Explain how software, technology and equipment has improved the systems for Argos five-year transformation program. Please be explicit in your response Identify two outstanding ch

Omnichannel Transformation–Argos and LLamasoft (2017)

Case Study

Argos is a £5.7bn general merchandise retailer in the UK operating 840+ stores. In 2013 they announced a £300m five-year transformation program to become a truly multichannel retailer.

Over a 4-year period Argos developed a market leading customer proposition using LLamasoft’s professional services and software.

They now offer an award-winning service with same-day collection and delivery with demanding order cut-off times for 20,000 products throughout the UK.

The journey began when Argos embarked on a strategic review of its business, focusing on customer proposition. This review was driven by research into the customers’ expectations of a digitally evolving retail environment, with the goal of positioning Argos as a leading digital retailer.

Research carried out identified that customers wanted several key propositional dimensions that would challenge existing and traditional supply chains at affordable costs, including

· A choice of fulfillment to home or point of pickup.

· An expectation of fast and convenient home delivery.

· Local convenience when collecting orders.

· A seamless link between e-commerce, mobile commerce, and physical stores.

· Consistent delivery of fulfillment promises.

· A wide range of products on an expedited lead time.

· A simple convenient way to return any product.

· The review highlighted key strategic advantages in the Argos existing real estate model that could be leveraged for competitive advantage in developing an omnichannel fulfillment proposition, including

· Real-time, local, store stock balances.

· A history of putting these real-time balances in the customers’ hands with supporting processes to ensure accuracy to 99.99 percent.

· A store model more characteristic of 840+ nationally distributed warehouses.

· Strategic insight into the notion that key online players were developing links with partners who have physical points of presence.

However, the existing store estate varied considerably in both size and immediately available range—with inconsistent, and lengthy, lead times for the products not held in hundreds of smaller stores. Lead time for products not held suited existing replenishment operations—not that of the Argos customers’ fulfilment requirements. The one-man home delivery offer left customers waiting in all day 8 am to 7 pm.

There was a fundamental need to capitalize on the structural advantages and reengineer the supply chain operating model (systems, process, people, skills, and infrastructure) in order to deliver compelling customer propositions in a way that was not previously possible. The business required growth to be sustained through more cost-effective ways of working and the release of working capital so that it could deliver the strategic vision.

With over 40 percent of sales facilitated through online interactions, and over 80 percent still involving a physical store, it was important for Argos to focus on their Supply Chain to deliver the vision: transforming the supply chain from a traditional “replenishment model” to an agile “fulfillment model,” responsible for the speedy delivery of customer promises.

The customer research was translated into key customer fulfillment propositions:

· Same-Day Pickup

· Up to 20,000 SKUs available same day, to any store regardless of size or location.

· Same-Day Home Delivery

· Same-day, next, or named-day home delivery.

· Within all these, a choice of convenient delivery slots.

Same-Day Pickup, Fast Track Collection

To deliver same-day pickup, Argos implemented a new hub-and-spoke operating model; that’s where LLamasoft’s Supply Chain Guru Software came in.

With a store base of about 840 locations with varying capacities for storage, picking, and van operations, and different proximity to other stores and customers’ homes, we were faced with the task of deciding which stores should become hubs for this service, and which should become spokes. This involved trading off the management and administrative costs involved in running a hub, with the delivery costs associated with different configurations, while achieving the tight collections and delivery windows.

The design phase was critical in assessing the viability of the new service prior to a decision to launch, as well as providing the blueprint for the implementation. In the early phases of the project, LLamasoft consultants built models and ran optimizations around many different scenarios. They honed in on the right solution and determined which stores should be hubs, which should be spokes, and which hubs they were served from. The power of the analytics, combined with the mapping of results for the different scenarios, helped to convince Argos’s management that the project was heading in the right direction.

As the project headed toward reality, the team carried out regional trials and updated the Supply Chain Guru models, also adding in the concessions (new small stores within Homebase and Sainsbury’s), and evaluated the impact before rollout.

Highlights of the project include

· 150 larger stores converted to hubs—holding a 20k SKU range.

· 600 spokes retained a smaller modified range, acting as immediate sales and collection points.

· Hubs and spokes organized into clusters allowing same-day collection of 20k SKUs in all stores.

· Hub stores operating vans to spokes (subsequently to be used for home delivery).

· A collection proposition of

· order by 1 pm for 4 pm same day, and

· order by midnight for collection on opening.

