DSV : is getting ready for a future where e-commerce will change everything

'So far, everything's going fairly smoothly,' assures Chief Commercial Officer Meinderdjan Botman from our Solutions division. Up to 80 major brand owners are already engaging in e-commerce together with DSV. Each month we handle close to eight million order lines. And even if you have to work fast to keep up - the number of transactions is growing by close to 50% every six months - terminals and employees still manage to handle the many smaller orders, which are gaining ground compared to general cargo, LTL and FTL. But there is a limit to the current production system which Meinderdjan intends to move, because otherwise it will end up being painful:

'This is one of the biggest challenges we've ever encountered, and if we don't do anything, we'll run into enormous problems already a year from now. We've got to constantly improve our flexibility and speed,' says Meinderdjan, who has probed deeply into DSV's e-commerce skill-sets over the past year.
'We're no less prepared for e-commerce than our usual, comparable competitors, but we have one significant factor where we excel: our hands-on mentality, which is also what brought us where we are today. It won't be enough in the years ahead, though; we've got to upgrade our production system, too,' he says.

Same volume, more channels

Meinderdjan is talking about switching from the familiar distribution channels to a multi-channel model where it is crucial to protect the existing business and deliver the same volume but in multiple channels.

Already now, more than 30% of the order lines processed by DSV for our brand owner and multi-channel customers are e-commerce. But these 30% amount to only 1.5% of total revenue. A year from now, the share of revenue generated by e-commerce will rise to 2-5%, but the number of order lines will have doubled, putting unprecedented pressure on the production system.

'We can coordinate the delivery itself with our 'local heroes', i.e. local hauliers with the infrastructure to reach customers. But we must set up totally different workflows at our warehouses, where we currently optimise processes and consolidate during afternoons and evenings, so the cargo is ready for further distribution the next day. From now on, we'll have to respond immediately, and the goods will have to be picked and packed at the same moment the orders arrive so our partner can come and pick them continuously, 24/7,' Meinderdjan says. He predicts a high degree of warehouse mechanisation in response to the sharply increasing number of order lines - and to the vast seasonal fluctuations and many peaks that will occur.

Meinderdjan Botman, Chief Commercial Officer, DSV Solutions

Higher automation

'Everyone is face these challenges, and everyone needs more people. This will affect our bottom line, because there will be a great demand for warehouse and terminal employees. Therefore, we need to initiate a comprehensive mechanisation and automation of warehouse workflows as well,' says Meinderdjan, emphasising that developments have already begun: The DSV warehouses planned for the future will be far more automated than previously.

At the same time, the IT systems will have to be more dynamic. Today, the various processes are encoded in the Warehouse Management Systems (WMS) and then adjusted whenever routines change. E-commerce will offer far more articles once customers, together with the new products, also gain access to products from last season and the season before that; i.e. far more products that will require WMS processes to be changed far more frequently. The dynamics will differ throughout the day and change much more frequently than in the past. If we do not pick up on this, too much time would be wasted in the picking processes (where goods are retrieved from the shelves).

Already off to a good start

Finally, more suppliers, i.e. local hauliers, need to be associated with DSV's distribution activities, and this will require the development of efficient IT applications so DSV can communicate across all suppliers and warehouses throughout the network.

'We have a long way to go before we can brand ourselves as a fully-fledged player in the e-commerce market, but we're developing our organisation in the right direction, and we already have a large customer segment for whom we actually provide satisfactory e-fulfilment,' Meinderdjan says, emphasising that e-commerce is not only a B2C phenomenon. B2B is increasingly transitioning to e-commerce as well, leading to the same volumes having to be shipped out in more, but smaller orders.

'For example: in the construction industry individual order lines are shrinking while volumes are increasing. Single bags of 25 kilos of concrete are being processed in a B2B environment already. We won't experience the same fluctuations and peaks we see in B2C. It will be more predictable, but the trend will require the same skill-sets: speed and flexibility.'

Abundant information

Flexibility also means being able to provide customers with far more details than previously, including pre-alerts, that will be more important than ever. Because if DSV does not deliver as promised, it could have direct consequences for the customer who risks being publicly humiliated. Direct feedback from end-customers via the online shop of the brand owners is inevitable, and a new phenomenon. Bad ratings on these online shops is the new business killer.

'If you don't deliver, you get hammered on social media - right away. Bad ratings on these online shops is the new business killer. And this would damage our customer relations. That's why pre-alerts and far more accurate customer service are more important than ever,' Meinderdjan says. In his view, most customers forgive a supplier if it notifies its customer well in advance of any delays. 'When you send a clear message, there are usually no problems.'

Attitude changes

Meinderdjan calls for careful consideration before DSV goes out and offers e-fulfilment to all customers, because the organisation is not yet fully geared for it. Attitudes will have to change first: from focusing on 'costs and efficiency' to 'speed and flexibility', and investments will have to be made in software, hardware and robotics at the warehouses, and new agreements will have to be entered with local distributors.

'Historically, we've resolved our customers' problems and we'll continue to do so now that they need e-commerce solutions. The area will grow enormously in the future, and we're not ready for it yet. We've got to face the fact that extensive changes will be needed,' he says.

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