BUILDING THE SHOPPING 2020
SUPPLY CHAIN
Rapportage expertgroep Supply Chain
Januari 2014
© Shopping 2020
Preface
Shopping 2020: Supply Chain
Shopping 2020: the battle of supply chains!
Online retail is growing faster than many of us expected. Consumers are ready and should be buying over 30% of their purchases online by 2020. Are
retailers and manufacturers prepared for this? Are they ready to pick individual items in these quantities and prepare the corresponding shipments for
the consumer? Some companies already act on the rapidly changing behavior of consumers. A good example is Amazon®. By using a clever business
model, they can offer lower prices than retail giant Walmart. This will fuel their attractiveness for investors and will enable them to build state of the art
supply chain capabilities. By now, in Germany alone, Amazon® already has 800.000 m2 of distribution space. Google® has started Google Express®, a 1
hour delivery service for Google Shopping®. What will be your answer to this?
Shopping 2020 will become the battle of supply chains. 2020 still looks far ahead but those who don’t take action now will be out of business tomorrow.
If there is one conclusion we can draw from our research and vibrant discussions, it is the necessity to start moving now, in order to be ready on time
for 2020! Are you prepared?
The expert group Supply Chain (see next page) has compiled their expertise and insights in this report. It contains over 25 recommendations on how to
build competitive supply chain competences over the next 6 years. The number of recommendations might look quite high, but condensing them would
lead to a loss of practical insights. Reference cases have also been included to bring the recommendations alive.
For us, taking part in this expert group and the Shopping 2020 program brought us an incredible amount of new insights and a clear view of how supply
chains are impacted by them. I hope that reading the report will have a similar effect on you and that it will motivate you to continue discussions and
initiatives to prepare our country, your company and its supply chain partners for 2020. We kindly thank the expert group members and interviewees
for sharing their vision, experience and insights from which this report has been constituted. It has been a pleasure working with you!
Frits
van den Bos
Frits van den Bos
Innovation manager GS1 Netherlands
Host Shopping 2020 expert group Supply Chain
+ 31 (0)6 50654722
frits.vandenbos@gs1.nl
Axel
Groothuis
Axel Groothuis
Partner Eurogroup Consulting
Chairman Shopping 2020 expert group Supply Chain
+31 (0)6 51243288
a.groothuis@eurogroupconsulting.nl
© Shopping 2020
1
Expert group Supply Chain
Shopping 2020: Supply Chain
Henk-Jan
Groeneveld
Kees Jan
Roodbergen
Theo
Heemskerk
Jacco
Timmerman
Jos
Visee
Hans
Elshout
Benjamin
Grugeon
Bart
Lammers
Erwin
Grondman
Rowell
Versleijen
Robin
Tichler
Pieter
Aarts
Rens
Tap
Martijn
Arkesteijn
Ferry den
Hoed
Erik
Velthoven
Maarten
van Welsem
Jerry
Tracey
Interviews
Frank
Balder
Frits
van den Bos
Axel
Groothuis
For more details: see appendix
© Shopping 2020
2
Contents
Shopping 2020: Supply Chain
▪
▪
▪
▪
▪
▪
▪
▪
▪
Management summary
Research approach
Future trends
Supply chain trends
Business models
Scenarios 2020
Building the future supply chain
Conclusions
Appendices
– Expert group and interviewees
– Program information Shopping 2020
– Reference cases
© Shopping 2020
3
MANAGEMENT SUMMARY
Building the shopping 2020 supply chain
© Shopping 2020
4
Management summary (1)
Shopping 2020: Supply Chain
Introduction: the battle of the supply chains
Shopping 2020 will become the battle of the supply chains. 2020 still looks far ahead but those who don’t take
action now will be out of business tomorrow. The expert group Supply Chain has researched trends and scenarios
and comes up with concrete recommendations for supply chain partners
Research questions: the future supply chains
The research approach (scope: all sales channels) is aimed to answer the following questions:
▪ What is the impact of current trends and future developments on the supply chain?
▪ What capabilities are required in supply chain dimensions like sourcing, planning, inventory and returns?
▪ Which actions can companies take to respond to those developments?
