DHL Supply Chain CIO Hugo Patten is focusing on standardisation and innovation

DHL Supply Chain CIO Hugo Patten is focusing on standardisation and innovation as he tries to align business objectives with ITPhoto: DHL Supply Chain

You might think a long career in IT is a prerequisite for heading up a corporate IT department but for DHL Supply Chain CIO Hugo Patten the route to CIO was far more varied.

Patten started out working in electronics manufacturing in the 1980s and 1990s with Mitsubishi Electric, a traditional Japanese keiretsu, or conglomerate, that Patten describes as “very diverse but very traditional at its heart”.

He ended up working in the European strategic planning side of the business, where he helped the organisation move away from its traditional approach to become a “more modern, forward-looking company”.

Patten left Mitsubishi Electric in 1996 to set up a web publishing business specialising in allowing medical and scientific professionals to view journals online, an entrepreneurial venture Patten describes as “a bit of fun”.

Patten then invested in Tesco Direct ecommerce platform developer Unipower, before moving to contract logistics business Exel in 2004. Exel was acquired by DHL the following year and Patten became CIO of DHL Supply Chain in 2009.

Patten believes his background in business, rather than the more traditional IT-based route, has helped him as CIO.

“For a CIO these days, you’re not just sitting on the board and speaking when spoken to. You’re on that board because you are involved in every single aspect of the operations that you’re running. You’ve got to think like the business to really add value, I think,” Patten said.

Here, Patten discusses the DHL Supply Chain technology strategy in detail as well as the need to develop IT skills and the importance of using technology to innovate.

The CIO skills for a complex business

DHL Supply Chain is a €3bn business employing 50,000 people and is part of the diverse Deutsche Post group. The German company bought DHL Supply Chain in 2002 to operate alongside DHL Express and DHL Global Forwarding and Freight. Patten heads up IT in the UK and Ireland.

DHL Supply Chain is divided into several divisions, namely retail – consisting of food, non-food and fashion – industrial and automotive, trade team distribution, fast-moving consumer goods (FMCG) and Ireland.

Customers include large UK supermarkets Morrisons, Sainsbury’s and Tesco, major clothes retailers and FMCG businesses Proctor & Gamble and Unilever.

The nature of DHL Supply Chain’s supply-chain operations and the largely contract-based nature of its business mean customers have varied requirements, presenting significant challenges to IT.

For example, fashion and grain businesses would have very different requirements from a DHL warehouse in terms of how their product is stored and the systems needed to manage them. “So they need very different IT systems and services,” Patten said.

Bearing all of this in mind,…

…Patten said knowledge of the actual business you’re working in – and the sector it operates in – is key.

“It really helps to have worked in the business because probably the most important thing is that you understand the market that you’re working in. You understand the business people that you’re working with. If you can talk the same language, you can get a hell of a lot done,” he told silicon.com.

Indeed, Patten believes communicating how IT can help achieve business objectives is an important CIO skill, as IT is much more business-facing compared with 10 or 15 years ago.

“We can do lots of wonderful technical stuff but if our business-development and system-design community can’t communicate the benefits the customer gets from that solution, then we’ve failed. IT marketing and communication is a very key aspect of what we’re doing,” Patten said.

“I think the ability to bring together all the good stuff that IT can do for you and communicate it in such a way that the business understands the value, that’s quite a difficult skill,” he added.

The business and IT balancing act

Patten said his biggest challenge is much the same as in many big businesses: managing change and juggling competing needs.

“So as a CIO you’re always trying to balance the needs of the customer and meeting those customer needs as a priority versus trying to do it in such a way that you get towards the corporate IT strategy,” he said.

Another significant challenge for IT is delivering the best value for the money invested. This challenge also means not being afraid of investing money with the aim of securing greater cost savings in the future.

“You’ve always got an eye [on cost] but at the same time there may be opportunities to invest money to get them the value that they’re looking for,” Patten said.

Standardisation, simplification and cloud

The company’s 240-strong IT team is currently working on 100 IT projects to help achieve these aims through standardisation, faster deployment, cost reduction and more effective use of real-time information.

Since DHL Supply Chain has a range of different systems as a legacy of recent acquisitions, simplifying the IT products and service portfolio is a major focus.

“So we need to clear out the legacy and standardise and get economies of scale by doing that. And, from a service point of view, we need to have a single service desk, single desktop support and a single datacentre strategy,” Patten said.

As part of this simplification strategy, the IT department has moved some of its platforms to Deutsche Post’s virtualised datacentre in Prague. “Our general strategy [is that] most of our platforms will be based in Prague from now on,” Patten said.

The datacentre is based on Citrix virtualisation technology, so…

…new customers can be quickly set up on the DHL shared environment at a low cost.

“If we have a new customer tomorrow we don’t need to set up a separate rack, a separate box, a separate database. It’s basically sitting on that virtualised environment – we just stick it in there,” Patten said.

Not all systems can be moved to Prague however, because some customers – particularly public sector organisations – require services to be provided from the UK due to privacy and data protection concerns.

DHL Supply Chain has a flexible arrangement where it tries to standardise as much as possible while continuing to cater for more specialist needs of some customers by running them in a Capgemini datacentre in Rotherham.

DHL Supply Chain is standardising its warehouse management systems

DHL Supply Chain is standardising much of its technology including its warehouse management systemsPhoto: DHL Supply Chain

With the Prague datacentre, DHL Supply Chain has access to what is essentially a private cloud. However, extending its technology to public cloud and software as a service isn’t on the immediate agenda due to complicating issues associated with public sector customers and where data is held.

“I think cloud computing is already within the Prague datacentre but is it ubiquitous across the whole of the business? No. Are we going to be using it in the future? Where it makes sense,” Patten said.

