Managing a Store Relocation Project: Marks and Spencer in KendalOrder Description1. Who are the key stakeholders and how will they need to be managed during this project? [25%]
2. Complete a project plan and use this to provide an opening date for the new store. Explain your answer carefully. [50%]
3. Reflecting on your own experience of managing the delivery date of your assignment, to a tight schedule, critically appraise how well M&S are managing this project. [25%]
Assessment criteria
Marks will be earned for:
? Reference to and use of frameworks and tools from the course and wider reading, sometimes beyond the standard test and reading list. ?
Good application of the tools to the case data, especially that concerning stakeholder management, project planning and risk assessment. ?
Clear reporting ? Good decision-making and problem analysisP a g e | 1
Managing a Store Relocation Project: Marks and Spencer in Kendal1
Introduction
This case study describes the relocation a Marks and Spencer (M&S) store in Kendal, Cumbria, UK. The situation presented is a relatively unusual example of store development for the company not just because it involves relocation, but because it involves the acquisition and refitting of an existing supermarket. The case begins with an overview of the objectives and broad management structure behind store development projects. The case then looks back to the actual Kendal relocation project schedule. We hear from three key managers closely involved in the scheme the technical coordinator for construction services, the store planner and the store manager who describe in detail the reasons for the relocation, progress to date and the work still remaining.
Marks and Spencer
M&S is one of the UKs leading retailers with a group turnover of 10.3bn in 2013/14i. About half of the revenue is generated from food retailing and 1.2bn of revenue comes from international operations. The underlying profit before tax was 623m. There are 798 UK stores and 455 other stores located in 54 countries worldwide. The company employs over 85,000 people. For the last few years M&S has struggled to maintain market share in some categories of merchandise and investors have put the senior management team under considerable pressure.
The companys stated strategy is to transform M&S from a traditional British retailer to an international multi-channel retailer.ii The recent UK strategy has been to refurbish existing stores giving customers clearer, better-merchandised and more exciting stores. It intends to increase UK retail space by 2.3% per annum. Annual capital expenditure is in the region of 0.75bn with store development focusing on Simply Food stores in the UK and 55 new stores internationally.
The decision to relocate an existing store is a major decision for the company, both in terms of the business risk and the amount of managerial effort and cost it incurs. A considerable amount of time, resources, research, planning and management effort will be invested. Numerous individuals and departments within the business will be involved, and many external organizations will contribute all working to achieve the companys financial and strategic objectives. Internally, the company will call on managers with expertise in research, financial planning, construction, design, marketing, merchandising, personnel and store operations, and externally the company will receive advice and services from specialist architects, designers, quantity surveyors, planning consultants and marketing agencies. Achievement of a new store opening on time and on budget is therefore critically dependent on effective organization, coordination, cooperation, communication and teamwork.
Among this network of contributors are those focusing on construction, and those focusing on the
1 This case was originally prepared by Malcolm Kirkup, Paul Walley and Daniel Ganly. The case has been updated by Paul Walley in 2014.
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commercial issues. The construction function ensures that the store building and infrastructure is delivered on time and on budget. Central to the construction function is the work of the store development group. Within this group, in overall charge of each new store development is a project manager, who is involved right from the early planning stages and will see the project through to opening day. The project managers role is to get the store completed, fully operational on time, on budget and to the desired quality standards, and to provide a building that can meet the commercial requirements of the business. The project manager relies heavily, however, on a team of technical and equipment coordinators, who manage the construction and fitting-out process, an internal architect, who looks after the corporate design aspects, an estates surveyor and also a store planner, who focuses on designing the stores layout and interfaces between the commercial and construction sides of the project.
