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The role of automation in contemporary warehouse design

The role of automation in contemporary warehouse design, John Lewis Magna Park case study
John Lewis department store, is part of the John Lewis Partnership. And encompassed within the John Lewis Partnership is our Waitrose Supermarket chain. The business basically is comprised of about 380 supermarkets, and the rest, you’ve got 42 John Lewis department stores, and a thriving online business. Waitrose make up about 60% of the sales, and 40% John Lewis. John Lewis has been a successful retailer now for over 150 years, and we’ve seen a huge transformation in the last 10 years as we’ve seen the business transform from being a purely bricks and mortar based department store through the world of multi-channel and now into the slightly less predictable world of omni-channel.
Our first ventures into multichannel was the use of a third-party logistics provider, who still works with us today. And we use them solely, and we created them up as a shop in its own right. So we used to send stock to that third-party and treat it like a shop. So customers would order online, and that third-party provider would actually pick and pack that product from there. So very much a multi-channel kind of model with a single pool of stock for branch replenishment and a separate pool of stock for our online customers.
Our move to omni-channel has basically been driven by the introduction of the likes of Magna Park where we now have a single pool of stock serving all channels on a first come, first serve basis. We went live with this facility in 2009 just with one building. And the footprint here is about 700,000 square feet, which is about the size of 22 football pitches. We’ve extended the facility in the last two years, and we now have a campus, so two buildings joined by a 100-metre link bridge at the size of, I think, 36 football pitches and just over two million square feet of operating space. We look after all of John Lewis’s small items, totable items.
You’ll see the tote bins whizzing around behind me. Anything that fits two or more units into a tote bin, it comes through Magna Park. And we also look after all of John Lewis’s fashion line. So the hanging garments. Between them two characteristics, they account for about 220,000 different products. 2005 is when the first designs started to take place for Magna Park, which were quite interesting because on the back of the uncertainty of where the growth would come from, our original strategy was entitled 10 in 10. And this was the ambition to increase our department stores from 26 to 36 in a 10-year period. And what we’ve seen happening in the last 10 years is something very different.
Nearly 40% of our sales are now driven by online. So therefore the decisions around how we would actually design Magna Park were quite interesting. There were three key decisions we took right at an early stage. One was to make sure that we had a sensible mix of both manual and automated solutions to ensure that we weren’t accommodating all of this mechanisation for a short-period of the year, the peak period. The second, again with our partners in Knap, was to make sure the systems were as multi-functional as possible. So as much as the facility looks after both branch replenishment and customer online orders, we have the facility of picking and packing in each of them different areas simultaneously.
And the third area that we decided back then was to make sure that we could build it in a modular way, which sounds easier said than done. It’s not a LEGO or Meccano set. And every single year since we’ve been live, we’ve undergone major surgery in accommodating additional capability. So they were the three principles that we built the site on. Our online business has grown exponentially over the last five to six years. When we first set out in 2006 designing Magna Park, the view then was that our online business would never really be any bigger than an average-sized department store.
So the early views on growth suggested that our online business would reach the dizzy heights of about £300 million turnover by 2017. Last year’s sales, 2015, were 1.6 billion, just to give you some idea. Now, our online sales now represent just over 38% of our total sales. A lot of the solutions that we have at Magna Park, basically look after automated storage. And that is a huge one. In terms of the storage capability of Magna Park, we can hold around about 10 million units of stock. And that would look at a peak stock holding, in sales terms, of just over £100 million worth of sales. So our automated capability looks after the automated storage of most of that equipment.
We also have automated picking capability, automated packing capability. So most areas have a level of mechanisation. We have quite a vast area of more manually intensive areas which are less capital hungry that we roll out for our peak periods. So space is really our kind of breather when it comes to those peak periods. But most things are mechanised. The total investment in mechanisation at Magna Park is over £100 million sterling. If you go back only to 2012, we had a traditional shape at Christmas, as we called it, and our peak day back in 2012 was our clearance operation in January.
So we had a quite smooth running over Christmas, slight respite, and then we kind of hit the heights of our clearance operation. It was only in 2012 that we started becoming suspicious about this particular Friday in November, as we now know it as being Black Friday. And even in 2013, it was only a blip on the map. And 2014, completely different story. If you look at the kind of profile at what happened in ‘14, it’s no wonder that the logistics industry really struggled through that. 2015 was much more a collaborative event. And we managed to control our way through, like many retailers. Much better. 2016, who knows?
Now, when you’ve got that level of variability, then the obvious question the business asks is are we investing in all this mechanisation just for that short period of time? Our volume increases by a factor of about six-to-one for that period of time. So it’s an incredible spike that we get. And the real challenge there is what type of solutions can we actually bring into play for that period? And as I say, the areas that we’ve got in Magna Park are more labor-intensive. Some of our more manual picking locations, and even the good old manual packing station comes to the fray in them peak periods.
The automation mechanisation is where we’re really trying to sweat the asset 52 weeks of the year. And that’s where we really get the, sweat the cash if you will. We’ve been maturing this facility now for what feels like a lifetime, at times but, 10 years, so there are many, many learnings.
If I had to choose three, they would probably be: the first one would be the team. So we have a relatively small project team. There’s only four guys that actually come with that group. We’ve had the same team together right since the start of the journey. And we’ve also maintained from our integrator Knap that they have a very tight and retained group. So the retention of a very tight group has been learning number one based on previous experiences. Learning number two would be the systems challenge. So anything as complex and as abstract as what we have here at Magna Park is a real challenge from a systemic point of view.
So I would suggest that the approach that we’ve taken here is having one integrator where everything leads into. So the John Lewis tote system comes into a black box, and there is just one provider of that rather than multiple interfaces, which would probably be a second learning. And the third learning, I think the word flexibility is used quite a lot. And in the crazy world of disruptions and disruptors, it really is important to make sure that you’ve got as much flexibility built into these solutions as possible. And a phrase I always use is flexibility is expensive, but fundamental.

We continue the theme for this week with this case study about the John Lewis Partnership.

Based at Magna Park near Milton Keynes, UK, John Lewis’s warehouses have recently expanded and now occupy over 2 million square feet (200,000 square metres). From here John Lewis delivers to its stores and to online customers. The store replenishment is based on a daily sell one replace it process. On-line customers can choose from over 220,000 different product lines excluding white goods (washing machines, refrigerators etc) and brown goods (televisions and furniture).

Magna Park is a campus of state-of-the-art, semi-automated warehouses that service John Lewis’s retail store business and online customers, providing housewares, fashion and electronic goods. Before John Lewis built these warehouses their online deliveries were undertaken by a third-party warehousing and distribution company as an outsourced operation. The returns process, which can amount to nearly 25% of the outgoing deliveries, is also handled by a third-party logistics company thus giving John Lewis added flexibility, especially at peak times.

In this video we hear from John Munnelly, Head of Operations at John Lewis. John is responsible for the design, build and implementation of these warehouses in collaboration with their automated equipment supplier – Knapp. We asked John to comment on the following topics.

  • What is the scale of operations at Magna Park?
  • How does Magna Park fit into the John Lewis Partnership retail operation?
  • What is omnichannel, and how does this relate to Magna Park?
  • How do the operations at Magna Park handle peak demand (size, cause, etc.) and how does the operation flex to accommodate them?
  • What three things has John Lewis learned from the experiences of designing, building and running the Magna Park National Distribution Centre?
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