10th January 2007

An Introduction to Retail Consolidation Centres

Contents

Executive Summary

How does the Consolidation Model work?

Background to the Heathrow Consolidation Centre (HCC)

HCC Operation

Key Elements of the Solution

Bristol City Centre Consolidation Centre

Benefits of Consolidation

Conclusion

Contact Details

Executive Summary

Multi-retailer environments, such as those seen in Airports and City Centres face a number of significant operational and environmental challenges

Different stakeholders (Landlords, Retailers, City Councils, Centre Operators) require specific agendas to be addressed and the consolidation solution set is designed for this purpose

The end to end solution spans management of the inbound supply chain, to product processing, scheduling and delivery control, through to final direct replenishment to shelf

Impact on the environment is measurable and significant

How does the Consolidation Model work?

Direct deliveries

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ulti-retail environm

entParcel Carriers

RDC

Suppliers • Increased congestion around multi-retailer centres• Worsened turnaround times leading to additional costs into the supply-chain• Requirement to provide more reliable services to retailers

Retailers• Inefficient staff planning• Severe restrictions on stockholding ability• Lower productivity due to the performance of non core activities

Landlords• Service area congestion results in higher emissions and risk of accident• Irregular and ad-hoc supplier management difficult to control • Mismanagement of delivery media causing potential H&S and fire risks

Cha

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es

Key logistics processes are performed by retailers and landlords who are distracted from their core business activities

How does the Consolidation Model work? (Cont’d)

DHL Exel Supply Chain addresses these challenges with solutions that outsourcekey logistics processes enabling stakeholders to focus on core business

activities

Parcel Carriers

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Multi-retail

environment

Direct deliveries

Supplier Management•Approved suppliers•Performance reporting•Supplier collections

Stock consolidation•Checking of goods•Offsite stockroom management/provision •Caging of stock for delivery

Delivery to store•To door/stockroom service•Agreed delivery windows•End to end carton tracking•Delivery of manageable quantities

Returns•Collection of inter-branch transfers and supplier returns •Disposal of cardboard•Collection of delivery equipment (cages, tote boxes)

Stock visibility and replenishment solutionEn

ab

lin

g

To

ols

Consolidation platformRDC

Consolidation centre media tracking system

Background to the Heathrow Consolidation Centre

Terminal 5 planning application required BAA to

– Reduce traffic congestion

– Reduce waste per passenger

– Reduce environmental impact e.g. vehicle emissions

– Against a background of increasing retail activity

Terminals 1 - 4 not designed for retail logistics

– Access restricted and insufficient loading bays

– Landside access shared with passengers and staff

– Limited or non existent stockrooms and back room storage for retail outlets

– Poorly controlled environment

Background to the Heathrow Consolidation Centre

The preferred solution was the set up of a Consolidation Centre, in order to:

– Streamline the supply of retail and catering outlets

– Provide a central point of receipt for all suppliers

– Provide timed delivery by outlet into the terminals

– Provide door to door deliveries in secure roll cages

– Provide retailers with a Great Service

The HCC Operation

The operation has been through two relocations in 6 years and has now relocated to a 54k sq ft purpose-built warehouse in West Drayton

Every month, the HCC:

– Receives 200K cases from 3,500 supplier vehicles

– Assembles and cross docks 14,000 roll cages

– Carries out 490 vehicle journeys and 4,600 deliveries to the terminals

– Delivers a 82% reduction in supplier vehicle movements

The HCC also accommodates multi-temperature warehousing (8,500 sq ft chiller and 2,500 sq ft freezer) and transport operations for caterers

The HCC Operation (Cont’d)

This new facility has been built for the future in mind:

– Terminal 5

– Heathrow East

By the end of 2007, all of T1 to T4 volumes for caterers and retailers will come through the Centre

