Connected Retail Supply Chains: Racing towards 2025
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Transcript of Connected Retail Supply Chains: Racing towards 2025
Connected Retail Supply Chains
Racing towards 2025
Stuart HarkerPartnerSeptember 2016
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…
…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.
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
4
Globalmegatrends
5
Mega trends will progressively influence retail supply chains…
6
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
7
Consumer & market
trends
The supply chain fundamentals will not change…
8
…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
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
Consumer and major market trends are and will continue to drive material change in future supply chains…
10
Customer
Technology
OmnichannelGlobalisation & consolidation
TalentDisruption & risk
11
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
12
Strong customer value propositions will continually change and be redefined
Customer profiles
Personalised serviceValue
Price transparency Range Convenience
Marketing & promotions
Customers now expect personalisation and curation
13Image source: Company websites
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
Online expenditure in Australia will continue to grow
15
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
The impact of this growth of omnichannel on supply chain and logistics has seen…
16
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
The increased level of complexity, cost and pace of change will require organisations to…
17
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
Globalisation & Consolidation
18
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
19
• Technology infrastructure and integration
• Systems integration
• Internet of Things (IoT)
• RFID
• Big data and analytics
• Cognitive insights
• Mobile and digital
• Payments
• Wearables
• Cloud
Technology
• 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
20
Technology
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
21
Technology: Cyber
Enterprise
Consumer
Suppliers
JV/Partners
Service Providers
Industry/Competitors
Customer
Technology
En
vir
on
me
nta
l
Economic
Image source: PwC Cyber
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
22
Technology: RFID
Image source: Company websites
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
23
Technology: Big data & analytics
• Product traceability
• RFID
• Quality and warranties
• Insights across supply chain
Where is the value potential of the Internet of Things?
24
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
Internet of Things (IoT): sensing and sense making
25
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
26
Technology: Automation & robotics
Image source DHL Self-driving vehicles in logistics
27
Technology: Beacons, Wearables, Mobile
Image source:Forbes, DHL, zdnet
28
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
29
Government & infrastructure
trends
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
30
Infrastructure
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
31
Regulatory & tax
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
What can you do?
In summary, supply chains in 2025 will be have the following characteristics…
34
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
…which will drive the “connected and transparent” supply chain of 2025 and will be built around…
35
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
Thank you
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