Chemist Warehouse
Partnership and collaboration through multiple projects
Chemist Warehouse Group is Australia’s largest pharmacy retailer, with over 500 stores nationally. Founded in 2000 in Melbourne their growth trajectory has been nothing short of extraordinary, with both physical stores and a dominant online presence.
In May 2020 Chemist Warehouse Group engaged ThreeSixty Supply Chain Group (ThreeSixty) to complete a national network review and to deliver an optimal Distribution Centre and network strategy. With the success of the initial project Chemist Warehouse has since engaged ThreeSixty on multiple projects which are a part of an ongoing five-year strategy road map.
Network Strategy & Solution Delivery
Solution
ThreeSixty completed a full current state analysis of the Chemist Warehouse national network of DC’s, including inventory holdings, transport, and service levels. This included sensitivity analysis on nine possible scenarios of shifting inventory and volumes based on order service levels as well as current and projected growth. The ThreeSixty team completed a DC design, transport, service levels and commercial comparison of all scenarios, which provide clarity on the final recommendations and road map to deliver the optimal DC and network strategy to Chemist Warehouse.
Challenges
Ensuring all the appropriate scenarios were considered to ensure the right solution outcome was one of the key challenges of the projects. Finding the right balance with the allocation of inventory and order volume by state was important to ensure optimal outcomes were achieved between service, speed-to-market and overall cost. Given that Chemist Warehouse had several current DC’s within their network with long term leases, it was important to ensure that these DC’s could accommodate the additional inventory and volume to meet the required customer service levels.
Outcome
The ThreeSixty team successfully developed a 5-year strategy to deliver the proposed network strategy. This included plans for upgrades to current DC’s to ensure they were fit for purpose to meet the proposed changes. The strategy included a shift of inventory (DC and stores) and volumes to ensure optimal service delivery, speed to market and the reduction in overall costs. The Network Strategy proposed by ThreeSixty will deliver a $32 million dollar per annum saving across the Chemist Warehouse network.
DC Operational Review and Continuous Improvement Initiatives
Solution
ThreeSixty conducted a full review of current DC operations and developed a report based on the Lean and 5S principles. This included identifying key observations by functional area along with the opportunities, benefits and recommendations to change and improve current processes. As part of this review 78 initiatives were identified and a SMART action plan was developed for the operations/business to deliver.
Challenges
As with any internal review, one of the key challenges of this project was change management and getting the buy-in from the operational management team. As well as working with external suppliers to ensure the appropriate management of inventory challenges.
Outcome
The ThreeSixty team delivered a rollout of training as well as systems and knowledge transfer at all levels to address the gaps identified during the review. This included the development and visibility of KPI’s at the operational level. The team also developed a lean process for inventory management of both storage and replenishment and the slotting of pick-face. A part of this his operational optimisation was to meet the recommendations of the Network Strategy.
Automated Greenfield DC Solution
Solution
ThreeSixty completed a detailed analysis and setting of design levels, including the development of automated solution options, as well as IT WMS and WCS functionality and operational requirements. ThreeSixty coordinated the engagement of automation vendors through a formalised RFP, and evaluated the supplier solution options, costs and overall submissions in order to identify the best option for Chemist Warehouse. ThreeSixty developed a detailed manning, equipment, operational and commercial modelling and investment evaluation, to develop a business case and justification.
Challenges
Though this is an attractive business case and return, the challenges it presents is the requirement for a large capital outlay to deliver on the benefits and ability to mange the large volumes.
Outcome
ThreeSixty presented the detailed analysis for the automated greenfield solution, based on this and changes to internal strategic objectives, Chemist Warehouse chose to proceed with the Brownfield DC redesign.
WMS Evaluation
Solution
ThreeSixty conducted a review of the current Chemist Warehouse systems architecture and topology. This included the review and documentation of the As-Is business, customer and operational rules. The team conducted a gap analysis workshop which identified the future functionality requirements of both the operations and the business. ThreeSixty developed operational functionality specification and worked with the WMS supplier to implement changes.
Challenges
The key challenges faced include the change management of operational staff to implement systems functionality and improvement to the operational process. In addition to this addressing the workarounds the operations team had implemented to cater for missing WMS functionality was also a significant obstacle.
Outcome
ThreeSixty delivered a more efficient and productive operational process, by removing inefficient operational workarounds and the duplication of work effort.
Brownfield DC Redesign
Solution
ThreeSixty completed a detailed design of the existing Chemist Warehouse operation to develop a solution to meet projected growth. The proposed solution included the upgrade of the existing brownfield site with appropriate levels of automation and changes to the IT/WMS. The ThreeSixty team completed modelling and commercials to justify the proposed solution and developed a plan to implement the new solution. This included the project management of the delivery and implementation of equipment, automation, IT/WMS and operational change management in an operational environment.
Challenges
The key challenges presented were coordinating the implementation of major infrastructure, automation, and software upgrades in an operational DC. In addition to managing these installations across night shifts and multiple long weekends in order to not impact operations and service.
Outcome
ThreeSixty’s solution delivered an increase in capacity, throughput and productivity in a high-volume split case operation.
eCommerce DC Design
Solution
ThreeSixty conducted an in-depth analysis of Chemist Warehouse’s current operations, aiming to devise a solution aligned with their anticipated growth. The proposed solution encompassed the enhancement of their existing ecommerce distribution centre, introducing suitable levels of automation and IT/WMS modifications. Our team also conducted financial modelling and assessed the commercial aspects to substantiate the proposed solution. Furthermore, we formulated a comprehensive implementation plan that involved overseeing the delivery and integration of equipment, automation, IT/WMS, and operational change management within an active operational setting.
Challenges
The key challenges that needed to be addressed as part of the solution design included the mitigation of disruptions to the ongoing retail operations as well as the efficient management of inventory duplication between e-commerce and retail while maintaining optimal stock levels for both channels was crucial. Lastly, the integration of the e-commerce operation into the pre-existing large-volume retail environment presented a multifaceted challenge that demanded precise planning and execution for a successful outcome.
Outcome
The solution delivered provided significant outcomes, including the efficient relocation of inventory and the successful establishment of an e-commerce (eComm) operation. This strategic move not only optimised inventory management but also enhanced customer service by streamlining processes and significantly reducing the time to market for products.
I would highly recommend ThreeSixty. Their team consists of best-in-class technical minds, providing the right people for the job, a can-do attitude, a lack of red tape and no direct supplier bias. The team is realistic about managing change dynamics.
Steve Cleaver, General Manager Supply Chain, Chemist Warehouse
