perth, Melbourne and
Sydney – each of which would act as
the Distribution Centre for the cluster
of stores in the relevant region.
Another key aspect of rewriting
our strategy was to look at our
international supply chain. Working
with our partners in China, Cargo
Services, we now have four key hubs –
three in China – Shanghai, Shenzhen,
Hong Kong and one in Singapore.
A further key goal was in July 2007 to
transition and significantly advance
our e-commerce capabilities. All
information, including the Gateway
(communication between our IT
function and supply chain) had to
migrate across from Coles to Myer.
All supply chain goals for year one
post the acquisition were successfully
Supply Chain Focus
by Prakash Menon,
Supply Chain
Director for Myer
Supply Chain is Sexy’. As one of our cultural imperatives, those four
words have raised the profile of supply chain and raised awareness of
the potential benefits both operationally and financially.
Bill Wavish, Executive Chairman, Myer
For Myer, supply chain is not simply about distribution
centres, but rather the entire ‘end-to-end’ process. We
aim to ensure that the entire process, from initial concept,
through to source, to distribution centre and ultimately to
store, is managed efficiently – with service, safety, speed,
flexibility and cost being our key principles and drivers.
At the time of acquisition in 2006, (when Myer was
acquired by private equity firm Texas Pacific Group
(TPG), the Myer Family Company and members of the
Myer Management Board) Myer inherited a build up of
inventory and 24 off-site warehouses, so our first priority
was to consolidate, simplify and streamline. The first step
in achieving these goals was the holding of our ‘History
Making Clearance’ that enabled us to clear out $400
million worth of stock and paved the way for the removal
of the 24-off-site warehouses. We then set about writing
the strategy for the new Myer supply chain, including the
development of five key principles; service, safety, speed,
flexibility and cost.
Myer partnered with supply chain specialists XAct
Solutions, led by Peter Ramsay and Byron Patching, to
assist in developing the strategy and the implementation
of many of the mission critical components of our new
achieved, such as the transitioning of
supply chain e-commerce from Coles
to in-house within one year, ahead
of time and budget. The opening and
going live of four standalone RDCs and
four international hubs was achieved,
as was the re-writing of all contracts
for Myer supply chain.
Some of our second year achievements
to date include reducing our
distribution centre operating costs by
47% on the previous year (having gone
to market predicting a 40% reduction
in costs). We were also 22% lower in
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international freight costs, despite
higher volumes and were 11% lower
in domestic freight in spite of opening
new stores and increases in fuel
charges. The introduction of roll-cages
across the majority of stores has
dramatically improved the efficiency
of transportation of goods from the
store dock, to the floor. Off-loading
time now has been reduced to around
seven minutes, where previously it
was up to 45 minutes using pallets.
Stock can also now be moved during
trading hours, where previously this
was not possible. Other achievements
during the second year include;
• Achieving 99.98% e-commerce
compliance with suppliers
• Reduction in the error rate by 60%
in ASN (Advanced Shipping Note)
compliance
• Reduction in international lead
times (overseas transit time from
hubs to stores) from 42 days to 24
days
• Streamlining disciplines across
suppliers to reduce late deliveries
by carriers (transport providers) by
85%
• Introduced more delivery points
from 221 originally to 451 now into
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our stores making it easier and
faster to replenish from the store
dock to the shop floor
• Relocation of home-delivery
function back into RDCs from
external suppliers – a saving of
around $2 million.
The five key principles that we
strive to achieve within the Myer
supply chain framework are critical
to ensuring that we achieve our
company goals. These five principles
are as follows;
SERvIcE
To ensure that all product that comes
through the Myer supply chain is both
store and customer friendly – that is
to say, that the product is ‘store ready’
and ‘floor ready’ and can be quickly
and efficiently brought onto the floor.
This has been achieved through the
introduction of a number of new
systems, such as roll-cages and other
initiatives such as ‘Goods on Hangers’,
‘Source tagging at source’ and so
forth.
Each team member working in Myer
supply chain has an ‘adopted store’
in line with the Company’s “Adopt
a store” program. This helps us to
proactively work with stores (our
“Our relationship with Myer is a
positive and proactive one. We
work with a great buying team
who are always looking for new
and creative executions for our
products within the Myer stores.
We have been able to establish
many different retail strategies
that have provided great results
for both organisations. The broad
audience that Myer attracts is
certainly a key benefit. Nintendo
can reach every different type of
person in the iconic Myer stores
all across Australia. This depth of
coverage is important to Nintendo
as more and more people are
playing video games and we need
retailers that offer this broad
demographic coverage.”