Approach: pragmatic and expert based
Both overall and supply chain trends are
described, including current best practices. Several
possible scenarios are detailed. By making use of
four concrete business models, and taking into
account all trends, supply chain models are
developed.
Concrete recommendations per supply chain
dimension are then presented to (further) develop
these capabilities.
© Shopping 2020
5
Management summary (2)
Shopping 2020: Supply Chain
Future trends lead the way
The future trends are grouped into four areas:
1.
2.
3.
4.
Consumer. The consumer requires 24x7 transparency in the supply chain. There is 24x7 connection and the consumer requires
increased responsiveness to his needs.
New technologies. Modern technology (Mobile, Big Data, Digitization) raises consumer expectations in terms of products,
availability, information and services. Furthermore, it is conceivable that disruptive change will arrive with new technologies such as
3D printing and ‘the internet of things’
Sustainability. Supply chain partners need to collaborate to achieve sustainability.
New legislation. EU legislation moves towards strengthening consumer rights, which raises extra challenges for the supply chain.
Supply Chain trends in six dimensions
Supply chain trends are grouped into six dimensions:
1.
2.
3.
4.
5.
6.
Sourcing. Shorter product life cycles require responsiveness to minimize stock risks. Also assortments and customization will grow
further.
Supply Chain Control. Borders between retail and product brands dissolve. Margins will become smaller, leading to elimination of all
non value-add activities.
Handling and Transport. Delivery times will diminish further. Congestion requires bundling of transport.
Inventory & Planning. (Online) shelf availability will be increasingly important. Stock visibility across the supply chain will become a
key requirement.
Information. There is a growing amount of information to share across the supply chain, leading to high data volumes to be handled
and making further standardization a necessity.
Returns and leftovers. The number of returns increases and mass customization and fashionability lead to difficulties in reselling
returned items.
© Shopping 2020
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Management summary (3)
Shopping 2020: Supply Chain
New business models arise
In the current and future (online) market new commercial business models emerge.
We distinguish between four basic models which are used in related supply chain models:
1.
2.
3.
4.
Marketplace (e.g. Ebay, Kieskeurig);
Generic reseller (e.g. Amazon, V&D);
Specialist reseller (e.g. Camerashop, Run2Day);
Brand direct-to-consumer (e.g. Apple)
Supply Chain models show complexity
The set up of a supply chain is largely dependent on the business model.
The four basic business models have been translated into their matching
supply chain models and the 3D printing supply chain model has
been added.
Scenarios 2020 take uncertainties into account
Future scenarios show the importance of supply chain flexibility and transparency. Extreme outcomes of current
uncertainties may significantly impact the 2020 supply chains. Examples of this are:
•
•
•
When a large orchestrator will dominate the market, the only way to survive may be to join;
When one hour delivery becomes the norm, storage of products near consumers becomes necessary;
When 3D printing will explode, it means disruptive change in many physical supply chains.
© Shopping 2020
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Management summary (4)
Shopping 2020: Supply Chain
Building the future supply chain. Will you be ready in time?
Actionable recommendations for all dimensions. Key examples:
• Sourcing: Differentiate in sourcing locations and consider vertical integration to improve responsiveness;
• Inventory and Planning: Acknowledge complexity in planning and professionalize. Collaborate to improve
forecasting and use online opportunities to demand sensing. Introduce an ‘inventory captain’ role to optimize
stock availability across channels;
• Handling and transport. Determine stock locations based on delivery times to consumer. Organize stock
flexibility and efficiency across bulk and consumer units (merge online and offline). Offer different delivery
options and centralize personal preferences.
• Returns and Leftovers: Implement clear return policy and charge reasonable cost. Speed up the return
process and prevent returns using product information, standardization and consumer interaction. Consider
specialized partners for return and repair handling.
• Supply Chain Control: Focus the supply chain control on integral profitability and measure profitability across
channels.
• Information: Build information exchange with partners on cross industry standards. Manage data quality.
Prepare for the internet of things!
Two additional topics for recommendations are 3D printing and ‘small retailers’:
• 3D printing: Facilitate consumers in production and implement raw materials transport to consumers;
• ‘Small retailers’: Participate in buying groups and shared services to create buying power. Collaborate to reach
and service the consumer.