FIGURE 1

Sample of Hub & Spoke Network in the West Midlands, UK

· Team transformation events: Removing 750 managers and 1,200 store colleagues from the business for 24 four-day events nationwide.

· Significant cultural change—converting stores into hybrid store/fulfilment centers.

· Recruiting and training of around 1,000 drivers.

· Voice operations enhanced to allow spoke and home delivery picking.

· Availability improved with investment in faster selling lines, while slower selling lines were managed more tightly.

· RDC deliveries to hubs were ramped up to reduce replenishment lead times.

· Stock efficiency improved through lead-time reduction, supplier delivery improvements, forecasting improvements, and improved flow management.

From the base of 2012/13 Argos has transformed its Supply Chain while maintaining sales growth and profit. Hub and spoke is contributing to this and has become the foundation of its convenience strategy, enabling the opening of over 100 concessions stores and collection points where it would not have previously been able to, all with 20,000 products available within hours serviced by hub and spoke.

September 2016, Sainsbury’s Acquires Argos

It’s widely reported that one of the main attractions from Sainsbury’s acquiring Argos was getting access to its retailers’ online delivery network, to rival Amazon’s fulfillment propositions.

Now that the network has been designed, Argos has taken Supply Chain Guru in-house so that the models can be changed to reflect new circumstances on the ground.

The team has taken a concept from the drawing board to operational reality and in doing so transformed the Argos supply chain to more ably deliver for its customers and to meet their strategic goals and future ambition.

Argos has now extended its hub-and-spoke distribution concept with a trial of a regional hub. The regional hub trial will provide the potential to hold a significantly higher number of products, potentially including third-party products, for same-day fulfilment.

The existing system enabled the introduction of same-day delivery service Fast Track, and is part of Argos’s Transformation Plan to reinvent the company as a digital retail leader.

Same-Day Home Delivery, Fast Track Delivery

At Argos, Check and Reserve has been the shopping mission of choice for many customers since it was invented 15 years ago. For a while this was a differentiator. However, many retailers have now caught up. With the success of Check and Reserve, small-item delivery received less focus over this period.

This resulted in Argos having a home delivery offering that lagged behind, in an environment that was moving more customers online, and into home delivery. For small items delivery, they had an early, next-day cut-off, with a 13-hour (7 am to 8 pm) delivery window. This was not competitive or convenient.

Argos chose to build a disruptive proposition that would change the way people thought about home delivery for good. They wanted to innovate and, like Check and Reserve, build a unique proposition. Fast Track Nationwide Same-Day Home Delivery was born.

Fast Track is now the UK’s leading home delivery proposition.

· 20,000 products available for same-day delivery.

· Four convenient delivery slots; 7 am–10 am, 10 am–1 pm, 2 pm–6 pm, 7 pm–10 pm.

· Three “in day” cut-offs for same day (5 am, 1 pm, 6 pm).

· Seven days a week—364 days a year.

· To 95 percent of UK households—Inverness to Isle of Wight; Holyhead to Great Yarmouth.

Customers were most excited that they could order up to 6 pm on a Sunday and still get their order delivered that evening!

To achieve this, Argos had to completely reengineer its operating model and systems infrastructure. This involved complementing our more traditional fulfillment model with a store-based fulfillment operation delivered by 3,300 drivers employed by Argos. This required collaboration and a huge effort across the entire Argos business and its supply chain partners.

Additionally, it was challenged to make sure that the operation had a lower cost to service; in other words it made sound business sense too.

Details of Execution

The ambition behind Fast Track meant the scale of change management would be larger than any other in Argos’s five-year transformation plan.

The program was split into three core programs:

· IT systems

· Changes to Voice Operations/Warehouse Management/Sterling OMS.

· Introduction of Paragon Dynamic Routing Solution and EPOD systems.

· Supply Operation and Systems

· Forecasting and replenishing home delivery across 163 hubs rather than one central site.

· The ability to forecast and replenish a “Dark Hub” for North London to add additional capacity for the capital.

· Operational Development—which included

· 25 teams including Store Operations/Home Delivery/Distribution/Marketing/Customer Experience/Contact Centre/Finance/Digital/Procurement/Supply/Brand Management/HR.

Additionally, Argos needed to recruit 3,300 customer fulfillment drivers, specially trained to deliver great customer service at the doorstep.

