When the Dutch online retailer worked with a key supplier to switch from weekly to daily replenishment, inventory levels improved—as did sales, service, and working capital.
Companies that sell over the Internet face a whole new set of demands when it comes to inventory replenishment. To ensure that products are available as promised yet still keep stock levels down, an "e-tailer" must fashion a more collaborative supply chain with key suppliers than traditional bricks-andmortar retailers typically do.
Five years ago, the Dutch online retailer wehkamp.nl did just that, forming an unusually close arrangement with its chief supplier of computers and related items to support a shift from weekly to daily restocking of its distribution centers. The two companies worked together to develop a process that closely connects replenishment and inventory levels to actual demand. As a result of that partnership, both retailer and supplier improved their inventory turns, reduced working capital in the supply pipeline, and boosted sales, especially for fast-selling items. Here's a look at how wehkamp.nl achieved those improvements with help from its supplier.
From mail order to Internet-only
Based in Zwolle, the Netherlands, privately owned wehkamp.nl has become the largest online retailer in that country. It sells a wide assortment of home goods, from televisions and computers to apparel. It handles more than 100,000 different stock-keeping units (SKUs) and makes some 4 million shipments each year. Although wehkamp.nl does not release revenue figures, its parent company, RFS Holland Holding B.V. (which also owns other retailers as well as credit management services in the Netherlands) reported annual revenues of about 488 million euros (about US $780 million) in fiscal year 2010/2011.
After starting out as a mail-order merchant some 60 years ago, today wehkamp.nl is online only. "We came from being a catalog company, meaning we sent a catalog once or twice a year to our customers," says Gerco van Norel, the supply chain planner for wehkamp.nl's electronics group. "We have since made the change to a full Internet company, so our only [platform] is the Internet."
Wehkamp.nl promises to deliver products the day after customers place their orders; hence, a product ordered before 10 p.m. on a Monday will be shipped to the buyer on Tuesday. Orders ship out from one of two warehouses. One facility, located in Maurik, stores large items like appliances, while another in the town of Dedemsvaart handles smaller items like DVDs and clothing.
Unlike some online retailers, wehkamp.nl generally does not ship orders direct from its suppliers to customers. "We prefer to have goods in our warehouse first so we can then combine shipments," explains van Norel. "So if a customer orders a mouse, a laptop, and a printer, we can ship all of the items out at once instead of making three different shipments."
The international third-party logistics company (3PL) DHL helps wehkamp.nl combine the various elements of orders so customers receive only one shipment. To do that, DHL picks up orders from the two warehouses and consolidates them at its own Utrecht hub. The 3PL then delivers those orders to buyers' homes or businesses throughout the Netherlands.
Five years ago, wehkamp.nl's management realized that its traditional supply chain model was causing problems in the online side of the business. As a catalog retailer, the company had placed orders weekly and restocked its warehouses based on in-house forecasts. When it switched to online selling, wehkamp.nl discovered that its methods for ordering and replenishment were leading to lost sales. It wasn't hard to understand why. Online customers were not willing to wait for their orders; they expected to place an order and receive deliveries very quickly. But the weekly ordering and replenishment system, which was designed for mail orders, meant that the items customers desired often were not in stock.
Moreover, wehkamp.nl wanted to expand its product range, but that meant tying up working capital in more inventory. If inventory levels weren't right, moreover, the company would have to mark down prices on overstocks. That problem was particularly acute for electronic goods, which tend to have a shorter shelf life because of the rapid pace of technological advancement.
What wehkamp.nl needed was a "pull" selling model rather than the traditional "push" approach. In the latter system, a catalog or bricks-and-mortar retailer predicts customer demand using forecasts based on historical data, and then "pushes" the goods out to buyers, enticing them to buy through marketing promotions and advertising. Successful online retailing, however, is predicated on a pull approach, in which customer orders drive the supply chain. To make the switch to a pull system, van Norel says, wehkamp.nl determined that it needed "more intense" relationships with its suppliers that would allow it to keep inventory levels down while having enough of the right mix of SKUs on hand to immediately fulfill customers' orders.
Automating complex decisions
In 2007, wehkamp.nl began discussions with a top supplier, the wholesaler ETC, about developing a new supply chain model involving daily replenishment and next-day shipping. ETC, the Dutch subsidiary of U.K.-based Specialist Computer Holding, distributes computer hardware and software from a variety of manufacturers.
"ETC was the best partner to do this with," says van Norel. "ETC could meet the requirement for delivering on a daily basis and was willing to invest in a new system [to make this happen]."
The two companies agreed to start with a pilot that involved computer-related products such as laptops, desktops, printers, and accessories. ETC would assume responsibility for keeping the right items in stock at wehkamp.nl's warehouses, a practice known as vendor-managed inventory (VMI).
