Pioneers in the retail trade

Mith 64 department stores, a market share of around 60 percent and sales of CHF 2.8 billion in 2012, Manor is Switzerland's most successful department store chain. With so much strength, the group's headquarters in Basel's narrow Rebgasse seems downright modest. The management of the Supply Chain Division is housed in the adjacent building, a winding old residential building. In the stylish confines of the three floors, there is an almost family atmosphere. It's hard to believe that the logistics threads for Switzerland's leading department store chain are pulled from this idyllic setting.

Complex supply chain management

Here, Rainer Deutschmann, Director and Member of the Executive Board, has been directing and managing Supply Chain Management for more than eight years, "a complex business full of dynamism," he notes. The 600 employees in his division ensure internally that over one million articles (textiles, hardgoods, food with all their seasonal changes) from more than 6,000 suppliers from all over the world find their way onto the shelves of Manor department stores. This includes the import of goods, their preparation, storage in the distribution centres, distribution including order picking and transport to the department stores. Added to this are services such as waste disposal and recycling, returns as well as advice and training on merchandise management in the department stores, quality assurance, consumer protection and sustainability. "Complex" is almost a euphemism for this scope of services.

Complex business full of dynamics

s "highly complex and risky" would be more appropriate.

For Rainer Deutschmann, it was clear from the very first situation assessment at Manor that these challenges to supply chain management could only be met by a holistic management system. Since 2005, he has therefore been consistently guided by the EFQM Excellence Model. Only on this basis, he says, can effectiveness and efficiency be improved in the long term - entirely in the interests of key stakeholders: Manor's owners and management expect a reduction in the capital tied up in the warehouse as well as a level of service at optimal cost, and for the most important internal SCM customers, i.e. the purchasing divisions and department stores, a high availability of goods in agreed quality and at the lowest possible cost.

Leadership

On the way to holistic management, leadership plays a key role. And, according to Rainer Deutschmann, "the first task of leadership is to shape culture. Only through it can you master complexity." Acting with foresight and reacting in time are part of the success potential of every organization. But no less important is: "How do we interact with people so that the 600 employees in our company and the thousands outside understand what we want? What do we do so that everyone thinks and acts in the same way? And dozens of cadres pull in the same direction?"

For this to succeed, nothing must be left to chance. A culture does not come into being by itself; it must be actively formed and fit in with the strategy and the processes. And managers are the key players in this process. They act as role models for values and morals and create the necessary trust. In the Manor Supply Chain, divisional management has therefore signed an annually revised declaration of commitment for all areas since 2005, which visibly sets out the "values and principles" for management and cooperation everywhere. In addition to the Manor values of "Customer, Passion, Ambition, Respect, Integrity and Responsibility", it also sets out the management principles for the division (see box on p. 6). These principles and the priorities to be set are clarified in workshops.

Compliance is monitored on an ongoing basis using various instruments. For example, a structured dialogue on this is held twice a year in the division management and three to four times in the departments. In the "culture or values check", each manager submits his or her points and then it is discussed whether one is on the right

Understanding the logic of the supply chain

s way and what corrections need to be made. For example, the question is how management deals with the individual resources of each person and how these can best be stimulated. To prevent this from becoming "navel-gazing", two "external images", surveys of employees and customers (purchasing and department stores), contrast the results. These are then refined at management meetings.

A cybernetic model

In addition to culture and good leadership, Rainer Deutschmann sees a second pillar that is part of holistic leadership, namely understanding the interrelationships or logic of supply chain management at Manor. In view of the complexity, "we have to understand the cause-and-effect relationships very well, i.e. the critical success factors, in order to be able to identify the strategic levers," says Deutschmann. Cybernetics can be extremely helpful for this.

Six years ago, Deutschmann commissioned a cybernetic network. Together with experts from the University of Applied Sciences Northwestern Switzerland, a broad-based team developed a simulation system. The computer model incorporates the most important commodity factors. Over 100 influencing variables and 200 quantitative relationships are processed. Based on the cause-and-effect principle, this simulation supports decision-making and process design for the optimization of the entire logistics. In the meantime, several projects with savings in the millions have been realized on this basis.

For the simulation system, Manor Supply Chain Management has not only collected national and international logistics awards, but above all proved that the division is highly innovative and technologically competent in its approach. The intensive partnership with the University of Applied Sciences (Prof. Dr. Andreas Stettin) has led to numerous projects over the past seven years.

Example of goods rotation

The problem of inventory shows how elementary it is to know the logistical relationships precisely in order to be able to draw the right conclusions. Inventories of 30 to 40 percent of the balance sheet total harbor huge business risks: "The lower you can keep them, i.e. the higher the rotation, the more agile and the fitter the company is. Merchandise rotation is the aggregate representation of how a

High availability of goods

company ticks. Because a whole range of skills culminate in this key figure," says Rainer Deutschmann.

Manor holds a total of 170,000 articles in its distribution centres. For each individual item, it is important to control the flow of goods intelligently. Take coffee machines, for example: "If demand is high, there doesn't have to be 1,000 machines in stock. With very good logistics, we can sell thousands with an inventory of 100 machines," says Deutschmann. He sees making such interrelationships transparent as a central task of supply chain management. "The SCM team, buyers and warehouses have to recognize how many goods absolutely have to be at hand." Integrated process management has made it possible to plan the flow of goods precisely. Inventories and follow-up costs of tens of millions of francs have thus been reduced.

