Office Depot is in the process of radically transforming its European supply chain operations with a shift away from country-specific models to a continent-wide system which will ultimately improve service delivery for customers.
Having witnessed extreme peaks and troughs in sales and the evolution of Amazon-style competition over the past decade, the overhaul programme is optimising the stock management and delivery processes across its 13 European countries, 16 distribution centres and 110,000 SKUs of stocked product.
Office Depot Europe is the largest part of the International Division of Office Depot Inc, a merger of Office Depot and OfficeMax which is now worth $17 billion and present in 59 countries.
Charged with ensuring $2.7 billion of annual office product sales reach the company’s 1.6 million European customers is Willem Vesters, Director Supply Chain Planning & Inventory Europe.
He said: “When I started three years ago our inventory levels were too high and the company was not sure what was leading to this. The first objective was thus very clear – the inventory had to come down so we could invest the freed up cash flow.”
Transforming into tomorrow
In the first year inventory levels came down by 20 percent, allowing Office Depot Europe to focus on the more fundamental process and system changes which has seen the supply chain convert to a channel-driven operation.
Its main channels comprise retail, contract and direct, with major clients including Marks & Spencer, Lufthansa, Siemens, Heineken and Carlsberg. The company’s retail presence is in France and Sweden with 60 and 40 stores respectively.
New methods have already been put into place across Office Depot’s German-speaking countries (Germany, Austria, Switzerland, Netherlands and Belgium) and many valuable lessons have been taken on board.
Vesters said: “We have seen positive effects but have also learned a huge amount based on the challenges faced. For example we know how many sales to expect when we send out a catalogue based on historical figures, but we didn’t know what drove those sales, whether it was the adverts in there, the sorts of products or the layout.”
“This came down to a simple question of information – all the data was there but the right information wasn’t created out of it. With these lessons learned we are going to apply it on the channel structure across Europe.”
Vesters hopes to receive the green light from the appropriate boards and works councils by the turn of the year, with structures in place 6-9 months after this which will then be followed by a programme of continuous improvement lasting at least another year.
“It is a time consuming process because although the questions being asked are simple and fundamental, alignment of processes on this scale is not easy,” Vesters added.
On the ground
Office Depot Europe’s supply chain is already being transformed on the ground in light of the new strategy.
The company has closed a warehouse in the UK and is upgrading others to meet contemporary demand, which sees customers placing smaller orders in higher frequencies, removing the need for large amounts of huge bulk storage.
“We are going to completely visualise our inventory and make it traceable. Do we partially ship from our own stock, do we source from elsewhere? These are decisions we need to be able to make based on correct information,” Vesters said.
Because Office Depot is built on several acquisitions made across Europe, it already has a number of legacy and ERP systems generating information at its sites.
Vesters’ aim is to place a technical layer on top of these existing mechanisms which will connect various functions and information points together, allowing him to answer the question of where and how to source orders.
The company is looking at solutions from the likes of Llamasoft, Barloworld and Manhattan. “It allows us to find the lowest cost and most efficient route to the customer. If you have visibility you can truly optimise and compete with the smaller leaner operations that are out there on a local scale,” Vesters said.
Office Depot is also looking to collaborate on a more detailed level with fewer vendors on a pan-European scale. Currently 90 percent of products are sourced from European vendors with 10 percent from operators in the Far East.
On the transport side, the company will evaluate its three current models of fully outsourced (e.g. Germany), fully in-house (e.g. France) and hybrid (e.g. UK), before deciding on a continent-wide strategy to fill consumer demands that now stretch beyond that of 24-hour delivery.
Where Office Depot can move ahead of its industry competition is in its fulfilment of the ever-growing desire for sustainably-sourced products.
It is using its huge global network and investing heavily in green product lines with tracking and traceability functions, relaying to the customer exactly what is in their purchase and where it has come from.
The company is also investing in finding the next generation of supply chain professionals which it can gear towards its new channel-based European model.
Vesters concluded: “In the Netherlands we engage closely with university students and these kinds of initiatives are extremely important for us in the next year. We will be investing a lot in training our own people to get them up to speed again as well.
“In three years I would like to see us be able to fulfil the demands of ‘the future’s customer’. We recently watched a video of what the typical future customer looks like – we need to be able to serve them in the most cost-effective and efficient way possible.”