Connected Retail Supply Chains: Racing towards 2025

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Connected Retail Supply Chains Racing towards 2025 Stuart Harker Partner September 2016

Transcript of Connected Retail Supply Chains: Racing towards 2025

Page 1: Connected Retail Supply Chains: Racing towards 2025

Connected Retail Supply Chains

Racing towards 2025

Stuart HarkerPartnerSeptember 2016

Page 2: Connected Retail Supply Chains: Racing towards 2025

Traditional supply chains as we know today will be extinct by 2025 as various trends

and disruptive forces drive change and new connected distribution models emerge…

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…the only consistency during this time will be the accelerating level of change across

organisations.

There will be more change in the next 10 years than in the last 25 years.

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The ever changing retail landscape will see substantial changes to global supply chains by 2025 due to…

Global megatrends

Consumer & market

trends

Government &

infrastructure trends

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Globalmegatrends

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Mega trends will progressively influence retail supply chains…

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Climate change & resource scarcity

Demographic shiftsShift in economic

power Technology Accelerating urbanisation

Pop of 8.3b by 2025 ; 7.4b today

Infrastructure stretch on ports, airports

Mega cities outside of major cities

Electric vehicles

Scarce resources Increased regulation

& taxes Sustainability 8.3b pop by 2025 will

need: 50% energy 40%water 35%food

21% by 2050 over 60 Polarisation of haves and

have nots Talent shortages New skills Ageing Gen Y individuals with

digital shopping behaviour

Asia powerhouse Shift in power to Asia Increase in wealth New markets &

competitors

Changing operating models enabled by technology

New and more complex Data – expected growth Digital impacts Consumers using multiple

connected devices Omnichannel to

continue growth

…and these will drive substantial changes in supply chain

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Consumer & market

trends

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The supply chain fundamentals will not change…

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…but the competitive market and operating environment will require supply chains to fundamentally change due to consumer demands, increasing length, complexity, cost and growth

Right products

Right place

Right time

Right cost

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Consolidation

Customer

Government

Regulatory

Technology

Collaboration & TrustInternet of Things

Consumer personalisation

Analytics

Value equation

Sustainability & environment

Automation

Costs

Complexity

Offshore/onshore

Sourcing

Diversity

Productivity

Risk

Talent

Cyber security

GlobalisationSafety

Operating model

Digitisation

Social networks

Labour costs

Transparency

Connectivity

Mobile

Big Data

Global Competition

Disruptive technology

Omnichannel growth

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Consumer and major market trends are and will continue to drive material change in future supply chains…

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Customer

Technology

OmnichannelGlobalisation & consolidation

TalentDisruption & risk

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Customer: Everchanging, complex and promiscuous

Shops globally

Difficult to engage and

complex

Shops anywhere, anytime

Time poor More informed

Connected and

empowered

Always connected and always on…

Image source: Google Images

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Strong customer value propositions will continually change and be redefined

Customer profiles

Personalised serviceValue

Price transparency Range Convenience

Marketing & promotions

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Customers now expect personalisation and curation

13Image source: Company websites

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Connected customers who are always on…

Connectedcustomer

Customer focused with transactions

anywhere

Social media

Consumer networks

Market place Trust &

privacy

Integrated

Supply chain

In store

Engagement

Curation

Experience

Personalisation

Insights

Big data

Productivity

People

Operations

Merchandising

Enablement

Value proposition

Technology

Seamless

In store ecosystem & experience

Empowerment

Analytics

14Source: PwC Connected Retail

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Online expenditure in Australia will continue to grow

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Omnichannel

the seamless integration between the online

and offline world

7.3% Percentage of retail sales

$18.1bnTotal retail spending

11.4%Annual growth

And projected to be 9% plus… in 2018

Source: NAB Online Retail Sales Index

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The impact of this growth of omnichannel on supply chain and logistics has seen…

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Greater complexity & cost to organisations due to:

