DHL: Current IT distribution model is 'not fit for purpose'

Logistics behemoth says model needs to change to cope with 'volatile' global trading environment

German logistics giant DHL is throwing its hat into the IT distribution ring by claiming the current global model is not working.

In a white paper entitled: Lean and agile, the resilient tech sector supply chain the firm explained how volatility "permeates every aspect of the high-tech industry".

DHL claimed that because the majority of the industry’s production capacity remains in Asia, which is prone to floods and earthquakes, supply chains in the sector are more exposed to risk, meaning a different approach that is less linear and more of an end-to-end solution for customers is needed.

It also said the tech industry’s expansion into emerging markets means high levels of variability is injected into normally fast-flowing supply chains which slow down the chain even further.

Shrinking product life cycles, emerging markets and visibility black holes create challenges for tech firms, the report said.

“These are challenges which the rigid, status quo supply chain is ill equipped to handle,” it claimed. The report said that to build the right supply chain, the traditional approach needs to be upended. "This is because the traditional supply-chain model, which operates in a linear and sequential fashion, is not fit for purpose in this volatile environment," DHL claimed.

Lisa Harrington, president of lharrington group and co-author of the report added: “The dynamics of uncertainty and ambiguity in the tech industry make predicting what’s coming next difficult. Product life cycles are forever shrinking as manufacturers race to create innovative new products to displace the old ones.

“Emerging markets and their growing middle-class populations are creating high sources of demand which are more difficult to serve, and as the supply chain’s geography expands, so too does the number of partners involved. Meanwhile, tech industry outsourcing has resulted in multi-tiered and geographically dispersed supply chains with visibility gaps so companies do not have a complete picture of their logistical operations.

“Ironically, in a sector so closely associated with innovation, most companies today have yet to apply this innovative thinking to how they think about their supply chains in order to address these challenges,” she said.

But established global IT distributors begged to differ with DHL.

Wade McDaniel, vice president of solutions architecture at Avnet, said: “Distributors are, by their very nature, a multi-client endeavour which offers efficiencies to tens of thousands of customers in the B2B supply chain.”

And Markus Schmuecker, executive director of Ingram Micro Supply Chain Solutions Europe, said: “[The white paper] indicates that tech companies are suffering from antiquated supply-chain structures where information flow is affecting the agility of the supply chain. In turn, this is causing delays in product to market and, in some cases, revenue losses. No other company delivers as broad and deep a spectrum of technology and supply-chain services to vendors, resellers, and retail partners globally as Ingram Micro.”