Some of the UK’s largest firms are embarking on supply chain innovations to help cut costs amid fears over plummeting consumer spending.

Retail giant B&Q is in the middle of a major warehouse revamp project worth around £55m.

According to Martin Bitmead, B&Q’s space and merchant development manager, changing patterns of customer demand combined with rising rents and tighter budgets are forcing the retailer to streamline supply chains and squeeze every drop of revenue possible from outlets.

As part of the project, B&Q is using site planning software from JDA to optimise the layouts of its outlets. The software will help it arrange stores in a customer-friendly manner, while reducing numbers of unpopular items.

Meanwhile, mobile operator O2 is attempting to improve its demand forecasting for handsets. Since 2004, it has been improving its forecasting accuracy from below 10 per cent to over 80 per cent today. This has allowed it to speed up stock turnaround and increase product availability ­ essential in running a tight ship.

In the past, forecasts were generated based on previous sales. These were then adjusted by the sales staff and put through the forecasting system again before being processed by the fulfilment system and orders being made. Now, forecasts are run in conjunction with sales staff predictions and merged into a more accurate assessment.

“This highlights the importance of collaboration,” explained demand optimisation manager Ian Bexson.“You can only do so much with mathematics, statistics and algorithms, but by working closely with sales staff on the ground you can improve sales accuracy.”

Elsewhere, catering giant the Compass Group is introducing space planning applications to help it improve the flow of people through the staff canteens it runs at sites such as Heathrow Terminal Five.