Asos works to restore warehouse throughput, build operational flexibility for peak

Dive Brief:

Asos executives said work to restore warehouse capacity after setbacks in March and April is a primary reason the company is on track to meet its profit growth goals for 2020 on a Wednesday earnings call. The retailer saw a 10% uptick in year-over-year sales during the period ending June 30.
In the first phase of the pandemic, Asos lowered consumer delivery expectations due to the operational constraints of limiting people within warehouses and maintaining distance between workers, along with absenteeism and worker travel restraints. The company suspended next-day delivery for five to seven weeks (depending on the region) and standard delivery required up to an extra 11 days. "We made great progress in restoring capacity, and this has allowed us to restore our delivery proposition across all key markets," said CFO Matthew Dunn Wednesday.
During the current quarter, the retailer will incur roughly 5 million euros ($5.7 million) in costs related to pandemic operational requirements to keep workers safe while scaling capacity for peak season. The costs relate to increased cleaning and staggering shifts to limit the number of workers on site.

Dive Insight:

Incremental cost increases of warehouse operations due to the pandemic are a staple of 2020 retail earnings releases, and Asos executives offered a window into the challenges of high-tech fulfillment operations.

"Our warehouses are automated and mechanized, which results in people being congregated in certain high-density areas such as pack benches, for example. So we had to go beyond just increasing the distance between people and this took some time to implement," Dunn said.

European border closures squeezed the retailer's warehouse labor as some workers regularly cross the border between Germany and Poland. Available labor in Asos' European hub in Germany reached a low in early April at 45% of its planned labor level. Executives also listed a heavier reliance on airfreight as the border closures made land transport more difficult.

Improvements to warehouse throughput and receiving will be top of mind for Asos as it heads into peak season. The retailer said its suppliers are facing similar warehouse challenges.

"We're preparing for peak building in as much flexibility into our operations as we possibly can do," Dunn said.