Supply Chain Transformation Delivers Market Leading, Award Winning Performance for Waterstones

UTL has worked in partnership with Waterstones since 2007, and today handles in excess of 30m books and 10m related products per annum for the high street and online retailer.

While a resurgence in sales of physical books in recent years has been a major factor in Waterstones’ renaissance, its partnership with UTL, whose shared vision is ‘You Succeed, We Succeed’, has been a major part of the turnaround; as recognised at the 2015 European Supply Chain Excellence Awards.

In 2013, while evaluating the impact of an ongoing global recession, increase in competition and changes to the way in which people were consuming books, UTL and Waterstones launched a full supply chain review; touching suppliers, the Burton Hub, shops and back office functions.

The challenge was to configure a supply chain that enabled Waterstones to not only survive the recession, but through establishing a resilient, scalable and dynamic solution, support growth beyond it; and this meant improving service to customers across all channels and reducing costs.

Previous state: Low accuracy in forecast resulted in a reactive demand pull on the publishers, small and highly frequent orders, high levels of small mixed inbound loads, high operational handling and processing, long customer fulfilment timeline, poor customer experience and reduced sales opportunities.

Through effective engagement, communication and leadership, a clear future vision was created which would ensure that Waterstones could continue to service their millions of customers, against a landscape of increasing competition, economic decline and changing consumer behaviour.

The vision was to develop the customer and in-store experience in Waterstones’ 300 shops. This meant reducing the overall stock held in shops, but increasing the range of titles to create the space for shops to present books in a more customer friendly, visually appealing way, as well as; increasing space for ‘Related Product’, launching ‘Café W’, reducing lead time to shops and extending next day delivery order cut off.

What followed throughout 2014 was a major supply chain transformation with a joint team challenging how both organisations worked up and down the supply chain. The transformation was a key enabler to a permanent step change in the service offering. The transformation included changes to the automation, IT-systems, operational processes and the facility.

The supply chain partnering of UTL and Waterstones has been built on the foundation of a long relationship, with a culture of openness and collaboration in delivering wide reaching joint business transformation initiatives.

The solution needed to review and refine operational processes, IT and shop infrastructure, IT and processes, advance the S&OP process and change the supplier relationship to increase order multiples and reduce mixed pallets.

The UTL and Waterstones team set about reviewing and making changes to the operational and IT processes within the hub facility. At the same time, Waterstones were developing their own infrastructure and way of working, including refinement of the shop ordering system and its integration into the UTL processes. This, in conjunction with a facility relay, accommodated the increase in range holding and delivery requirements.

The joint team focused upon the 3 key elements of; Organisational Design, Cost-to-Serve, and Flow.

Organisational design: The Waterstones’ stock flow and supplier management teams are based with the UTL operational team in the hub to increase two-way daily communication. This is supplemented by the S&OP/Supply team splitting their time between Waterstones Head Office and the hub operated by UTL. Operational reviews, project boards and account/financial reviews are completed in conjunction with the S&OP/Supply team being in the hub. As part of the partnering the UTL team across the different functional areas base themselves from the Waterstones’ head office. The two teams spending time between the sites enables greater collaboration and the sharing of information and ideas.

Cost to serve: The two organisations focused upon how to reduce the cost to serve to the shops and the internet customers and developed specifically selected initiatives that would reduce cost. A key element of this was the UTL Operational Excellence model. The purpose of the model is to create – ‘a system of Safe, Repeatable, Reliable, Capable and Environmentally Sound processes which add value to the customer, under control and continuous improvement’. A part of the OpEx delivery plan was a number of ‘overdrive’ improvement events, model line introduction and standard work projects, which removed waste from the process within the Hub and wider supply chain. The aim was to seek opportunities to enhance the service offering. Benefit tracking was implemented with key monitors throughout the supply chain to measure the real benefits these had on the cost-to-serve and customer impact.

Supply Chain Flow: The team completed a supply chain flow review (see simplified image), to deeply understand the current ‘as is state’ looking to design the ‘to be state’, with the aim to build a customer centric supply chain that challenges the competition and increases customer satisfaction, shop foot-fall and online traffic to generate increased sales. Changes to the S&OP process improved forecasting accuracy to 98%, this enabled the team to improve the relationship with suppliers to drive cost down, improve service levels and increase centralised inventory holding. The hub operational team commenced changes to the physical infrastructure of the site, operational and IT processes, increasing flexibility of the workforce through simplified processes, introduction of banked hours and up skilling through the dedicated learning centre (faculty on the floor) and a programme called the ‘Build Program’. These key enablers ensured that an 8am next day service could be implemented for shops ordering by 4pm the previous day from a centralised stock holding of 65,000 titles, increasing the availability of key titles and perennial selling titles across the 300 shop estate. The changes implemented reduced the network wide inventory holding releasing cash back to the business, the ability to order for next day delivery increased on shelf availability subsequently increasing sales. Other benefits included a reduction in damages to stock in shops with the shops having more space to hold and display books, reducing the return activity and the associated costs with returns and disposition by >28%.

The results have been dramatic:

  • Increased range of titles available in shops with increased flexibility to tailor shops to their local market.
  • Reduction in operating costs by 11%
  • Reduced lead time from 7-9 days to 16hours
  • Reduced cost to serve from 5% to 3.5%
  • Reduced distribution costs by £250,000 with zero impact to service
  • Changes to the S&OP process has improved forecast Vs. actual accuracy to 98% and driven improvements in supplier ordering, reducing cost of supply and inventory.
  • Reduced shop inventory levels by over £5m
  • Increased Employee Engagement; Unauthorised absence reduced from 13% in 2013 to 3.15% in 2015, overtime reduced by 24,000 hours per annum.

European Supply Chain Excellence Awards 2015

The UTL Waterstones partnership swept the board at the 2015 European Supply Chain Excellence Awards, winning three awards as a result of the supply chain transformation work, a fourth for UTL who were awarded Best 3PL.

These awards are recognised as the most trusted measure of outstanding best supply chain practice by supply chain leaders across Europe operating in all market sectors.

Waterstones Managing Director James Daunt said:

“These awards are a fantastic recognition of the work and intelligence that has been applied in UTL’s steady transformation of operations at the Burton Hub. It has been grounded in a close and productive working relationship between UTL and Waterstones. We are delighted and proud to be associated with these honours, and are especially grateful for the dramatic improvement in service now experienced by our shops thanks to UTL’s continuing, and relentless pursuit of productivity gains and performance efficiencies that ultimately benefit our customers.

It’s clear to me that great leadership has enabled real engagement on-site, which in turn has lead to significant benefits for our customers and shops. Congratulations and thank you to everyone involved – it’s great to know you’re part of the Waterstones team!”

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