2018 Value Chain - University of...

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"We can't solve problems by using the same kind of thinking we used when we created them." Commonly attributed to Albert Einstein Welcome! The Future Value Chain Project, Trends, Opportunities And the Industry Response…. Sabine Ritter, The Consumer Goods Forum Jim Flannery, P&G

Transcript of 2018 Value Chain - University of...

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"We can't solve problems by using the same kind of thinking we used when we created them."Commonly attributed to Albert Einstein

Welcome!

The Future Value Chain Project, Trends, Opportunities And the Industry Response….Sabine Ritter, The Consumer Goods Forum Jim Flannery, P&G

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Objectives:

! Give the retail/consumer goods industry a comprehensive, more “connected”view of trends

! Identify trends (“external forces”) over which the industry has little control

! But that will have significant impact on the way it operates

! Identify trends over which the industry has more control

! And the ability to influence their course or impact

! Identify key areas where companies must collaborate in order to manage the value chain in 2016

2018 @ ECR Australia Conference 2009 Slide

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"We can't solve problems by using the same kind of thinking we used when we created them."Commonly attributed to Albert Einstein

Forces and Trends Driving the Future Value Chain

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"We can't solve problems by using the same kind of thinking we used when we created them."Commonly attributed to Albert Einstein

Succeeding in a Volatile Market2018: The Future Value Chain

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2018 Future Value Chain – Global and Asian focus

Why Asia?• ! 45 million square km.

(! 2 x NA, 5 x Europe)• Home to some of the

earliest retail models• Asia central to Western

and global commerce• Rapidly developing and

massive consumer market

• Major source of ingredients and manufacturing

Major Population Centres in Southeast Asia

Asia has over 40 markets with populations of more that 10 million people2018 @ ECR Australia Conference 2009 Slide

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2018 @ ECR Australia Conference 2009 Slide

Eight Trendsand the

Industry Opportunities

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2018 @ ECR Australia Conference 2009 Slide

!Things Move Fast!!Markets are more similar

than they are different !Even though the

challenges are similar across the world, the markets are in different phases of adopting solutions

Findings

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Trend #1:Declining economy

! Increased market volatility!Leveling off of economies in emerging markets

ABC News Consumer Comfort Index

2018 @ ECR Australia Conference 2009 Slide

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Trend #2:Changing Society

New Middle Class

Urbanisation

Low Income

Aging Population

2018 @ ECR Australia Conference 2009 Slide

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Trend #3:Rising Cost (and Scarcity) of Raw Material

2018 @ ECR Australia Conference 2009 Slide

! Continuing rise in cost of energy and raw material! Population spikes put pressure on water and food

supplies! Increasingly volatile climate, affecting production and

the supply chain! Effects of political instability

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Trend #4: Increasing awareness and action on sustainability

2018 @ ECR Australia Conference 2009 Slide

! Global!Sustainable lifestyles, regardless of economic

status and ahead of regulation!Consumers demand responsible and ethical

behavior but will not pay extra!Growing corporate awareness and

responsibility!Responsibility for the entire product lifecycle!Financially beneficial sustainability programs

! Asia!Environmental degradation and extreme weather events increase

concern!Pollution will be a key driver of consumer concern!The move towards sustainability will resemble Western patterns. !Government will increasingly step in

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Trend #5:Growing consumer access to technology! Asian consumers increasingly at ease with new technology! Asian adoption of technologies matches Western economies! Even faster penetration of new technologies in urban areas! Use of technology extends beyond high-income groups! Many Asian markets can leapfrog developed nations! Access to product information anytime, anywhere! Personalized and consolidated consumer communication will be key

2018 @ ECR Australia Conference 2009 Slide

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Trend #6:Changing business models

! Shift from ‘traditional’ to ‘modern’ (or ‘organized’) trade! Boosted by

- increasing consumer purchasing power - availability of technology - information sharing across the supply chain

! As organized retail grows, there are less intermediaries! Rather than polarization, models will merge and new

models develop

2018 @ ECR Australia Conference 2009 Slide

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Trend #7: Growing Availability of Supply Chain Information

