Federated Department Stores is to consolidate its distribution centre network in the US Midwest in order to reduce duplication following its acquisition of The May Department Stores Company.

It will shut three centres, which it bought along with May in 2005, in early 2007. The centres are located in Kansas City, Kansas; Warren, Michigan; and Minneapolis, Minnesota.

Work currently handled at these facilities will move to other Federated distribution centres in the region, including those in St Louis; Chicago; Bridgeton, Missouri; and North Jackson, Ohio.

In addition, Federated plans to reduce the workforce at the Chicago, St Louis and Bridgeton centres, also beginning in February.

In Chicago, the company intends to initiate a process to potentially outsource responsibilities for delivery and merchandise transportation to a supplier, affecting about 85 delivery and shuttle driver positions.

About 89 merchandise processing and furniture customer service positions in Chicago, as well as 31 merchandise processing and transportation positions in St. Louis, 25 merchandise processing and customer service positions in Bridgeton and 19 merchandise processing and customer service positions in North Jackson, will be eliminated as the result of changes in operating procedures.

"The difficult decision to consolidate facilities was necessary because we simply have too much distribution capacity for the company's needs going forward," said Federated vice chair Tom Cole. 

"Advances in logistics and distribution centre technology allow us to handle a larger volume of goods more effectively with fewer facilities that are more regional in nature."

The company will seek opportunities to offer affected employees transfers to other Federated facilities. Severance packages will be provided to employees who are laid off as a result of this consolidation.

Distribution centre consolidations are consistent with Federated's plans to save costs of at least US$175m in 2006 and $450m in 2007 and beyond as a result of the May Company merger. Expenses associated with the consolidations are included in the previously announced estimate of about $1bn in one-time costs.