Put operations first

IT GOES without saying that eCommerce has radically changed retail and even society, but we also see it impacting the logistics world, blurring the lines between retailer and technology provider, for example, Ocado, and blurring the lines between retailer and fulfilment company, for example, THG

In short, this is an eComm retailer that got so good at fulfillment, they decided to offer it as a service alongside technology and digital marketing solutions to brands and retailers – through its Gartner accredited THG Ingenuity business. So, what does it take to achieve this level of excellence? 

THG Brands chief operating officer Tom Killeen, explains: “The key point is that we put operations first, for us it is never an afterthought.”

Having a very sound grasp of modern warehouse technology also plays a hefty role. THG works hard to increase its use of automation as a percentage of units processed and puts a great deal of thought into the right choice of robotics.

“It is a major disadvantage if you don’t understand your operating model and therefore which solution will work best for you,” says Tom.

“In addition, you might find implementing an AutoStore system, for example, gives you gains for Year One, but the mechanics will only go so far. You need keys to the software to keep the momentum going and keep driving improvements.”

Having control over your software also gives you greater flexibility in how you use the automation, argues Tom.

“Looking at picking strategies, as you get more volume you might want to change from picking to order to picking to batch. Let’s say you pick to batch one week a year, when you need to ship 550,000 units in a day, as opposed to a more typical 200,000 units per day. You need the capability from a software perspective to make this happen. Most companies don’t run their own software, but we do and we feel this vertical integration is greatly beneficial.”

For Tom, warehouse automation is absolutely not about replacing warehouse staff, it is about the collaboration of human and machine. 

“Effective automation and consistent focus on creating marginal gains across each process function can make people’s jobs easier and more enjoyable, alongside reducing time, thus reducing cost. In addition, if we can reduce the more tedious tasks, we can move people to higher-skilled activities,” he says.

“Critical thinking and problem-solving are still human-driven tasks, as much as we try and use elements of AI to create lighter work.”

Flexibility

Within this fast-moving world of eCommerce, and to an extent throughout logistics, especially in these difficult times, flexibility becomes something of a superpower. Tom describes flexibility as a ‘currency in itself’.

“Anyone working within any operational function within eCommerce will appreciate the difficulty of accurate forecasting. Changes in consumer behaviour or market dynamics can dramatically change a pre-planned outcome and cause real commercial implications from a labour or service front.

“Some problems are good to have. An explosive sales campaign should be applauded. Automation helps with flexibility, the ability to have robots picking products can dramatically increase output without the need for increased personnel, however, it may provide some challenges in packing or sortation unless you are fully automated.”

THG’s approach to automation is in itself flexible. Not all of its warehouses have the same configuration and the same processes are not automated at each site. THG installed a massive AutoStore system at its Icon2 warehouse in Manchester, representing a £20 million investment, which paid back within 18 months. A key principle for THG is that investments need to achieve ROI within 24 months. The company is also onboarding a Geek+ solution at its 1 million sq ft Omega Business Park, Warrington facility, 25 miles from the Icon2 facility which houses the huge Autostore.

Tom says: “We are redesigning the Warrington site and migrating clients. Part of it is implementing the modular robotic Geek+ solution. The site did not suit AutoStore, and we did our research on Geek+ and found it the right solution.

“It’s easy to implement, all you need is a flat floor and QR codes on the floor. Our software needs to speak to theirs, which can be a little complex. But what we will do in time is the same as we did with AutoStore.

“We are now a software integrator and distributor for AutoStore - so any new AutoStore installation will be driven by us and our software.”

THG has clearly made significant investments in its warehouse technology and will continue to do so, says Tom, despite a challenging macro-economic climate which has led to more expensive borrowing.

Tom summarises: “Our continuous investment in operational services has been rewarded with consistent year-on-year reductions in cost to serve globally, while increasing our speed to customer and overall level of service.”

Control

This is a key point that kept coming up in the interview with Tom. THG very much wants to drive its own operations, having control over the software. This doesn’t just apply to automation, it applies also to WMS. The company found third party WMS restrictive, and so developed its own. Likewise, it grew frustrated with courier aggregators and launched its own. This gives THG a cohesive, end-to-end technology stack dedicated to its own business and that of its clients.

Tom says: “For eComm retailers that work through us there is just one integration - with us. They do not have to worry about integrating with separate partners on WMS, automation, couriers etc. Customers can plug into our offering and they don’t have to go through the same pain that we’ve been through.”

Customer-focus

This level of control and data insight gives THG the bandwidth to push for excellence in customer service. For example, last year THG upgraded 4.1m customers who ordered a standard delivery from a THG platform, to its next-day service.

Tom explains: “This cost us a little more from a courier perspective, but we calculated the customer lifetime value of this and it paid off. This is cash back to the CMO, showing ops can become a profit centre.”

Warehouse operations have faced many challenges in recent years, and perhaps none more persistent than staff shortages. The investment in technology is an important strand in THG’s plan to tackle the labour shortage, but it is by no means a standalone factor. 

“Optimising inventory management workflows, as well as increased direct instruction driven by data science and engineering solutions, reduce the need for increased labour.

“At the same time, this allows us to focus on retention strategies by enhanced training and development schemes to create higher-skilled team members, which in turn is likely to increase employee satisfaction. On top of this, it gives us the opportunity to develop the next generation of team leaders. Most of our leaders are produced from within, moving from the youth team to the first team, so to speak.”

Future

It is very difficult to predict what the fulfilment warehouse will look like in 10 years time, but Tom suggests the role of technology will continue to grow and evolve.

“It will be in a much more advanced state compared to today. Just look at how the warehouse of today is dramatically different to ten years ago. Using that trajectory you could presume a more advanced state of automated solutions, with AI and machine learning doing most of the heavy lifting in terms of quantifying data to facilitate the explosion of customer personas we have to cater for, more flexible and modular designs. In addition, solutions will be much greener by nature,” he says.

Tom’s mention of customer personas is revealing in terms of modern retail. While bricks and mortar retail has a personal touch, the data profile eComm retailers can build of customer preferences and behaviour is extensive, and I get the feeling that the industry is still in the infancy of how this can be undertstood and used.

Certainly, the modular offering of THG Ingenuity, offering everything from fraud detection, to fulfilment to courier management is a powerful one. And with THG having such drive and control over its processes, putting operations first as Tom says, you can only see the company going from strength to strength.