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! Japan: pushing the envelope!The use of RFID technology will accelerate when investment

costs drop!A ‘consumer-driven supply chain’, based upon consumer

information

! India: Focus on the basics!Enhanced performance as a result of

information sharing

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Trend #8:Increasing concern about product safety

! Increasing pressure to disclose product history, safety and wellness information

! Need to share costs and risks involved

2018 @ ECR Australia Conference 2009 Slide

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The industry must Develop New Ways of Working Together

Trading Partners must more readily and freelyShare Information

In their Bi-Lateral relationships

The industry must Redefine the 2016 Value Chain

Conclusions: Despite the tough economic, social and environmental climate that we operate in, there are many opportunities for our industry to continue to grow and to better serve our consumers needs.

2018 @ ECR Australia Conference 2009 Slide

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New Ways of Working Together

2018 @ ECR Australia Conference 2009 Slide

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The Case for Change

! We have been talking about Collaborative Commerce and Collaboration for years.

! Efficient Consumer Response was founded on the Strategies of:

• Efficient Assortment• Efficient Replenishment• Efficient Promotion• Efficient New Item Introduction

Yet today’s Supply Chain is STILL filled with waste….

2018 @ ECR Australia Conference 2009 Slide

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2018 @ ECR Australia Conference 2009 Slide

““Stores are over Stores are over SKUSKU’’dd””New SKUs New SKUs RegisteredRegistered

1980 2,899

2005 10,651

2007 85,000

Average Items in a Average Items in a Typical SupermarketTypical Supermarket

1987 24,500

1997 30,000

2007 45,000

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2018 @ ECR Australia Conference 2009 Slide

Inventories are too highInventories are too high

“There is too much of the stuff consumers don’t want and not

enough of what they do.”

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2018 @ ECR Australia Conference 2009 Slide

OutOut--ofof--stocks persiststocks persist

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2018 @ ECR Australia Conference 2009 Slide

Trading partners Trading partners continue to focus on continue to focus on business minutiae business minutiae

instead of shoppersinstead of shoppers

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2018 @ ECR Australia Conference 2009 Slide

Manufacturers Retailers

JOHNSON & JOHNSON CARREFOUR

NESTLÉ KROGER CO.

PROCTER & GAMBLE METRO GROUP

KRAFT FOODS WAL-MART

UNILEVER TESCO

J.M. SMUCKER WEGMANS

COCA-COLA SAFEWAY

Legal Counsel

Brenda C. BARNESChairman & Chief Executive OfficerSARA LEE CORPORATION

Jean-Paul AGONChief Executive OfficerL’OREAL

Eckhard CORDESChairman of the Management Board& Chief Executive OfficerMETRO AG

Colleen GOGGINSWorldwide Chairman, Consumer GroupJOHNSON & JOHNSON

A.G. LAFLEYChairman, President & Chief Executive OfficerTHE PROCTER & GAMBLE COMPANY

Sir Terry LEAHYChief Executive OfficerTESCO PLC

Jeff NODDLEChairman & Chief Executive OfficerSUPERVALU

Stefano PESSINAExecutive ChairmanALLIANCE BOOTS

Paul POLMANChief Executive Officer DesignateUNILEVER

New Ways of Working TogetherProject Leaders

Lars OloffsonChief Executive OfficerCARREFOUR GROUP

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New Ways of Working TogetherEliminate value chain disruptions, enable growth

Industry Track (Collaborate)

Best Practices/ Standards

Documentation, Education,

Communication

Guiding Principles and Frameworks

Share Results

• StrategyAlignment

• JAG Framework

Focus on

Consumer

• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

• Knowledge, Skills & Capabilities

• Incentives & Rewards

• organisation Design

Prepare People for New World

• Sustainability• Cross

Industry Integration

• Integrated Supply Chain

Share Our Supply Chain

Trading Partner Track (Competitive Advantage)

