Moving the Furniture
Restructuring its distribution network is not something that any company can undertake lightly. But furniture and kitchen retailer MFI Homeworks felt it was necessary to order to meet the future needs of the business.
In the past three years the firm has moved from keeping stock in its 185 stores to a sys-tem whereby the vast majority of the product is delivered direct to the customer's home through a centralised home delivery network.
This is intended to create a more efficient supply chain and improve service standards no matter what means are used to sell – traditional stores or the small but growing e-commerce part of its business.
"We felt that if we hadn't moved to home deliveries we would not have been preparing ourselves for the changes hap-pening in the market," Colin House, director of logistics and home delivery says. "If you sell on the Internet the customer expectation is that you will be able to provide the goods quickly."
There are still some flat-pack products available to take away from 110 of the stores in a range called MFI-To-Go but only certain specialist lines are sold in this way, including some office and bedroom furniture.
"It is not our core product. There is no planning and fitting involved with these products and it is all the sort of stuff people would want fairly quickly," House explains.
Since it embarked on the home delivery policy MFI has opened a network of its home delivery centres (HDCs) spread around the UK – seven of which were purpose-built on the company's behalf. All of them are between 4,500 sq m and 5,500 sq m and hold very little, if any stock. Last year the network of HDCs handled 2.4 million deliveries
to customers' homes.
"The HDCs turn Stock 45-50 times a year. They are as near as damn it cross-doddng facili-ties," House says.
The HDCs are fed by three central hubs. MFI's Schreiber kitchen and bedroom manu-facturing operation has a 18,500 sq m warehouse in Run-com, while its Hygena sub-sidiary which also manufac-tures kitchen and bedroom furniture, has 46,500 sq m at Howden near Hull. The retail operation itself runs a 46,500Sq m depot at Brackmills, near Northampton.
The company uses only a limited amount of outsourc-ing. All the central depots and HDCs are run in-house, as is the main trunking fleet of 132 trucks and 500 trailers. Previ-ously there were three separate fleets for each of the hubs but these were merged into a sin-gle entity last year.
"We didn't consider out-sourcing our warehousing to a third-party because we believe we understand our product
better than anyone else. The view we take is that we know how to run the operation and that if someone else did it they would charge us extra to do the same thing," House says.
The transport element of home delivery is, however, out-sourced to 30
contractors around the country. Each HDC has its own operators attached to it -rn some cases just one or two but in others more.
Some of the contractors, for example those in northern Scotland, also provide out-bases for mov-ing the product
to its final destination.
Some of the home delivery operators are part of much larger organisations but the vast majority are smaller local companies, with whom MFI tries to work very closely. Train-ing materials are provided for the contractor's staff and there are weekly meetings to discuss performance levels.
Recently the company held a one-day conference for all the contractors, so they could hear from different sides of the business including MFI's mar-keting director.
"We want them to under-stand just how important their role is. It is imperative that the customer experience they pro-vide is a good one," House says.
MFI has also made use of a mixture of in-house and bought-in expertise in develop-ing its IT systems. Its ware-house management system was created internally, whereas its fleet management system was bought as a ready-made package.
But whatever method of software development is used, the company considers the use of IT in its supply chain to be vital.
An example of this is where the in-store customer is given a confirmed delivery date immediately after buying the goods and then three days before delivery they can find out if the delivery will be in the morning or afternoon.
Further back up the supply chain the company tries, where possible, to use its systems to
match its man-ufacturing out-put to what is being demanded by the customers.
"Our sys-tems control the whole pro-cess from point of sale through to point of delivery,"
House says.
Although MFI has saved warehousing costs by not storing goods in the showrooms, the costs of using home delivery are signif-icant and it makes efforts to operate as efficiently as possi-ble. But overriding everything is the need to keep customers happy. "We don't do anything that cuts into costs by impact-ing on customer service," House explains.
Over the next few years, the network is likely to have to cope with increased volumes, not only from the internet but from the chain of stores itself, which is being expanded by 20 this year.
Last year MFI's UK retail sales grew 12.3% to £671.4m and continued to do so for the first i8 weeks of this year according to a trading update put out by the company in May.
Although the distribution network does not deal with anything like the volumes in other sectors, for example the grocery trade, the high value of the goods means there is very little margin for error, making the smooth running of the logistics operation an impor-tant factor in whether the com-pany is successful.
"With furniture and bulky goods it is very, very costly if you make a mistake. We have to be certain we get things right," House says.
