Marks & Spencer's network restructure starting to pay off

Marks & Spencer shaved 8.3% off its distribution costs last year.

In its latest results, for the year ended 28 March 2015, the retail giant spent £408.7m on its distribution activities, down from £445.5m the previous year.

Savings were attributed to a combination of new contractual terms with long-term food logistics operator Gist, benefits from the first stage of its network restructure, and lower volumes in general merchandise.

M&S announced in 2009 that it would be moving from 110 smaller, regional warehouses to a network based around six NDCs and a move to a direct supply model. The restructure is expected to be in place by 2017.

The first two NDCs have opened in Bradford and Castle Donnington, however M&S has not yet confirmed which four of its remaining regional sites will be converted into larger facilities. It last year abandoned plans for a site at the DP World London Gateway.

During Q3 of its financial year, M&S previously reported it took a hit from operational difficulties at Castle Donnington over the Christmas peak, leading to delivery delays and the temporary removal of the next-day service for shoppers.

However, it said in its results yesterday (20 May) that it had “learned from this, made improvements to our systems, and further strengthened the logistics management team”.

The 900,000ft² Castle Donnington site, opened in April 2013, is seen as a major growth platform for the retailer’s online merchandise sales, last year handling 64 million items.

Overall results saw group sales up 0.4% to £10.3bn and underlying pre-tax profit up 6.1% to £661.2m.

In a statement, M&S said: “With our new infrastructure largely in place, we are focused on delivery. Looking ahead we will continue to work on completing the final part of the single-tier logistics network and GM4 systems, which will bring us closer to achieving our target of becoming a leading international, multichannel retailer.”