Argos: Pioneer of modern distribution...

Argos has become a pioneer of modern distribution by being the first company in the UK and Ireland to order new gas-powered Euro 6 articulated trucks. Now the online and high street retailer, with 755 stores and more than 96 percent of the population within 10 miles of a store, is set to capitalise on being a market frontrunner.

Partly in a bid to cut down carbon emissions throughout the organisation, from the type of vehicles used to general energy consumption, five new environmentally friendly trucks were ordered from Swedish commercial automotive manufacturers, Scania.

Complying with Euro 6, Europe's latest clean exhaust emissions standard, the vehicles can run completely off biomethane gas, and release up to 70 percent less carbon dioxide compared to their diesel counterparts. 

David Landy, Argos Fleet Manager, said: “These trucks offer a glimpse into the future of the UK haulage industry, and as one the UK’s biggest retailers selling around 50,000 different products, we’re delighted to be leading the way in getting products into our stores and customers’ hands in an environmentally friendly way.”

The new gas trucks can travel up to 350 kilometres without refuelling, and are now based at Argos’ Magna Park, Lutterworth distribution centre.

The introduction into service of these vehicles also represents a major milestone in a project created by Innovate UK (formerly Technology Strategy Board) to assess the benefits of gas to the UK haulage industry.

A key aim of the project has been to introduce gas-powered vehicles into service at Magna Park in the run-up to a publicly-accessible gas refuelling station scheduled to open on site later this year according to CNG Services, which leads the project in collaboration with Gasrec, Argos, DHL Supply Chain, Culina Logistics and Eddie Stobart.

It is reported that the introduction of Argos's new gas-powered Scania trucks will be transformational in terms of carbon dioxide emissions and their impact upon air quality in the coming years. Many other companies in the supply chain industry are expected to follow suit for instance.

Remaining agile

In the financial year to February 2015, Argos sales were £4.1 billion and it employed some 29,000 people across the business.The company is part of Home Retail Group, the UK’s leading home and general merchandise retailer, which also owns popular firms Homebase and Habitat.

The nature of the Argos business means demand is driven by seasonal events such as Mother’s Day, Easter, Spring bank holiday and of course Christmas. Product popularity also fluctuates dramatically due to weather so in summer, BBQs and garden furniture naturally need to be available in high volumes. Whereas leading up to the festive season, technology products such as HD Televisions, smartphones and iPads prove popular with customers.

Phil Hull, Distribution Director at Argos, said: “Our agility as a business is crucial and key to our ongoing success in the UK retail space. We are very much working on a seven day, 24/7, shortest lead time possible basis to successfully and swiftly complete store replenishment.

“Essentially, the things we are working on are geared towards improving product availability to ensure we are giving the best experience possible to our customers. Having said that, we are also cleverly managing our inventory level to pre-empt seasonal demand peaks, so that we are not tying up excess capital in unused stock in the warehouses and distribution centres.”

Lean and green

Landy recognised how the prominence of green, environmentally friendly projects could affect the industry as a whole. Although he stated as far as gas mileage with the new Euro 6 trucks goes, it is not just about reducing kilometres on the motorway but rather reducing the overall carbon footprint of the organisation.

He said: “With the fleet, our initiative is to carry on reducing the CO2 footprint over the kilometres, so that means using bigger trailers to fit more products in, and they are generally light in weight so therefore the payload is not an issue. Subsequently we went for as many of the new semi-trailers as we can as that particular vehicle type, at 15.65 metres, is able to accommodate our needs.

“We can now start to deliver more product per litre of fuel used and that’s what the aim of the game is. That’s what makes you more efficient, filling the cube up as much as you can with more and more product and less fuel to do it.”

The firm is also looking at utilising a range of urban double-deckers going forward, because where it has restrictions on delivery access, especially with older stores, the company can usually run the same length of stock on another deck, so again Argos can go out with more products and therefore reduce stem mileage.

Scania has stated its delight that Argos has become the first UK operator to put its dedicated gas-powered trucks into operation. This, together with an ever-developing fuel-supply infrastructure, represents a major step forward in terms of combating emissions of greenhouse gas, the truck manufacturer said in a statement.

Thinking smart

Another major decision that has been implemented recently is the way product repair and refurbishment is handled. Prior to summer 2014 Argos operated a refurbishment and repair service for technology products through a network of third parties. This network was serviced from the organisation’s central returns operation near Burton-upon-Trent, with movements between the operations before finally being shipped to the eBay/Clearance Outlets which Argos has in place for sale.

