LEROY MERLIN and ROTOM PORTUGAL a successful partnership

Streamlining operations and optimising flows Merging two brands, as happened with the Aki and Leroy Merlin shops, is never an easy task. With the integration already at cruising speed, the challenges are many, as are the ongoing projects with an impact on the supply chain aimed at efficient management, both B2B and B2C. The project involving Rotom Portugal’s Smartboxes is one of them and was the pretext for us to find out more about what is changing in the retailer’s supply chain. In Portugal, Leroy Merlin and Aki, although banners of the same group, acted independently in the national market, with Leroy Merlin adding the construction segment to the DYI, decoration and garden universe. Although they operated in the same market, their strategies were different and quite complementary. There were also differences in terms of shop formats. The former with large shops located preferably on the outskirts of large urban centres and the latter with small and medium-sized shops closer to the centre. For this reason, the whole merger process was accompanied by the need to optimise processes, take advantage of existing resources and improve response capacity, in a logic of complementarity. Basically, to unify operations and respond to the challenge of the multiformat, as well as the expansion plan outlined. We’re with José Miranda, Leroy Merlin’s supply chain operations manager, and the movement of forklifts and pallet trucks is great as we move through the logistics centre. And so is the pace and speed of operations. Garden equipment and solutions; doors; painting materials ranging from paint buckets to rollers or paint brushes; but also smaller products such as lighting equipment or light bulbs… these are just a few examples of what we see there, still on the move or already properly packed in Smartboxes and in their exit location for the respective shop. Managing change Leroy Merlin’s supply chain manager calls João Miranda to join the conversation, explaining that João used to be the Aki shop manager and was a key player in making the change happen, thanks to his in-depth knowledge of the Aki reality and his valuable contribution to the logistics of the distribution chain moving to the new reality. The truth is that, as José Miranda points out, there is a huge difference: “From administrative gestures to the perception of the shop, including the way the shops were structured and organised. It’s a different mindset,” he tells us. “They were very lean shops in which the cashier could also do the restocking or receive the goods. Leroy Merlin’s strategy is different, it’s more about sales, the first line. In other words, it was necessary to change the chip. We’re talking about people who used to receive boxes, and today they receive pallets with wood, with heaters…”. About a year ago, Leroy Merlin and Rotom Portugal established a partnership to use Smartboxes in the retailer’s handling and transport operations. Miguel Correia, Rotom Portugal’s managing partner, begins by saying that this partnership is very “exemplary of what we do today: we go to companies, we observe the processes related to logistics and storage equipment, we make product proposals, the customers can accept or not, and this ‘consultancy’ is free of charge”. In fact, in the case of Leroy Merlin, the partnership came about because of the need to optimise trucks and serve shops with more picking and more units, rather than large volumes. “The use of boxes allows us to pack goods that would be difficult to pack on pallets,” explains João Miranda, who was involved in the project from the start. “As well as optimising space in transport, they also prove useful in reverse logistics, as the return is made at very interesting costs, as well as, of course, a fundamental aspect: the correct packaging of goods in transport and distribution,” adds José Miranda.   Ease of handling With regard to the acceptance of this type of solution on the market, the head of Rotom Portugal emphasises that “among other aspects, boxes are a product that is much in demand due to their ease of handling”. The fact is that only one worker can assemble and disassemble the box by himself and, on the other hand, “there’s also the reverse logistics aspect, mentioned by José Miranda, and the savings they allow in transport, as they are foldable, as well as being robust and with a good load capacity”. Choosing the right means of loading is essential for safe transport, whether it’s a wooden pallet, a roll container or a box like the Smartbox. For this reason, Miguel Correia explains that “Rotom’s sustainable solutions help to improve the supply chain and save costs, particularly by returning empty packaging to recipients, helping companies to make their logistics process more sustainable. On the other hand, as we can maintain this equipment, we increase its durability, reducing operating costs and benefiting the environment. Because many of our loads are reusable.” There are currently 300 boxes at the service of Leroy Merlin’s picking by line operation. In his already perfect “Leroy Merlinês”, João Miranda says that “it’s an operation that has come to meet the needs of proxi and MSB shops”, proxi being the ex-Aki shops and MSB being the medium-sized DIY shops, i.e. shops that are intermediate between the two formats, as is the case in Oeiras, for example. Detailing this project, João Miranda explains that with this solution they are able to respond better to “the need that existed because