Efforts to streamline logistics

For a retail business of our scale, efficiency in logistics is a key success factor. In 2022, we focused on achieving logistics efficiency gains and tested new logistics formats, which may soon become industry best practices.

Supply chain logistics improvement

The Company and its partners embraced an end-to-end supply chain to streamline product shipments in a meaningful way. Magnit took over part of the suppliers’ logistics functions to increase delivery speed, improve inventory turnover and reduce distribution costs.

Cost savings in logistics unlock additional opportunities for lowering the price of products, thus improving their affordability and value for customers. The end-to-end supply chain helps harmonise all logistics processes from manufacturer to buyer, while also reducing inventory levels, improving delivery times and increasing turnover.

Launch of fruit and vegetables sourcing via ports in the Russian Far East

Magnit embarked on developing intermodal transportation of products from Asia-Pacific through the Russian Far East, pioneering in fruit and vegetables sourcing via this route. The efficient operation of the customs service makes it possible to streamline clearance processes and reduce clearance time. Products are then delivered to the Company’s distribution centres in special reefer containers that maintain the required temperature levels.

The launch of these new logistics operations will help reduce both the cost of goods and delivery time, boost efficiency of Magnit’s distribution processes and ensure consistently high quality of fruit and vegetables, one of the most popular product categories.

Unmanned logistics corridors testing

Magnit and other logistics and transport operators signed the Common Programme of the Regulatory Sandbox Regime (RSR) for the implementation of the Unmanned Logistics Corridors (ULC) initiative on the M11 Neva highway.

The programme was developed by the Digital Transport and Logistics Association with support of the Russian Ministry of Transport. The unmanned logistics corridor on the M11 highway is slated for launch by 2024, with a total of 19,500 km of Russian public roads potentially becoming available for autonomous vehicles by 2030.

Over the next three years, digital innovations in truck transportation will be tested in areas of designing, building and operating highly automated trucks and infrastructure for them as well as developing unmanned transport and logistics services. The testing of technical solutions and business models for unmanned trucking will make it possible to scale the project to other highways in the shortest possible time and at the lowest cost.

Improved assortment rotation at Magnit Cosmetics

Maintaining and improving the on-shelf availability of products is the number one priority for Magnit amid the headwinds caused by the limited supply of imported goods and raw materials, logistics constraints and the departure of major players from the Russian market.

Against this background, we launched an initiative to improve the assortment rotation and new SKUs introduction at Magnit Cosmetics, which is strongly dependent on imports. By leveraging early volume and date arrangements with suppliers, reviewing our internal processes, and optimising the supply chain, we were able to accelerate both SKU rotation and introduction.

These efforts also helped us increase the transparency of processes both on the Company side and the supplier side, improving supply discipline and accuracy of product shipments.

Swift arrangements to source products in short supply

Magnit joined forces with its key suppliers to develop sourcing arrangements for products in short supply caused by global feedstock shortages and external logistics constraints.

We work in lockstep with suppliers to ensure monthly alignment of our sourcing needs with their supply capabilities. To do that, we:

• define sourcing priorities by region;
• leverage similar available products to handle shortages;
• identify priority promotional products;
• ensure targeted replenishment for high-traffic stores.