The commercial functions ensure that customer needs are satisfied through the offer made available in the new store, that sales potential is maximized and that the store is run efficiently to minimize costs. Central to the commercial success of a new store in this respect are the roles of the store manager, who has the local commercial aspects of the operation to consider, the divisional management team, which can guide and advise the store manager and store planner on issues such as staffing, merchandising and display, and the buying groups at head office, who will plan the ranges for new stores. Other head office groups are also critical to the success of a new store. The information technology department will install the systems which connect the store to distribution centres and the computer centre. The transport department will manage the task of physically getting the stock to new stores. The corporate affairs group will help the store management team in promoting the new store opening.
The Marks and Spencer Relocation Project in Kendal
The date is 10 January 2014. Marks and Spencer is six months into the schedule for a store relocation project in Kendal, Cumbria. In the text below we hear from three key managers closely involved in the scheme. Paul Mellor is the Kendal store manager, Mike Peterson is technical coordinator for construction services in the store development group and Katy Bull is store planner for the project. Their comments provide an insight into the reasons for the relocation, how the project is progressing and the tasks still to be carried out prior to the new store opening.
The Case for Relocation
Paul explains some of the background to the project. Kendal is a busy market town in Cumbria on the south-eastern edge of the Lake District National Park, which is a popular tourist area. The town is close to the M6 motorway, and about 25 miles north of Lancaster. Figure 1 shows our current store in Kendal at 18-20 Stricklandgate. Its a prime location in the High Street, where we are at the heart of shopping activity and we pick up a lot of passing trade. However, there are a number of problems with the site. The selling space, at 9000 square feet, is far too small to exploit the sales potential available in
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Figure 1. The locations of the old and new store sites
Kendal the sales per square foot performances were achieving clearly show we can support a far larger store. The narrow frontage doesnt reflect the offer behind the doors, and the long narrow shape of the store and bottleneck entrance doesnt help either when youre trying to create exciting merchandising. A worse problem is access to the rear of the store for deliveries our lorries struggle to get down the narrow access roads and we pay a substantial rent for access rights across private land to get to our loading bay.
For many years the company has considered different ways to expand the old store. It was suggested at one time that we might buy the Burton site next door, but this would have cost a fortune both to buy the freehold and to integrate the buildings. We wouldnt have generated a great deal more selling space, and the sales increase wouldnt have justified the cost. We could have built a second floor and doubled the space by mirroring the ground floor footprint but an already narrow store would be difficult to operate with extra escalators and stairs at the side. We looked at expanding to the rear, but this would have been on to land owned by the Westmorland Gazette, and we werent able to agree an acceptable financial deal.
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Last August the company decided it really must sort out the Kendal situation once and for all, and relocation became the only real option. A greenfield edge-of-town development was unlikely to get planning permission, but an alternative opportunity arose to acquire an existing Fine-Food supermarket in the town. I alerted the business to the Fine-Food site a couple of years ago, located at the end of Library Road, off Stricklandgate. In 2013 I heard that Fine-Food were under pressure from local competition, and our acquisitions people in the estates department started seriously considering this site as an option. It is an unusual relocation choice, because we are effectively vacating a prime High Street site for a site that is off-pitch in terms of passing footfall and has to attract customers in its own right. The site isnt that visible, and existing direction signs arent ideal. Furthermore, the Fine-Food building isnt in the best possible state, and the general area has deteriorated.
However, the site does have a number of significant advantages. For a start, it is the ideal footage we want, with the sales area all on one floor in a very workable footprint operating efficiencies can therefore be achieved, meaning a significantly increased turnover but with proportionately less staff and management. Well end up with 26,000 square feet of net selling space, 5000 square feet stock area and 6000 square feet staff quarters. The large sales floor means we will be able to expand significantly our mens and ladies clothing ranges, and offer childrenswear for the first time. Well also be getting fitting rooms for the first time. On the food side well be able to double our footage. We wont actually extend the food range much because weve already got a good range jammed in the current store but we can give it more space which will help customers to find what theyre after more easily.
