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 cus-
tomer 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 lev-
els 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 prac-
tice 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.
