15 March 2006 | Anusha Bradley

Boots plans to save £60 million a year in supply chain costs before 2011 by centralising distribution; restructuring major IT contracts and cutting 2,250 warehouse jobs.

In a statement, Boots' chief executive Richard Baker said the changes will "allow us to compete even more effectively while delivering a better service to our stores".

Boots currently has 17 regional warehouses which are to become lorry-docking facilities. In place of those warehouses a £70 million automated facility will be set up in Nottingham within the next three years.

In the past two years Boots has made a number of changes to its supply chain. As reported in SM in November, the company announced savings of £80 million after a year-long efficiency programme to switch to a demand-based system.

Boots says the next step is to further centralise this process with a single warehouse in Nottingham. It anticipates a saving of £50 million through reduced stock holding at warehouses by 2011.

The company spends around £70 million a year on IT as part of a 10-year contract with IBM. It now plans to alter its major IT contracts to reflect its new technology requirements. It expects these to result in some implementation costs but expects payback within three to four years through lower ongoing IT costs.

SMmar2006