Rising from the ashes

When fire destroyed ArrowXL’s Worcester hub, its operations only paused for a week. Since then, the business has grown through the Covid-19 pandemic and will face the expected recession with similar resolve, as CEO Charlie Shiels tells Steve Hobson

The story of how two-person delivery specialist ArrowXL came back stronger from a fire in its Worcester hub that would have finished many businesses is remarkable.

In April 2017 a devastating fire quickly took hold and destroyed the site, which handled 43% of the firm’s volumes.

As luck would have it, two weeks before the fire CEO Charlie Shiels (at the time COO) had been to look over a former Littlewoods warehouse in Chepstow. Although it was not of interest at the time, it was a godsend after the fire.

“It was 50 miles away and we moved in and ran it for eight months,” says Shiels. “We only stopped for a week then carried on running.

“We then started looking for another place and found one in Droitwich which we used for two years while we rebuilt Worcester. Remarkably, virtually none of our 200 warehouse staff left and we hired coaches to take them to work in Chepstow every day.”

The blaze broke out at 8.30am on Thursday 20 April, destroying the entire stock in the hub. ArrowXL Worcester was at the time primarily a delivery rather than a storage company so most of the products in the warehouse were for delivery in the next day or two rather than for longterm storage.

Trying to manage racking and picking of product with no IT was a major challenge, as Shiels recalls. “We were picking by hand and we found a way to print off the pick lists,” he says. “On 5pm that Saturday evening I was going round all the stationery shops in Chepstow buying up 30 clipboards and pens!”

While a few of its 85 clients had no choice other than to switch to other carriers, most stuck with ArrowXL and that, together with unwavering support from owners the Barclay family, got the company through the difficult first few days and weeks.

“The loyalty and level of support from the clients was amazing,” says Shiels. “Immediate support from the parent company was also obviously important. We went to zero income and still had the wages and bills to pay, which is where the support of the family helped us get back on our feet.”

At one point there were 200 trailers of product on site waiting to be delivered as ArrowXL’s retail customers wanted to keep selling throughout the week of the move.

Timely move

The company moved into its rebuilt £20m, 260,000sq ft Worcester hub in October 2019. It had only been in for a few months when Covid-19 struck and online sales went into overdrive as people made offices and gyms at home, refreshed their garden furniture and bought fridge-freezers to stockpile food.

In the 53 weeks to 30 June 2021, the company saw revenue jump £24m to £114.9m. Pre-tax profit also surged to £1.9m, up from a loss of £465,000 in 2020.

“There was a Covid dividend,” says Shiels. “Then, as soon as things returned to normal, there was a Covid correction. But it didn’t go as low as the entry point, because more people used ecommerce for the first time to buy products they may not have bought before and then realised how comfortable they were with it.

“The older generation also used to have a three-piece suite for life – now it’s a fashion item and when people redecorate they want a new sofa. People now want to change their mattress every five years and the boxed mattress market has taken off.”

The Covid-19 lockdowns almost halted ArrowXL’s twoperson delivery model, however, as maintaining two-metre social distancing between crew members and consumers was a challenge. At one point the second crew member had to follow the truck in a car, a measure that the delivery crews themselves agreed was ludicrous overkill.

“A lot of people tried to stop us,” says Shiels. “We introduced daily Covid testing, PPE and a rigorous

From The Fire Came A New Way Of Working

The need to get back up and running quickly after the fire meant news ways of working had to be found, which have benefited ArrowXL since it moved into its new hub.

“The Chepstow site was probably half the size of the old 280,000sq ft Worcester hub,” says Luke Barton, Regional General Manager. “We changed the operational process when we moved and pretty much remodelled the network almost overnight.

“In the old operation we used to put everything away and then pick it – it was a full diary model. We went to a more just-in-time solution, which meant we needed less space because we didn’t have to put everything away. We effectively marshalled it for 12 hours then delivered it. It created something we actually use and sell to clients now.”