The aim was to keep a lower level of inventory in wehkamp.nl's warehouses by replacing each unit sold daily. Thus, every day at around 5:00 or 6:00 a.m., the e-tailer provided ETC with information about the previous day's sales. At 11:00 a.m., ETC shipped the replenishment orders to wehkamp.nl's warehouses, by truck for large items like furniture or via DHL's package division for smaller ones.
To make that daily replenishment possible, the partners required software that could determine the appropriate level and type of inventory needed. They chose software from Agentrics, which provides a Web-based application that uses mathematical models to analyze sales data and inventory. The software calculates stocking levels based on a "pull" approach—in other words, sales data drives replenishment.
Agentrics' application replaced software that wehkamp.nl had developed inhouse to determine maximum and minimum inventory levels. "When we changed from a catalog to an Internet company, there was no specific software for that, so we had to do something ourselves," recalls van Norel.
One problem with wehkamp.nl's own software was that once one of the company's planners set the inventory levels, he or she would have to manually reset those levels if a product became "hot" and the online retailer started selling more of a particular item. The new software performs that complicated task faster and more easily, automatically calculating the "trigger" levels for replenishment—that is, the suggested order quantity for each SKU. Van Norel still has to manually set the initial inventory level for a new product, but thereafter the software makes adjustments to the suggested reorder quantity based on actual sales.
"For example, let's say we want to sell a new laptop computer," van Norel explains. " I think I'm going to sell ten a week, so I set the norm to ten. Then we start selling, and Agentrics starts calculating. If we sell more, the norm gets set higher. If we sell less, the norm decreases. It sounds pretty simple but it's really complicated."
The application provides a dashboard that gives supply chain planners strategic, operational, and technical perspectives on wehkamp.nl's inventory. Some examples: On the operational level, the software creates a list of the best-selling products and the slowestmoving ones. On the strategic level, the dashboard provides total inventory value and a breakdown of that value into categories, including fastmoving, slow-moving, inactive, and new products. On the technical level, the system provides both historical and current views of inventory, which allows the planners to see, for example, that 60 percent of the items in the warehouses are fast movers but only 50 percent fit that profile during the same period a year earlier.
The reports and dashboards are available throughout all levels of the company, which means everyone is working from uniform information. "This information is available on a daily basis to the planner, the unit manager, and top management," van Norel says.
Because actual sales are driving inventory restocking decisions, van Norel can let the software handle 80 percent of the replenishment orders automatically. He can then focus on the 20 percent of items that need special attention, such as seasonal goods or new products. In addition, a planner must still approve the replenishment shipments each day. "ETC sends the order to us for the planner to give the okay, but it's only a formality," van Norel notes.
More sales, less inventory
The three-month pilot worked so well that wehkamp.nl and ETC have made it a permanent way of doing business. The collaborative supply relationship's ability to keep even the hottest-selling product in stock increased sales and helped to fuel wehkamp.nl's 15-percent revenue growth in 2010.
"By ordering on a daily basis instead of weekly or monthly, we don't buy too much but [instead buy] exactly what the customer requires," sums up van Norel. "The percentage of customers waiting for their delivery has decreased. Because the service level has increased, so have sales."
At the same time that the e-tailer has increased sales, it has also achieved about a 30-percent reduction in safety stock, resulting in fewer markdowns and lower overhead. That inventory reduction frees up working capital, which means the company can invest in a wider assortment of products, according to van Norel. He notes that in the past, if a manufacturer came out with a new line of products, wehkamp.nl would be forced to choose which ones to carry due to financial considerations as well as limits on warehousing space. Now the online retailer can carry a wider product array and let customer demand determine the level of stock it keeps in the warehouse to support sales. The benefit of that strategy is clear, he says: "If the availability of individual products is higher, you sell more products overall."
Because daily replenishment and vendor-managed inventory have been so successful for computers and associated products, ETC has expanded that program to include some other types of hard goods it supplies to wehkamp.nl, such as cameras, appliances, and home electronics. The e-tailer, moreover, would like to get more suppliers involved in daily replenishment and is now in talks with vendors that furnish goods for its hardware category.
Wehkamp.nl's experience in collaboration with ETC clearly demonstrates the value this approach offers for online selling. "Instead of having to sell goods that are not popular, there can be a focus on the best-selling items. It's pull instead of push," van Norel says. "It's a totally different way of doing business."
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The number of container ships waiting outside U.S. East and Gulf Coast ports has swelled from just three vessels on Sunday to 54 on Thursday as a dockworker strike has swiftly halted bustling container traffic at some of the nation’s business facilities, according to analysis by Everstream Analytics.
As of Thursday morning, the two ports with the biggest traffic jams are Savannah (15 ships) and New York (14), followed by single-digit numbers at Mobile, Charleston, Houston, Philadelphia, Norfolk, Baltimore, and Miami, Everstream said.
The impact of that clogged flow of goods will depend on how long the strike lasts, analysts with Moody’s said. The firm’s Moody’s Analytics division estimates the strike will cause a daily hit to the U.S. economy of at least $500 million in the coming days. But that impact will jump to $2 billion per day if the strike persists for several weeks.
