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Operations management: the

Wincanton way
A Wincanton case study

Wincanton: the nature of the


business

Wincanton's mission is
'delivering supply chain solutions across Europe'. The company is customer focussed:
its aim is to help its customers become more efficient and more successful by enabling
them to set up facilities and systems that guarantee them the supplies they require,
when they need them.

Wincanton is one of the leading logistics firms in Europe and it is the UK's second
largest logistics company with 13% of the overall market. It is the UK market leader in
grocery distribution, automated warehousing and petrochemical distribution.

In 2004 Wincanton:
had a 1.6bn turnover
employed over 25,000 people
operated over 100 major warehouses
deployed 6,000 vehicles
operated in 15 European countries.
Currently, the UK accounts for 62% of Wincanton's turnover and produces 83% of the
company's profit.
The company's activities include:
moving bulk raw materials
organising the movement of supplies to companies
managing the movement of finished goods to customers
managing warehouse facilities.

Wincanton ensures that products are delivered appropriately labelled and in a suitable
condition. It can track and trace where these products are at any time. It can also
integrate its warehousing systems with its customers' systems to improve the efficiency
of stock ordering and delivery. It can help firms with package design and provides
consultancy services in areas such as project management and warehouse
development.

It can also help with record keeping and data management. Its business, therefore, is
not simply moving products from one place to another. It involves fully understanding
the client's operations. This ensures that the flow of goods to the client absolutely
matches their needs and provides them with the reliability, flexibility and cost
effectiveness they require.

Wincanton's Products and Services:


transport and distribution e.g. delivery of goods using road, rail, and barges
warehousing e.g. providing temperature controlled warehouses
specialist services e.g. helping with records management
added value services e.g. labelling and package design
information technology e.g. modelling and simulation, enabling firms to track
goods
management e.g. consultancy work linked to warehouse design and project
management.

Many of Europe's best known businesses use Wincanton's services, including:


Sainsbury's, Somerfield, Tesco, Waitrose, Co-op (Food Retail)
Bosch, Kellogg's, Mattel, Nestle, Procter and Gamble, St Ivel (FMCG)
BASF, BP Castrol, Exxon Mobil, Tesco, Texaco (Petroleum and chemicals)
Bostik, Ineos, Saint-Gobain (Industrial)
BMW Motorcycles, Honda, Renault, Volvo (Automotive)
Argos, B&Q, Comet, Gucci, Next, WH Smith (General Merchandise).

To ensure it maintains its position as one of Europe's leading supply chain management
and logistics companies, Wincanton makes full use of its business development team.

The team's role is to find new opportunities for the organisation. It presents proposals
for possible projects to senior managers. For a new project to be accepted, the team
must demonstrate that the venture is highly likely to achieve a revenue target specified
by senior managers. Wincanton is constantly developing new areas of business and the
company's annual turnover increased by over 68% in 2004.

Once senior managers have accepted a project, it has to be 'made to happen'. The rest
of this Case Study looks at what is involved in delivering one such project: a client's
request for a new warehouse facility.

New business development may involve:


new contracts with established customers
new customers
new areas of business
strategic acquisitions of other firms to enter new business areas (e.g.
MidiData in January 2005 to strengthen the position in the High Technology
Logistics sector).

Operations
When planning a
new warehouse, Wincanton must first clearly establish the client's requirements. The
first major decision is where to locate the warehouse. The best location will depend on
factors such as:
the ease of access to transport links such as motorways, rail networks, ports
and airports
costs e.g. land prices
the availability of a suitable workforce.

When developing the warehouse, Wincanton has various options. It can:


develop an existing facility
build a new, specially designed facility
share facilities within an existing warehouse.

Wincanton will discuss with its client the costs and time required to deliver each of these
options.
As part of its service to clients, Wincanton will:
decide whether to buy the land and facilities or to lease them
organise insurance for the warehouse and goods
manage contractors during the building phase to ensure completion on time
and within budget
develop, introduce and manage a Health and Safety plan (including staff
training)
handle the transfer of the client's existing operations to this new facility if
required
test the system before "going live". This may involve running an old system
and a new system in parallel until all risks associated with the switch-over are fully
understood and completely under control.
It is clear from this that setting up a new warehouse facility is a complex project
requiring specialist skills for its successful completion.

Project management tools, such as critical path (or network) analysis, help to organise
activities in the right order. They also enable managers to focus on the key activities that
must not be allowed to over-run. These critical activities have no float time - even the
slightest delay with them would cause delay to the whole project.

Human resources and finance


Human Resources

Whilst developing a new warehousing facility Wincanton will also be working on the
workforce plan. This sets out the firm's future human resource requirements and
develops appropriate strategies for meeting those needs. Wincanton may have sole
responsibility for this task or may develop it with the client.

The workforce plan will include:

an outline of the jobs required at the facility, including the terms and
conditions involved e.g. the method of payment, holiday entitlement, period of
notice, sickness pay, and dismissal and grievance procedures
proposals for attracting applicants e.g. where to advertise the vacant positions
(which will depend on the nature of a particular job) and co-operation with local job
offices
the range of methods of selection to be used for each job category
a programme of training, including induction training when employees first join
the business e.g. an introduction to the organisation, the facility, Health & Safety, the
job and their colleagues. Wincanton is committed to training. In 2004 the company
provided more than 30,000 hours of training for its employees.
Finance

Wincanton's financial team is


responsible for negotiating the contract with the client. This involves agreeing the terms
and conditions under which the facility will be developed.

It will include many aspects of financial planning such as:

estimates of the capital expenditure involved, such as the building costs


the expected breakeven point
the likely return on the investment.

The financial team will be dealing in large sums of money and significant levels of
investment: a purpose-built automated warehouse is likely to cost between 20 million
and 40 million. The customer usually finances this although, if required, Wincanton can
help with finding sources of funding.

Wincanton's effective operations management team and good workforce planning


usually mean that a project such as this can be completed within a few months.

Information Technology
The Information Technology (IT) team at Wincanton focuses on defining the system
requirements and identifying the most suitable IT specifications for the warehouse
facility. This involves working closely with the client to understand existing systems,
ensuring the links between the two and also with the rest of Wincanton's systems work
effectively. The team's work will include installing and testing the system as well as
training employees.
The IT team will also be responsible for developing a Disaster Recovery Plan (DRP) as
part of contingency planning. In its contracts with clients, Wincanton undertakes to
provide them with a service 24 hours a day, 7 days a week, 365 days a year. The
purpose of the DRP is to ensure that Wincanton is in a position to fulfil this promise, no
matter what happens.

By using IT effectively throughout its


operations Wincanton is able to improve its efficiency and the quality of the service it
provides. The company also uses IT in many different aspects of the logistical process
e.g. by using bar codes and voice identifying technology. This is now so highly
developed that in an automated warehouse Wincanton's systems enable 24 pallets to
be offloaded from a vehicle in less than 90 seconds.

Wincanton also uses IT to support the work of the other functions of the business, such
as operations, finance and human resource management.

Conclusion

Most people seldom think about


supply chains until something goes wrong and yet they make a huge contribution to our
personal welfare. Wincanton is in the business of ensuring that 'things going wrong'
remains a rarity.
By managing supply chains effectively, Wincanton enables other firms to improve their
own efficiency. The company provides many different products and services related to
the movement of goods around Europe. To do this well requires close co-operation with
clients to understand their needs.

This Case Study highlights the way in which the company has tackled the challenge of
operations management and has organised itself with a view to maximising the quality
of its service to its clients.