Technology options and standards for supply chain management

Some of the data transfer options and standards that enable eSCM were introduced in

Chapter 3. These include:

● EDI, which is an established and relatively simple method of exchanging orders, delivery

notes and invoices;

● XML- or XML-EDI-based data transfer, which enables more sophisticated one-to-many

data transfers such as a request for orders being transmitted to potential suppliers;

● middleware or software, used to integrate or translate requests from external systems

in real time so they are understood by internal systems and follow-up events will be

triggered;

● manual email orders or online purchase through a traditional web-based e-commerce

store for B2B.

These mechanisms enable data to be transferred to suppliers from clients using enterprise

resource planning (ERP) systems, which include material requirements planning modules

that are used to model future demand for products, create a bill of materials of the relevant

components needed to manufacture the products and then order them.

Typical benefits of e-supply chain management, with respect to a B2B company, include:

1 Increased efficiency of individual processes. If the B2B company adopts e-procurement

this will result in a faster cycle time and lower cost per order.

Benefit: reduced cycle time and cost per order.

2 Reduced complexity of the supply chain. This is the process of disintermediation referred

to in Chapter 2. Here the B2B company will offer the facility to sell direct from its e-com-

merce site rather than through distributors or retailers.

Benefit: reduced cost of channel distribution and sale.

3 Improved data integration between elements of the supply chain. The B2B company can

share information with its suppliers on the demand for its products to optimise the supply

process. Case study 6.3 on the Argos multichannel retail strategy shows the online sales
growth that can be achieved through good integration of systems and data.

Benefit: reduced cost of paper processing.

4 Reduced cost through outsourcing. The company can outsource or use virtual integration

to transfer assets and costs such as inventory holding costs to third-party companies.

Benefits: lower costs through price competition and reduced spend on manufacturing

capacity and holding capacity.

5 Innovation. eSCM should make it possible to be more flexible in delivering a more diverse

range of products and to reduce time to market.

Benefit: better customer responsiveness.

Chapter 6 Supply chain and demand 273

Case Study 6.3 Argos uses e-supply chain management to improve customer convenience

Retailer Argos is a leading proponent of using supply chain management to improve multichannel sales.
The transactional Argos website was launched in 2000 when the company was a pioneer in
implementing a reservation service. Sales have grown significantly since the launch over 17 years ago.

According to ‘Econsultancy’ (2010), multichannel sales for Argos reached £1.9 billion in 2009. Its ‘Check
& Reserve’ feature, which enables visitors to check store availability and then order from a specific store
for later pick-up, was responsible for 22% of the retailer’s total sales in 2009, growing by 36%. Internet
sales account for 32% of all sales. Some features of the system that rely on integration of the website
with different logistics systems are superior to competitors’. For example, real-time stock availability
information is shown and, while some retailers make customers wait several days for in-store
collection, items reserved on the Argos website can be collected straightaway.

David Tarbuck is head of multichannel retail at Argos. He explains the approach Argos has used for its

fulfilment:

The way Argos is built is unique in the UK market, and this has made it easier for us to implement Check
& Reserve. Since customers are in the front of the store, and the stock is held in the back, we have a
clear picture of stock levels in our stores. This means we can be confident that, if we ask our systems
about stock levels at any store, this information will be accurate.

Check & Reserve gained immediate adoption with customers, and this has accelerated over the last
two or three years, with this channel growing by 36% for a second year in a row. People have caught on
to it, and appreciate the convenience of being able to check before they leave the house and save
themselves a wasted journey. While our model has been improved over the last ten years, other
retailers have a more difficult and costly process for implementing this kind of service.
Since then, the multichannel retailer has also opened ‘small format’ concessions in Homebase,
Sainsbury’s and some London tube stations. According to Mark Steel, digital operations director at
Argos, ‘Stores are a really important part of our multichannel offer. Customers really value having that
physical touchpoint. Some customers still prefer to come in to pick something up’ (Spary, 2015).

Mobile commerce offers more order choice for Argos customers. In 2010, Argos launched its first
iPhone app, in response to a 600% increase in traffic to Argos.co.uk from mobile devices. In December
2014, sales via mobile increased by 28% and, in 2015, 45% of Argos’ sales came through digital
channels.

The company’s iPhone app initially asks you to set your home store to make subsequent reservations
smoother. The app can also find the local store via GPS, or by entering the town name or postcode.
Results of local stores are shown via Google Maps, and details are provided on opening hours, as well as
driving directions, and the option to set this as your store. You can then use the search icon to search
for stock held at that store. The stock checker works just like the machines in the Argos stores. Each
product page comes with some detailed review information, which makes the app very useful for
people wishing to do some extra product research while in the store. Once a product is selected, the
reservation process is straightforward.

Argos has also developed a ‘kids’ wish list’ app, aimed at five to seven year olds, which was one of the
ideas generated from a 2014 hackathon. The idea behind the app was to re-create some of the
experiences that children historically loved about Argos – e.g. circling their Christmas catalogue to let
mum and dad know what presents they wanted for Christmas. Engagement metrics for the app have
been good – the average dwell time was 13 minutes in 2014.

Argos is well known for catalogues, which are also part of retail multichannel strategy since products
featured can encourage purchase both in-store and on the web. Argos releases two catalogues every
year, each with a print run of 18 million. David Tarbuck explains how the catalogue fits into the
multichannel strategy:

We have large numbers of people who have our catalogue in their lounges, on their coffee tables, and
this gives us a presence in people’s homes.

Catalogues are often the starting point for customers shopping with Argos, they will flick through the
catalogue, or browse the website at the same time.

We have over 11,000 products online that aren’t in the catalogue, so people will come online to check
this and for latest offers, so catalogues are used in conjunction with other channels. With catalogues or
any other channel, it’s all about talking to customers and working with them in whichever way they
want to interact with us.

Tarbuck believes that the structure and focus of the team has also been important to success. He says:

We have a multichannel team, and I head up the development team and the operation of the website,
overseeing online strategy.

We have e-commerce, marketing and commercial teams who respond to the trading side of the
business, and make sure the various promotional campaigns are joined up, and there is consistency
across channels. We’ve had a self-contained Internet-focused team in place for the last ten years, and
this dedicated team has been very closely related to marketing and other areas of the business.

Questions

1. Explain how Argos uses supply chain manage-

ment to improve the proposition for its customers.

2. What do you think are the factors that have made

Argos successful within its multichannel retail

strategy?