Deutsche Post DHL Annual Report 2013

2013 Annual Report

FROM CATWALK TO SIDEWALK

LOGISTICS, MADE TO MEASURE

All present and correct: transparency
and stock management are the order of
the day – not only in the high bay
warehouse but throughout the entire
logistics chain.

Tom Tailor produces twelve collections
for eleven lines every year.

Tom Tailor now distributes its
products retail, wholesale and
online throughout 21 countries.

Fashion is a fast-moving business. Today’s must-have could be tomorrow’s overstock. Online retail has taken this to the next level as consumers are increasingly freed from the constraints of time and place, and schedules for getting new goods to market are ever tighter. For logistics providers like DHL, this means that the pressure to increase speed while lowering costs is becoming more intense.

Meeting this challenge requires agility within an optimised cost structure – and in the fashion industry, this applies to logistics providers and manufacturers alike. That was the conclusion of a DHL white paper based on the findings of a “Fashion Master Class” workshop held in May, 2013. DHL invited executives from brands like Adidas, Levi Strauss & Co. and the Tom Tailor Group to discuss strategies on the future of fashion logistics. The general consensus: the demand for speed, flexibility, responsiveness and control in the supply chain is greater than ever before.

The paper’s author, Lisa Harrington of the strategic supply chain consulting firm lharrington group LLC, sees a number of trends that are radically changing the fashion landscape.

Increasing fluidity between online and offline

One of these is omni-channel retailing, in which modern consumers switch seamlessly between purchasing items at online and brick-and-mortar stores. “Nowadays, one in ten online orders is now issued from within a store,” explains Marcel Beelen, Vice President Business Development, DHL Fashion & Lifestyle Europe, “meaning customers notice an item in a shop and then order it via their hand-held device.” Shoppers can also decide whether purchases should be delivered to their home, to the store or any other collection point.

This style of shopping has fundamentally changed the world of inventory management. “In the past, brands often separated the online and offline world, with separate systems and inventories being the norm,” comments Beelen. “Nowadays, there is a strong desire to integrate and handle both environments with a single system and out of one inventory.” Store managers can use tracking systems at any time to follow the progress of a specific item along the chain. This allows goods in transit to be considered “on-hand inventory”, able to be sold to customers.

A logistics challenge

“Keeping both transparency and control of inventory and merchandise flow are the real challenges for logistics,” agrees Carsten Schmelting, responsible for supply chain management at German clothing manufacturer Tom Tailor. The company produces twelve different collections a year for each of its eleven clothing lines, manufactured predominantly in Asia. It sells them both retail and wholesale, and increasingly via online shops in 21 countries. Since 2008, DHL has been a third-party logistics provider for major parts of the Tom Tailor operation.

With Tom Tailor’s online sales growing and its stationery distribution network spreading, the two channels are becoming increasingly integrated. For example, the company is currently examining whether it could be possible for customers to return items ordered online, directly to stores. But this, in turn, throws up its own questions: Should these articles be added to the local inventory or brought to a central warehouse? “A lot of new processes and booking procedures are involved as well as critical monetary issues,” says Carsten Schmelting.

Faster and faster

Another key trend within the industry is known as “fast fashion”. Inditex, the parent company of Zara, pioneered this style of “disruptive” retailing. Instead of purchasing huge inventories in distant factories with long lead times in the hope that the goods would sell well, these retailers produce small batches of items in nearby factories, with incredibly fast turnaround and delivery. If an item sells, more can be produced and delivered quickly. If not, there is less stock to mark down. “In the past, there were four seasons a year. Nowadays, the shop floor changes every four weeks,” comments DHL’s Beelen. Tom Tailor manager Schmelting agrees: “Fashion has always been fast, but over the past ten years we have shortened the lead times between conception and delivery of a collection considerably, in order to stay on top of the trends.”

DHL manages the entire supply chain

Speed is not the only factor in successful fashion logistics. Quality and cost-cutting are important, too. “At the end of the day, we need to bring those three issues in line,” says Schmelting. This is only possible through planning, continuous process optimisation and innovative solutions, such as RFID tagging – and state-of-the-art automation. It is also important to carefully examine interfaces: many incremental steps are involved between sourcing raw materials and delivering the final goods – and poor handovers or missing information can cost both time and money. Thanks to years of experience and its sophisticated supply chain management systems, DHL protects its fashion customers from problems like these – and makes sure the latest styles are at the right place, at the right time.

© 2014 Deutsche Post AG
2013 Annual Report

Tailor Made

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2013 Annual Report

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