Nick Bubb's Verdict: Asos - From coal to global fashion fulfilment in a generation

Back in 1984, the coal-mining village of Grimethorpe became famous for its violent clashes between the miners and the police. But today it is the peaceful hub of Asos’s global logistics operation.

Interestingly, the huge Asos distribution warehouse at Grimethorpe, near Barnsley in South Yorkshire, is actually built on the site of the old Grimethorpe Colliery, famous for its Brass Band (as immortalised in the 1996 film “Brassed Off”). Grimethorpe Colliery was one of the deepest pits in Britain and is said to have employed 6,000 men at the time of its closure in May 1993.

In 1994, the European Union’s study of deprivation named Grimethorpe as the poorest village in the country and amongst the poorest in Europe. The unemployment rate was more than 50% and a large proportion of the population were disabled, having suffered injuries down the coal mines.

But over the last 20 years the area has been very successfully regenerated and the biggest employer in the area is now mighty Asos, with over 2,000 people working in its warehouse at peak times and 80% of them live within 10 miles of the site (which opened in June 2011).

Now, you might think it a bit odd that what must be a “state-of-the-art” highly automated distribution warehouse employs as many as 2,000 people. And you would be right, because the picking and packing operation is heavily manualised.

The reason why there were no glitches when Asos moved from the distribution warehouse from Hemel Hempstead to Barnsley in 2011 was that they used exactly the same operating systems and policies as before (even though the new warehouse was 5 times the size), so that there was no risk of something going wrong.

Things usually do go wrong, of course, when retailers move distribution warehouses and Asos is no stranger to warehouse disasters; remember December 11, 2005 when the giant Buncefield Oil Storage Terminal in Hemel Hempstead next to its warehouse blew up?

It is understandable therefore that Asos played safe with its working practices when it opened the new warehouse in 2011, but the huge 5-floor “mezzanine” storage area of 850,000 sq ft has no less than 26 miles of walkways so its “picking by customer” approach is asking a lot of the poor workers wheeling their trolleys up and down the lifts.

But despite the inefficiencies in the picking operation, the new Asos warehouse has been a great success, enabling Asos to ship to customers in the US, Australia and Europe within 2 days. And in December, the warehouse dispatched nearly 4.5m units, to meet the global demands of Asos’s “twenty-something” customers, so it is a high-volume operation.

And despite the very labour intensive working methods, Asos has been able to cut the key “labour cost per unit” metric from £1.14 back in April 2011 to £0.56 when last measured, through the use of incentives and targets and better management. The Unipart logistics business, which operates the site for Asos, employs some experienced people who used to work for Next, which sets the benchmark in terms of the fashion distribution industry, so they know what they’re doing. In due course they will introduce “picking by batch” and “zonal picking” and aim to cut the labour cost per unit to only 35p in a couple of year’s time.

The warehouse is now fully “bonded” by HM Customs, bringing useful cash flow and margin benefits to Asos on tax and duty payments, and the warehouse is being extended soon, with more automation being brought in. An automated despatch parcel sorter will go live by August and there is room by the storage mezzanine to introduce conveyor belts to speed up the picking process.  

Although Barnsley is the “global fulfilment centre” for Asos, it has operations elsewhere in the world. In Atlanta and Sydney, Unipart run processing operations for Asos and by the end of the year the plan is for the US to be able to fulfil customer orders from in-country returns.

By this time next year Asos will also be in sight of having full-service warehouses in the US and China, to help meet the growth of the business to £1bn sales a year and well beyond. If they go as smoothly as the Barnsley opening did, then Asos will be well on its way to become “the Amazon of the global fashion business”, although it is not clear whether the new warehouses will be formally opened by the famous Grimethorpe Colliery Band.