Costa Express’ supply chain revolution

Martijn150x150With all the media hype in supply chain, the casual observer might easily think that within the next decade companies will all have perfectly optimised, data-driven supply chains and labour forces overtaken by robots, sensors and drones. This was certainly the picture that Gartner’s top supply chain guru Michael Burkett painted when he keynoted the research firm’s annual Supply Chain Conference in London, held 23-24 September 2015.

I’m a little more skeptical. With so burnt out planning teams still running their company’s supply chains on spreadsheets and old ERP systems, I see this utopian (or dystopian, depending on your perspective) scenario taking several generations to play out and there will be many unexpected technical, cultural and ethical issues to overcome.

That’s why Costa Express’ presentation at the Gartner Executive Supply Chain Conference in London stood out. Just three years ago, Britain’s largest self-service coffee company, was still running its supply chain using a hellish home-grown system of 2000 linked Excel spreadsheets. Today Costa Express is disrupting its coffee industry peers with its automated, intelligent supply chain. While others ponder the relative merits of Internet of Things, smart machines and advanced analytics, Costa Express has already rolled them out and is reaping financial benefits. The turning point for the company came when it shrewdly decided to recruit young supply chain maverick Chris Clowes.

All you ‘evolution versus revolution’ devotees better look away now. Clowes had no time for incremental change, preferring to start his tenure by changing logistics and warehousing partners, IT systems and even the roles of the planners in only nine months. His presentation suggests that the revolutionary approach paid off because he dared to do a few things differently like:

Daring to select ‘boutique’ partners

Clowes chose relatively small, private supply chain analytics vendor ToolsGroup to handle automated forecasting and replenishment for its growing network of self-service machines along with family owned Howard Tenens for logistics and warehousing. It’s much harder to blame small vendors than the likes of SAP, Oracle and UPS when things go wrong so you have to be prepared to hold yourself accountable. More conservative leaders tend to go for the safer ‘you never get fired for choosing SAP’ options, even when they are more expensive and not as functionally or culturally suitable.

Daring to automate

Automation scares people, which why so many more companies talk about it, rather than do it. It helps that Costa Express’ business is built around the concept of self-service machines of course. It took guts, however, to totally automate the supply chain and change the roles of its number-crunching planners into customer service ‘brand ambassadors.’ I can imagine that Clowes had to moderate some heated debates with staff and partners about the trustworthiness of machine-generated replenishment data.

At the partner sites, Costa Express’ new ‘Marlow’ smart, talking coffee machine apparently simulates a full-on sensory coffee shop experience. The machine is a design collaboration with – among others – gaming experts who worked on Harry Potter and Lord of the Rings, sound engineers who worked with U2, Rolling Stones and Coldplay and designers who worked with Ferrari. The machines also send data to the store managers to alert them when supplies like milk, beans and syrups are running low.

Daring to talk about it

When you talk publicly about your project, more people hold you to account so you’re more likely to deliver. Clowes was clearly practised in talking up his project but also down to earth (preferring ‘talking coffee machines’ to ‘Internet of Things’) and speaking openly and with humour about things that went right and wrong during his supply chain overhaul. His communication skills also probably helped him to persuade his colleagues and business partners to sign up for revolutionary, rather than evolutionary change.

Costa Express’ impressive recent performance can be directly attributed to its supply chain transformation. By 2013, Costa Express exceeded its parent company Whitbread’s goals announced in 2011 to double the size of its business by adding 2000 more machines – two years ahead of schedule. At the same time it slashed inventory and logistics costs by 20 percent and raised customer satisfaction (net promoter scores) by 10 percent and cut carbon emissions by 70 tonnes.

Clowes, however, is not a man to rest on his laurels. His latest ‘Project Grid’ initiative launched in 2014 is supporting Costa Express’ ambitions to double in size yet again by hitting 8000 machines by 2020 and reach new international markets. As part of this initiative, all the smart machines in the Costa Express ‘estate’ will communicate with the people in the extended operation including the managers at the partner sites and the back office support people, continuously improving uptime and customer satisfaction. Clowes also hinted at applying analytics to handle spare parts management.

With his revolutionary spirit, I’m willing to bet that Clowes will rise to these new challenges and possibly even throw in a few more surprises for us.

Martijn Lofvers
Publishing Director & Chief Editor
martijn.lofvers@supplychainmedia.nl