Sainsbury’s IT efficiency improvements deliver as profits rise 11%

An IT-led efficiency programme has helped Sainsbury's offset three-quarters of the damage caused by inflation in other costs, the retailer said today.

Two to three percent inflation in basic costs, including rises in wages, property and energy, was at the “top end” of Sainsbury’s expectations, it said.

But the supermarket chain’s annual profits rose 11 percent in 2008 to £543 million, as its 'Making Sainsbury’s Great Again' plan delivered efficiency savings, and higher revenues through attracting and retaining customers.

“Sainsbury’s has made significant progress in improving its operational efficiency as a result of the MSGA recovery plan,” the company said in its financial statement.

The retailer said it had improved the performance of its supply chain and IT infrastructure, which would continue to deliver benefits this year.

"Ongoing operational improvements now ensure Sainsbury's continues to do a great job for customers in terms of product availability and service and are also delivering cost savings," the statement continued.

Further undisclosed IT projects will take place over the coming months.

The retailer said it had improved a wide range of processes, including installing new checkout systems in its stores. Printers that issued double-sided receipts were “quicker and also provide environmental benefits”, it said.

One hundred of its stores have self-scan tills, and 100 more this year will adopt the systems.

Extensive green programmes were slashing energy usage, it added. In August last year, Sainsbury’s opened a “green” store in Dartmouth, reducing CO2 emissions by 54 percent by using renewable energy.

In 200 existing stores, the introduction of new technology and policies around energy usage was “delivering good payback”, it said. Some 53,000 tonnes of CO2 would be saved on annual basis.

Costs had also been saved in human resources, through last year’s introduction of a shared HR service centre in Manchester. The centre processes a number of administrative tasks previously undertaken within stores and provides an online recruitment service.

It ran a three month programme from January to remove duplicate processes and simplify operations in its store support centre in London, improving efficiency further.

Sainsbury’s had also made large changes in supply chain processes. Last month, it signed a five-year deal with IBM to outsource its supply chain, and in 2008 it introduced a transport management system and modified processes, “helping improve overall supply chain efficiency [and] reducing the requirement for temporary facilities at peak trading periods”.

The continued loss of stock had also been reduced through investment in IT systems tracking goods, alongside security improvements.

In other IT developments, online food sales grew by a quarter in 2008, hitting half a billion pounds, it said. In the first half of this year, Sainsbury’s will launch an online store for non-food goods.

Justin King, chief executive at the supermarket chain, said Sainsbury’s had “responded quickly and effectively to a rapidly changing environment”.

Copyright © 2009 IDG Communications, Inc.

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