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."
Business software vendor Cleo has acquired DataTrans Solutions, a cloud-based procurement automation and EDI solutions provider, saying the move enhances Cleo’s supply chain orchestration with new procurement automation capabilities.
According to Chicago-based Cleo, the acquisition comes as companies increasingly look to digitalize their procurement processes, instead of relying on inefficient and expensive manual approaches.
By buying Texas-based DataTrans, Cleo said it will gain an expanded ability to help businesses streamline procurement, optimize working capital, and strengthen supplier relationships. Specifically, by integrating DTS’s procurement automation capabilities, Cleo will be able to provide businesses with solutions including: a supplier EDI & testing portal; web EDI & PDF digitization; and supplier scorecarding & performance tracking.
“Cleo’s vision is to deliver true supply chain orchestration by bridging the gap between planning and execution,” Cleo President and CEO Mahesh Rajasekharan said in a release. “With DTS’s technology embedded into CIC, we’re empowering procurement teams to reduce costs, improve efficiency, and minimize supply chain risks—all through automation.”
And many of them will have a budget to do it, since 51% of supply chain professionals with existing innovation budgets saw an increase earmarked for 2025, suggesting an even greater emphasis on investing in new technologies to meet rising demand, Kenco said in its “2025 Supply Chain Innovation” survey.
One of the biggest targets for innovation spending will artificial intelligence, as supply chain leaders look to use AI to automate time-consuming tasks. The survey showed that 41% are making AI a key part of their innovation strategy, with a third already leveraging it for data visibility, 29% for quality control, and 26% for labor optimization.
Still, lingering concerns around how to effectively and securely implement AI are leading some companies to sidestep the technology altogether. More than a third – 35% – said they’re largely prevented from using AI because of company policy, leaving an opportunity to streamline operations on the table.
“Avoiding AI entirely is no longer an option. Implementing it strategically can give supply chain-focused companies a serious competitive advantage,” Kristi Montgomery, Vice President, Innovation, Research & Development at Kenco, said in a release. “Now’s the time for organizations to explore and experiment with the tech, especially for automating data-heavy operations such as demand planning, shipping, and receiving to optimize your operations and unlock true efficiency.”
Among the survey’s other top findings:
there was essentially three-way tie for which physical automation tools professionals are looking to adopt in the coming year: robotics (43%), sensors and automatic identification (40%), and 3D printing (40%).
professionals tend to select a proven developer for providing supply chain innovation, but many also pick start-ups. Forty-five percent said they work with a mix of new and established developers, compared to 39% who work with established technologies only.
there’s room to grow in partnering with 3PLs for innovation: only 13% said their 3PL identified a need for innovation, and just 8% partnered with a 3PL to bring a technology to life.
Even as a last-minute deal today appeared to delay the tariff on Mexico, that deal is set to last only one month, and tariffs on the other two countries are still set to go into effect at midnight tonight.
Once new U.S. tariffs go into effect, those other countries are widely expected to respond with retaliatory tariffs of their own on U.S. exports, that would reduce demand for U.S. and manufacturing goods. In the context of that unpredictable business landscape, many U.S. business groups have been pressuring the White House to pull back from the new policy.
Here is a sampling of the reaction to the tariff plan by the U.S. business community:
American Association of Port Authorities (AAPA)
“Tariffs are taxes,” AAPA President and CEO Cary Davis said in a release. “Though the port industry supports President Trump’s efforts to combat the flow of illicit drugs, tariffs will slow down our supply chains, tax American businesses, and increase costs for hard-working citizens. Instead, we call on the Administration and Congress to thoughtfully pursue alternatives to achieving these policy goals and exempt items critical to national security from tariffs, including port equipment.”
Retail Industry Leaders Association (RILA)
“We understand the president is working toward an agreement. The leaders of all four nations should come together and work to reach a deal before Feb. 4 because enacting broad-based tariffs will be disruptive to the U.S. economy,” Michael Hanson, RILA’s Senior Executive Vice President of Public Affairs, said in a release. “The American people are counting on President Trump to grow the U.S. economy and lower inflation, and broad-based tariffs will put that at risk.”
National Association of Manufacturers (NAM)
“Manufacturers understand the need to deal with any sort of crisis that involves illicit drugs crossing our border, and we hope the three countries can come together quickly to confront this challenge,” NAM President and CEO Jay Timmons said in a release. “However, with essential tax reforms left on the cutting room floor by the last Congress and the Biden administration, manufacturers are already facing mounting cost pressures. A 25% tariff on Canada and Mexico threatens to upend the very supply chains that have made U.S. manufacturing more competitive globally. The ripple effects will be severe, particularly for small and medium-sized manufacturers that lack the flexibility and capital to rapidly find alternative suppliers or absorb skyrocketing energy costs. These businesses—employing millions of American workers—will face significant disruptions. Ultimately, manufacturers will bear the brunt of these tariffs, undermining our ability to sell our products at a competitive price and putting American jobs at risk.”
