It counts among its brands some of the biggest names on the British high street, but uncertainty over its owner, Kaupthing, means that Aurora Fashions is making a priority of agility and risk management in its supply chain. Distribution director David Roberts explains the strategy to Johanna Parsons.
Aurora Fashions recently outsourced its entire distribution operation to WT SeaAir, transferring some 300 employees to the operator, giving an impression of massive change. Not so, according to David Roberts, Aurora’s group distribution director, who has also made the move to WT.
Roberts is no stranger to the vagaries of outsourcing deals. While working for FedEx he spent five years overseeing Laura Ashley’s supply chain, from the outsourcer’s side of the arrangement.
Operations under the new contract officially began on 1st February, and Roberts says the changes will mainly involve “bedding down the complex ways we charge the brand partners”. Aurora’s brands include: Karen Millen, Coast, Warehouse and Oasis.
Roberts points out that the Aurora/WT contract is not a traditional outsourcing deal. “This isn’t structured around cost or service changes. The purpose is to protect the economies of scale with independent contracts, because of our [Aurora’s] ownership setup.”
Aurora is a strong business in its own right, but is currently 90 per cent owned by troubled Icelandic bank Kaupthing, which is not expected to be a long term holder. So in 2010 Aurora launched a strategy to safeguard the group financially. By hiring managing directors for each of its brands last year, and now establishing an “arms reach 3PL contract” it is protecting the integrity of the group in the eventuality of one of the brands being sold.
Richard Granville, Aurora’s chief financial officer, says: “This structure not only preserves the benefits of scale of our shared services but secures optimal service levels for all our brands both now and in the future.”
That means that if a brand were sold, it could remain in the distribution network, continuing its contribution to revenue, and avoiding having to negotiate its own distribution contracts elsewhere, in turn making it a more attractive investment itself. But that’s not to say the changes in the warehouse are immaterial. This deal is a significant win for WT, and Roberts is expected to uncover any opportunities for growth as an end-to-end logistics operation.
“There is certainly a gap in the garment logistics business in the middle ground,” he says, and collaboration is something he has experimented with before.
Although he says it is still too early to tell where the new deal will develop, “they do want more than just their management fee”. For now, Roberts’ biggest challenge is the transition to the spring/summer stock ranges. “We try to work with the brands to smooth in-flow and smooth out-flow without prejudicing the sales through the stores.”
About 50 per cent of Aurora’s products are sourced from China, with the other 50 per cent coming from various other global suppliers. “It’s an uncertain process getting all of that to arrive at the back door of the distribution centre exactly when the brands intend that it should… That becomes a tricky balancing act because you can’t afford to throw unlimited amounts of money at it, on the other hand you can’t afford to see your service deteriorate to the extent that the stores don’t have the stocks they need.”
Roberts sees a particular challenge to this balance in sourcing. He says that as little as two years ago China was the default supplier, but with rising wages and worker dependability problems that is no longer the case. In fact, Roberts reckons that finding reliable new sources may be the biggest challenge facing supply chain as a whole. “Products from India do tend to have more quality problems… and while Brazil has traditional strengths in footwear it has no clothing pedigree.”
Growth too is a challenge for the supply chain. “Europe is very much the area of growth for the Aurora brands at the moment… There’s still a lot of untapped potential.” Roberts says the intention is to extend the store network but also its e-commerce offerings “clearly to increase sales penetration to Europe means providing a returns channel”.
And at the customer end of the chain, the biggest impact is now unquestionably e-commerce. Aurora offers next-day deliveries and plans to introduce same-day delivery within the M25, but all of that comes at a cost for the distribution centre. “For every item I send to a store, it takes six or seven times more labour and time to dispatch an internet order.”
Labour is a key pressure point for Aurora’s operations. All staff have to be trained on the WMS for picking, as well as an e-commerce system for packing and dispatch so they can switch to whichever operation is facing its peak. “We’re in the fairly fortunate position that the e-commerce peaks and the store delivery peaks do run counter to one another,” he says, with store peaks built around the seasonal collections which hit shops in the autumn and spring, while the brunt of the Christmas rush is for online orders.
However e-commerce peaks can prove a huge drain on labour, because it is so much harder to forecast. Roberts says that when a brand launches a web promotion, the distribution centre sees an upturn in sales within as little as 30 minutes. And with the requirement to learn two systems, he can’t just take on temps at a moment’s notice.
“That upturn… far outweighs any ability we have to put on additional labour. That’s the problem of resourcing to internet demand, and I don’t think anybody has really cracked that one yet.”
After university, David Roberts began his career in distribution as depot manager for temperature-controlled food operations at Unilever company Macfisheries.
He worked for NFC subsequently Exel, now DHL, as general manager BRS Midlands.
Roberts became divisional commercial manager at TNT Logistics.
He joined FedEx as regional director FedEx Systemline.
Roberts became managing director of the Laura Ashley global supply chain contract at FedEx.
He was appointed managing director FedEx logistics Europe.
Roberts worked as a consultant on various interim projects.
He joined Aurora, then Mosaic, as an interim to help initiate operations at the Oxford DC, but stayed on, and is now group distribution director.