Think inside the box
April 1st 2009

Moving from field service parts distribution to shared inventory management for some of the world's biggest firms, ByBox CEO, Stuart Miller, is now hoping to tempt consumers to use 'MyByBox' as their preferred online shopping delivery method. Brendan Coyne reports

Three years after returning from California, Miller, operating in partnership with Hays took a punt when the group was being broken up, buying its field support business – a network of 11,000 mechanical boxes across the UK used primarily to deliver overnight spare parts to mobile engineers. Realising the sector was intolerant of failure, Miller decided its own distribution network (10 depots across the backbone of the country with a hub in Coventry) was the only way to guarantee reliability.

But it was only when the firm got curious about what it was carrying – and why – that ByBox started to become much more than the sum of its parts distribution.

"If an engineer is going to fix a forklift truck, for example, he might take three parts because the truck's diagnostic system says the fault could be one of three things – and he can't afford not to fix it first time," says Miller. "Presumably, he will swap out a broken part for a good part and then return all three parts to the box, which will go back to the depot and be trunked back to the field support company the following day. The customer then opens up the box, sends the broken part to a repair vendor and puts the other two unused parts back into stock. It doesn't take much brains to work out that if the engineer scans those parts back into an electronic box, using the touch screen to say which parts are faulty and which are unused, we can cut out an unnecessary journey and send it straight to the repair centre." That step in itself can generate significant stock savings. But, when the same sort of stock is being delivered, why send the good parts back to the customer's warehouse when it is likely to be needed by another engineer elsewhere in the UK? And so, says Miller, Thinventory was born.

Move data, not parts "Thinventory is designed to give visibility and access to the data on customers' stock so we can re-route it as required. Our mantra is 'move the data not the part'.

Because the part is probably in the right place, you just can't see it." While Thinventory clearly made sense, it took Fujitsu buying in to the solution for it to start rolling. "What made it interesting was that Fujitsu wanted it in five countries at the same time. It was incredibly difficult to keep the whole thing on track but they moved everything onto Thinventory and we came through the woods with it about 18 months ago. What we have now is a software platform that spans point of purchase to delivery, return and repair," says Miller. "The whole visibility and control of that stock is tremendous." With other customers coming on board – such as Computacentre, Konica, Ricoh and Unisys – Miller says it became clear many of them held similar stock. "We said: 'Why don't you let us, with other partners, help you maximise that stock? So if a Computacentre engineer returns an unused hard drive in Liverpool and we know a Fujitsu engineer needs it in Swansea, do you really care who owns it? Why don't we just forward it to whoever needs it?" Miller says there is a huge appetite for shared inventory, even amongst competitors – because duplicated stock is a waste of money. To this end, the company has just signed a commercial agreement with electronic parts and systems distributor ACAL. "ACAL provides the parts and owns the stock for the various Fujitsu's of this world and we provide the accessibility and visibility of stock as it moves around the network, taking responsibility for optimising stock on behalf of a group of customers." Since launching 18 months ago, Thinventory now makes up around £10m of ByBox's turnover, and Miller says it will make up at least half of its revenues "sometime next year". Or perhaps more quickly, if the recession continues to force companies to become as lean as possible.

Consumer conquest However, Miller's next trick, indeed ByBox's "holy grail", is to convince the retail and consumer markets to use box-based deliveries for online sales. For the last year or so, the company has been putting the back end network in place – doing deals with BT to put electronic boxes into its now virtually redundant payphone network; with Network Rail to install boxes on commuter stations; and universities, placing boxes outside the 150 or so student unions across the UK.

"All of them were really up for it," says Miller. "But we ran into a hitch when we applied for planning permission for a BT payphone in Aldershot. Unfortunately, with Aldershot's military presence, that got us onto the radar of a group called NACTOS, part of the counter-terrorism branch of MI5." He says after a three hour briefing, ByBox got the green light – but Miller says he was politely shown the door after pitching ByBox deliveries for MI5 field service agents… Nevertheless, the company now has a network of consumer-friendly locations and is launching a trial phase with five online retailers – figleaves.com, iwantoneofthose.com, Lighting Direct, Schuh and a drinks retailer (the details of which were being finalised as this issue went to press). Miller says the challenge now is to make consumers realise they can use MyByBox as a delivery option.

"Home deliveries can cause problems because most people are at work from 9-5, so we want to highlight MyByBox as a delivery option at the point of purchase.

When the consumer is selecting their delivery option we have to explain the benefits very simply. So, for example, 'Do you want 3-5 day delivery, next day delivery or ByBox?' The consumer asks 'What's ByBox?' and we prompt with a question 'Are you in 9-5?' If they click 'No', we prompt them to enter their postcode, show them their nearest box – the local Tesco's – and give them the access code." And that, says Miller, is job done.

To ensure consumer acceptance and adoption, the service will initially be discounted – for footwear retailer Schuh the cost is £5, essentially pitched against its next day pre-5pm rate. But Miller says the pricing structure is interesting because of the way many online retailers are now offering the cheapest delivery option for free. "If we can convince retailers to pay us what they would pay, say ParcelForce, to perform that cheapest delivery option, we can collect it directly from the retailer and use our distribution network to get it to the consumer in a box for 8am the next morning. The consumer only has to pay a small chunk of that £5 for much faster delivery." The model for internet consumers will initially be pre-payed. As well as penalties for late pick-ups (which mean the box cannot be used for another delivery), customers can also earn discounts by picking up before 10am or before midday for example.

Another potential use is for last minute forgotten-the-wife's-birthday type of purchases. Although Miller isn't sure how many marriages this might save, it is proving an interesting concept to some retailers. "Iwantoneofthose.com asked us if they could rent a bank of boxes as basically a vending machine stocked with its top ten best sellers and then just sell the code to customers who can pick up their goods directly." As with field service customers, the plan is to eventually move retailers onto Thinventory. But Miller admits there is still some way to go. However, he says by Christmas 2010, with early adopters using MyByBox, the company will reinvest between £5m and £10m to build the network for the future. "But first, we have to see if it works," says Miller. "When I'm sure we have the right path, the return will happen pretty quickly."

More articles from Bybox: