The complexity in retail and wholesale chains is getting out of hand. Those who do not want to sell no to their customers will have to switch quickly between different stock points and distribution channels. Those who want to keep their costs under control at the same time will have to organise their operations more intelligently. On 7 and 8 November, the ICT & Logistics trade fair will show that modern ICT systems are indispensable in retail and wholesale.
What is true for retailers is also true for wholesalers. Customers are ordering online more and more often and later and expect fast delivery according to their specifications. Is an item not in stock at the nearest distribution centre? Then it has to come from another stock point in the chain, be it a warehouse, a depot or a shop. This increasing customer demand for customised service leads to additional complexity and extra costs, which retailers and wholesalers can only keep under control thanks to modern ICT systems.
René van den Elsen and Jos Koenders are two consultants who help retailers and wholesalers select and implement warehouse management systems (WMS). They talk daily about the logistics challenges these companies face. "Take internationalisation as an example," explains Van den Elsen. "A Dutch wholesaler in food supplements has grown very fast in a short time thanks to its webshop, but is now suddenly also receiving orders from Germany. To guarantee those customers short delivery times as well, the company wants to create a local stock point, but how do you manage that?"
Dynamic order management
The answer to such issues is DOM: dynamic order management. A DOM system uses smart algorithms to determine from which stock points an order can best be delivered. "Order orchestration is a better word, but a DOM system does much more than that," Van den Elsen argues. "Think about stock allocation: which items should you put at which stock point in order to serve customers as well as possible. Suppose the demand for a certain agricultural machine shifts from Western to Eastern Europe. Then the spare parts have to move with it."
Retailers and wholesalers who are able to switch quickly partly thanks to such systems, manage to improve their performance towards customers while reducing costs. Van den Elsen cites the example of a wholesaler of consumer products who does a lot of purchasing in the Far East. At the moment the containers go on the boat on the other side of the world, the final destination is not yet known. "Only en route is it decided whether that container goes to the distribution centre in the Netherlands or in Eastern Europe. Call it opportunistic supply."
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Smarter packaging and shipping
Optimisation also remains desirable in the warehouse. With the rise of e-commerce, for instance, the demand for smart solutions for packing and shipping orders is increasing. A webshop like Coolblue has a choice of different box sizes, the height of which is adjusted according to the volume of the order. "Smart algorithms are needed in that case to calculate exactly what the volume of an order is, but also to instruct order pickers how to stack the products in that box," Koenders explains. "And then comes the choice of transport mode. Is it cheaper to send several boxes for one customer separately or to put them together on a pallet?"
At a time when free shipping is the norm, smart solutions with algorithms are necessary to minimise transport costs. The question is whether free shipping will remain sustainable in the long term. Especially now that parcel carriers are under pressure to pay their drivers better. "We will see more and more differentiation in customer service," Van den Elsen expects. "Not everyone needs to receive their order the same day. Offer customers discounts if they are willing to wait a few days. In the warehouse, those orders can be used to fill empty hours. The WMS should then be able to assign different priorities to orders, but increase the priority of orders with less urgency after a few days. Otherwise, that order will never get out of the system."
Selection process as formation meeting
Koenders and Van den Elsen advise companies to look at the entire IT infrastructure when buying a logistics software. A WMS, for example, must increasingly be able to communicate with other systems: with the webshop about stock information and delivery options, with a content management system for additional documentation and with a warehouse control system to control sorters or conveyors. "Or take a wholesaler that uses a product configurator to enable its customers to easily order the right parts. If a customer wants that product quickly, that product configurator needs to know which parts are in stock. That requires a link to the WMS."
The two experienced consultants warn companies that selection processes are becoming more complicated precisely because of the importance of interfacing with other IT systems. "Discussions with software suppliers are starting to look more and more like formation discussions: which systems together constitute the best solution? Increasingly, we see that combinations of software suppliers submit a quotation together," knows Van den Elsen, who is complemented by Koenders. "Especially in e-commerce, we see more and more companies with their own IT department. These are looking for a WMS, which they can easily expand with their own applications. That also makes demands on the WMS. Those applications do have to stay upright when the WMS undergoes an update."
ICT & Logistics
ICT & Logistiek will take place on 7 and 8 November at the Jaarbeurs in Utrecht. Register for ICT & Logistiek via the website.
