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| Russia is a rapidly developing economy that is still establishing the foundations of a modern, efficient food retail supply chain infrastructure. X5 is contributing to the country’s economic development while strengthening its competitive advantages by better managing the flow of goods throughout the supply chain. |
X5 has made significant investments to expand capacity and develop an optimised distribution network using the latest productivity-enhancing technologies. We expect this to positively impact operating expense ratios, service levels, product quality and availability, inventory turnover and shrinkage. |
Distribution Centre Network
X5 made a major step forward in its goal of increasing the share of volumes it distributes through its own logistics network. We increased our supply centralisation rate from 51% to 61%, well in excess of the Company’s 57% objective for 2009 – and we are positioned to take this to 67% in 2010. This will provide more opportunities to drive gains in efficiency as we open new stores and increase sales volumes. |
At 2009 year end, X5 operated 23 Distribution Centres (DC) with overall warehouse capacity of 309.1 thousand square metres. X5 opened six new food DCs in the Moscow and Perm regions, St. Petersburg, Voronezh, Rostov-on-Don and Kazan, and expanded storage capacity of several existing DCs. We also launched our first national non-food DC in the Moscow region. The Company closed two small DCs in Perm and one small DC in Lipetsk. |
Warehouse Productivity
X5 is rolling out a modern Warehouse Management System (WMS). This will improve control over the movement and storage of goods within our warehouses, and optimise processes and transactions involved in shipping, receiving and picking. WMS will be complemented by voice technology to improve order picking accuracy and productivity of warehouse personnel. |
Moving from a paper-based system to voice-detected picking will dramatically reduce errors and help us achieve a picking accuracy rate of one error per thousand picks. In addition, WMS and voice picking reduces the logistics cycle from store order to delivery by at least 50%. As a result of implementing new technologies, X5 is targeting a 10% to 15% increase in DC labour productivity by the end of 2011. |
Transportation Efficiency
As at 31 December 2009, X5 operated a fleet of approximately 600 trucks, some 400 of which owned by the Company and 200 leased. X5 also uses railway shipments over large distances as a cost-effective logistics solution. |
We have identified significant scope to increase transportation efficiency. This will improve fleet utilization, lower fuel costs and result in greater product availability and freshness. X5 began implementing its new Transportation Management System (TMS) in 2009 to enable route optimisation and reduction of demurrage. TMS is expected to deliver of up to 15% improvement in transportation costs within two years. |
|
Region
|
|
Warehouse
space
'000 sq.m. |
|
# of DCs |
|
Net Added
in 2009 |
|
Functionality |
|
| |
|
|
|
Dry |
|
Fruit&Veg |
|
Fresh |
|
Frozen |
|
Non-Food |
|
| Central |
|
153.9 |
|
8 |
|
2 |
|
v |
|
v |
|
v |
|
v |
|
v |
|
| North-West |
|
65.1 |
|
5 |
|
1 |
|
v |
|
v |
|
v |
|
v |
|
|
|
| Volgo-Vyatsky |
|
17.5 |
|
1 |
|
- |
|
v |
|
v |
|
v |
|
|
|
|
|
| Urals |
|
21.8 |
|
4 |
|
(1) |
|
v |
|
v |
|
v |
|
|
|
|
|
| Centralno-Chernozemny |
|
11.8 |
|
2 |
|
- |
|
v |
|
v |
|
v |
|
|
|
|
|
| Sredne-Volzhsky |
|
13.4 |
|
1 |
|
- |
|
v |
|
v |
|
v |
|
|
|
|
|
| South |
|
12.6 |
|
1 |
|
1 |
|
v |
|
v |
|
v |
|
|
|
|
|
| Privolzhsky |
|
13.1 |
|
1 |
|
1 |
|
v |
|
v |
|
v |
|
|
|
|
|
| X5 Retail Group Total |
|
309.1 |
|
23 |
|
4 |
|
v |
|
v |
|
v |
|
|
|
|
|
|