Embed - Universal Music Group

An embedded solution and stable partnership

Universal Music Group (UMG), the biggest music content company in the world, outsourced its UK warehousing and logistics operation to Arvato in 2008. As the music industry has evolved over the last four years, so Arvato’s role has extended to include e-commerce, customer service and credit services.

Clive Smith, Director, Supply Chain for UMG explains how Arvato embedded itself in the business following the takeover of UMG’s Milton Keynes site.


Open Outsourcing: what were you looking for in an outsourcing partner?

Clive Smith: Like many companies looking to outsource, we wanted a combination of things. A cost effective solution was one driver but trust was also vital. We had to trust Arvato to look after our retailers and artists as we would do. For example, if a new release is delivered early to the market, it can affect chart positions and our reputation.

Has the partnership delivered?

Thanks to the way Arvato handled the TUPE-transfer, the team delivering the services is largely the same as it was under UMG’s control. This consistency has really helped maintain knowledge. In contrast to this, the systems have completely changed. Arvato has invested over £2 million into the facility and introduced its own warehouse management solution, including pick-by-voice technology to replace the manual paper-based system. This was a critical change that defined the new partnership and further improved our customer service levels – now among the best in the business.

Since the start of the relationship, Arvato has shipped 150 million units with an average 100% completion rate. But, it’s not just the results, but the way they are delivered that makes the difference.

If there are problems or issues, how are these addressed?

It’s a very open door relationship, literally. Myself and my counterpart at Arvato have offices across the corridor from each other. We’re a team and if a problem comes up, one of us pops our head around the others’ door and we discuss the issue in a very honest fashion. Together, we come up with the best possible solution.

Taking it to the next level, Arvato knows our business so well that the team often anticipates issues and tackles them before they hurt us. For example, one of our external systems went down recently which meant we had to beat our contracted KPIs to make up for the downtime. In this case, we didn’t even need to have a conversation about what Arvato was contracted to do, the team just did whatever was needed to sort it in the quickest possible time. I knew it was under control.

Given the constantly changing nature of the music industry at the moment, it’s vital that we have this level of dependability in such a vital area of our business. And, this isn’t down to the contract but rather the people. The contract is there for legal reasons, but the partnership we have means I rarely even look at it.

How has the partnership developed?

arvato’s expertise allowed it to secure additional music and entertainment clients. The benefits were passed onto us in the form of reduced unit costs and increased speed, without compromising the partnership we’ve developed.

In addition, we’ve called on Arvato’s e-commerce, customer service and credit services expertise to support us. The fact that Arvato knows our business so well, is focused on helping us keep our customers happy, and has a reputation as being a trusted partner has made this process much easier than it could have been.

At every turn, Arvato operates as an extension of our business and provides the flexibility we need.

Are there still elements that could improve?

There is always room for improvement. It wouldn’t be a good relationship if we ever stopped challenging each other, because the market is never going to stop challenging us! It’s difficult and ever changing. The physical distribution of music is in decline yet we have high value areas such as a resurgence in vinyl driven by collectors and special releases and the growing importance of the e-commerce channel.

Whatever happens, we know we have a flexible partner to help us deal with whatever the industry throws at us!