Key Elements of the HCC Solution

Store Liaison

– Agreeing time windows by outlet by day

– Dedicated terminal resource that coordinates the delivery activity

– Ongoing customer satisfaction surveys to improve service

Supplier Management

– Agreeing time windows for each retailer

– Performance monitoring and ensuring compliance

– Performance reporting to retailers / caterers internally and externally

Key Elements of the HCC Solution (Cont’d)

Delivery Management

– Vehicles operate a continuous shuttle service between the HCC and the terminals

– “In-terminal teams” co-ordinate the off-loading of the vehicles and the delivery to the outlets

– All vehicles fitted with satellite tracking and driver communication system to ensure quick response and enhance security

Systems Solution

– All transactions are date and time stamped

– Full track and trace functionality

– Automatic production of on time and delivery accuracy reports

Bristol City Consolidation Centre

Scope / Aim

- 1st city centre consolidation operation in the UK

- Applies to the Broadmead Shopping Centre and the Galleries

- Aim: Reduce vehicle congestion into the City Centre and improve air quality

Operational Background

- Service started in April 2004

- 5,000 sq ft warehouse operating 6 days a week

- Deals with retail goods only

Bristol City Consolidation Centre (Cont’d)

Retailer Participation

- 57 retailers, 20 of which contribute to the cost of the service

Environmental Achievements (since April 04)

- 4,573 supplier journeys to the city centre have been removed

- c. 120,000kms saved equivalent to 14.6tonnes of Co2

- Over 8tonnes of recycled materials

The operation has recently been extended for another year with scope for a further year based on DHL meeting agreed KPIs

Bristol City Consolidation CentreService Capabilities

Retailer Challenges

- Maintaining stock availability

- Limited, if any, stockroom/storage space

- Waste disposal management

- Collections and returns

- Staffing for ad-hoc operations

Bristol ConsolidationCentre

BCC Solution

- Flexible replenishment

- Off-site storage and split deliveries

- Pre-retailing and waste recycling

- Transport solutions

- Manpower provision

Broadmead/GalleriesShopping Centre

Benefits of the Consolidation Model

Benefits for BAA

- Reduction of vehicle movements landsideand intra terminal movements of stock

- Improved security as all airside goods aresecurity screened

- Quick response contingency operationalcapabilities

- Reduced freight movements/emissions- Planned and controlled delivery operation

that benefits in-terminal operations and reduced abandoned equipment

- Consistently higher delivery performance- Increased recycling capability- Reduced design and building costs for T5

Benefits for Retailers

- More reliable supply chains with supports an increase in sales

- Improved staff planning and productivity- Better product availability through increaseddelivery frequency and offsite storage

- Increased security of stock- Deliveries can be split to requirement to accommodate

small stockrooms and staffing issues-Reduced Health & Safety risk and fire notice issued-Reduced staff turnover

Benefits for the Community

- Reduction in vehicle movements hence congestion and risk of accident- Improved air quality - Improved waste management and recycling

Benefits for Bristol City Council

- Reduced congestion, pollution and noise- Meeting of their electoral commitments- Increased recycling capability through

collections of cardboard and plastics ondelivery

- Less delivery equipment left unattended

Benefits for Suppliers

- Single point of delivery thathelps deliver a speedy turnaround

- No vehicle size restrictions- Out of hours deliveries accepted- Cost savings (no airside licenceand drivers training required)

Conclusion

Consolidation is aimed at reducing the impact of deliveries in a specific retail delivery environment but can also help stakeholders address other concerns such as security of delivery operations in densely populated areas.

In order to work, the consolidation model requires the commercial back up of those key stakeholders.

The model can be scaled down or up and therefore adapted to a variety of environments.

The consolidation model has been run successfully in Heathrow for over 6 years and Bristol for over 2 years.

Even the Local Press likes the idea of Consolidation!

Contact Details

Olivier Bastien

HCC Retail Development Manager

Direct Landline: 0208 606 3007

Mobile: 07810 057 434

Thank you for listening