Free and time driven delivery

Same day/one day delivery

Multiple delivery preferences

Returns options

Click and collect services

Global delivery points

Parcel points

Predictive purchasing

SKU proliferation

Order processing speed and accuracy

And this complexity will continue and require a need for:

Inventory accuracy and visibility

Personalisation and curation

Image source: DHL, Google Images

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The increased level of complexity, cost and pace of change will require organisations to…

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Containing or reducing costs will be a priority

Technology systems and integration will be the key enablers and drive innovation

Agility, flexibility, efficiency will be key to success

Inventory visibility, traceability and accuracy will be essential for customers and brand reputation

Data management and Analytics will need to be core competency and high priority if customer insights and understanding are to be obtained in a timely manner

Collaboration and integration with suppliers will be critical; collaborative warehousing will become core to efficiency and lower costs

Increase investment in supply chain

Sustainability and ethics will be fundamental to future supply chains

Source: Retail Week -Supply Chain Trends and innovations in retail 2014-2015

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Globalisation & Consolidation

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Globalisation will continue to drive transformation and this will drive industry consolidation

Large transactions will continue – global and local. Scale and capital are the drivers to invest and grow

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• Technology infrastructure and integration

• Systems integration

• Internet of Things (IoT)

• RFID

• Big data and analytics

• Cognitive insights

• Mobile and digital

• Payments

• Wearables

• Cloud

Technology

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• Technology is the core enabler of the Customer driven supply chain

• Investment in CAPEX will be greater than before

• System integration is critical to success for visibility across supply chain –supply & demand; single view of customer and products

• Data warehousing and analytical tools are vital; RFID impact

• Integration and collaboration/partnership with all stakeholders; mitigating risk

• Mobile, cloud, etc.

• Old metrics and ROI are no longer relevant

• Disaster recovery becomes critical

• Uber impact

• Cognitive ecosystems drive enhanced customer experience

• Connected distribution ecosystems

• Cyber security increasingly important as supply chains become larger and connected across the world

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Technology

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The global cyber challenge extends beyond the enterprise and now includes:

All people, process, technology and extended ecosystems:

• The extended supply chain has and will have numerous partners

• Various data flows

• Connectivity and collaboration with known and unknown partners

• Supply chains in the future will increasingly be interconnected, integrated and interdependent

• Cyber risks cannot be viewed in isolation

• Supply chains will have material risk

• High ethical standards

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Technology: Cyber

Enterprise

Consumer

Suppliers

JV/Partners

Service Providers

Industry/Competitors

Customer

Technology

En

vir

on

me

nta

l

Economic

Image source: PwC Cyber

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Rapidly expanding in apparel across the world

Now commencing in Australia

Tracking inventory and assets across the Supply Chain

Data quality and accuracy

Analytics

Visibility across supply chain

Industry collaboration required in some industries such as CPG & retail to make it successful

Technology impact

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Technology: RFID

Image source: Company websites

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More data in last 3 years than in last 30 years

Personalisation and curation

Impact on data warehouse and tools

Data visualisation critical for success

Data flows – complex, numerous and quantity of data, i.e. IoT

Potential impact on:

• Productivity & operational efficiency

• Visibility

• Customer experience

• Supply chain risk management

• Business model innovation

• Talent

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Technology: Big data & analytics

• Product traceability

• RFID

• Quality and warranties

• Insights across supply chain

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Where is the value potential of the Internet of Things?

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Technology: IoT

Source: McKinsey Global Institute – The Internet of Tings: Mapping the value beyond the hype

Retail environmentsAutomated checkout

$410bn-1.2tr

FactoriesOperations & equipment

optimisation$1.2tr-3.7tr

OfficesSecurity & energy

$70bn-150bn

HomeChore automation

& security$200bn-350bn

VehiclesAutonomous vehicles &

condition based maintenance$210bn-740bn

CitiesPublic health & transportation$930bn-1.7tr

WorksitesOperations optimisation /

health & safety $160bn-930bn

OutsideLogistics & navigation

$560bn-850bn

HumanHealth & fitness

$170bn-1.6tr

9 settingsGave us a cross-sector view of a

total potential impact of $3.96trillion-11.1trillion

per year in 2025

2x more valueFrom B2B applications than consumer

Interoperability required to capture 40% of total value

Developing: 40%

Developed: 60%

<1% of data currently used; more can be used for optimisation & prediction

Types of opportunities:

