High street chemist Boots is to cut spending on its supply chain and IT infrastructure by £60m a year as it prepares for its merger with Alliance UniChem.
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One of the ways the company plans to save money on its IT infrastructure is by renegotiating an outsourcing contract with IBM.
Boots said, "A review of ongoing IT requirements has identified additional opportunities to restructure the IT contractual arrangements to reflect better these requirements and realise further benefits."
Boots renegotiated its other major IT outsourcing contract with Xansa last year.
A spokesman said, "We do not think we need a contract around transformation."
The savings in the supply chain will come from the replacement of 17 regional warehouses with a single central warehouse costing £70m.
A new Epos system, including chip and Pin, has been implemented throughout Boots' stores over the past few years.
The company's IT suppliers have also deployed a SAP system covering its finance, merchandising, procurement and property functions.
Some £120m will be spent on capital investment, including £50m in 2006-07.
Boots expects to merge with Alliance UniChem in June. The £7bn combined company, which will trade as Alliance Boots, will have about 2,400 stores in the UK.