Costa Express is raising a cup of coffee in celebration after doubling the size of its business and winning a 2013 European Supply Chain Excellence Award.
Costa Express, part of the business-to-business (B2B) division of the UK’s number one coffee shop, Costa, which includes Costa’s Proud to Serve brand has undergone a supply chain transformation.
Costa Express offers coffee lovers the opportunity to get a coffee on the go at one of its easy-to-use, self-serve coffee machines found in a variety of locations such as supermarkets, railway stations and hospitals.
In 2011, former brewers Whitbread Group Plc, owners of Costa, invested £60 million in acquiring Coffee Nation Ltd’s 800 machines and created the new Costa brand – Costa Express.
A year later, 1,600 Costa Express machines had been installed and today that figure has more than doubled again to 3,500, far exceeding the original target to hit 3,000 machines by 2016.
Growth was supported by the measures to improve the supply chain and its strategic partnership with ToolsGroup UK, one of the world’s most experienced providers of market-driven demand analytics and supply chain optimisation software.
Supported by the entire supply chain team, Chris Clowes Costa Express’’ Supply Chain Manager , said: “We have also got machines in Ireland, Poland and the United Arab Emirates , so we are quite a good growth story.”
The integration of ToolsGroup’s S099+ software system has had an enormous impact on the supply chain operation.
Clowes explained: “Within Costa Express we have a unique business model where we push stock out to our sites. We previously used thousands of linked spreadsheets and averaged sales data, giving us very little visibility.
“The S099+ software system takes our sales data, uses a bill of materials to turn it into ingredients used and then based on delivery dates, historical sales and actual stock holding, we can easily decide how much stock to place.”
The European Supply Chain Excellence Award has recognised the fundamental changes Costa Express made to its processes and systems, and the way its logistics providers work.
Clowes added: “It is not very often changes that big happen so quickly with a company the size of Costa, they normally get slowed down by bureaucracy.”
The SO99+ system has been rolled out to sites in Poland and Ireland, and will support our International growth.
“We have 3,500 delivery points across Costa Express alone and a further 3,000 in Costa Proud to Serve -there are not many UK retailers who have to have such a large reach,” said Clowes.
Part of the supply chain transformation process has involved adding a new logistics/warehousing partner, a new IT system and a new process of purchasing stock directly from the suppliers.
“It is bit of risk to make changes to a business so quickly, but with higher risk often comes higher reward.”
Before implementing ToolsGroup’s software, Costa Express used to estimate how much stock to supply each site with at the end of each month using figures provided by the partners.
Now Costa compares the actual sales data to the levels of inventory declared in the sites to give far better visibility and control.
For example, every 15 minutes the team receives digital messages from the machines giving an update on ingredient levels, so it is easy to see if milk is running out.
Clowes said that his operation works hard to make it easy for clients, by installing dispensing machines free of charge, servicing them and refilling ingredients.
Delivering Logistics Change
As well as Costa Express, The B2B division encompasses the Costa Proud to Serve brand. Until recently the two brands had warehouses operated by two different logistics partners.
He said: “We’ve just awarded Howard Tenens an increased logistics contract which encompasses the Costa Express and Costa Proud to Serve brands.”
Howard Tenens started working with Costa Express following a tender process in 2012 Clowes said: “The additional Proud to Serve business will help us deliver even more in terms of efficiency gains through Howard Tenens’ sustainable logistics offering and is an exciting step forward in our supply chain strategy.
“Through our logistics partnership we can now sustain both UK and International growth and have turned supplier – customer relationships into true partnerships.”
The new contract follows a detailed six month tender process and Costa is looking for further efficiencies and savings for the two brands.
During the initial 12 months relationship between Costa Express and Howard Tenens stock holdings have been centralised at one location rather than the previous nine sites.
Direct purchasing relationships have been developed with 15 suppliers providing in excess of 100 SKUs. Stock availability of over 99.9 per cent has been achieved while there has been a 50 per cent reduction in stock holding at partner sites.
There has been a move from landed purchasing to ex-factory gate generating annualised savings in excess of six figures with some products. Annual logistics have been reduced by 30 per cent and annual CO2 savings of 70 tonnes.
The future looks even more hi-tech, with Costa Express spending the past 24 months working on Project Marlow in a bid to develop the next generation of self-serve, sensory vending machines.
The Marlow vending machine will allow users the choice of over 250 different types of coffee, so they can recreate their own favorite from Costa shops.
The machine also has been designed to replicate the experience of a real Costa coffee shop by appealing to the five senses, offering a touch screen experience, the smell of coffee and playing a soundtrack of noise from Costa sites.
The machine has a stylish design; with Italian design house Pininfarina helping Costa to create its look, and uses fresh milk and ground Costa Mocha Italia beans for each drink.
Marlow is unique in that it is intended to closely mirror the experience found in a Costa coffee shop by appealing to all five sense.
Customers can use the interactive touch screen, put together by a team of interactive specialists including gaming experts Atomhawk, to design their perfect coffee.
The machine also imitates the sounds of a bustling Costa coffee shop, and Costa worked with Scentys to have Marlow release a ‘coffee shop aroma’ with smells of Costa Mocha Italia blend coffee, freshly baked goods and hot chocolate.
Clowes said: “We know that our competitors are going to try and get success from our business model, so we have developed a brand new concept which is this sensory machine.