The immediate cost of the strike can be seen in rising surcharges and rerouting delays, which can be absorbed by most enterprise-scale companies but hit small and medium-sized businesses particularly hard, a report from Container xChange says.
“The timing of this strike is especially challenging as we are in our traditional peak season. While many pulled forward shipments earlier this year to mitigate risks, stockpiled inventories will only cushion businesses for so long. If the strike continues for an extended period, we could see significant strain on container availability and shipping schedules,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“For small and medium-sized container traders, this could result in skyrocketing logistics costs and delays, making it harder to secure containers. The longer the disruption lasts, the more difficult it will be for these businesses to keep pace with market demands,” Roeloffs said.
Jason Kra kicked off his presentation at the Council of Supply Chain Management Professionals (CSCMP) EDGE Conference on Tuesday morning with a question: “How do we use data in assessing what countries we should be investing in for future supply chain decisions?” As president of Li & Fung where he oversees the supply chain solutions company’s wholesale and distribution business in the U.S., Kra understands that many companies are looking for ways to assess risk in their supply chains and diversify their operations beyond China. To properly assess risk, however, you need quality data and a decision model, he said.
In January 2024, in addition to his full-time job, Kra joined American University’s Kogod School of Business as an adjunct professor of the school’s master’s program where he decided to find some answers to his above question about data.
For his research, he created the following situation: “How can data be used to assess the attractiveness of scalable apparel-producing countries for planning based on stability and predictability, and what factors should be considered in the decision-making process to de-risk country diversification decisions?”
Since diversification and resilience have been hot topics in the supply chain space since the U.S.’s 2017 trade war with China, Kra sought to find a way to apply a scientific method to assess supply chain risk. He specifically wanted to answer the following questions:
1.Which methodology is most appropriate to investigate when selecting a country to produce apparel in based on weighted criteria?
2.What criteria should be used to evaluate a production country’s suitability for scalable manufacturing as a future investment?
3.What are the weights (relative importance) of each criterion?
4.How can this methodology be utilized to assess the suitability of production countries for scalable apparel manufacturing and to create a country ranking?
5.Will the criteria and methodology apply to other industries?
After creating a list of criteria and weight rankings based on importance, Kra reached out to 70 senior managers with 20+ years of experience and C-suite executives to get their feedback. What he found was a big difference in criteria/weight rankings between the C-suite and senior managers.
“That huge gap is a good area for future research,” said Kra. “If you don’t have alignment between your C-suite and your senior managers who are doing a lot of the execution, you’re never going to achieve the goals you set as a company.”
With the research results, Kra created a decision model for country selection that can be applied to any industry and customized based on a company’s unique needs. That model includes discussing the data findings, creating a list of diversification countries, and finally, looking at future trends to factor in (like exponential technology, speed, types of supply chains and geopolitics, and sustainability).
After showcasing his research data to the EDGE audience, Kra ended his presentation by sharing some key takeaways from his research:
China diversification strategies alone are not enough. The world will continue to be volatile and disruptive. Country and region diversification is the only protection.
Managers need to balance trade-offs between what is optimal and what is acceptable regarding supply chain decisions. Decision-makers need to find the best country at the lowest price, with the most dependability.
There is a disconnect or misalignment between C-suite executives and senior managers who execute the strategy. So further education and alignment is critical.
Data-driven decision-making for your company/industry: This can be done for any industry—the data is customizable, and there are many “free” sources you can access to put together regional and country data. Utilizing data helps eliminate path dependency (for example, relying on a lean or just-in-time inventory) and keeps executives and managers aligned.
“Look at the business you envision in the future,” said Kra, “and make that your model for today.”
Turning around a failing warehouse operation demands a similar methodology to how emergency room doctors triage troubled patients at the hospital, a speaker said today in a session at the Council of Supply Chain Management Professionals (CSCMP)’s EDGE Conference in Nashville.
There are many reasons that a warehouse might start to miss its targets, such as a sudden volume increase or a new IT system implementation gone wrong, said Adri McCaskill, general manager for iPlan’s Warehouse Management business unit. But whatever the cause, the basic rescue strategy is the same: “Just like medicine, you do triage,” she said. “The most life-threatening problem we try to solve first. And only then, once we’ve stopped the bleeding, we can move on.”
In McCaskill’s comparison, just as a doctor might have to break some ribs through energetic CPR to get a patient’s heart beating again, a failing warehouse might need to recover by “breaking some ribs” in a business sense, such as making management changes or stock write-downs.
Once the business has made some stopgap solutions to “stop the bleeding,” it can proceed to a disciplined recovery, she said. And to reach their final goal, managers can use the classic tools of people, process, and technology to improve what she called the three most important key performance indicators (KPIs): on time in full (OTIF), inventory accuracy, and staff turnover.