ArrowXL operates six regional warehouses, at Worcester, Enfield, Wigan, Airdrie, Inverness and Carrickfergus, and 24 delivery “nodes”. “As we are growing we are doing some modelling and the Swindon area is a bit of a black hole for us,” says Shiels. “South Yorkshire is also an area where we will have a hub in future years.”

The firm has a partnership with DHL in Dublin to cover the Republic of Ireland. “Since Brexit, trade with the Republic has fallen off a cliff,” says Shiels. “Very’s Littlewoods brand is still trading in the Republic and we service all of that, but our other 85 trade clients looked at the administration needed in the south and, apart from one or two, decided it wasn’t worth the effort.

“It is just some paperwork and maybe if we can educate and help them that might reignite that trade as the south was always a strong market. Northern Ireland is just business as usual.”

ArrowXL is getting more enquiries from continental retailers looking to use them to import and distribute their products in the UK. “Some quite big brands are talking to us about how they can use us as customs brokers and freight forwarders,” says Shiels. “If they can put some product with us and sell it via their normal ecommerce channels, we can deliver it for them.”

That might involve more long-term storage in the UK as well as just-in-time fulfilment. “We have developed our 3PL proposition over the last three years,” says Greg Whyman, ArrowXL commercial director. “We have been providing warehouse solutions for around 20 different clients where we unload containers or full trailer loads, do the pre-stock storage, pick, pack and ship either through the network or a range of carriers.”

The 750,000sq ft Wigan site has four floors and high-bay storage with capacity for 26,000 pallets, and the move to quicker flow-through of domestic shipments has created more storage space. “It makes sense for us to monetise that,” Whyman says. “Together with Covid, the Ever Given [the container ship that blocked the Suez Canal for six days in March 2021] meant we could have filled our warehouses over and over again.

“Demand has cooled now with the economic downturn and people have got plenty of stock.”

The interruption to the global supply chain coupled with the brief surge in demand for products like exercise machines meant that some retailers now have excess stocks.

“Demand went up very rapidly, then there were problems like the Ever Given, so stock didn’t move to the UK as fast as before,” says Whyman. “Towards the back end of Covid the gyms started to reopen and those retailers found that by the time the stock got here the demand had dropped. We are still being paid to store it.” procedure for cleaning the vehicles, so our colleagues were comfortable with the processes. As long as it was the same pair in the cab every day they were happy to keep working. We trusted them to carry out risk assessments on the doorstep.

Returns is another area ArrowXL has invested heavily in, as its customers are understandably keen to realise as much value as possible from expensive items such as white goods, furniture and electricals. It has recently won a delivery contract with a major UK white goods manufacturer, partly because of the strength of its returns process.

“Because we couldn’t connect washing machines it actually reduced the time spent on each call and we were getting maybe an extra drop on each route. First-time delivery went through the roof and complaints fell off a cliff.”

Covid-safe procedures for the crews were helped by the fact that ArrowXL had by this time completed the roll-out of its DAF LF 7.5 tonners, which had far more spacious cabs than the previous vehicles, while the demountable bodies meant crews were in the same vehicle every day. ArrowXL’s policy of directly employing most of its crews rather than relying on agency labour was also a big factor.

As Covid-19 wound down in 2022 there was a largescale return to the workplace for many consumers after a year or more of working from home. Failed deliveries because a consumer is not at home when they should be is expensive, as a new bed cannot be left in a safe place or with a neighbour.

Delivery windows

Shiels was with DPD for 23 years before moving to ArrowXL in 2017 and says that while consumers have got used to a one-hour delivery window for parcels, it is much harder to achieve for two-person delivery of large items. ArrowXL gives recipients an initial two-hour window, which shrinks to half an hour as the day progresses, and crew will notify consumers if their delivery is delayed for any reason.

