operation in a 76,500-square-meter (823,000-square-
foot) facility outside Moscow. In 2015, John Deere
reconfigured its existing operations into a reduced
footprint of around 50,000 square meters (538,000
square feet) while simultaneously relocating its
Russia headquarters from central Moscow to the same
facility. The change has allowed John Deere to maintain full functionality while enjoying increased operational efficiency at a greatly reduced real estate cost.
As part of its Russia restructuring efforts, Adidas
has purchased outright the distribution center in
the south of Moscow that it had previously leased.
Adidas acquired the 120,000-square-meter ( 1.3-mil-
lion-square-foot) building at a relatively low price
from a landlord in need of capital, a less costly option
for the sportswear company than its previous U.S.-dollar-denominated long-term lease contract.
I asked executives at three international companies
that have elected to maintain and grow their presence
in Russia to share their experiences, with a particular focus on the impact of the crisis on their supply
chains. Here are their stories.
The bricks-and-mortar retailer: Leroy Merlin
Throughout the economic crisis, the Russian division
of French do-it-yourself (DIY) and gardening retailer
Leroy Merlin did not slow the pace of its ongoing
expansion plan. That plan involves around 20 new
store openings every year, and the company opened
its 59th store in Russia in the final days of 2016. The
retailer is also expanding its geographical scope. It
will open its first store in Khabarovsk, which is 9,000
kilometers ( 5,600 miles) from Moscow by road, in
2017; Vladivostok, a city on Russia’s Pacific coast, is
scheduled to follow in 2018.
Eric Poulet, director of supply chain at Leroy Merlin
in Russia, notes that while the average Leroy Merlin
store in France sells around 3. 4 million items per
year, Russian stores sell between 16 and 19 million.
In France, the company’s supply chain moves around
470 million items per year. In Russia, that number is
now over 1 billion.
To support its network, Leroy Merlin prefers to
build and run its own distribution facilities where
possible, using a standard format optimized for cross-
dock activities. During 2015 and 2016, the com-
pany partnered with a developer to construct a
100,000-square-meter ( 1.1-million-square-foot) facil-
ity to the south of Moscow. It is currently developing
a second warehouse of a similar size in the north of
Moscow, which will take over from an outsourced
facility on completion in 2018. Eighty percent of
the company’s domestic suppliers are located in the
Moscow area, Poulet explains, making the region an
important one for both its inbound and outbound
supply chain activities.
Leroy Merlin runs two other, smaller distribution
centers today, one in Russia’s third-largest city,
Novosibirsk in Siberia, and the other in Samara in
the Volga region. In 2018, the company will open
additional facilities in Rostov-on-Don in the south
of the country and St. Petersburg in the north. When
demand in eastern Russia is sufficiently high, the
retailer plans to open another distribution center in
To protect their purchasing power during the crisis, Russian families switched to cheaper products
wherever they could. For Leroy Merlin, that meant a
big acceleration in its lowest-priced, “basic” product
categories, says Poulet. For a company that already
operates on an “everyday low price” basis, that meant
increased pressure to keep supply chain costs down.
That’s always challenging across such a widely
distributed network. The company can move inventory between its warehouses in France according to
demand, says Poulet, but that approach isn’t economic in Russia. “We need to be creative and low-cost in
the way we organize our transport,” he says. As the
network gets larger, finding more ways to reduce the
cost and carbon emissions associated with transport
has become a major focus for the company, which is
working with universities in the country to explore
Leroy Merlin has also worked hard to accelerate its
supply chain, doubling the share of inventory that
passes through its cross-dock operations to 43 percent
this year, with plans to increase that to 55 percent in
When it comes to road transportation, the crisis
has created some unexpected challenges, says Poulet.
The weak ruble and resulting collapse in the sales
of imported goods meant there were fewer trucks
transporting merchandise from ports in the north and
south of the country to Moscow. That led to a reduction in available capacity in the opposite direction,
creating a capacity crunch for Leroy Merlin, which
ships a significant volume from its main Moscow distribution centers to stores in those regions. “The cost
of transport increased a lot on these routes,” he notes.
Some transportation challenges had causes unrelated to the crisis. The rollout of a new national system
of road tolls has increased costs and administrative
complexity for transport companies, especially for the
small owner-operated motor carriers that still dominate the market in Russia. That change took a lot of
capacity out of the market and pushed up prices in
2016, Poulet says.
Other regulatory changes have helped the busi-
42 CSCMP’s Supply Chain Quarterly [QUARTER 1/2017] www.SupplyChainQuarterly.com
[SUPPLY CHAIN EVOLUTION IN A CRISIS: CASE STUDIES FROM RUSSIA]