The leaner the better

Leading shippers are now moving from cost-focused to growth-geared supply chain strategies as the global economy recovers from the past two years. But inventory management is key, according to Richard Owens, Asia Pacific CEO of DHL’s global customer solutions unit (pictured).

The unit handles DHL’s top 100 customers. This means providing dedicated teams for each one, covering all modes and drawing on DHL’s global resources to optimise the supply chains of some of the world’s largest companies.

“Most companies now recognise at board level that the supply chain is not only an area that can improve competitiveness, but it can also offer market differentiation,” he tells IFW.

“A number of companies in the technology sector, for example, are now using a single operator rather than up to 17 different providers. They are not leveraging for better freight rates, they’re looking to gain other advantages.

“We look to remove the pain points in the supply chain, to make sure systems talk to each other and there’s visibility, which can be difficult with multiple providers.”

One major client had 173 warehouses worldwide. Owens says his unit was able to cut this to 57. “If you take fixed costs like that off the balance sheet, it reduces the pressure to constantly be cutting freight rates,” he says.

Depending on the cargo being moved, the actual charges for transport might represent less than 5% of a company’s supply chain costs.

Owens says: “When we analyse the supply chain, usually the big savings can be made on inventory, storage and warehousing and managing that whole process. Product cycles are short now and obsolete inventory is not a cost companies want to carry.

“Customers sometimes think that express services should be avoided because of their higher cost, but when you factor-in all other elements, it may prove more efficient and lower the overall supply chain cost.”

During the global downturn manufacturers ran inventory levels down to almost zero, and companies became more willing to review their supply chain costs.

“There’s a level of trust built with customers over a long time,” Owens says. “It needs to be very collaborative process, as we need a lot of their data to map a thorough analysis of their supply chain.”

The challenges and opportunities are different as the global economy recovers and the level of demand in the lead-up to the peak summer season rises, he says. But other factors are also at play.

“Some of this is about refilling supply chains and inventories,” he explains, but I think consumers are also fed up and want to buy things again. Smart phones and computer notebook sales are very strong.

“We expect a strong peak for ocean through to July, and then the air sector to peak at the beginning of the third quarter or later. “The rationale for moving goods earlier than usual for many will be concerns over a lack of capacity if they wait,” he says.

Finding capacity out of China on Europe and Asia routes continues to be problematic, even for integrators with the buying power of DHL, admits Owens. "We have the leverage, but even we are finding it difficult to always get the capacity we need,” he says. “On ocean especially, the slot often goes to highest bidder, irrespective of contract.

“Slow-steaming has had a big impact. Customers understand it’s not something we’ve created, but they want us to find a solution.”

DHL has not, so far at least, gone as far as chartering containerships – although if that eventuality seems far-fetched, it is worth remembering that DHL is a major charterer of bulk-carriers.

By Mike King