Smart inventory management of DHL

Knowing how to make and sell great products isn't enough; having them in the right

place, in the right quantity and at the right time is what really counts.

Christmas is the busiest time of year for shopping, so how did one US electronics retailer get

left out in the cold? A few days before the holiday, consumers who had purchased products

online were informed that due to a “situation”, some orders could not be fulfilled. The company

had simply not planned for the influx of orders and had run out of stock. Several months later,

and it’s not too surprising that the struggling company is facing a buyout. Could all this have

been avoided if the retailer had managed to get its inventory management right? “Inventory is

the lifeblood of most organizations,” says Paul Glanville, VP at DHL Supply Chain. “When

inventories are managed well, the processes they support, however diversified, work well too –

retail sales are maximized, service engineers are productive, hospitals run efficiently, product

launches go smoothly and troops have all the equipment they need”. We rarely hear about

inventory management success, but as the example above proves, getting it wrong can result in

spectacular failure.

“If you have too much stock, it strangles your ability to operate, results in heavy discounting

and costs can spiral out of control, even leading to bankruptcy,” says Glanville. “Too little and

you miss sales and provide poor service. In extreme cases, aircraft can be grounded or your car

could be off the road, waiting for a part for days.”

“The management of inventory is one of the critical success factors for organizations,” says

Frank Gesoff, Head of Strategic Accounts at Barloworld Supply Chain Software. “As customers

become more demanding and unpredictable and supply becomes more complex, organizations

are realizing that their inventory management processes are the key to their success and growth.

As a result, the best performers are investing heavily to improve their capabilities and stay

ahead of the competition.”

E-tailer Amazon, the poster-child of smart inventory management, stays on top with stock

handling innovations such as secure and automated inventory management software that all

registered sellers use, allowing the website to track its huge stock levels accurately and provide

meaningful information to customers. Meanwhile, in bricks and mortar, iconic British toy store

Hamleys issued staff with an iPad, a handheld Bluetooth scanner, a wireless PIN entry device

and a wireless printer to help them manage in-store inventory during the pre-Christmas rush.

But good inventory management isn’t just vital for retailers - in some vertical industries it can

literally be a matter of life and death. “The products we hold can save lives,” says Barry

Knichel, MD of Supply Chain and Service Transformation, NHS Supply Chain. “Operations are

canceled if the right products aren’t available, putting patient lives at risk.”

Glanville identifies four factors that contribute to inventory success or failure: data, systems,

people and collaboration. Data helps forecast future demand, but you need both the right

systems and incentivized people to translate that into useful insight. As Glanville puts it: “You

need information, not raw data.” And without careful planning and collaboration between

departments such as sales, marketing and manufacturing, everything falls apart. The best

businesses have structured Sales and Operational Planning (S&OP) processes backed up by

agile business intelligence. “Communication, planning and collaboration are key,” says

Glanville. “They will give you the competitive advantage.”

“Business functions can no longer operate in isolation,” concludes Gesoff. “Our world is

becoming more and more complex. Success is now dependent on investing in systems and

processes that support better decision making when it comes to the core of the business: the

inventory.”