The new site has a large car park (160 spaces, although 70 of these are underground) which is ideal for food shoppers. It will be a pay and display facility, but our customers will get a refund. Access for deliveries is excellent, with a dedicated entrance and purpose-built underground delivery area. Another factor in favour of the site in the beginning was the possibility of a good financial deal, and we knew we would have the opportunity to sell or lease our current site to offset the development costs. The local planners like the idea of us taking on the site our investment will further improve the look of the building and the immediate area. With Marks and Spencer as the tenant, neighbouring traders might also see the opportunity to improve the presentation of their own businesses. By relocating nearby, of course, we can also develop larger premises without disrupting the existing store or our trade in Kendal.
Project Management
Mike explains his role in the project. The Kendal project has an overall project manager who works in the store development group, and she oversees a number of projects around the country at the same time. Because the Kendal scheme is relatively small, I have been delegated much of the project management responsibility on the construction side. My job is to ensure that all the necessary building and fitting-out work is completed on time, within the costs that have been agreed, and to the right specification. I am the interface between the commercial side of Marks and Spencer, the design team and the building contractor. I have to make sure the right people provide the right information at the right time, to ensure that the construction and fitting-out programme runs to plan and the costs are controlled. Ive had an interest in the Kendal scheme from the beginning, and I will see it through until a
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year after opening, after which the on-going maintenance of the store is handed over to another department.
Katy explains her role as store planner for the project. Store planner positions tend to be attachments and development posts within the business. Using our store management experience, we focus on ensuring that new stores are designed in a way that meets the commercial requirements of the business, maximizing sales in an attractive store environment and ensures that stores are operationally efficient to minimize costs. I liaise with all departments that have an interest in the design, building and operation of the store. I must ensure that the final layout meets the needs of the store manager, divisional management and also the buying groups they are my clients. Effective communication is a critical requirement in my role. In Kendal the companys objective is to increase footage and sales substantially, but not to increase costs substantially. We want to build efficiencies into the design of stores we want efficient stock handling, tilling, fitting rooms, efficient backstage areas and so on. My brief therefore covers a range of layout and design issues: looking at the way stock is moved around the store, positioning walkways to facilitate customer movement around the store, planning public points of access and exit, designing backstage areas (including administration quarters), positioning fixtures such as food counters, fridges, tills and displays, and deciding the width of gangways. We also work out how much space to allocate to each of the main merchandise groups (e.g. the foodhall) using our extensive databases on sales densities in existing stores. The buying groups will work with me in getting the balance right. In general the areas of each department will relate to their expected turnover, but the time of year for the store opening and the type of town will also affect the mix.
In addition to my contribution in the early stages of designing the store layout (alongside the architects, corporate designers and store manager), I will also get involved later in the project to plan the location of merchandising equipment (racks etc.). We need to know what were doing on these things about 12 weeks before opening, because it can take that long sometimes to order some of the equipment. Ill also get involved in the last few months prior to opening, as the interior of the store takes shape, to make sure that our original plans are being delivered in practice. Sometimes you can come up against unexpected problems during the building process particularly if youre redeveloping an older building such as hidden columns or differences in floor levels. As these problems arise, we may need to revise the layout around them. We also need to be around when the food and general merchandise groups are checking their final layouts, in case changes are necessary.
I work closely with the project manager whose role is to deliver the particular design of store weve all come up with, on time and within budget. The project manager has complete control of the budget, i.e. the amount of money weve been allocated by the company to build the store. I had quite a few discussions with the project manager on budget issues prior to the monies being signed off for the scheme if I had wanted something new incorporated into the store design I might have had to make a sacrifice elsewhere, because the budget can be quite tight. In some stores we have debates over things like vinyl versus marble flooring. At the end of the day the design scheme has to be appropriate for the budget available.
