Travis Perkins plc · LSE:TPK
Travis Perkins — Investor Day (November 2015)
43 slides from Travis Perkins's investor day presentation, November 2015
Slide 1: Supply Chain Briefing. 2015
SUPPLY CHAIN BRIEFING. 2015 Supply Chain Briefing. 2015 1
Slide 2: Agenda
Agenda Introduction John Carter Travis Perkins Group Supply Chain Robin Proctor Q&A John, Tony & Robin Refreshment break All Site tours All Wrap up All Supply Chain Briefing. 2015 2
Slide 3: Our growth not constrained by the market
Our growth not constrained by the market • Majority of the markets we compete in are highly fragmented 1 Market • Proliferation of small family-owned businesses fragmentation • Our businesses are #1 or #2 in each of our markets, but with relatively low market shares • Sourcing & supply chain: sourci
Slide 4: Levers of value creation
Levers of value creation Portfolio Scale management Optimising advantage network • Streamlined central Customer • Supply chain functions innovation investment • Devolved • TP expansion & modernisation • Leverage property management • Improved value capability responsibility • Extended range • Wickes
Slide 5: Supply Chain. Robin Proctor
SUPPLY CHAIN. Robin Proctor Group Supply Chain Director Supply Chain Briefing. 2015 5
Slide 6: Agenda
Agenda 1. Supply chain strategy p8 2. Merchanting supply chain p16 3. Lightside distribution p24 4. Heavyside distribution p28 5. Customer fulfilment p33 6. Creating structural advantage p36 Supply Chain Briefing. 2015 6
Slide 7: Key messages
Key messages Superior • Fastest access to the broadest range of heavy and light products in the market 1 customer • More products available in-branch and extended range within 48 hours proposition • Enables a consistent multi-channel solution Encouraging • Drives revenue growth ahead of the market 2
Slide 8: Supply Chain Strategy
SUPPLY CHAIN STRATEGY. Supply Chain Briefing. 2015 8
Slide 9: Supply chain aligned to Group strategic goals
Supply chain aligned to Group strategic goals • Sell the broadest range of products, available quickly, at the Strategic ambition appropriate cost to serve • Extend the range and provide faster access to products Customer Innovation • Deliver a multi-channel proposition • Enables improvements to bra
Slide 10: Supply chain to support Group ambition
Supply chain to support Group ambition • Multi-channel for transactions • Offer a market leading and fulfilment customer proposition • Deliver on-time, in-full every • Extended range of products, time closer to the customer • Make profitable customer • Greater access to branded and promises own-labe
Slide 11: A highly experienced team
A highly experienced team Robin Proctor Group Supply Chain Director - Joined 2006 • 26 years experience : Sainsburys, Iceland, Howdens • Highly experienced team • VP of Chartered Institute of Transport & Logistics • Total supply chain experience of >125 yrs • Advisor to Cranfield University Merchant
Slide 12: Customer needs determine supply chain
Customer needs determine supply chain Consumer Merchants Contracts Sales = £1.3bn Sales = £1.9bn Sales = £1.4bn Sales = £1.1bn Medium-Large Customers Small tradesperson / Consumer Trade Variable by customer to templates / Tendered / framework Pricing Fixed agreements guided Variable Ranging Mandated
Slide 13: Contracts supply – fit for purpose
Contracts supply – fit for purpose • Large quantities of specialised heavy civils product • Balance of supply from yard and direct delivery from suppliers • Specialised product range – high number of SKUs • Central distribution balanced with direct delivery from suppliers • Two specialised distribut
Slide 14: Wickes supply chain – more mature
Wickes supply chain – more mature • Stand-alone supply chain Stores 232 • Fixed range of heavy and lightside products Distribution centres 4 • Centralised lightside distribution SKUs in store 10,000 • Heavyside replenishment direct from supplier SKU extended range 6,000 • Auto-replenishment and real
Slide 15: Toolstation supply chain – leading edge
