Strikes and glitches in the supply line

SAINSBURY'S admission that its Christmas sales picked up only when it called a temporary halt to a costly and disruptive investment programme is a revealing one.

Its multi-billion pound investment in overhauling systems and distribution centres is certainly necessary. But the upheaval is taking a heavy toll on performance.

Ensuring that the supply chain works smoothly is a key issue for Sainsbury's - and indeed for its rivals.

Quite simply, if consumers do not find what they want in their local store, they will move on swiftly to a better-stocked rival.

Supply chain director Martin White admits that 15 years of under-investment had left Sainsbury's network 'fossilised' and 'complacent', lagging behind rivals Asda and Tesco.

In a belated attempt to put this right, chief executive Sir Peter Davis decided three years ago to pump huge sums into 'radically changing' the network.

Britain's third-largest grocery chain concedes that the ambitious overhaul has been 'testing'.

Sainsbury faces an enormous task in trying to rectify the neglect of the past. Getting it right is absolutely crucial for the group, which faces increasing competition now that rival Safeway is being taken over by Bradford-based Wm Morrison.

Davis insists that availability in stores has improved. But the retailer's experiences at Hams Hall - one of its flagship new distribution centres in the Midlands - suggest that, to put it kindly, he faces an uphill battle to revive the business.

The 700,000 square feet supply warehouse just outside Birmingham has been plagued by computer glitches and automated crane breakdowns. Suppliers have struggled to get to grips with stringent new delivery specifications.

A state-of-the-art new computer system ritually rejected pallets laden with wrongly-packed stock, prompting Sainsbury to introduce a penalty system on suppliers.

As if that were not enough, when the warehouse went fully electronic in February last year, the supermarket discovered that the building was located in a 'low-power zone' on the National Grid.

As a result, it had to shell out a sizeable amount of cash on a back-up electricity generator to kick in when the power fails.

White concedes that there have been 'teething problems'.

'Yes, some things have gone wrong,' he admits. 'There have been some areas that have worked out really well and others that have worked out less well.' But he insists that Hams Hall has never had to shut down completely.

He adds: 'What we are doing represents the biggest supply chain change at any company anywhere in Europe and one of the most radical in the world.'

Hams Hall employs 800 and serves 52 Sainsbury stores as far away as Great Yarmouth and Norwich. It is just one of four new sites the group has opened this year - each of them providing more than 650,000 square feet of space.

Having started with 23 mega distribution sites, White aims eventually to have just 11 serving the company's 520 supermarkets.

On top of its problems in Birmingham, Sainsbury has run into a row with unions over a pay settlement for workers at another distribution centre in Merseyside.

Employees, led by Glen Dyson of the Usdaw union, have already held two 24-hour strikes since Christmas in protest over pay.

Usdaw wants Sainsbury to raise staff wages from £7.55 to £8.00 an hour. The dispute could take a while to resolve, but White expressed confidence that the worst of Hams Hall's problems are behind it.

Having completed a hosted tour around the cavernous warehouse, a quiet sounding-out of staff failed to reveal much in the way of serious discontent.

One worker says the only headache he has is ensuring that the mile-long warehouse is kept clean. Another says: 'It's better here for my backache than at other places.'

Although Sainsbury irritatingly insists on calling its centres 'fulfilment factories', White clearly means business.

'Each time we open a new site we learn more,' he says.

He claims that once the warehouse upgrade is complete, Sainsbury's will have an edge over its rivals.

It will need it. Retail research analyst Verdict is predicting a new price war following the Safeway/Morrison marriage.

And if shoppers are unable to fill their trolleys with their favourite products, they will need little prompting to go elsewhere.

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