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Thought of the week: Alex looks at the recent trend of supply chain collaborations.

After seeing many major announcements over the past few weeks, from Morrisons and McColl’s agreeing a major supply chain partnership to Walmart and developing their strategic relationship, it seems that collaboration really is as popular as ever, so I thought I’d check for myself. After reviewing our last 50 news stories on Supply Chain Analysis, I found that 38% mentioned either ‘collaboration’ or ‘partnership’ within them. As the industry becomes tougher, and the low hanging fruit seemingly gone, it seems like businesses are now increasingly open to collaborative opportunities in order to unlock breakthrough change.

What areas of your business are open to collaboration?

To continue the discussion, check out our annual Supply Chain Summit, Thursday 9th November 2017.

Morrisons and UK convenience chain McColl's have announced a major long term supply initiative that will enable British shoppers to once again by Safeway private label products.

Morrisons to supply McColl's from 2018

Through the partnership Morrisons will begin supplying both Safeway products and national brands to 1,300 McColl's convenience stores and 350 newsagents across the UK. In time the partnership will replace McColl's existing supply arrangements. Morrisons supplied products are expected to begin appearing in McColl's shops from January 2018. Following its announcement last year that it would be be reviving Safeway as a brand for the wholesale channel, Morrisons has developed a range of over 400 fresh frozen and ambient products, many of which are produced at Morrisons food manufacturing sites. McColl's will be given a one year exclusive access to Safeway products.

What this means for Morrisons

The deal is a major milestone in Morrisons journey towards delivering against the £50m-£100m incremental profit opportunity identified by CEO David Potts last year. It expects the McColl's partnership to make an initial profit contribution in 2018/19 and the deal will accelerate the growth in the contribution of wholesale activities to Morrisons like-for-like sales. Partnering with McColl's will greatly extend Morrisons reach into the expanding convenience channel where it remains under represented, and with minimal capital investment. The deal will also allow Morrisons to make better use of capacity at its 17 UK food processing plants. Morrisons now expects wholesale revenues (including tobacco) across all of its partners to reach £700m by the end of 2018, putting it well on track to reach its longer term £1bn target.

What this means for McColl's

The partnership will significantly advance McColl's fresh food credentials, an increasingly vital part of the retail offer for shoppers deciding which convenience store to visit. The exclusivity agreement to use the Safeway brand - albeit only for 12 months - should provide an important boost to McColl's in 2018 - and using Morrisons as its sole partner will significantly simplify its operations. This is particularly important given the jump in McColl's scale created by the acquisition of 298 stores from the Co-op last year.

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Morrisons has extended the reach of its home delivery service with the launch of direct deliveries from stores in North-East England.

Focus on the North-East

The new service will provide access to for around half a million shoppers, including the major population centres of Sunderland, Middlesbrough and Darlington. This a region currently beyond the reach of Ocado's fulfilment centres which provide the backbone of Morrisons online service. A successful launch here is likely to lead to the rollout of the store pick model to cover other parts of northern England, western England and Scotland, which are important regions to Morrisons but not currently served by Ocado. As with Morrisons existing service, one hour delivery slots are offered to shoppers and a focus on freshness is a key aspect of the proposition. Customers will be invited to confirm the freshness of the products they receive before they accept them.

Expanding Morrisons online offer

The development of a store pick solution for Morrisons by Ocado was announced almost a year ago. The agreement was part of a wider renegotiation of Morrisons contract with Ocado that also saw its profit share obligation with Ocado ended and allowed to sell Ocado's non-food range. Morrisons also agreed to take up capacity at Ocado's Erith fulfilment centre that will open next year. Morrisons also now has a wholesale agreement with Amazon that provides it with an alternative route to market and it supplies products for delivery within an hour through Amazon Prime Now.

Online supporting Morrisons success

In its latest quarterly trading statement, Morrisons revealed that online contributed 0.5% to its 3.0% retail LFL sales growth, helped by the launch of its new website and a new seasonally relevant food-to-order offer for parties and special events. In addition, it reported continued growth from 'Morrisons at Amazon' as the service was extended to more London postcodes.

Looking for more on Morrisons?

Check out our retailer hub page for Morrisons, covering all of the latest news and developments for its supply chain, including our Morrisons supply chain snapshot.


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