© Shopping 2020
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Management summary (5)
Shopping 2020: Supply Chain
Conclusions: Winning the battle!
In order to win the ‘battle of the supply chains’ in 2020, it is essential to develop key supply chain capabilities
around ‘Flexibility’, ‘Collaboration’ and ‘Information’. These are the key elements:
1. Flexibility: Think about your specific role in the new competitive landscape. Focus on distinguishing added
value you can bring. Create flexibility in sourcing and stock in order to have all stock available to all channels.
2. Information: Invest in standardization and information exchange by building an information exchange with
partners on cross industry standards. Supply chain visibility (stock and tracking & tracing) and operational
excellence in data quality will become key.
3. Collaboration: Seek flexible partnerships and ‘dare to share’ information with your partners. Create
transparency. As a ‘small retailer’: work together in buying groups and consumer marketing.
And: in order to win in 2020: start now!
© Shopping 2020
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RESEARCH APPROACH
Expert Group Supply Chain
© Shopping 2020
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Building the Shopping 2020 supply chain
Research approach: Objectives and scope
Objective and research questions:
Supply chain requirements are changing as a result of the online ambitions of the Netherlands, macro developments
and changing consumer habits. To identify these changes and potential responses, the following research questions
were formulated:
1.
What is the impact of current trends and future developments on the supply chain?
2.
What capabilities are required in supply chain dimensions like sourcing, planning, inventory and returns?
3.
Which actions can companies take to respond to these developments?
Scope:
• Channels: the starting point is sales via all channels, with a focus on the growth of digital channels (web shops,
mobile commerce, et cetera) taking into account that the distinction between online and offline is becoming
blurred for the consumer.
• Target Groups: All companies whose products are sold online (B2B2C).
• Industries: Only physical products (food & non-food), no travel and finance.
• Regions: International developments and cross border e-commerce are considered,
the research is primarily focused on the Dutch consumer and Dutch companies.
• Supply Chain scope: From finished product to end consumer
• Including customization / assembly
• Excluding “the last mile” delivery (= expert group Delivery)
• Excluding warehouse operations (WMS, picking technology et cetera)
For more information regarding the Shopping 2020 program: see appendix
© Shopping 2020
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From trends to concrete recommendations
Research approach: Methodology
Methodology
Supply chain
models
• Interviews
• Expert Group
meetings
• In depth topic
discussions
• Best practices
research
• USA visit
Supply chain
dimensions
Current trends and possible future developments impact the supply chain models. This impact shows some crucial
supply chain capabilities to remain competitive in 2020. Concrete recommendations per supply chain dimension are
given to develop these capabilities.
© Shopping 2020
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FUTURE TRENDS
Trends that impact the future supply chain
© Shopping 2020
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New requirements are changing the supply chain landscape
Future trends: Overview
CONSUMER
SUSTAINABILITY
REQUIRES 7x24 TRANSPARENCY
REQUIRES COOPERATION
•
•
•
•
• People require
sustainability
• E-commerce effects on
the planet increase
• Profits leave
little room
for large
investments
Social media
24/7 connected
In control and informed
Responsible individual
Growth
e-commerce
NEW TECHNOLOGIES
NEW LEGISLATION
LEAD TO NEW REQUIREMENTS
AND OPPORTUNITIES
IMPACTS THE E-COMMERCE
SUPPLY CHAIN
• Mobile, location based,
touch points
• Big data
• Digitalization
(products and services)
• 3D printing
• AutoID: RFID, barcoding
• Internet of things
• Privacy
• Consumer
rights
• Safety
• Sustainability
• Cross border e-commerce
• City distribution
© Shopping 2020
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The consumer requires ‘7x24 transparency’ in the supply chain
Future trends: Consumer
▪ Social media
– Consumers are using social media to get informed and to express their
▪
▪
▪
opinions
– Via social media companies receive direct feedback on their activities
24/7 connected
– Connected always and everywhere is the new standard for consumers
In control and informed
– The amount of available information will make consumers increasingly
informed and bring them more and more into control; customer loyalty is
declining / becoming more rational
Responsible individual
– Consumers would like to know origin and characteristics of products
– Social responsible organizations have a higher appeal for consumers
Increased connectivity and social
media use
of Dutch
consumer…
Towards
24/7
connectivity…
> 60% …of Dutch people between 16-
74 years are using social media
(20111)
> 60M …hours spent on social media in
the Netherlands (20122)
> 73% …of Dutch people between 1825 years use mobile phones
daily for social networking
(20111)
The modern critical consumer requires transparency throughout all links in the supply chain, 7 days week 24 hours per
day. To meet this requirement, companies have to register, check and share a growing amount of information.
