Dematic focuses on total delivered cost in the retail supply chain

Having built out their distribution networks, retailers are now looking at how they can change their processes to gain competitive advantage.

By Bob Trebilcock Editor at Large -- Modern Materials Handling, 4/24/2007

Last June, Siemens AG sold its stake in Dematic to Triton, an independent European private equity investor.

With the one-year anniversary of that deal approaching, we checked in with Gregg Vandenbosch, a Dematic product manager, to find out what he is seeing in the retail supply chain, Dematic’s primary focus these days.

“The biggest change we’re seeing is a focus on the total delivered cost of a product,” says Vandenbosch. “That’s the complete cost of delivering an item from the start of the manufacturing process all the way to the ultimate consumer. What they’re looking for are areas to optimize the supply chain that their competitors have overlooked.”

Now, that may sound like a restatement of the obvious. But Vandenbosch says that’s not the case. “For the last decade or so, companies in the retail supply chain have focused on building their network of very large DCs that could move 200,000 to 300,000 cases a day,” says Vandenbosch. “The ability to move volume provided the competitive advantage.”
 
Today, he adds, most large retailers have built out those networks. Those that didn’t do it on their own turned to third-party logistics (3PL) providers to level the playing field for them. After all, if everyone can ship 300,000 cases a day, the cost advantage of shipping in volume goes out the window.

“When that happens, the rest of the supply chain matters,” says Vandenbosch. Figuring out ways to reduce the total delivered cost is creating opportunities for new processes, along with automated materials handling and automated information handling solutions in the retail supply chain.

While Dematic is tracking a number of trends in the retail supply chain, Vandenbosch highlighted three that might lead to lower total delivered costs.

1) DC-friendly deliveries. One way to lower the total delivered cost is to reduce the amount of touches in the DC, especially by crossdocking. “In order to do that, we’re pushing value-added services from the DC back up the supply chain,” says Vandenbosch. “I’m talking to 3PLs near ports of entry that used to move full pallets with lift trucks. Now they’re pre-labeling and re-palletizing cartons for the final destination before they even get to the DC.”

2) Accuracy counts more than ever. Shipping the right product has always been important. Today, the focus is not just on shipping the right product, but using IT solutions to track that product so that it’s not pilfered or damaged in the supply chain or simply lost in the back room of a big box retailer.

3) Store-friendly deliveries. In Europe, where stores are smaller than in the US and there isn’t room to back up a 50-foot semi, retailers have been focusing on store-friendly deliveries for several years. That means not only receiving smaller and more frequent deliveries of a product, but receiving deliveries that were packed according to the layout in the store. It’s much like a just-in-time, just-in-sequence delivery of parts to an assembly line. “This has not caught on yet in the states, but I think you’re going to see it develop in major metropolitan areas where the population density resembles cities in Europe,” says Vandenbosch.