A new depot management system at City Link has saved £30 million, in a year when the ailing delivery firm fell into a heavy loss.
Rentokil Initial, the rat catcher and laundry group that owns City Link, said it had made the saving in the six months to November, after implementing the system early last year.
The system had improved management’s view of resources, allowing it to cut operational expenditure at times of lower business volumes, the company said.
In the last year, City Link has moved towards centralising its cost control processes, rather than separate cost management in each of its 94 depots.
“Following the introduction of a new weekly depot management information system, visibility on cost trends has improved during the year, and the business now has a greater ability to flex its cost base in anticipation of softening demand,” Renotkil Initial said in its preliminary financial results for 2008.
“Measured over a six-month period, between April and November (ie avoiding seasonal peak distortions) the business reduced its annualised cost base by some £30 million.” Much of the benefit, it added, “will be felt during 2009”, but warned this would be hit by a continued tough economy. The company did not immediately respond to a request for details on the IT system.
The cost savings were a positive point in a difficult year for City Link, which posted a £60 million loss for 2008, compared to profits of £19 million the year before.
Owner Rentokil Initial also posted a difficult set of results, with profits nearly halving to £108 million. Rentokil said 2008 was "clearly a challenging year", but it was making progress on fixing its problems. It is cutting its dividend to preserve cash.
Rentokil Initial last May initiated a seven point overhaul plan for City Link, centring changes around IT. The turnaround plan includes improving information sharing, and putting in place new control systems and processes that enable transparency of information.
“City Link has made progress on the implementation of its seven-point recovery plan,” the company said. “Service levels have remained around our internal target of 98.5 percent on-time deliveries, customer relationships have stabilised and significant improvements have been made to systems and processes.”