Following an assessment of the whole operation Argos management concluded that refurbishing products, including non-technology, within its own returns site would have significant benefits, given the scale of the operation and economies of scale this would give the company.

The key Argos benefits being the leverage of the returns site space with 70,000 square foot made available and a better returns management operation; handling is minimised with stock only handled once before despatching for sale too. Inherent efficiencies are taken advantage of which reduces potential damage or loss in transit, and inventory levels are managed well by mobbing to a weekly production model as opposed to batch processing at remote locations.

Control also improved with stock on site and on core inventory systems with enhanced visibility; and finally product quality feedback gives Argos an opportunity to improve insight on customer/product issues and relay this information back into Quality Assurance and buying teams.

Phil Hull said: “In deciding how to implement our new onsite refurbishment service we recognised we would require expert support and selected Servicecare, part of Clipper Logistics, as our refurbishment partner. Working together Servicecare we established a trial ‘implant’ operation within our returns operation commencing in August 2014. This initial pilot has exceeded our expectations and has given us the confidence to accelerate our plans, and roll this out further this year.

“In summary we believe developing a centre of excellence for refurbishment and repair is a key component to our digital technology strategy and at the same time it will drive out costs and give us an opportunity to enhance our customer’s experience.”

Landy added: “Our previous operating model meant products would go out to third parties, who would re-service it, bring it back into our supply chain and resell that through an eBay channel or other clearance channels.

“Now we’ve changed that. Where it is totally onsite refurbishment it has taken out the cost of working with third parties and moving products around the country, and the time that that product is spent out of circulation in that repair route. So when coupled with our latest plans with Sainsbury’s it means product availability and customer convenience could not be better.”

Digital-led future

Alongside the partnership with eBay, another business relationship has been put in place with Sainsbury’s supermarket. Argos, as the UK’s leading general merchandise retailer and Sainsbury’s, the UK’s second largest grocer, have teamed up to open 10 new Argos digital stores within existing Sainsbury’s supermarkets this year. This will bring extra choice and convenience to Sainsbury’s and Argos’ customers who will have access to the combined ranges in the convenience of a Sainsbury's supermarket.

These new format digital stores will provide customers with a choice of over 20,000 non-grocery products which they can either buy instantly in store via tablets, or reserve online for easy collection within hours, the same or the following day. An extended range of around 40,000 products can also be ordered in store for home delivery.

Upon announcing this new way to reach the end user, John Walden, Chief Executive of Home Retail Group, said: "Our new distribution model allows us to provide customers in any Argos location with a choice of around 20,000 lines within hours, regardless of the size or stocking capacity of the store. This strategic capability has opened up options for a variety of new Argos stores and formats, and the possibility that we can now cost-effectively reach more customers and neighbourhoods with an Argos presence. I look forward to the results of the 10 store programme with Sainsbury’s and to understanding the full potential of this exciting opportunity."

Argos continues to be the UK’s largest high street retailer online with around 121 million customer transactions a year through its stores and over 900 million website and app visits in the 12 months to February 2015.  Customers can take advantage of Argos’ convenient Check & Reserve service available through its network of 755 stores across the UK and Republic of Ireland.

It is clear to see that Argos is not standing still and waiting for the future to come to it; rather it is embracing a new strategy that keeps the ongoing global digital revolution as a core consideration. The company is also providing the opportunity for all levels of staff to build on their existing skills on the job, through initiating training in a form where employees are able to achieve an NVQ in lean or continuous improvement.

Commenting on the organisation’s reasoning behind the move to invest in gas powered transportation, Landy pointed out it was important to be aware of the manufacturer’s own plans. He said: “Up until now you couldn’t buy a manufacturer-made gas lorry off of the production line: you would buy a normal diesel lorry and it would be converted by an after-market firm. For us, that suggested that if manufacturers aren’t behind it, should we really be doing it? Now Scania have this 100 percent gas truck coming off their production line. If they are supporting us in our green initiatives this way, it is probably the right thing to do now.” said Landy.

“This is the beginning of a sea-change I think, and a lot of fleet operators will start to take it much more seriously as people follow the lead. But without people purchasing them Scania won’t produce the trucks. It has been a move together but I think it is the right one.”

Hull concluded: “As we see the volume of these environmentally-friendly vehicles start to come into the industry, the price changes, the market changes and it becomes more viable and realistic to many operators. We are proud to be pioneering this new form of distribution and we hope to continue to innovate for the benefit of our customers.”

It is clear to see Argos is set to stay ahead of the industry curve as it is closer to the end user than ever before.


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