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The Development Planning Process
Paul explains, In the case of Kendal the whole process really got underway once the estates department had shown serious interest in the Fine-Food site on 9 August 2013. Right from the start the whole development planning process went without a hitch. I was involved from the beginning when we were doing the feasibility research, arguing vigorously in favour of the re-site, and I remember discussing the prospects with the footage assessment unit (FAU) when they were putting together sales estimates for the site in the summer. Quite a lot of research went into estimating the turnover and a host of factors were considered existing sales performances, the proposed selling space available, the local customer profile, the size of the catchment population, local competition and so on. They also looked into how the new Kendal store might compare against other company stores with similar catchments. I fed into the FAU quite a lot of my local knowledge and views on Kendal to help in the turnover estimates.
Mike has been closely involved in the planning activities at head office. At the start of September we then went through to the preparatory planning stage, during which the scheme was subjected to progressively more and more detailed examination, and had to pass through a series of project boards before it could gain approval to proceed to the Capital Evaluation Committee (CEC) in early November. The preparatory planning stage started with probably a months work by a skeleton design team drawing up a broad outline of the proposed scheme. Once this had been agreed by the project board, we then studied the scheme in detail. Our architects, corporate designers and store planner produced detailed plans and layouts, even down to walkways, the food-grid and the location and size of the main sales departments. We needed detailed layouts at this stage because of the implications for costs, plant requirements, pipe runs and so on. Our quantity surveyors could then produce estimates of costs for the building and fitting-out works, and various financial evaluations could be carried out to see how the turnover estimates stacked up against the combined development and likely site acquisition costs, and what sort of return we might get. Once the final project board was happy with the scheme, the costings, the likely profitability and the outline timetable, we could then go to the CEC for ultimate approval for the funds and the go-ahead.
After the initial feasibility research in August we then of course went into negotiations with Fine-Food, and we had to do the background planning in strict confidence. We had to be careful not to spark off any rumours of our interest in the site, which might upset the existing Fine-Food staff, until everything had been settled. This really hampered some of the early surveying, costing and planning work because we couldnt get official access to the site to examine the building in detail. Talking to the local authority about potential planning requirements was also a bit tricky we could only hold provisional discussions while the deal with Fine-Food was under wraps. I suppose the negotiations with Fine-Food didnt take that long once the initial approach had been made. The critical stages were probably sorted by the end of October, although it took until December to conclude the exact purchase terms, sort out all me legal paperwork, agree a vacation date and so on. I remember we had a few problems with the land registry documents, which took a while to sort out. So, in effect, by the year-end Fine-Food were in a position to announce the sale.
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The project sailed through the Capital Evaluation Committee within a couple of weeks. All the research showed that the Kendal scheme would achieve the required returns, so the directors gave us me OK on the expenditure without a problem. As soon as wed got CEC approval we went to tender on the design and build contract for the store. The building contractor who won the tender must have been up and running on the contract by the middle of November, beavering away on the detailed design stage with their appointed architects, quantity surveyors and various consultants, as well as talking to all the subcontractors who would be tendering to provide services and equipment for the store. Weve worked closely with the building contractor of course, feeding in our views and guidance on die design and our construction requirements. We expect to hear from them any time now with the final design, detailed specifications, costings and the building timetable.
Paul Mellor has also been involved throughout the planning process. Im making sure that I have an input on the internal design of the store, because of my commercial management interest. The sales floor plan is mainly developed by store planning, who work to a successful design formula. However, given that every store has a unique configuration and customer profile, there is always room for a local commercial manager to influence the layout. Throughout the preparatory planning stages, and in conjunction with my divisional office, I fed in my views on the location and sizes of departments, and on the positioning of customer service desks, tills, telephones and so on. I also felt quite strongly about the design proposals for the staff quarters and the location of the staff entrance. I want a canopy over the entrance it rains so much in Kendal I can see staff getting soaked while they fiddle with their bags to get through the cardswipe. Ive got views on how I want the car park run ideally I want the local authority to manage it for us, and as part of the deal Id like them to manage the greenery around the site as well. I think it is crucially important for the store manager to be involved in planning a new development we have a valuable contribution to make and, after all, weve got to run the store once it opens.
