Just-in-Time Assistance

Sponsored by          

 
 
 
Cost savings generally top the list of concerns when retailers look to outsource operations. Sometimes, however, improved service and greater reliability can be achieved, as well.

When Somerfield, a chain of some 1,000 U.K. convenience stores, decided to outsource its IT operations to Tata Consultancy Services in 2006, reducing costs was the driving factor, according to Dave Haycocks, the retailer’s director of IT operations. But it wasn’t the only factor. “We also had a demand to improve service and increase the reliability of our data operations.”

Shortly after being acquired by private investors in 2005, Somerfield management was under pressure to implement a cost-reduction plan. The IT management team realized it did not have the expertise to deliver additional operational improvements and determined that outsourcing those operations was the only way to generate the mandated reductions.

By outsourcing its IT operations, Somerfield was immediately able to reduce departmental staffing from 195 positions to 25 (and, eventually, to 18). A majority of its former IT staff now work for TCS. Equally important, the chain has been able to improve the ability of its store managers to communicate with the parent company about inventory issues and to reduce the number of store complaints and questions directed to the IT department.

While it previously had maintained nearly all the IT operations in-house, Somerfield decided to turn over complete responsibility for the service, delivery and system performance of its operations to TCS. That allowed Somerfield staff to focus on what it knew best: retailing. Outsourcing also allowed the staff to focus on the successful re-launch of the Somerfield brand.

An easy decision
The basic technology used by TCS is not significantly different from what Somerfield had been using, although TCS was able to add some application software to improve operations. More important, outsourcing has allowed the chain to get better information about inventory and supplier status.

“There has been a lot of press in the U.K. about some companies that made mistakes when they outsourced their IT operations,” Haycocks says. “But it was clearly the right thing for us to do. I’ve heard people say, ‘Never outsource a problem.’ But that’s a bunch of rubbish. If your car has a problem, you take it to an expert who can fix it. It’s the same with IT operations. If you’re having problems, sometimes you can find an expert who can fix your problems for you.”

At Somerfield, IT is an important component in helping store managers keep fresh inventory on their shelves. “IT oversees the operations that make sure that orders from the store are delivered to suppliers, and it manages the supply chain network 24 hours a day,” Haycocks says. “We run small operations with small backrooms — our stores need seven-days-a-week deliveries. Our fresh products have the highest margin, so we have to make sure we are not keeping product on the shelf for too long.”

Additionally, the IT operation oversees special promotions and ensures that stores have sufficient items in stock to meet demands for those products. “If we put an advertisement on TV promoting a special and there isn’t any of that product in one of our stores, it’s catastrophic,” he says.