JYSK expansion with tighter logistics control

Retailer, JYSK, is a Danish success story. Since its humble beginnings in 1979, the purveyor of Scandinavian living — and one of the largest distributors of duvets, mattresses and garden furniture in Europe — has enjoyed worldwide expansion; turning one store in Aarhus into a 2,400-store operation across 48 countries, employing 21,000 people.

The ambitious journey of international expansion began in Germany in 1984, and in many ways, it is only just getting started. With assets doubling during the last ten years, along with staff numbers, last year JYSK recorded its best annual turnover of €3.12 billion. Executive Vice President Logistics, Allan Kjaergaard, tells Nigel Wright how infrastructure investment is facilitating the next stage of growth.

In the same month that he turned 46, Allan Kjaergaard was celebrating another milestone. On 30th May, the logistics lead for JYSK’s Nordic division — covering 20 territories across Central and Eastern Europe —  was delighted to announce construction had begun on the businesses new distribution centre (DC) in Bozhuristhe, Bulgaria. A €100 million investment for the Group, which is the culmination of a three-year project that will play a major role in JYSK’s future success: “Our distribution centres are crucial to the business. We have chosen Bulgaria as the location because it matches our expansion plans and enables us to better serve customers while reducing our trucking kilometres by around 10 million per year.”  The centre will be ready for use in late 2018 and will create around 300 permanent jobs, once fully operational.

JYSK aims to open 100 stores per year in territories where it already has a presence, in addition to launching in new countries through a mixture of own-store development and franchise agreements. Central and Eastern Europe are major focus areas for new assets and Bulgaria is somewhere JYSK has enjoyed rapid growth, adding twelve stores in ten years, welcoming 2.5 million customers through its doors. Allan explains that JYSK’s continuing success is due to a combination of logistics and commercial proficiency: “Our small stores located in convenient locations is a tactic that works and the strategically located DCs allow us to get closer to customers and create easy shopping experiences.” The decision to increase five percent of items produced in Europe compared to the Far East is related to this broader aim while giving the business more control over its supply chain, reducing its labour costs and minimising its environmental impact.

In addition to Bulgaria, a further eight DCs are located across Scandinavia, Germany, Spain, Poland and China — the Polish centre being one of the largest of its kind in Europe. With all 2,400 stores taking delivery of products from each centre at least once per week, Allan commented how investment in infrastructure together with ramping up quality and compliance is vital to ensure high standards are maintained: “We have in and outbound quality control at every distribution centre, with specialised departments inspecting products upon arrival. Cooperation with suppliers regarding factory visits and audits is now the norm, and twice a year we arrange assembly days of furniture to validate quality.” JYSK will now leverage its new centre in Bulgaria to better serve customers across the country and make in-roads into Romania and the wider West Balkan area as its seeks to consolidate its position as “first-mover” in those markets.

To secure the growth in Northern Europe, JYSK will also expand its distribution centre in Denmark making it the biggest in the region. The investment covers a new high-bay with a 14,000-meter square footprint and room for 81,000 pallets (increasing the number of pallet locations to 216,000); an additional 16,000 meter-squared front building and eight new automatic picking stations bringing the total number to 32 and growing capacity by 30%.

While turnover is mainly attributed to its stores, JYSK acknowledges that finding the right combination of online and in-store sales is needed to maintain growth. Allan noted how the DCs will play a key role in maximising the online opportunity: “Our business will always maintain a large network of physical assets, but the market leader in the future will be the company that finds a seamless customer-oriented supply chain system that will give them a competitive advantage. It’s very complex because it means changing from serving thousands of stores to potentially millions of customers. Track and trace are sacred words in the logistics “Handbook” and we’re now selecting 3PL providers to assist JYSK with distribution, based on their track and trace prowess, more so than cost and quality factors.”

JYSK’s existing online strategy, however, already sets it apart in the market. Its competitors, in the main, focus investment on developing big stores or ‘furniture houses’ and don’t consider online a major channel. Together with its small store model and convenient locations, JYSK’s online business helps connect customers direct to the stores and offer them a superior service. Allan was keen to point out though that success isn’t always immediate and the business has learned that patience is an important aspect of organic growth.

Founder Lars Larsen — of the Lars Larsen Group which also owns Bolia.com and IDdesign among others and is the fifth biggest retailer in Europe — is regarded as a generous owner who invests huge capital into growing the business. He has an aggressive, pro-risk and expansionist mindset but is also a leader who’s happy to wait. Allan explained: “He’s a patient man; sometimes remaining in a market for ten years until the business turns profitable. This approach, driven from the top, gives us the flexibility and support to experiment with different product ranges and locations until we find something that connects and works for our customers.”

Further afield, JYSK has franchise agreements with 138 stores across Canada, parts of Asia and The Middle East. Dänisches Bettenlager — JYSK’s German division and name in Germany and Austria, which also runs Italy, Iberia, France, and Switzerland — Allan explains, is also looking at expansion in South America and JYSK Nordic will also explore new opportunities in Asia moving forward. The immediate focus for Allan though is very much growing and consolidating Europe by ensuring JYSK demonstrates logistics excellence. He concluded: “While our DCs offer first class services, we’re always monitoring developments in things like pallet systems, digitalization and automation that will enable us to achieve more and better flow. Automation is the most anticipated change in manufacturing and will ensure JYSK remains at the cutting edge of technical innovation.”

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