Tesco is to close two of its distribution centres in the UK, bringing all warehouse operations carried out by DHL Supply Chain and Wincanton in-house, as part of a long-term plan to “simplify” its distribution operations.
Closing its Welham Green DC in Hertfordshire, moving grocery distribution operations to Reading, alongside the closure of its Chesterfield DC (with general merchandising moving to one DC in Middlesbrough) reduces the number of Tesco DCs from 25 to 23.
It also stated that it would be “bringing all warehouse operations that are currently carried out by DHL and Wincanton in-house” and “simplifying the management structure across all distribution centres.
Tesco is also withdrawing from its Daventry hanging garments shared DC, currently operated DHL, and its clothing operations will move to a nearby Tesco Daventry DC.
A Wincanton spokesman said: “We can confirm that Tesco has decided to take the warehouse operations run by Wincanton at Snodland in Kent, back in house following a review of its operations.
“Tesco is a long-term and valued partner of ours, and we will be working closely with them to manage the transition of the staff, whose job security is our top priority at this time.
“No other Wincanton operations for Tesco are affected by this announcement.”
Tesco is also re-tendering its transport operation as part of the overhaul.
Market analysts Liberum Capital told investors that the contract loss was “not a major issue” for Wincanton and reiterated its buy position on its stock.
“Wincanton only operates one warehouse on behalf of Tesco, so we see a limited financial impact on the group. We estimate that less than 2% of group revenue is at risk. Although disappointing, we see this as part of the usual ebb and flow of contract wins and losses, with no impact on our long-term positive stance,” said Gerald Khoo, equity research - transport and leisure, at Liberum.
Speaking about the changes Tesco UK and Ireland chief executive Matt Davies said: “As the needs of our customers change, it’s vital we transform our business for the future.
“As part of this we are proposing to close two of our distribution centres in the UK. These changes will help to simplify our distribution operations so we can continue to serve our customers better,” Davies added.
“Our priority throughout this process has been our colleagues and we will continue to do all we can to support them at this time.”
Tesco warned that the restructure would result in what it described as some redundancies, but also said that new roles would be created within other sites across the Tesco distribution network. It said that this would include new jobs at Reading and Middlesbrough DCs as well as what it described as the creation of colleague support roles in the majority of centres.
Union Usdaw said it would now enter consultation talks with Tesco where it would look closely at the business case for “proposed closures”.
Joanne McGuinness, Usdaw national officer, said: “Our priority is to save jobs and keep as many staff employed in the business as possible.
“The proposed management restructure in all Tesco distribution centres will result in jobs being put at risk; again Usdaw will be consulted on the business case for the company’s proposal and we will be seeking to get the best deal for any of our members who will be affected,” she added.