Marks & Spencer launches IT overhaul plan as profits dip

Marks and Spencer is set to spend £400 million in the next 12 months on its IT and supply chain infrastructure, as part of a transformation plan.

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Marks and Spencer is set to spend £400 million in the next 12 months on its IT and supply chain infrastructure, as part of a transformation plan.

The retailer has launched a transformation programme called ‘2020 – Doing the right thing’, to be headed by finance director Ian Dyson. The plan is to overhaul its operations, including IT, in order to stave off the effects of the tough economy and to stay competitive. The initiative came as the retailer posted a fall in adjusted preliminary pre-tax profits to £704.4m from £1bn.

Marks & Spencer spent around £188 million on technology and supply chain infrastructure this past year, and plans to more than double this spending to £400 million this year, as part of its 2020 programme. The initiative has already seen 5,000 new PCs switched on.

“We will spend [approximately] £400m in 2009/10, shifting the focus of our capital expenditure from our property portfolio, where we have made considerable investment over the last three years, to our IT and supply chain infrastructure,” M&S told investors in a statement.

The 2020 programme will focus on IT systems and logistics as well as accelerating M&S’s multichannel operations such as its online and store presence, “focusing on the customer whichever channel they want to use”, driving international operations and reinvigorating “brand communication with customers”.

M&S CIO Daryl Stein is responsible for the corporation's supply chain, which is to receive a new distribution centre in Bradford next year. The Bradford depot will improve the speed of distribution.

M&S is also investing in processes for buying and stock checking, after restructuring its distribution centres to create regional hubs in Hong Kong, Singapore, Sri Lanka and Istanbul. The regional hubs help it avoid transferring most goods through the UK when they are on sale in other countries.

SAP systems are currently being rolled out to China and Hong Kong, before other countries, by supplier IBM.

The company said it was “improving” systems for management, human resources and sales, but did not immediately give details. It has already updated finance and procurement systems.

In-store, it has implemented 14,000 tills, all with new electronic point of sale software, to speed up transactions and cut queues. It has a seven year deal with Fujitsu to support technology in its outlets. Web sales grew 34 percent in the year.

M&S chairman Sir Stuart Rose said the 2020 initiative came about after a "thorough review of the business" by the Board. “This confirmed our long term growth plans but also highlighted the need to deliver a step change in the way we service our customers' needs and operate our business."

"We are on a journey," Rose told BBC Radio 4 this morning. "We have changed the culture, we have revamped the logistics and we have spent hundreds of millions pounds on that journey, but it has been disrupted by the recession."

Questioned on the recession Rose said he was "cautiously optimistic" and confirmed the company is investigating opportunities of moving into the financial sector in partnership with HSBC using its trusted brand.

Mark Chillingworth also contributed to this report