Toolstation supply chain – leading edge • Stand-alone supply chain Stores 209 • Fixed range of lightside products only Distribution centres 3 • Centralised distribution - high conformity of supply SKUs in store 12,000 • Auto-replenishment and real-time stock visibility SKU extended range In developm
Slide 16: Merchanting Supply Chain
MERCHANTING SUPPLY CHAIN. Supply Chain Briefing. 2015 16
Slide 17: Trade customers have specific requirements
Trade customers have specific requirements What customers get now What customers want • Limited range in-branch • ~800 heavyside and 2,000 lightside products Range Range • Access to a broader range of products • Extended range accessed from suppliers • Lead-time of ~10 days on extended range • Short
Slide 18: A multi-channel solution for customers
A multi-channel solution for customers ‘Bricks’ ‘Bricks or clicks’ ‘Bricks and clicks’ Single channel Multi-channel 1 Multi-channel 2 • Customer single touch point • Multiple, independent touch • Seamless customer • Direct contact between points experience customer and branch staff • Internet, catal
Slide 19: Traditional merchanting supply chain structure
Traditional merchanting supply chain structure Supplier Supplier Supplier Supplier Supplier • Traditional Travis Perkins model involved 10,000 suppliers delivering 250,000 products directly to ~1,300 merchant branches • Current structure for majority of merchants • Infrequent deliveries by suppliers
Slide 20: Our ambition for a leading customer proposition
Our ambition for a leading customer proposition Traditional proposition Travis Perkins ambition TP control Immediate • 2,000 – 3,000 lightside • ~5,000 lightside availability • 800 heavyside • ~1,500 heavyside (in-branch) • Product availability ~90% • Product availability ~95% • Centralised Distribu
Slide 21: Developing a modern supply chain network
Developing a modern supply chain network Heavyside Heavyside Lightside Lightside Own label supplier supplier supplier supplier supplier Broader range Heavyside DC Lightside DC (x4) (x2) Better availability Merchant branch Enhanced efficiency Customers Supply Chain Briefing. 2015 21
Slide 22: Systems upgrades to support physical supply chain
Systems upgrades to support physical supply chain • Investment in systems as important Warehouse as physical infrastructure Customer and inventory • Experience from Toolstation and interface management Wickes • Multi-channel customers demand: – Real-time stock visibility Product Automated – Clear pr
Slide 23: Product categories demand different networks
Product categories demand different networks Lightside Products Heavyside Products Primary Distribution Centre network Range Centre network • Boilers, taps, screws, doors, kitchens, paint • Bricks, blocks, timber, aggregates • Products have high value to weight / size • Products have low value to we
Slide 24: Lightside Distribution
LIGHTSIDE DISTRIBUTION. Supply Chain Briefing. 2015 24
Slide 25: Network delivers extended range and efficiency
Network delivers extended range and efficiency 2011 ~900k ft2 • Six distribution centres consolidated 2015 ~1.1m ft2 into two sites in the right locations • Potential in future for a further site in the South to match capacity • Fewer, larger distribution sites drive: – Improved operating efficiency
Slide 26: Flexible approach to network utilisation
Flexible approach to network utilisation • Direct sourcing requires warehouse space to buffer long lead times Direct sourcing • Centralised distribution allows a single stock holding to serve many brands • More capacity for direct sourcing enables increased own brand penetration Extended • Heating s
Slide 27: Group scale drives delivery efficiency
Group scale drives delivery efficiency • North / South divide on lightside distribution allows later order cut-off times • Sharing lightside distribution across multiple businesses improves efficiency Traditional delivery to a single business New model – delivery to multiple businesses DC DC • Vehic
Slide 28: Heavyside Distribution
HEAVYSIDE DISTRIBUTION. Supply Chain Briefing. 2015 28
Slide 29: Development of a heavyside solution