Paul explains the current situation on the deal with Fine-Food. We agreed the final terms on the purchase just before Christmas, but of course the deal was still under wraps until the official announcement of the purchase the other day. Fine-Food naturally wanted to trade over Christmas. Theyve given their staff a months notice of the store closure, but theyll close at the end of the month because theyll need a week to remove their hardware and clear up.
Planning the Work
Mike explains how the building work is likely to develop over the next few weeks, and the current position on planning approvals. The building contractor will have access to the site from 14 February, and within a fortnight there will be scenes of organized chaos, peppered with hoardings, huts and hard hats. The building contractor will spend two weeks or so preparing the site, and then two weeks stripping the building, removing all the unwanted fixtures, fittings and services left by Fine-Food, and
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putting in the new roof insulation. Then work can begin in earnest on the installation of new sprinkler, electrical and mechanical services, and the new lift.
Well send off for detailed planning permission for the building works in late February once Fine-Food have moved out, but we expect the dialogue with the local authority to continue for about three months before we get all the official approvals for the design, building regulations, signage and so on. It takes time to get all the necessary permissions, because some of the process requires statutory public notice periods to see if anyone has any objections. There shouldnt be any problems with the planning authority though, because our planning consultants have been sounding out the council for some time on our proposals for the store, and they seem generally happy. The main things were seeking approval for are changes to the elevations and shop-front (moving from a sixties Swiss chalet look to a rustic look, and relocating the entrances), new directional signs on Library Road and new signs on the front of the store, and of course well need building regulations approval.
The local planners have given us some ideas on what they want to see and what they dont want to see in the development. Theyve set high standards for the style and type of development work in Kendal because it is classed as a conservation area. They prefer, for example, the use of natural stone if possible, and they are very sensitive on signage. We want to use internally illuminated signs for the store, but the council may insist on exposed downlights over signs. Well work hard to negotiate for the Library Road signage, because we want a sign that is bigger and higher than the Fine-Food one. The planners may also have views on our proposed expanse of glass in the new shop-front (which we want in order to maximize the amount of natural light on the sales floor). They may insist on mullions in the window so that were consistent with the vertical design emphasis on other shop-fronts in the town. Our plans are to use green signs and timber trolley corrals in the car park. Timber doesnt really last long, gets smashed to smithereens and gives a real headache for maintenance, but weve decided not to use stainless steel because timber is more suited to the look well be trying to achieve. Well also spend a lot of money making the car park lighting effective and making it more environmentally friendly.
The planning approval process should be relatively straightforward for this site fortunately the Fine-Food site already has an All Retail Store Use classification, so we wont have to apply for a change of use, and there arent any restrictions on what can be sold. Well keep in close contact with the planners throughout the development work its a big investment for us, so we want to make sure everything is acceptable and done properly.
The Building and Fittingout Process
The main objective for the building contractor will be to open as soon as possible. Well confirm the exact opening date once weve been on site a few weeks, and well have progress meetings every four weeks anyway to make sure things are going to plan. Weve got a few problems with the building to sort out. Weve found quite a bit of damp on the site, which hasnt been helped by the geography of the area, with water coming down from the granite and Cumbrian slate to the rear, and the expanse of wet
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woodland and park next to the site. The gutters have been damaged by snow, and are too small anyway. Much of the plant needs to be replaced -well need new refrigeration plant, a new generator and lift, and we need to service the heating under the concrete delivery ramp (which stops it freezing in winter) because it isnt working as far as we know. A lot of these problems of course were taken into account in the price weve paid for the building.
Weve got to fit out three levels of the building (see figure 2): the lower ground floor (underground car park, stockroom, refrigeration plant area and goods reception area), the ground floor (sales area and food hall, and backstage areas including the cold room) and the mezzanine floor (kitchen, toilets, offices and EPoS room). We wont, however, be doing a gold-leaf job on the store, because theres a limit to what we can spend, and we want to make as much use of the existing services and structure as possible.