Strategic Issues Between Trading

PartnersCommon Goals,

Common MeasuresSpecific Measures

& PrioritiesOther Data

Sharing Opportunities

Consumer/ Shopper

Satisfaction

2018 @ ECR Australia Conference 2009 Slide

*Note: Utilizations of Industry Standards

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New Ways of Working TogetherEliminate value chain disruptions, enable growth

Industry Track (Collaborate)

Best Practices/ Standards

Documentation, Education,

Communication

Guiding Principles and Frameworks

Share Results

• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

• Knowledge, Skills & Capabilities

• Incentives & Rewards

• organisation Design

Prepare People for New World

• Sustainability• Cross

Industry Integration

• Integrated Supply Chain

Share Our Supply Chain

Trading Partner Track (Competitive Advantage)

Strategic Issues Between Trading

PartnersCommon Goals,

Common MeasuresSpecific Measures

& PrioritiesOther Data

Sharing Opportunities

Consumer/ Shopper

Satisfaction• StrategyAlignment

• JAG Framework

Focus on

Consumer

2018 @ ECR Australia Conference 2009 Slide

*Note: Utilizations of Industry Standards

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2018 @ ECR Australia Conference 2009 Slide

! Encourage bi-lateral collaboration• Based on clear, fact-based

understanding of market context and trends

! Embrace joint long-term planning• Annual planning is often insufficient• IP protection and trust

! Implement longer term planning processes

Focus on

Consumer

• Five step process building a three-year rolling JAG plan

• Annual milestones to be set• Program reviewed

throughout the year• Buyer-Seller accountable for

functional liaison, planning coordination, agreement and execution follow-up

• Cross-functional teams drive analysis and planning to support Buyer-Seller

JAG process

• Help trade partners build rationale for their growth strategy

• Demonstrate the objective selection of relevant growth levers

• Allow reliable quantification of the opportunities and expected ROI

Fact based

Step 5Monitor &

adapt

Step 1Review the economic and shopper environment

Conditions for success

Step 2Review

sales and agree on

prioritized growth levers

Step 3Define and agree on

3-year JAG plan

Step 4Execute the

JAG plan

• Five step process building a three-year rolling JAG plan

• Annual milestones to be set• Program reviewed

throughout the year• Buyer-Seller accountable for

functional liaison, planning coordination, agreement and execution follow-up

• Cross-functional teams drive analysis and planning to support Buyer-Seller

JAG process

• Five step process building a three-year rolling JAG plan

• Annual milestones to be set• Program reviewed

throughout the year• Buyer-Seller accountable for

functional liaison, planning coordination, agreement and execution follow-up

• Cross-functional teams drive analysis and planning to support Buyer-Seller

JAG processJAG process

• Help trade partners build rationale for their growth strategy

• Demonstrate the objective selection of relevant growth levers

• Allow reliable quantification of the opportunities and expected ROI

Fact based

• Help trade partners build rationale for their growth strategy

• Demonstrate the objective selection of relevant growth levers

• Allow reliable quantification of the opportunities and expected ROI

Fact basedFact based

Step 5Monitor &

adapt

Step 1Review the economic and shopper environment

Conditions for successConditions for success

Step 2Review

sales and agree on

prioritized growth levers

Step 3Define and agree on

3-year JAG plan

Step 4Execute the

JAG plan

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New Ways of Working TogetherEliminate value chain disruptions, enable growth

Industry Track (Collaborate)

Best Practices/ Standards

Documentation, Education,

Communication

Guiding Principles and Frameworks

Share Results

• StrategyAlignment

• JAG Framework

Focus on

Consumer

• Knowledge, Skills & Capabilities

• Incentives & Rewards

• organisation Design

Prepare People for New World

• Sustainability• Cross

Industry Integration

• Integrated Supply Chain

Share Our Supply Chain

Trading Partner Track (Competitive Advantage)

Strategic Issues Between Trading

PartnersCommon Goals,

Common MeasuresSpecific Measures

& PrioritiesOther Data

Sharing Opportunities

Consumer/ Shopper

Satisfaction• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

2018 @ ECR Australia Conference 2009 Slide

*Note: Utilizations of Industry Standards

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! Common Goals and Common Measures