Transform business processes

Predictive maintenance, better asset utilisation, higher

productivity

Enable new business models

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Internet of Things (IoT): sensing and sense making

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Technology: IoT

Image source: Cisco Consulting

Successful implementation of IoT will require a clear vision, strong collaboration and trust by all stakeholders within the supply chain, standardisation of systems/components, and also the ability to invent as required.

• Inventory management via RFID• Fleet & asset management• Risk mitigation• Health & safety• Infrastructure sensors• Real time routing• Connected workforce• Pay as you go• Autonomous vehicles• Predictive asset lifecycle management

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Technology: Automation & robotics

Image source DHL Self-driving vehicles in logistics

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Technology: Beacons, Wearables, Mobile

Image source:Forbes, DHL, zdnet

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Operating model changes

Supply chain talent will require:

• Demand, skills, image, training

Changing needs in next 10 years will require different:

• Leadership

• Executives and team skills

• Skills – technical, analytical, commercial and collaborative

Acquire, retain and develop

Talent

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Government & infrastructure

trends

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Level of capacity at ports will continue as many organisations have shifted sourcing offshore and congestion and delays will continue

A government review is underway; privatisation will assist development

Increase congestion zones and additional tolls/charges likely

Increased investment required in rail but unlikely due to capital required (approx. $3-13bn)

Antiquated rail, road and sea infrastructure is costing the Australian economy an estimated $9bn per year

Government economic situation unlikely to change re budget deficit

Substantial impact in productivity and cost of doing business

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Infrastructure

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Regulatory framework must be harmonised

Agreements on standards to assist in shaping the digital future re IoT, etc.

Regulatory environment will only increase and compliance critical re. chain of responsibilities

Tax and duties optimised to be competitive in a global market place

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Regulatory & tax

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Future global supply chains will need to be constantly monitored to ensure compliance and government charges are optimised…

Free trade agreements

Export controls or sanctions

Export rebatesBio security obligations

Product standards

Free trade zones

Customs duty

Trade facilitation schemes

Border interventions, eg

Quarantine

Environment levies and discriminatory

taxes

Customs Reporting

Bonded warehouses & Indirect tax

deferral

Tax exposure

Regulatory exposure

Concept Offshore Factory

Offshore Warehouse

Haulage HaulageExport Wharf

ImportWharf

Overseas freight

Local warehousing & distribution

Retailer Customer

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Excise duty & returns

Packing standards

Trading terms with vendors

Labelling Requirements

GST/VAT imports

Supply chain security

Ethical sourcing assurance

Tax incentives

R&D incentives Fuel tax

Chain of responsibility

regulations

Government incentives

Truth in labelling

GST/VAT optimisation

E-commerce and Low value threshold

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What can you do?

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In summary, supply chains in 2025 will be have the following characteristics…

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Customer Driven Supply Chain

Regulatory& Tax

Digital Transformation

People & Leadership

Technology StrategicAlignment

Risk Privacy & Cyber

…and will need to be agile, transparent and connected if retailers are to be efficient, competitive and relevant to their customers

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…which will drive the “connected and transparent” supply chain of 2025 and will be built around…

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Global sourcingGPS

Control tower analytics

Social network

Safety

RFID

Portals

Returns

Automation

Data based routing

3D printing

RoboticsProcurement

Environment management

Predictive Analytics

Big data

Optimisationtools

Technology infrastructure

Risk management & analytics

Dynamicreporting

Data analytics IoT

Wireless

Cloud computing

MobileConnectivity

Collaborative partners & suppliers

Digital media duplication

@

Vendor managed inventory

Logistics Management

Predictive ETA’s

Retailer

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Thank you

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