Standardisation is also taking place with Deutsche Post’s email platform which is being moved to Microsoft Outlook globally.

Although the cost of moving systems from legacy systems to the Prague datacentre is sometimes significant, Patten said the organisation has done a good job in terms of standardising IT systems.

The IT department also wants to achieve a “single implementation capability” for all new business, to reduce implementation costs.

There was a huge push to reduce the number of warehouse management systems, which at one point numbered more than 35 in Europe. The business is now putting all new warehouses onto the Red Prairie system as a template and then tweaking it for individual customer needs.

Fashion customers, for example, need information about how garments are hung around a storage facility. In comparison, automotive customers – which include Jaguar Land Rover in the UK – need information about parts that are coming into the manufacturing pipeline and sequencing them for build-to-order processes.

“If we’re going to be a truly global company and get away from what was very disparate acquired companies, then we need to use IT to help glue these things together. And I think we’ve done a great job since 2006 to normalise what was a very colourful estate,” Patten said.

Cutting costs and implementation time

One of the areas in which IT can help with these corporate objectives are through the “transparency and reduction of cost” according to Patten.

“With the economy as it is, it’s pretty tough and we need to ensure that we get as much value out of every penny we’re spending on IT. Where it makes sense we invest and increase our costs and where it doesn’t make sense we will reduce costs.”

One of the ways to reduce costs is to…

…cut the time needed for implementing new technology.

“We’ve got to improve our ability to implement – so whatever we sell to customers, whatever promise we make – we need to ensure that we deliver that on budget every time,” Patten said.

The ability to improve how projects are implemented is more difficult as the business becomes involved with more “big transformational deals” such as with the NHS and an ecommerce deal with British Airways.

“Those projects bring a lot of revenue and income, which is great, but obviously a few challenges in terms of implementing them because they’re new areas, new markets, possible new operational challenges to us as well. So accelerating our IT implementation is a key strategy,” Patten said.

A focus on innovation

There is clearly a need for IT to keep the lights on at more than 600 storage warehouses across the UK but the business is constantly demanding more from IT.

With many IT functions – such as setting up LANs at new warehouses – now becoming “bog standard”, Patten said he also needs to be able to work out how technology can improve the business and the services it provides to customers in more innovative ways.

This requirement means coming up with processes that can differentiate ecommerce customers from their competitors, such as 24-hour delivery or delivery staff contacting customers to confirm delivery arrangements.

Real-time information is an area where DHL Supply Chain has been innovating. The company is using three integration hubs that act as real-time data interchange platforms between DHL and customer back-end systems.

“What we’re trying to do is provide that real-time tracking of order-level data between warehouse management systems, between different distribution centres and between different customers,” Patten said.

Another example is Dex, which is used by the spare parts and logistics business in Milton Keynes to monitor the supply and reverse logistics of spare parts, divided into fast and slow-moving components.

“The ability to track that and then provide data on the spare parts coming back from customers is the core element of that platform.”

The IT organisation has also been working out how to use new technological approaches to improve its transport operations. DHL Supply Chain has a fleet of about 4,000 delivery vehicles in the UK, so the scope for improvement is significant.

“The IT is the glue between the seven divisions, and if you take the transport challenge, we need to provide real-time visibility and management data on what drivers are available, what vehicles are available, so that we can get achieve better asset utilisation. From an environmental point of view, we can improve our mpg and so and so forth,” Patten said.

DHL Supply Chain trucks are installed with the Microlise in-cab telematics technology which…

…records and analyses driving behaviour, such as harsh braking and where drivers are keeping the engine running at idle to keep a cab warm – both of which use up unnecessary fuel.

The system is also able to analyse routes so drivers take the most fuel-efficient routes.

The company has a control centre for its chilled transport fleet in Coventry, which uses a transport-in-a-box system that combines various systems, including Microlise, the Callidus transport-management system and the live order-tracking system.

“That’s focusing on getting efficiencies in our transport network and also offering up available fleets and drivers to customers who might need it – so an asset and utilisation and business-development opportunity,” Patten said.

DHL Supply Chain is using innovative technology to monitor its lorry fleet

DHL Supply Chain is using innovative technology across its business, including a system to monitor the use of its 400-strong lorry fleetPhoto: DHL Supply Chain

DHL Supply Chain is developing iPhone apps that customers can use to track orders and delivery times – something that is particularly pertinent to retail and FMCG customers wanting to maintain appropriate stock levels.

Harnessing and developing the best IT skills

As well as the implementation of technology, Patten is also making sure the organisation possesses the best IT talent possible.

With a 250-strong IT department, Patten is very aware he needs to create the conditions for people to want to remain with the company and for other people to want to work for the businesses.

“I’ve got to ensure that [IT staff] have got a really good career path, that they enjoy their work in quite difficult circumstances. In peak periods for retail, it’s manic, especially with the ecomm work that we do. It puts huge stress on those people.”

Patten has created IT academies at DHL Supply Chain to make IT staff working in warehouses around the country more aware of the IT-related opportunities in the organisation.

People working away from the central IT operation may not be aware of general business strategy so the aim is to make them more knowledgeable about this area while giving them the tools to progress in their chosen field.

“If we can skill up our own people, then it’s giving them an ability to develop their careers and skills, but at the same time we help to retain them as well,” Patten said. The company also runs an IT business school that Patten says is aimed at creating the CIOs of the future.

“If I have the best people working for me and my team, then I think that makes the job a hell of a lot easier. If you have a project manager who’s ill-equipped to manage a project, it can give you a lot of sleepless nights.”

Find out how another logistics firm is transforming its IT, in Stobart Group on the road from small business tech to enterprise IT.