• Based on a common language

! GS1 “Trading Partner Performance Management”Standard

! Global Data Synchronization

Connected Business

Information

2018 @ ECR Australia Conference 2009 Slide

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Six Key Sales Measures

2018 @ ECR Australia Conference 2009 Slide

Focus on

Consumer

Connect our

Business

Information

Prepare

People for

New World

Share Supply

Chain

• Item Master Data Accuracy %• Item Data Synchronisation %

• Order to Delivery Cycle Time• On-time Delivery %• Finished Goods Inventory Cover• Out of Stock %• Service Level / Fill Rate %TPPMTPPM

SalesSales Supply ChainSupply Chain

OperationsOperations Data AccuracyData Accuracy

•Sales Growth %•Share•Retail Item Gross Margin %•Retail Gross Profit Margin %•Sales Forecast Accuracy %

• On Time Payment % • Invoice Accuracy %• Order Item/Quantity Change %• Unsaleables%

All definitions include formulas, conditions, parameters and examples.

Markdown %•

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New Ways of Working TogetherEliminate value chain disruptions, enable growth

Industry Track (Collaborate)

Best Practices/ Standards

Documentation, Education,

Communication

Guiding Principles and Frameworks

Share Results

• StrategyAlignment

• JAG Framework

Focus on

Consumer

• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

• Sustainability• Cross

Industry Integration

• Integrated Supply Chain

Share Our Supply Chain

Trading Partner Track (Competitive Advantage)

Strategic Issues Between Trading

PartnersCommon Goals,

Common MeasuresSpecific Measures

& Priorities Other Data

Sharing Opportunities

Consumer/ Shopper

Satisfaction• Knowledge, Skills & Capabilities

• Incentives & Rewards

• organisation Design

Prepare People for New World

2018 @ ECR Australia Conference 2009 Slide

*Note: Utilizations of Industry Standards

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2018 @ ECR Australia Conference 2009 Slide

Change

Vision Skills Measures /Rewards Resources

ActionPlan

Change

Skills Measures /Rewards Resources

ActionPlan Confusion

Vision Measures /Rewards Resources

ActionPlan

Anxiety

Vision Skills ResourcesActionPlan

GradualChange

Vision Skills Measures /Rewards

ActionPlan

Frustration

Vision Skills Measures /Rewards Resources False

Starts

Five Elements of Change?

Prepare People for New World

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! Understand the Barriers and Enablers to long term, shopper focused business planning

! Transform people performance incentives and rewards

! Build knowledge, skill and capability sets

! Design organisational structure around consumer needs and drivers

Prepare People for New World

2018 @ ECR Australia Conference 2009 Slide

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New Ways of Working New Ways of Working Together: Prepare Together: Prepare our our People for the New WorldPeople for the New World

GCI/Childs Davidson Global Study

DISCOVERYDISCOVERY--

WhatWhat’’s holding us back?s holding us back?

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GCI NWWT Project

• “Expert Panel” workshops in multiple markets around the world:– Ahold, Carrefour, Kroger, Metro, Safeway, Tesco,

Wal*Mart, Wegmans – Coke, J&J, Kraft, Nestle, P&G, Smuckers, Unilever

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2018 @ ECR Australia Conference 2009 Slide

Lack of focus on the consumerLack of focus on the consumer

“Wrong assortment, layout and promotions.”

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2018 @ ECR Australia Conference 2009 Slide

Lack of focus on the consumerLack of focus on the consumer

“My buyer explained that he would rather

have a slower growing category with a higher per unit gross margin

percent because that’s what he is evaluated

on.”

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“He kept telling me that I had access everything they had.…”

One dimensional, functionally One dimensional, functionally siloedsiloed goalsgoals

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2018 @ ECR Australia Conference 2009 Slide

One dimensional, functionally One dimensional, functionally siloedsiloedgoalsgoals

“Many of the merchants in her company began

pushing back on her efforts to fix the quality defects.”

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What would it look like?

