Beyond the traditional procurement paradigm

While economic indicators may be on the rebound, many transport providers who cut capacity during the downturn are raising their premiums, fuel prices are heading back up, and supply chain costs are threatening to bust many companies’ forecasts. As they struggle to keep their supply chain spend within budget while maintaining their service levels, companies are increasingly finding that the traditional procurement-led method of purchasing logistics services is no longer ideal.

Many companies have come to the realization that lowest price does not necessarily mean lowest overall cost, and that, by redesigning or optimizing their supply chains end-to-end, they can have both cost savings and a more efficient and effective supply chain.

Michael Wiedemann, Senior Vice President Global Strategy, DHL Global Customer Solutions, has noticed a distinct upward trend in the number of customers requesting supply chain consultancy. “Customers are increasingly open to trying a new approach in today’s competitive environment,” he says. And, with a typical reduction of 10-15% in supply chain costs using DHL’s methodology, there is a pretty compelling argument to support this trend.

The DHL Supply Chain Consulting team is a consultancy unit within DHL Global Customer Solutions, the dedicated customer relationship management organization for DHL’s top 100 global customers. The Supply Chain Consulting team offers key GCS customers proactive advice, working with them to pinpoint inefficiencies and waste in their supply chains, and then develop solutions to achieve their strategic supply chain objectives. “We are the first-mover and industry leader in offering this innovative supply chain optimization service and plan to stay ahead by continuing to invest in industry sector-specific capabilities with a global reach,” says Sven Gade, Vice President Supply Chain Logistics Americas.

Using a consultative approach, the Supply Chain Consulting team looks at the customers’ products and markets served, taking a holistic, end-to-end view of the supply chain. “Tell us about your business, how it works well and where you feel you are not as competitive as you’d like to be, and we’ll look at your supply chain using our proprietary diagnostic tools, calculate how well it runs, and advise you on how it could run better,” says Alfred Goh, Vice President Supply Chain Logistics Asia Pacific.

DHL’s Supply Chain Consulting methodology is particularly relevant in the context of the recent economic environment. In good times, companies are not looking to shake things up, but when markets are constrained and prices are rising faster than sales, this is the time for innovative thinking. This is where DHL’s optimization methodology - designed to supersede the traditional logistics procurement approach - comes into its own. Instead of comparing prices per lane, the customer has a partner to work with in reducing the complexity and eliminating inefficiencies.

“One of the key tenets of our supply chain approach is not just to focus on the direct customer spend, but to look at the total supply chain costs,” says Peter Axelsson, Vice President Supply Chain Logistics EMEA. “This means taking account of indirect supply chain costs, such as inventory carrying costs, the impact of obsolescence of the supply chain, and even the impact of lost sales from not having an item on the shelf.”

Moreover, DHL “future-proofs” its solutions by designing in the necessary flexibility to deal with expected variations in demand, which is often the source of waste in a supply chain. Using network modeling tools, the team can map all the supply chain flows and check the impact on cost and lead-time of such variables as oil price or transport mode. The result is a range of solutions that can be applied, depending on the circumstances and the market at the time.

Recent success stories include 17% savings for a global semiconductor producer by simplifying the finished goods distribution in Asia, eliminating hubs and consolidating direct shipments to clients. Similarly, 30% savings and improved transit times were achieved for an international electronics hardware manufacturer through inventory reduction, freight consolidation and direct distribution to final customers.

Feedback from customers in regularly conducted surveys indicate that they found DHL’s approach “refreshing” and “rewarding,” and that it allowed them to look at their business in a new light. Customers also noted that the size and scale of DHL – with its customized, industry-specific solutions and expertise, and global capabilities – was its key advantage.

“When you’re designing integrated supply chain solutions, these are ultimately only as good as the services that you can deliver,” explains Jeroen Martens, Senior Supply Chain Consultant.

“The fact that DHL has the broadest service range and leading offerings, along with the vast experience in deploying and operating solutions differentiates us from traditional supply chain consultancies,” adds Michael.

To learn more about DHL’s Supply Chain Optimization value proposition, contact your DHL customer manager.