With this level of complexity, and moving at pace, there were times when systems didn’t always behave as expected. Together Argos had to learn fast and fail fast. However, with a team of colleagues solely focused on the customer, delivering the final mile rarely failed, even in the pilot stages while trying to get the systems reconfigured. There were days when manifests could not be downloaded to the stores, and the teams still went out and delivered 90 percent+ without any routes or schedules.

At the same time, the pressure was on to let customers know about Fast Track. A powerful marketing and PR campaign was put in place. This meant the teams involved had to deliver in line with our demanding timelines, to get Fast Track launched in time for Christmas 2015.

Fastest way to shop including same day delivery, 7 days a week for £3.95 and in store pick up in as little as 60 seconds.

Innovation

Argos was determined to set up, from scratch, the UK’s leading same-day nationwide home-delivery proposition, aiming to genuinely surprise and delight customers and set new expectations—furthermore implementing this almost entirely within its own operation, giving it complete control of the performance, experience, and future development.

Argos wanted to bring its friendly store experience to the customers’ door—through the faces of local store colleagues.

Many retailers and pure plays are chasing same-day delivery, often confined to urban areas using 3PLs, and early same-day cut-offs. Experience told Argos that the busiest order windows were early afternoon, so a midday cut-off was not good for many customers. Argos wanted as many customers as possible to experience same-day delivery even if they ordered in the afternoon, and regardless of whether they lived in Central London or Inverness.

The modeling of North London showed a gap in our capacity to deliver the proposition. This resulted in the need to define and implement a technical and operational solution for a “Dark Hub.” This was carried out in parallel to the main program and went from a property search to operational reality in 7 or 8 months and did not delay the timescales we were working to.

The technical challenge was immense and critical to the innovation too. Argos needed to offer slots in real time across various order channels (without common order taking services). The system had to be able to offer slots, book deliveries, and optimize routing in real time so that it could cut off routes just one hour before departure. And then it had to get these routes down to 163 fulfilment hubs and 900+ drivers so that they could load and depart in under 45 minutes.

Benefits

Fast Track Home Delivery is the leading delivery proposition across the UK. Not just for speed, but for convenience too. This has landed fantastically well with existing and new customers alike—the best way to demonstrate this is in their own words . . .!

Twitter Feedback from Satisfied Fast Track Customers

“The fact that Argos do same day delivery on a Sunday makes me so happy.”

“Fantastic @Argos Online same day delivery. Lots of updates re delivery & txt when 15min away. Lottie is loving her freshly filled sand table.”

“@Argos Online Love your same day delivery service. It’s superb. Especially great for baby things. Very impressed.”

“Big thanks to @Argos Online—only £3.95 for same day delivery, for something I urgently needed, that’s amazing! @ArgosHelpers”

“Seriously impressed by same day delivery from Argos. It’s blown my simple wee mind. #easilyimpressed”

Argos’s online delivery feedback metric has improved significantly, with calls per order to its contact center halved, with the exception of a 100 percent uplift in calls checking if the website offering same day is correct!

During the first two months of its introduction, Internet sales grew by 13 percent, and represented 55 percent of total Argos sales—up from 50 percent the year before.

The new business model relies on the strengths of the Argos hub-and-spoke network and stock accuracy to enable local same-day home delivery and covers 95 percent of UK population.

Council of Supply Chain Management Professionals

Read the Case Study Omnichannel Transformation–Argos and LLamasoft. Also, be sure to watch the videos listed below:

https://www.youtube.com/watch?v=I7J24RAOfGs

https://www.youtube.com/watch?v=Y76vXqVzDc0

https://www.youtube.com/watch?v=KRRlSBeVtg8https://www.youtube.com/watch?v=KRRlSBeVtg8

https://www.youtube.com/watch?v=KXYUSX-QNjc

Instructions

In your case study paper, you will address the following questions:

1. Explain how software, technology and equipment has improved the systems for Argos five-year transformation program. Please be explicit in your response

2. Identify two outstanding challenges that remain with respect to customer relationship management for our gross five-year transformation program. Please be explicit in your response

3. Describe two types of innovations that are gross utilized with respect to materials management and handling in their supply chain process for the five-year transformation program.

4. People have always been considered vital ingredients in any successful enterprise supply chain. Discuss how the employee training programs in our gross five-year transformation program assisted to optimize employee participation and effectiveness.

You will submit a paper of at least 500 words, not including title or reference page.

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