M&S slashes costs with IT

Marks & Spencer reduced like-for-like IT running costs by 13.5% last year, shareholders were told at the company’s annual general meeting this week.

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Marks & Spencer reduced like-for-like IT running costs by 13.5% last year, shareholders were told at the company’s annual general meeting this week.

The retailer, which has been the subject of criticism from the City, highlighted its IT and supply chain innovation as a bright spot for the company.

Despite the tough economic climate, Marks & Spencer is on track with its technology refresh programme with plans to spend £450m on IT systems, it revealed in its annual report. Ian Dyson, group finance director, highlighted the company’s £200 million a year investment in supply chain over three years in his presentation to shareholders.

The company has been working with IBM to refresh its point of sale systems. It is now adding more than 2,000 tills and 258 handheld terminals in-store to make stock-checking more efficient. Around 97% of its tills are fully operational, an improvement from 90% two years ago, M&S revealed.

The technology upgrade programme will underpin the grocery chain's growth plans, including establishing a presence in China, said Dyson.

"While we are sensitive to the economic environment, we are continuing to invest to move our business forward and intend to spend between £800m and £900m in capital expenditure in 2008 to 2009," said Dyson.

During the financial year, M&S extended the trial of its food self-service tills across the business, also trialling them in general merchandise.

It has "made vital behind the scenes improvements" by implementing new financial and back-office systems. These have improved operational efficiency and helped cut like-for-like IT running costs by 13.5%.

The retailer invested in its IT and logistics infrastructure to improve service efficiency. In 2007 to 2008 financial year, M&S delivered 13% more stock to its stores than in 2006 to 2007.

Supply chain systems have had to cope with significantly increased volumes, including a 63% sales growth from online shopping channel M&S Direct, while remaining cost-effective, M&S CEO Stuart Rose said. M&S Direct, which is hosted by Amazon, contributed sales of around £300m and is growing at 70% a year.

"Despite the growth of M&S Direct, increasing sales volumes and more direct buying from our suppliers, our supply chain coped well under these pressures, delivering 13% more stock to our stores, and responding to a 63% rise in volume from M&S Direct," M&S revealed.

Further supply chain improvements are in M&S's plans. "As we expand our business internationally, we’re planning to take more control of our logistics from source to store, allowing us to monitor our stock more efficiently and improve margins."

Last November, the retailer signed a deal with Logicalis to modernise its networks which involved engineering, design and development support for M&S’s wired and wireless network infrastructure, which spans 591 UK stores and regional offices.

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