40

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New Capability Model

Processes and tools

Skills and knowledge

Attitudes, beliefs and behaviours

Rewards and incentives

Structures and resources

KPIs

Goals

Creating the skills and process disciplines to target shopper satisfaction.

Enabling the organisationto embrace joint value creation for shoppers.

Measuring shopper satisfaction and building it into integrated KPIs and rewards.

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New Capability Model

4. Structures & Resources

1. Goals

2. Key Performance Indicators

5. Attitudes, Beliefs and Behaviours

6. Skills and Knowledge

7. Processes and Tools

3. Rewards and Incentives

1.1 Satisfied shoppers

2.1 Sales

Growth

2.2 Margin

2.3 Market Share

2.4 Brand Equity

3.1 Rew-ards hard-

wired to KPIs

3.2 Long-and short-

term balance

3.3 Integrated outcomes rewarded

3.4 Cult-ure rein-forces KPIs

5.1 Long-term,

sustainable

5.2 Joint development

oriented

5.3 Proactively seeking cost reductions

5.4 Flexible about shopper

solutions

5.5 Actively building trust

6.1 Knows trading partner

needs & practices

6.2 Can explain and sell

programs

6.5 Creative about activation

6.3 Skilled application of

insights

6.4 Disciplined use of tools &

methods

7.1 Shopper and

consumer logic

7.2 Category methods drive

strategy

7.3 Agreed decision

model

7.4 Terms of engagement,

escalation

7.5 Systematic cost-to-serve

analysis

7.6 End-to-end supply chain

efficiency

7.7 Rapid efficient date sharing

4.1 Empo-wered cross-

functional teams

4.3 Shopper Marketing function

4.4 Res-ourced to engage

4.2 Can deliver at

POP

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Typical results: Poland

Retailer Manufacturer

43

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Is sweeping changepossible?

52

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New Ways of Working TogetherEliminate value chain disruptions, enable growth

Industry Track (Collaborate)

Best Practices/ Standards

Documentation, Education,

Communication

Guiding Principles and Frameworks

Share Results

• StrategyAlignment

• JAG Framework

Focus on

Consumer

• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

• Knowledge, Skills & Capabilities

• Incentives & Rewards

• organisation Design

Prepare People for New World

Trading Partner Track (Competitive Advantage)

Strategic Issues Between Trading

PartnersCommon Goals,

Common MeasuresSpecific Measures

& PrioritiesOther Data

Sharing Opportunities

Consumer/ Shopper

Satisfaction• Sustainability• Cross

Industry Integration

• Integrated Supply Chain

Share Our Supply Chain

2018 @ ECR Australia Conference 2009 Slide

*Note: Utilizations of Industry Standards

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!Industry and trading partners must do things differently

!Adopt more sustainable business practices

!Collaborative Transport Management, Empty Miles

Share Our Supply Chain

2018 @ ECR Australia Conference 2009 Slide

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The FutureSupply Chain

2018 @ ECR Australia Conference 2009 Slide

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Key trends driving the report

• Increased awareness of CO2

• Increased urbanisation• Regulatory restrictions• Economics of supply

chain• Innovation• …

2018 @ ECR Australia Conference 2009 Slide

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Solutions all focusing on thephysical supply chain INNOVATION

1. In store logistics• In store visibility• Shelf ready products• Shopper interaction

2. Collaborative physical logistics• Shared transport (pooling etc)• Shared warehouse (including x-dock)• Review & Share infrastructure

3. Reverse logistics• Products Recycling• Packaging Recycling• Returnable assets

4. Fluctuations Management forPromotions

• Joint Planning, Execution & Monitoring

5. Identification / Labeling

6. Efficient assets (vehicles / building)• Alternative energies• Efficient / Aerodynamic vehicles• Switching modes• Green building

7. Joint Scorecard & Business plan

8. Regulatory & Environment

2018 @ ECR Australia Conference 2009 Slide

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As Is Situation: The Future Supply Chain 2016

2018 @ ECR Australia Conference 2009 Slide

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To-Be Situation: The Future Supply Chain 2016

2018 @ ECR Australia Conference 2009 Slide

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Conclusions

• True collaboration will be imperative

• Innovation rapidly applied

• Supply chain managers will need newcapabilities.