American Apparel & Footwear Association (AAFA)
“Widespread tariff actions on Mexico, Canada, and China announced this evening will inject massive costs into our inflation-weary economy while exposing us to a damaging tit-for-tat tariff war that will harm key export markets that U.S. farmers and manufacturers need,” Steve Lamar, AAFA’s president and CEO, said in a release. “We should be forging deeper collaboration with our free trade agreement partners, not taking actions that call into question the very foundation of that partnership."
Healthcare Distribution Alliance (HDA)
“We are concerned that placing tariffs on generic drug products produced outside the U.S. will put additional pressure on an industry that is already experiencing financial distress. Distributors and generic manufacturers and cannot absorb the rising costs of broad tariffs. It is worth noting that distributors operate on low profit margins — 0.3 percent. As a result, the U.S. will likely see new and worsened shortages of important medications and the costs will be passed down to payers and patients, including those in the Medicare and Medicaid programs,” the group said in a statement.
National Retail Federation (NRF)
“We support the Trump administration’s goal of strengthening trade relationships and creating fair and favorable terms for America,” NRF Executive Vice President of Government Relations David French said in a release. “But imposing steep tariffs on three of our closest trading partners is a serious step. We strongly encourage all parties to continue negotiating to find solutions that will strengthen trade relationships and avoid shifting the costs of shared policy failures onto the backs of American families, workers and small businesses.”
In a statement, DCA airport officials said they would open the facility again today for flights after planes were grounded for more than 12 hours. “Reagan National airport will resume flight operations at 11:00am. All airport roads and terminals are open. Some flights have been delayed or cancelled, so passengers are encouraged to check with their airline for specific flight information,” the facility said in a social media post.
An investigation into the cause of the crash is now underway, being led by the National Transportation Safety Board (NTSB) and assisted by the Federal Aviation Administration (FAA). Neither agency had released additional information yet today.
First responders say nearly 70 people may have died in the crash, including all 60 passengers and four crew on the American Airlines flight and three soldiers in the military helicopter after both aircraft appeared to explode upon impact and fall into the Potomac River.
Editor's note:This article was revised on February 3.
GE Vernova today said it plans to invest nearly $600 million in its U.S. factories and facilities over the next two years to support its energy businesses, which make equipment for generating electricity through gas power, grid, nuclear, and onshore wind.
The company was created just nine months ago as a spin-off from its parent corporation, General Electric, with a mission to meet surging global electricity demands. That move created a company with some 18,000 workers across 50 states in the U.S., with 18 U.S. manufacturing facilities and its global headquarters located in Massachusetts. GE Vernova’s technology helps produce approximately 25% of the world’s energy and is currently deployed in more than 140 countries.
The new investments – expected to create approximately 1,500 new U.S. jobs – will help drive U.S. energy affordability, national security, and competitiveness, and enable the American manufacturing footprint needed to support expanding global exports, the company said. They follow more than $167 million in funding in 2024 across a range of GE Vernova sites, helping create more than 1,120 jobs. And following a forecast that worldwide energy needs are on pace to double, GE Vernova is also planning a $9 billion cumulative global capex and R&D investment plan through 2028.
The new investments include:
almost $300 million in support of its Gas Power business and build-out of capacity to make heavy duty gas turbines, for facilities in Greenville, SC, Schenectady, NY, Parsippany, NJ, and Bangor, ME.
nearly $20 million to expand capacity at its Grid Solutions facilities in Charleroi, PA, which manufactures switchgear, and Clearwater, FL, which produces capacitors and instrument transformers.
more than $50 million to enhance safety, quality and productivity at its Wilmington, NC-based GE Hitachi nuclear business and to launch its next generation nuclear fuel design.
nearly $100 million in its manufacturing facilities at U.S. onshore wind factories in Pensacola, FL, Schenectady, NY and Grand Forks, ND, and its remanufacturing facilities in Amarillo, TX.
more than $10 million in its Pittsburgh, PA facility to expand capabilities across its Electrification segment, adding U.S. manufacturing capacity to support the U.S. grid, and demand for solar and energy storage
almost $100 million for its energy innovation research hub, the Advanced Research Center in Niskayuna, NY, to strengthen the center’s electrification and carbon efforts, enable continued recruitment of top-tier talent, and push forward innovative technologies, including $15 million for Generative Artificial Intelligence (AI) work.
“These investments represent our serious commitment and responsibility as the leading energy manufacturer in the United States to help meet America’s and the world’s accelerating energy demand,” Scott Strazik, CEO of GE Vernova, said in a release. “These strategic investments and the jobs they create aim to both help our customers meet the doubling of demand and accelerate American innovation and technology development to boost the country’s energy security and global competitiveness.”