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Optimising supply chain efficiency – Office®

Office encountered supply chain management challenges in the past year with the impact of the COVID-19 pandemic and extended lockdown on logistics and transportation across the UK and Europe, while also preparing the business to trade in a post-Brexit environment.

Management is committed to ensuring the business is ready to manage the impact of Brexit on both imports and e-commerce sales, and meets the requirements for goods being transported across Europe. Planning will be completed when the Brexit agreement has been finalised and updated government guidelines are issued on trade arrangements.

Refer to Material issues, risks and opportunities for more detail.

RELATIONSHIPS WITH KEY SUPPLIERS

Office continues to build collaborative, strategic partnerships with a key group of brand partners and suppliers which ensures that good service levels are achieved. Risk is minimised by spreading volumes of orders across this group of key brand partners and suppliers.

Through trusted relationships Office has developed a quick response model with key partners. This allows the buyers and designers to react to trading conditions and trend information, making late styling changes. These strong relationships within the supply chain are developed even further within Office’s own-brand made-to-order (MTO) footwear.

Office’s European suppliers source all components locally, allowing fast product development and reduced overall lead times. Additionally, key suppliers hold production capacity, leathers and other components, which allow the buyers and designers to react quickly to sales information and reduce lead times further. Buyers and designers regularly travel to key sources within Europe as well as to sources in longer-lead destinations in Asia to build relationships, align business strategies, improve communication and reduce development times. However, travel has been restricted since early 2020 following the outbreak of the COVID-19 pandemic.

As part of the re-evaluation of the MTO range and our attempt to reverse the downward trend over the past years, Truworths together with the Office team plan to re-position the range and improve the level of fashion and range selection.

Office is a Her Majesty’s Revenue and Customs (HMRC) Authorised Economic Operator which allows for the potentially faster flow of inbound orders through customs clearing processes, and this will become particularly advantageous in a post-Brexit environment. All merchandise is delivered to one of the two warehouses in London and Scotland prior to being distributed to stores or online customers via a third-party distribution network.

Improving warehouse efficiencies

Office commissioned a third-party consultancy to review its current warehousing and distribution model to improve efficiencies and reduce costs. This project to re-engineer distribution centres was placed on hold due to COVID-19.

ENHANCING E-COMMERCE FULFILMENT

The e-commerce team continued to focus on improving delivery options although COVID-19 has impacted the progress and implementation of several projects.

An express ‘click & collect’ service was successfully trialled pre-COVID-19 and will be implemented after September 2020.

The same-day delivery service trialled in 2019 was less successful than anticipated and management plans to test an alternative same-day service.

COVID-19 IMPACT ON SUPPLY CHAIN

Inventory intake was significantly reduced from the start of lockdown to preserve cash and mitigate the risk of the business holding excess inventory due to reduced sales.

The business initially experienced challenges with inventory being inaccessible for online sales as it was being held in closed stores. The warehouses remained open during lockdown to support the strong online demand and online despatch was not impacted by changing shift patterns and social distancing measures implemented to protect employees at the warehouses.

As Europe went into lockdown the movement of goods was restricted and certain countries only allowed essential goods to be delivered. Additional border checks across Europe and channel crossings increased lead times to customers. Surcharges were applied to cover the higher transportation costs during this period.

The restriction on commercial flights during lockdown impacted Office’s overseas e-commerce orders and this continued after lockdown when flights remained limited.

Alternative global routings and transportation was used and there were only a limited number of countries that Office was unable to deliver e-commerce orders to owing to prohibitive surcharges and the order volumes being extremely low. Deliveries to all countries with significant order volumes have been maintained throughout the COVID-19 crisis.

Managing account risk in 2021