Customers consistently at the center

"How can a company do everything for its customers externally if it is not internally customer-oriented and does not act accordingly? As an answer, he and his comrades-in-arms in the SCM management have come up with a motto that is as simple as it is visionary.

"We are the enablers"

"We are the enablers." Behind the phrase is an ambitious strategy. Deutschmann explains: "We enable purchasing and the department stores to concentrate on their core competencies, and we do the rest."

And not just by function and order. Deutschmann wants more: "We want to be the sought-after internal supplier. We want to be better than the competition." This refers to direct suppliers. This formulates demands that are constantly being met by "operational excellence" for the benefit of the customer.

and improved: through ease and speed in the supply chain, through professional competence, the focus on sustainability or the activities to increase the efficiency of the supply chain.

"Getting better all the time"

The aim is to increase turnover and product rotation and reduce costs. "The slogan 'Enabler' has been understood by the 600 employees at our company," says Deutschmann. Above all, the management has succeeded in ensuring that it is internalized and practiced on a daily basis.

The Excellence Philosophy

The same applies to the other pioneering principle: "Constantly improving" - the Swiss-German paraphrase for "Kaizen". But this is about more than just suggestions for improvement. This is only one element, but the workforce is now committed to it with hundreds of ideas for optimizing processes and thus increasing productivity.

"Constantly improving" is a comprehensive philosophy of "operational excellence" that has been gradually introduced since 2006, understood by management as a signpost for mobilizing excellence and actively applied. Comprehensive, autonomous ways of thinking and behaving are to be activated and promoted among all employees. And this is done via 6 points:

• Plan-Do-Check-Act cycle
• Rigorous quality orientation in terms of meeting customer requirements 
• Customer-supplier relationship (internal and external)
• Employee orientation (participation and empowerment)
• Process and result orientation (overall optimization)
• Speak in numbers (transparency, fact-based)

In terms of content, these points take concrete form in the company suggestion scheme, in management by objectives, in workplace design and in the optimisation of work processes (waste search). Manor values and management principles (see box) form the cultural basis of management and cooperation.

And how does operational excellence take effect? One indicator is the annual employee surveys at SCM, at headquarters and in the distribution centres. Since 2009, Manor has been asking employees specifically about their commitment. Questions include, for example, how people talk about the organization (say), whether they intend to stay with Manor (stay), and how pronounced the willingness is to make a special contribution to the company (strive). There are also questions about Manor's values, leadership principles, supervisor evaluations and other current topics.

The results of the 2011 SCM employee survey were an engagement score of 80 percent. This is above average when benchmarked against the broad-based comparative data (52 percent for Europe in 2012) from Aon Hewitt.

Sustainability in procurement

Hardly any other economic sector is so closely confronted with critical questions about the sustainability of its product range as the retail trade. Consumers today want to know under what conditions products are manufactured and what the company is actively doing to protect nature and the environment. Manor has successfully positioned itself in the market with "Manor Respect". Throughout the company, a Sustainability Committee headed by Rainer Deutschmann is responsible for setting the important course.

Procurement is particularly challenged. Since 2005, the Supply Chain Management division has had a dedicated department for this purpose.

"Quality and Sustainability" was set up. Its task is to review quality guidelines and safety standards via audits. For example, specifications for the procurement of goods (Code of Conduct) are implemented. This includes the regular review of the

triple bottom-line of sustainability

suppliers through CSR audits. The aim is to achieve an audited purchasing volume of 95 percent by 2015.

"For us, sustainability in the sense of the 'triple bottom-line' means creating triple added value," says Rainer Deutschmann, "added value for the environment, for the society that lives in it, and for the economy that operates in society." For the implementation of the Code of Conduct, the SCM boss is also personally present at the suppliers. Whether in India, Inner Mongolia or Thailand, he sees himself as responsible. What interests him about audits is not the anonymous ticking off of a list, he wants to know in personal conversation with suppliers how implementation is proceeding. "Hire and fire" is alien to Manor. Manor wants to develop together with its suppliers. Deutschmann: "This attitude is one of our opportunities in the global procurement market."

On the way to ESPRIX

The introduction of a holistic management system according to the EFQM model requires a sensitive hand. With brash dictates, one quickly bites on granite. Rainer Deutschmann has been following his own Business Excellence Plan since 2005. Basic concepts were successively introduced, customer management, process models, key figures, value system, etc. "For the first two years, no one knew what it was all about. No one I told, by the way, this is business excellence. We did one thing at a time, just did it."

It was only after two and a half years that he declared at a management meeting: "What we have built up has a system. And that is called Business Excellence according to EFQM." After that, the managers were offered the opportunity to take part in the training. Erich Schnarwiler, who is now Deutschmann's "right-hand man" for EFQM, explains the effect: "The fact that we can train in this area and are given the time to do so was and is incredibly important. With basic training comes appetite. The more you know, the more you want to know what's different there with EFQM." Since then, the cadre days twice a year have always been dedicated to EFQM. And Deutschmann has been taking 20 to 30 employees to the ESPRIX Forum at the KKL for years.

In the meantime, every Manor department store has an internal contact person for EFQM, trained by the SCM Division. With astounding success: "Every time we have confronted the men and women with the system for the first time, they have said: 'That's great, now I finally have a framework to orient myself by'".

And on the ESPRIX award, Rainer Deutschmann says: "The ESPRIX jury has rewarded our efforts to be among the best with an award. We won it because we consistently and persistently want to develop internally into sought-after 'enablers' in order to increase the added value for Manor. When you have this goal in mind and want to mobilise the whole team as the basis of success, there's nothing better than the EFQM model."