“If we are installing a washing machine as the first drop of the day and the plumbing isn’t quite right that knocks on for the rest of the day,” he says. “It might be a sofa won’t go through the front door or a hundred other possible variations. So while we give people a two-hour

Wages On The Increase

While ArrowXL hasn’t had to increase pay by the 20% or more that Category C+E drivers have enjoyed, it has put up wages by an average of 15% over the past three years. Nevertheless, ArrowXL has faced industrial action by 350 members of union Unite, which accuses the company of paying “poverty wages” – an assertion Shiels says is just not true.

The loss of the grandfather right to drive a 7.5 tonner on a car licence for drivers who passed their tests after 1997 has seen ArrowXL open its own training school to put car drivers through their C1 licence. There is a lot more to two-person delivery than just driving, however.

“There is 3.5 tonnes of product in the back of one of those vehicles and delivering that is a physically demanding job,” says Shiels. “There is still a driver shortage and there is no one answer to it.

“We have to be more attractive. The money has to be better and that includes warehouse people.”

Rising staff, vehicle, fuel and subcontractor costs meant ArrowXL had to renegotiate its rates with its retail customers.

“The level of inflation we suffered in 2021 was unbelievable,” says Shiels. “Everything we touched went up, so we had to put our prices up in the autumn. We had no choice and it was quite a strong increase. We didn’t lose a client – we explained why and they understood.

“It was an above-inflation increase and we can’t do that again in 2023. Industry inflation wasn’t as bad in 2022 but we are still under extreme pressure.”

ArrowXL is training warehouse staff to drive both its 7.5 tonners and a handful of artics, but Shiels is worried that his newly qualified drivers will up and leave for better money.

“The whole industry has to do it,” he says. “We will do this and someone will pinch them. The big guys are doing it but everyone time window it is very different from DPD’s half an hour. That is what I love – it is more complex, demanding and interesting.”

Entering 2023, the expected recession could hit discretionary spending on ArrowXL’s staple diet of large household goods.

“It’s the nature of this industry,” says Shiels. “We get over the fire, then there is Covid and now economic headwinds are blowing. If it’s not one thing it’s another. I can’t control the economy – all I can control is how good our service is and how tight our cost base is.

“Our service is the best it’s been in 10 years and that is what we sell. It is very different from parcels, where the drivers do 200 drops a day. Our crews do 30 or 40 drops a day and they are in your house, in your bedroom or in your kitchen. It is an intimate experience and I bear that responsibility quite heavily.

“We reckon we only have about 25% of the market, which means we still have 75% to go after.” ■ has to have collective responsibility to feed the future of this industry.”

In 2023 the company is throwing its six-month training scheme open to external as well internal candidates, giving a rounded experience progressing from the warehouse to a Luton van then onto the 7.5 tonners. To qualify as an apprenticeship scheme eligible for Apprenticeship Levy funding, they must continue training for a further six months after getting their C1 licence.

Not every driver’s mate has – or wants – a C1 licence as they are happy to crew without the stress of driving. This job role has also got more complex, as they now contact consumers through the working day to check they are in and update delivery times.

ArrowXL has experimented with 3.5-tonne delivery vehicles, which can be driven on a car licence and don’t have the added complication of tachographs, but found that, because the vast majority of routes cube before they weigh out, the 7.5 tonner is the best tool for the job.

“With a load capacity of 1,000kg maximum we can’t make a 3.5 tonner work commercially,” says Shiels. “There are some routes you could do with a 3.5 tonner – if you had a route full of TVs, for example – but the kg per cu m of the loads we move means we get more on a 7.5 tonner.”

Shiels does not currently see a viable zero-emissions alternative to a diesel truck. “We have spoken to a few people and an electric 7.5 tonner is £100,000 more at least,” he says. “It has a range of 180 miles and load capacity of 1.6 tonnes. It just wouldn’t work for us.

“We have looked at putting one into Enfield but to be brutally honest I’m just ticking a box. If I had to put 160 new electric trucks on the road tomorrow we would be bankrupt.”