Country Road has decided to move away from a longstanding outsourcing arrangement for its warehouse and distribution facilities and into an insourced model, requiring the retailer to procure its own technology to run a new warehouse.
Country Road yesterday revealed to investors the results of a strategic review of its warehouse, logistics, replenishment and fulfilment processes following its $180 million acquisition of Witchery and Mimco in 2012.
As a result of the acquisition, the group was running several outsourced warehouse and distribution facilities, incurring duplication costs, capacity constraints, and issues relating to speed of fulfilment.
Initially hoping to consolidate the centres into one outsourced facility, the company was unable to find a third party provider able to meet its requirements.
Country Road then decided to bring the warehousing functions back in-house, and signed the contract on a chunk of land in outer Melbourne on which it will build a 22,000 sqm distribution and fulfilment facility.
The centre is expected to be operational by June next year, with the overall project - which also includes a new outsourced fulfilment centre in New Zealand for its operations across the ditch - likely to come in at around $53 million. The group expects to also incur one-off transition costs of $2 million.
The consolidation means the group will, for the first time, need to go out on its own to source the IT systems to run the new facility.
Country Road had previously partnered with two third party logistics companies for its outsourced centres, who as part of the package also provided the warehouse management systems and the material-handling equipment systems underpinning the centres, using proprietary software.
The retailer has started negotiations with a number of software providers to invest in new systems, and is in the process of narrowing them down into a shortlist.
“When you’re talking about us being the owner of software and systems, we’re talking about a significant investment, and you’re starting the project from scratch,” Country Road’s group chief financial officer Oliver Kysela told iTnews.
“We’re looking to get the best fit-out equipment available, and we’re going through a very rigorous and significant assessment as to what these distribution fulfillment centre will look like.”
He said while the previous systems were in themselves not insufficient, the result of the wider decision to insource had forced the group to move to new software for its advanced handling and warehouse distribution systems.
A decision on which particular technologies the group will move to will be made in the coming months.
Kysela does not expect to increase Country Road’s permanent IT employee base of 40 for the project, and rather anticipates using contractors from the chosen supplier during the peak period of design and implementation prior to the expected go-live in mid-2015.
The contractors will be assisted by dedicated project teams sourced from the retailer’s existing employee base, who will return to normal operations once the project is delivered.
First-level support for the new systems will be provided by Country Road’s internal IT team, with complex issues escalated to the provider.
The retailer has already migrated its new Witchery and Mimco subsidiaries onto its own e-commerce platform, shifting the brands off Magento and onto eStar last year. Both were also migrated onto Country Road’s Oracle Retail-based merchandising system at around the same time.