• New ways of working

2018 @ ECR Australia Conference 2009 Slide

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! Focus on the Consumer will not work if there are not common goals and common measures, if there are not enabling rewards and incentive systems that reinforce the right behaviour.

! Connect our Business will not work if it is not linked to long term, shopper focused business plan; if the ability to share and use data for vertical trading partner, integrated or enterprise level goals are not reinforced; or if the supply chain is still viewed as “yours versus mine” and not shared.

! Prepare our People will be insufficient if there is not a clear, shopper focused business plan focusing the organisation, or if there are not the common goals, common measures and information visibility to act on.

! Share our Supply Chain will not be possible without understanding how every decision made impacts the shopper, today and for the long term; if the information we are looking, the supply chain visibility can not be compared up and down the supply chain; or if we still try to optimize each component of the supply chain, but sub-optimize the whole via siloed goals.

• StrategyAlignment

• JAG Framework

Focus on Consumer

• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

• Knowledge, Skills & Capabilities

• Incentives & Rewards

• organisation Design

Prepare People for New World

• Sustainability• Cross Industry

Integration• Integrated Supply

Chain

Share Our Supply Chain

An Integrated Approach to Better Business Results

2018 @ ECR Australia Conference 2009 Slide

Page 54: 2018 Value Chain - University of Aucklanddocs.business.auckland.ac.nz/Doc/...value-chain-project...response.pdf · The Future Value Chain Project, ... challenges are similar across

Get Started• You identify the “WHAT”

– Trading Partners- Pick a problem to solve or an opportunity to progress.

– ECR-A - Pick a problem to solve or an opportunity to progress.

• Use the New Ways of Working Together Framework as the “HOW”

54

Industry Track (Collaborate)

New Ways of Working TogetherEliminate supply chain disruptions, enable growth

Best Practices/ Standards

Documentation, Education,

Communication

Guiding Principles and Frameworks

Share Results

• StrategyAlignment

• JAG Framework

Focus on

Consumer

• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

• Knowledge, Skills & Capabilities

• Incentives & Rewards

• Organization Design

Prepare People for New World

• Sustainability• Cross

Industry Integration

• Integrated Supply Chain

Share Our Supply Chain

Trading Partner Track (Competitive Advantage)

*Note: Utilizations of Industry Standards

Strategic Issues Between Trading

Partners

Common Goals, Common Measures

Specific Measures & Priorities

Other Data Sharing

Opportunities

Consumer/ Shopper

Satisfaction

Industry Track (Collaborate)

New Ways of Working TogetherEliminate supply chain disruptions, enable growth

Best Practices/ Standards

Documentation, Education,

Communication

Guiding Principles and Frameworks

Share Results

Best Practices/ Standards

Documentation, Education,

Communication

Guiding Principles and Frameworks

Share Results

• StrategyAlignment

• JAG Framework

Focus on

Consumer

• StrategyAlignment

• JAG Framework

Focus on

Consumer

• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

• Common Goals & Measures

• Information Sharing*

• EPC• Data Sync

Connected Business

Information

• Knowledge, Skills & Capabilities

• Incentives & Rewards

• Organization Design

Prepare People for New World

• Knowledge, Skills & Capabilities

• Incentives & Rewards

• Organization Design

Prepare People for New World

• Sustainability• Cross

Industry Integration

• Integrated Supply Chain

Share Our Supply Chain

• Sustainability• Cross

Industry Integration

• Integrated Supply Chain

Share Our Supply Chain

Trading Partner Track (Competitive Advantage)

*Note: Utilizations of Industry Standards

Strategic Issues Between Trading

Partners

Common Goals, Common Measures

Specific Measures & Priorities

Other Data Sharing

Opportunities

Strategic Issues Between Trading

Partners

Common Goals, Common Measures

Specific Measures & Priorities

Other Data Sharing

Opportunities

Consumer/ Shopper

Satisfaction

Consumer/ Shopper

Satisfaction