Greg Arthurton, Marketing
Director, Nintendo

The three key facilitators
for having the highest
impact in bringing about
the change in Myer supply
chain are; total integration
across the company,
improved efficiencies across
the company and ongoing
education across the
company.
Bernie Brookes, CEO, Myer
customers) in ensuring we support
them in whatever way we can to
make it easier for them.
We have additional different delivery
points for the stores within the RDCs
to enable the stores to replenish
merchandise far quicker than before.
This is in line with getting it ready
for the ‘Store of the Future’ where
there will be lesser reserve spaces
available in stores.
SaFETy
To ensure the safety of all team
members and customers throughout
the entire supply chain – once again,
we have significantly improved safety
through improvements in systems
that have been implemented. Safety
remains a very high priority in all the
things we do in supply chain.
SPEEd
Speed is key in a department
store format. ‘Fastfashion’ is all
about speed to market. Speed and
efficiency are critical to achieve
Growth through innovation
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by offering an unparalleled service
network throughout the world.
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competitive advantage in the
marketplace. Our efficient supply
chain has dramatically improved the
speed at which Myer can move goods
through its RDCs and into stores.
This has led to buying teams having
more faith in our system and hence
lesser airfreight costs. We also have
improved visibility of our overseas
products with the implementation
of better systems that helps us track
our merchandise.
Moreover, if we become sluggish,
this leads to a build up of inventory
and an increase in holding costs.
It also means that we are more
reactive than proactive, and that
we are prone to more markdowns
than profitable sales. Acceleration
in speed to market helps to reduce
inventories, and gives the business
greater flexibility – lowering the risk
of being caught out by changes in
demand.
FLExIbILITy
Where the supply chain was
Contact your local MSC office or visit our website at www.mscaustralia.com
Brisbane: (07) 3909 4666
Burnie: (08) 6431 8431
Mediterranean Shipping Company (Aust) Pty. Limited, ABN 12 003 760 638 as Agent for MSC Mediterranean Shipping Company S.A.
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previously just another function of the
business, it is now considered one of
Myer’s core competencies – and an
essential aspect of the retail business.
It is no longer just about the ‘push’
from RDCs. Under the push mentality,
stores had little say in the product
they received and became ‘choked’
with product. Our system is now
much more about ensuring two-way
communication across the entire
supply chain and involves both ‘push’
and ‘pull’ strategies. We work closely
with the stores and our customers.
cOST
Cost is obviously an important factor
for any business and efficiency within
the supply chain has been critical
to reducing costs. However, Myer is
based on a service-driven model, so
therefore service is the primary driver,
with cost savings being an important
corollary of service improvements.
We have introduced a new Labour
planning and scheduling tool at each
of our RDC, to help us benchmark and
measure our performance on a daily
basis. Besides the DCs we measure
every single KPI in supply chain. One
of our imperatives is “if we can’t
measure it, we can’t manage it”.
These greater efficiencies have had
other important roll-on effects for
the business, including allowing the
business to release floor space for
retail trade. For example, where
previously only approximately 60% of
space was available for trading (with
the remainder devoted to storage of
inventory and administration) we are
now aiming to use closer to 80% of
the space in stores for retail space
(in the new Myer Melbourne store,
the expectation is closer to 90%). As
a result, Myer can carry more and
a broader range of stock in its new
and redeveloped stores than it did
previously.
Supply chain is about ‘buy, move,
sell’. Suppliers come in at the point
when our buyers place orders – so if
product is delayed at that point, then
the whole system breaks down. Our
suppliers are critical to ensuring that
our product is delivered in full, on
time and to specification (DIFOTIS).
Unlike many of our competitors,
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“Star Track Express was founded
in 1974 and has been providing
logistics solutions to many of Myer’s
leading retail brands for over 30
years delivering goods to Myer
stores and distribution centres on
a daily basis. Our long association
has enabled our two organisations
to develop a true working
partnership, which has been to our
mutual benefit.
“One of the reasons Star Track
Express remains the undisputed
leader in transport logistics is
that we invest the time to fully
understand the nature of the
businesses we provide service to.
In keeping with this, Star Track
Express is always mindful that
timely and reliable supply is vital
to the success of Myer’s retail
business. The Star Track Express
Operations Team meets personally
with the Myer DC staff to pre-plan
deliveries to ensure Myer’s specific
requirements are met “on time
every time”.