Figure 2 The new building layout
The ground floor fit-out will take place in three stages. It will take a week to install the high-level electrical, mechanical and sprinkler services above the sales floor and foodhall, and fix up the ceiling grid ready for the ceiling tiles to be added later. The CCTV equipment will be installed as soon as the electrical work is finished. After that we can start putting in some of the Marks and Spencer design features, like perimeter panelling, trims, skirting, coving, cornice and lighting, which will take five weeks. Once these are sorted, we can get the vinyl flooring down in the foodhall, the carpets down on the rest of the sales floor, drop the ceiling tiles into place and put the doors on. We can then install the
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equipment for the fitting rooms, the Marks and Spencer financial services desk area, the customer service desk, the wall and mid-flooring merchandising equipment, food cases and shelving, tills and phones. This flooring and equipment stage will take about five weeks. The lobby area and the automatic doors on die shop-front will be left quite late so that we can get some of the larger equipment (particularly the refrigeration plant) into the store more easily. The sales floor needs to be handed over to the store manager two weeks before opening to give staff enough time for dressing.
Backstage we need to get the coldroom fully operational and wound down to temperature in time for handover four weeks before opening. Getting all the necessary partitions and services fixed up will take about four weeks; then we can install the coldroom plant over a two-week period. The final activities backstage before handover will be a weeks work on joinery and decoration, and installing the Intrad fittings.
On the mezzanine floor we need to fit out Pauls staff areas. Well need seven weeks to sort the basic services and joinery for the offices, kitchen and toilets, and then probably four weeks to decorate, put the vinyl flooring and carpets down, do the final clean and take in the office furniture and kitchen equipment. We should be ready to hand over the staff quarters three weeks before the opening. Were on a tighter schedule for the EPoS room, which needs to be completed and decorated in five weeks, and needs to be ready eight weeks before store opening, in time for the IT equipment (point of sale systems and distribution control) to be installed and tested by our head office IT specialists, so Paul will then be able to prepare for ordering activities.
On the lower ground floor weve got some general improvement works in the car parking area, and preparation of the stockroom and goods reception areas (including upgrading the dock-leveller/hoist and shutters), which will probably take nine weeks. The air conditioning plant, refrigeration plant and main switch panel will be installed as part of this process. The stockroom and goods reception areas should be ready for handover four weeks before opening.
Aside from all the fitting-out work, weve also got to get all the major equipment commissioned, of course (which is included in the time scales mentioned earlier), which means checking and testing the sprinklers, air conditioning, refrigeration plant, alarms and so on, to ensure everything works the way it should. All the IT gear will be dry run and various tests done to make sure you can communicate and that the data check out, and all the tills will be tested once theyre hooked up. And then theres the outside of the building -trolley corrals, minor improvements to the layout of the car park and new white lining and signs.
Even when the stores opened there may still be one or two snagging jobs to sort out bits of the building or fitting-out process that were not happy with. These will need to be completed by the building contractor as soon as he can. I cant imagine well have any major problems because weve got a good team of people who are very experienced in developing and opening new stores, and the building isnt particularly complicated. About six months after the opening Ill go back for a project
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review day, so we can all get together with the contractor to see whats worked and what hasnt. If weve tried out any new lighting or colour schemes, well review them and see how the plant has operated.
The Local Commercial Operation
Paul is not sure yet when the new store might open. In the early days of considering the Fine-Food site I favoured Easter for the opening or certainly no later than the spring bank holiday at the end of May, both of which are classic times to open particularly Easter, because not only is it a peak in itself but it is also a good opportunity then to hit the kind of merchandise that sells well between Easter and Summer. The later you leave it the less window you have. Similarly, if you open in the autumn, you are set through to Christmas. For me, the most awkward time to open would be mid-season, because we would need to stock the current seasons merchandise as well as prepare for the next season. One problem with opening with current s