some shops didn’t have the free postage, in other words, because of the low value of the order, they didn’t have the capacity to absorb direct orders from suppliers. On the other hand, this had implications for the out-of-stock rate because we would have had to let stocks drop a lot in order to reach the minimum free postage, place the order with the supplier and, consequently, increase the delivery time. With this solution, a single order is placed with the supplier, which is received by us and then, through our internal application, the total order is multiplied by the needs of the various shops, according to the information provided by our RAP (automatic replenishment system) which, as its name suggests, has no human intervention.” José Miranda took the opportunity to add that “basically, a virtual shop was created – it’s an intermediate step, at a stage when Generix’s collaborative portal is also being implemented – which is the shop ERP, which will consolidate the needs of all the shops, trigger the orders to the suppliers and when they arrive at the logistics centre, the application will ‘drink’ this information, pass it on to the WMS and redistribute the items by shop according to the shop’s initial order. This is the skeleton of the process, so to speak.” And the main aim is for the item to arrive at the shop in the smallest possible handling unit. Preferably by the unit or single box and, of course, in perfect condition. Win-win solutions The head of Rotom Portugal emphasises that they have a huge range of rental solutions that are used during production peaks, and “especially during COVID-19, with many requests from DIY and ecommerce, namely Smartboxes like these, but also roll containers or racks for temporary storage. Our mission is to provide companies with the necessary means of transport to improve their supply chain and make it more sustainable. It’s fantastic to find a win-win solution for the environment and the customer.” Rotom’s boxes are a perfect match for the needs of Leroy Merlin’s Pick by Line operation, as they make it possible to move very sensitive or delicate products and goods in an environment that provides the necessary security and integrity. “In this picking by line, what we see there is nothing more or less than the needs of the shop departments. When the order leaves the logistics centre, it’s destined for a particular department in a particular shop and the orders are prepared to go straight onto the line. With these boxes, the products travel safely, it’s a transport package that has the portability to reach the conveyor belt and that, when it returns to the logistics centre, as they are foldable, allow for greater savings in transport,” explains the supply chain operations manager. “On the other hand, this allows us to considerably improve the service and quality of delivery to the shop. The shops are supplied daily, although not always to the same departments,” adds João Miranda. There are approximately 31 people assigned to this picking by line operation, although there can be fluctuations. “On average, we receive 1,700 pallets a day and dispatch 1,700 pallets. It’s a pure transit operation, with everything that’s ordered by customers being checked and everything you see in the shop passing through here. We do the initial reception and checking, but on arrival at the shop they check the journey and receive the customer’s order, which may or may not be delivered,” explains José Miranda. Always growing In Leroy Merlin’s supply chain, regional platforms, such as the one in Lisbon, can handle 30 million euros a year. They have 4 regional platforms and want to reach 8. One is due to open in Palmela in March, which will serve Setúbal, Évora, Almada, Moita and Montijo, and then they hope to open the other 3. With Palmela they will be closer to the customer, the population and the shop, “which will allow us to stock some items that we consider ‘filet mignon’ in the regional context, but also some slow movers, such as tractors, generators, high-priced thermal accumulators, which the shop doesn’t have to stock, but only display,” explains the supply chain manager. To everything that was already happening, we must add the explosion of e-commerce, which in Leroy Merlin’s case has been exponential. “The Lisbon platform can dispatch 800 orders a day, supporting the shops, without any problems. In other words, all the orders that the shops in the region receive by midday are prepared and sent here and what we do is pack, invoice and dispatch. Everything else is done by the shops. But the new distribution centre will be different and will already have a space created and prepared from scratch to respond to the growing needs of online. It is scheduled to open in 2021 and will have approximately 100,000 square metres in Castanheira do Ribatejo. The growth of Leroy Merlin’s operations is enormous and there are more than a few projects going on at the same time: the WMS, the last mile, the integration of suppliers within the order management platform, the new distribution centre… all to make the efficient management of the entire B2B and B2C supply chain a reality. Sizing up the operation, José Miranda looks around and says: “to give you an idea, a year ago we were handling 200 pallets/day here, we had 30 suppliers and now we have close to 300”. José Miranda has already had a long career in the sector but, when he talks about the challenge he has in front of him, he tells us with a twinkle in his eye: “this is a world!”. Source Supply Chain Magazine