Development of a heavyside solution Phase 1 • Four years of modelling work and trials to prove concept and viability 2010 - 2014 • Significant value in the IP developed - a simple solution to a complicated Trial concept problem Phase 2 • Enhance the heavyside proposition for the customer 2014 - 2018
Slide 30: Heavyside range centre roll-out progressing
Heavyside range centre roll-out progressing • Current coverage of ~2/3 of Travis Perkins branches Warrington Coventry North • Coventry due to open in late Midlands 150 branches 2016 / early 2017 c.150 branches Opens late 2016/early 2017 • Ensure returns on existing RCs ahead of Coventry investment •
Slide 31: Enabling future TP branch formats
Enabling future TP branch formats Current typical merchant format Future TP branch format • Large yard required to hold stock available in-branch • Up to ~5,000 lightside and 1,500 heavyside products • Fewer SKUs with more buffer stock in branch with better availability • Range inconsistent between
Slide 32: Range centres provide broad benefits
Range centres provide broad benefits • 3,000 extra heavyside products available next-day Initial range extension • A further 3,000 additional products available in 48hrs 1 for branches – Not held in Range Centre – supplier delivers into Range Centre next-day • Consistent proposition across all Travi
Slide 33: Customer Fulfilment
CUSTOMER Supply Chain Briefing. 2015 FULFILMENT. 33
Slide 34: Reliable and efficient final-mile delivery
Reliable and efficient final-mile delivery • Final-mile delivery vital to fulfil customer promises • Second largest private vehicle fleet in the UK: ~3,700 vehicles 2008 Vehicle tracking • Analysis of routes, distance covered versus delivery value and branch catchment radius Efficiency timeline 2010
Slide 35: Investing for future flexibility
Investing for future flexibility • Infrastructure is flexible to volume requirements – Designed for future growth of the business – Building materials distribution is cyclical – Low fixed costs – flexible variable costs • Infrastructure is flexible to changing product mix – Low automation – non-stan
Slide 36: Creating Structural Advantage
CREATING STRUCTURAL ADVANTAGE. Supply Chain Briefing. 2015 36
Slide 37: Creating significant structural advantage
Creating significant structural advantage • Hold more SKUs per branch to maximise immediacy Broader range • Offer unmatchable extended range through the DC network • Manage inventory to offer the best in-branch availability Better availability • Have the lowest lead-time in the sector for special or
Slide 38: Encouraging financial benefits
Encouraging financial benefits • Heavyside range centres enable low double-digit uplift in heavyside categories Revenue growth • Higher heavyside sales provide increasing opportunity to sell lightside categories above the market • Revenue maturity post-completion progressing in line with expectation
Slide 39: Increasing structural barriers
Increasing structural barriers • Investments viable through Travis Perkins’ scale in UK 1 Group scale • Other national players do not have breadth of category / channel operations • Never viable for independents (> 50% of merchant market) • Years of planning, modelling and trial work – significant I
Slide 40: Key messages
Key messages Superior • Fastest access to the broadest range of heavy and light products in the market 1 customer • More products available in-branch and extended range within 48 hours proposition • Enables a consistent multi-channel solution Encouraging • Drives revenue growth ahead of the market 2
Slide 41: Questions
LAROCE +40bps to 10.4% QUESTIONS. Supply Chain Briefing. 2015 41
Slide 42: Supplementary information
Supplementary information Opening Avg. SKUs Branches Deliveries Drops per Facility Size (ft 2) Capacity Capex Date FTEs stocked served per day load Lightside DC 510,000 + 85,000 1 Jan Gowerton £10m 677 28,000 862 550 7 176,000 pallets 2011 85,000 26 Jan £60m Omega 630,000 369 18,500 585 385 7 pallet
Slide 43: Contact
CONTACT. Download investor.relations@travisperkins.co.uk the Travis Perkins IR Graeme Barnes | +44 7469 401 819 app for graeme.barnes@travisperkins.co.uk iPad Matt Johnson | +44 7584 491 284 vCard matt.johnson@travisperkins.co.uk Supply Chain Briefing. 2015 43