“Pacific Brands and Myer have a very long history and as such our
association with the company spans many decades. Myer is an experienced
retailer and combined with our mutual scale and strengths, we are able
to work cohesively together to maximise many market opportunities and
achieve collective goals.”
Sue Morphet, CEO, Pacific Brands
“Like Star Track Express, Myer
is completely in tune with their
business, and more importantly,
their customers. A substantial
number of Star Track Express
customers supply Myer Stores
and their DCs enabling improved
efficiencies in deliveries through
consolidation to meet their
requirements. Benefits such as
cost-effectively increasing speed to
market pay enormous dividends for
Myer, their suppliers and Star Track
Express as their carrier.
“Apart from their goods delivered
on time and intact, Star Track
Express provides Myer with
complete visibility on all deliveries
via our online Track and Trace
systems. For Myer and their
suppliers, customer service is never
further than a phone call or mouse
click away.”
Derek Lightfoot, Chief Executive
Officer, Star Track Express Pty Ltd

Myer’s supply chain is a core
competence. Our entire system is
in-house and completely integrated
with the business and works fluidly
with stores and across all merchandise.
We have over 1200 suppliers across 12
different business models (including
electrical, footwear, fashion, furniture,
cosmetics) and deal with over 240,000
active SKUs (stock keeping units).
Clearly there is not a ‘one-size-fits-all’
answer, so we need to ensure that our
systems cater for all needs.
We have worked hard to ensure that
our relationships with our suppliers
are strong through the development
of Strategic Supplier Plans (SSPs). A
key aspect has been collaborative
forecasting, which allows our suppliers
to plan their resources on time. By
working collaboratively with our
suppliers, we can work to reduce costs
“Revlon has worked alongside Myer
for over 50 years to achieve beauty
leadership in colour cosmetics.
Revlon has brought to the Myer
business an iconic global brand,
which offers a range of affordable
colour, skincare and fragrance
products.
“While Revlon is a global, iconic
brand, our strength is our ability
to interpret and react to local
needs and execute with 360 degree
excellence. The Myer business
affords Revlon the ability to bring
to its customers exciting in-store
theatre, such as the recent Myer New
York Event in May of 2008. With this
event, Revlon was able to maximise
sales in the Myer business with
the launch of its innovative first to
market technology makeup, Custom
Creations Foundation. Revlon also
has over 200 fully-trained Beauty
Advisors in the Myer business who
communicate Revlon’s product
benefits to over 800,000 Myer
customers on an annual basis.
“It is one of Revlon’s objectives to be
the most valuable cosmetics partner
for all – they carry less inventory and
as do we.
Our goal in our supplier relationships
is to ensure transparency, visibility
and the sharing of plans so that we
work together for the same outcomes
and there is a win-win situation for
both sides. We also rely on support
from our non-merchandise suppliers
for example in transportation, IT and
professional services.
Myer has a brand promise and we need
to ensure that our suppliers can deliver
on this. They also need to have strong
functional background – including the
right systems and accreditation. We
also make it a priority to work with
our suppliers to ensure they have the
capacity to work with us – if they are
the right brand, we will work with them
to make sure that they get the right
to Myer. Revlon and Myer meet
biannually for Strategy Meetings with
the objective of mapping out a retail
plan that brings both businesses
profitable growth. Outside of these
meetings Revlon and Myer work
together to investigate best practice
approaches to retail.
“Revlon have always found that
Myer can execute our 360 degree
experience brilliantly for our
customers. As the number one
selling colour cosmetic brand in
Australia, Revlon have a layered
and comprehensive approach to
marketing our products. From spokes
model positioning, advertising/
PR and merchandising initiatives
through to POS, promotional
execution and fully-trained beauty
advisors, Myer enhances our strategy
with precise execution at the retail
end. Myer is a sophisticated and
leading retailer in the Australian
market. Revlon is the leading colour
brand in Australia. It makes sense it’s
a powerful combination.”
Rob Garratt, Commercial Director,
Revlon Australasia
systems in place. We work together
to streamline disciplines across
both organisations and have better
efficiencies.
We work hard to ensure that the
relationships we have with our
suppliers are open, transparent,
and characterised by open and
constant communication. Despite
having set high benchmarks in supply
chain operation, we are continually
working to enhance our supply chain
operations.
As a part of this, we have an obligation
to work closely with and educate
our suppliers, so as we go along our
journey, we work to ensure that they
come along with us.
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