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Case Study: AO.com: retailing that delivers

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White goods and technology retailer AO.com has logistics front and centre of what it does: its delivery capability is built not just for its own operation but also set up for third parties.


For more than 20 years, it has been offering two-person delivery as a service, using its fleet of 7.5 tonne and 3.5 tonne AO.com-liveried trucks, white vans and vehicles – all branded with its 3PL operation Expert Logistics.


Deliveries are made 362 days a year, complete with a promise to AO’s own customers of next-day, 7am to 7pm fulfilment to 95% of UK postcodes. Customers choose the time slot when placing an order.


AO.com operates a hub-and-spoke model, with two National Distribution Centres (NDCs) in Crewe holding stock for the entire UK operation. From here, orders are trucked out to 19 secondary storage depots spread across the UK, from Dundee in Scotland to Exeter in the South West.


No stock is held at the depots – known as outbases – since they operate as locations to move customer orders onto their final-mile delivery vehicles.

 

In fact, items don’t even touch the ground anywhere between the NDC and the customer’s home since the company uses trailers with moving floors, walls and ceilings, meaning items can move from the lorry onto the final mile vehicle. The fleet also backhauls so that vehicles don’t return empty to an NDC.


In all, 5,500 SKUs are held for next-day delivery. Many of the products AO sells are susceptible to damage so most of the pick-and-pack process is manual. Narrow-aisle, man-up trucks from Toyota are used between racking so that every item is accessible.

 

The company has no plans to outsource any of the final-mile side of the operation, preferring to retain responsibility for the entire customer journey. But some small parcels are delivered currently by DPD and in April this year (2019), it agreed drop-shipping arrangements with logistics specialist BluJay, in order to expand its supply chain operations and support the delivery of its vast and growing product range.


AO.com’s Expert Logistics business has delivered customer orders for white goods manufacturers including Hoover and Electrolux for many years, but recently signed its first contract to deliver customer orders for the furniture manufacturer The Cotswold Company.


Operating its own warehouse management system and having IT programmers based at Crewe means that AO.com can constantly push its proposition and easily integrate into third party systems. The retailer operates in Germany as well, and the hub-and-spoke model operating in the UK is replicated there.

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