David Cheesewright was only one year into his three-year term as chief operating officer at Wal-Mart Canada when the call came from Asda chief executive Andy Bond asking him to return home. Although he was reluctant to give up the "great Canadian way of life", the role of chief operating officer and trading director in the UK was just too good an opportunity to pass up, despite the sorry state of affairs at Asda. It was October 2005 and Bond had just announced a round of head office job cuts, sales were flat, the unions were threatening strike action at warehouses and a few months later suppliers were up in arms about the new "investment for growth" programme.
"We had a business that was in trouble," admits Cheesewright in an exclusive interview. But that was then. Thanks in no small part to a review of its supply chain, Cheesewright describes the business as being in good shape. He even claims that suppliers have benefited from the tough price negotiations of a year ago. "Most suppliers want to see a strong Asda - they want a competitor to Tesco. We had difficult choices to make and we chose to ask for help from suppliers outright," he says. "We needed a hand with investment to grow our businesses. Most people got on board - even those who initially said no. We are now growing our food business ahead of the market."
That's not to say the job is finished. Cheesewright is currently tackling suppliers on inbound delivery accuracy - orders from suppliers are only 95% to 96% accurate, he admits. He often gets involved personally if there's a delivery shortfall. "I will have at least five or six conversations with buyers about suppliers' short deliveries every Monday," says Cheesewright. "They are taking more responsibility for their shorts, which makes them much better at talking to suppliers."
Sorting out the shorts will be one more step in Asda's drive to better availability, which has been one of Cheesewright's primary goals. He admits the chain has historically lagged behind its rivals. Last year Asda's availability fell from about 97% to below 96%. "We were preoccupied with how we could move boxes through the network as cheaply as possible and sacrificed availability," he says. "There was a generic issue last year because of hot weather - the supply chain couldn't cope and the situation was exacerbated at Asda because we had only just come from a period where we were not performing on availability. However, by autumn we had recovered very well."
Indeed, Asda recovered quicker than its competitors. Cheesewright puts this down to five years of hard work getting the network "fit for the future". Asda installed Wal-Mart's systems in 2002 and then began restructuring its "mish mash" of a distribution network. Today, Asda is just three service centres shy of completing its eight distribution centre-network. "We've now got a stable network and our cost of delivery as a percentage of sales is much better than last year. We're now industry-leading on that front and are expecting cost as a percentage of sales to continue to go down in the next five years."
Asda is also rolling out dedicated in-store action teams to improve availability using a software system developed by Unilever to flag up problems in forecasting, supplier and store compliance and inventory accuracy. The focus on availability is paying off. For the first time in almost a decade, Asda's availability has come out top in its monthly customer survey. "Customer perception has traditionally put us at number three or four for availability and I'm flattered they now think we are number one. Personally, I don't think we are there yet. Morrisons leads on availability."
Asda's physical audit of 600 products by an external agency also confirms availability has improved, by 1.5 percentage points year-on-year. To improve availability further, Asda has started a massive project to get the right stock in the right place at the right time. It is to rerun all its replenishment algorithms to allow store-specific automated planograms to be produced instead of generic manual planograms. " We're doing this because we want stock to arrive at the back door and go straight out on to shelf and straight to the checkout," says Cheesewright. "If stock has to go back to the back-up, the cost of handling is tripled. Assuming all goes well, we will have store-specific modulars by the end of next year. We'll get better availability, lower costs and happier colleagues."
A new delivery system is making life easier for shop floor staff. Depot layout was changed last year to mimic a shop floor layout. Delivered pallets are now loaded with stock for one particular aisle, rather than the random order of old. And efficiency savings have been enhanced by retail ready packaging. "We have 10,000 lines that come in RRP now and I will continue to drive that by 30% per year - it helps replenishment."
Asda is recycling more than ever before, he claims. "Sustainability is a key issue. There's a raft of legislation coming our way, such as road tolls and carbon emission targets," he says. "But there is already a lot of good work going on. Look at food miles and the work the industry is doing to cut down distances travelled. Asda has been transporting goods on rail for a while and we are saving 2.5 million miles on the road. We've improved the capacity of our trucks 13% by making sure they have much fuller loads. And through backhauling we've removed eight million road miles. Put that all together and we've made a 25% reduction in food miles in five years."
Cheesewright would like Asda to get involved in more collaborative projects. It is still in negotiation with Sainsbury's to set up a shared primary consolidation network. "We've all got our own consolidation centres because of the limited number of suppliers who can come into a depot each day. Why can't a supplier use one consolidation centre for everyone?"
As chairman of the Food Industry Sustainability Strategy, he is also working with the government on ways in which legislation can help the industry become greener. One suggestion is to improve the west coast rail network - diesel trains run on these lines, which is not a cost-effective way to move freight. Delivery restrictions must also be looked at, he says. "The rules are forcing our vehicles into rush-hour traffic and making the situation worse."
There's still plenty to do, Cheesewright admits. But his hands-on approach is clearly working. Asda's supply chain is well on the way to becoming a leaner, greener machine.n
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What's been your career high?
Seeing Asda get back on track as Britain's fastest-growing retailer.
And your career low?
The first day back in the business after coming back from Canada. It was the day the redundancies were announced and days don't get much worse. A lot of people I worked with for a long time left the business that day. People were reasonably accepting that the cuts had to be made and I'm happy about the way we handled it. But on a personal level it hurt.
What is the hardest part of
I don't think of it as a hard job - putting a business back on track is enjoyable. The hardest part is probably getting grief from my wife about being back late again.
What's it like working for
We complement each other. Andy is good at taking a lot of information and cutting through to the one or two points that need focus. He's also great at pulling the right people in. Our management team is now way better than it's been before. I do call him the "butmeister" though. He's good at telling you what a fantastic job you've done, but there's always a but. There's always something else that needs to be done.
What do you like to do in your spare time?
I do a lot of fell running and go skiing. I originally trained as a PE instructor and I coach my son's under-13 rugby team. I am a qualified referee and he hates it when I'm in charge of a match. Andy Bond and I are both into our sports and cycle into work together a lot. He's unbelievably competitive. Asda does a three peaks challenge every year - a team-building exercise - but Andy is determined he has to beat everyone.