Moreover, the consumer gets more and more into control, which requires an increased responsiveness to his latest
needs and desired changes.
1
© Shopping 2020
2
cbs.nl
comscoredatamine.com
15
New technologies lead to new requirements and opportunities
Future trends: Technology
▪ Mobile, location based
– The number of touch points will keep on growing; in the end touch points will be
▪
▪
▪
▪
▪
everywhere
– Consumers are recognized ‘everywhere’ via mobile or via biometrics technology
and their location is ‘always’ known
Big data
– Due to an abundance of information consumers only respond to relevant
information and offerings
– The growing use of smaller (mobile) devices increases the need for relevance in
information presented
Digitization (products and services)
– Products and services (as books and movies did) turn into digital appearances
– The role of physical stores diminishes and changes
AutoID: RFID, bar coding
– Physical tagging allows continuous identification, tracking and tracing of products
Internet of things: see next slide
3D printing: see next slide
Technology drives number of
touch points, online sales & 3D
market
> 8M
…Dutch people possess a
smartphone (20121)
connected to the internet.
24%
…Expected retail sales via
the internet in 20202
$2.2B
…the worldwide market for
3D printer & serivces
(20123)
Modern technology raises new consumer expectations in terms of products, availability, information and services.
Supply chain partners need to collaborate to provide crucial, rich and varied product information in an efficient way.
Further digitization of products & services and 3D printing will finally mean a disruptive change to many supply chain
structures.
1
© Shopping 2020
2
3
http://www.gfk-retailreports.nl/#telecom
Source: Forrester Research; team analysis
Source: Economist
16
Internet of things and 3D printing may cause a disruptive change
Future trends: Technology
Internet of things
Products are communicating 24/7 with the world via
the internet…
3D Printing
Consumers are able to print products themselves based
on designs and raw materials…
Products are always connected to the internet. This
means that consumers have access to all relevant
information regarding these products. Information
about products automatically comes to consumers and
supports them in all kind of activities.
Consumers become producers, who are only
dependent on third parties for raw materials.
Companies become less dependent on pre-made,
expensive molds for production and on spare parts.
Supply chain impact
As a result, consumers and companies are
continuously informed about products, their location
and status throughout the entire supply chain.
Supply chain impact
The supply chain for 3D printing is more flexible with
less inventory, less returns and forecasting of raw
materials on a centralized level.
© Shopping 2020
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Supply chain partners need to collaborate to achieve sustainability
Future trends: Sustainability
▪ People require sustainability
– Consumers and legislation increasingly require insight into product
▪
▪
origin and are not satisfied with current information on product labels
– Companies being the last link of a supply chain currently bear the
overall supply chain responsibility towards consumers
E-commerce effects on the planet increase
– E-commerce leads to an increase in parcels, returns, packaging material
and possibly truck / car kilometers
Profits leave little room for large investments
– Efforts in sustainability may result in a negative effect on profitability
in the short run, but must be considered as a long term investment.
However, current profits in general are limited, which leaves little room
for investments
Returns and non-deliveries
impact the environment1
28%
…of parcels are not
delivered upon the first
time.
25%
…of 88 million orders was
sent back by Dutch
customers in 2012
75%
…of carton packages are
used for transport, of which
90% for e-commerce
Although the net effect is hard to determine, e-commerce causes some negative effects on sustainability through
increase in parcels, returns, packaging material and inefficient transport. Retailers, partners and consumers need to
collaborate to achieve more sustainable supply chain solutions and arrange proper consumer information like product
origin and ingredients.
© Shopping 2020
1
Sources: Selektvracht, J.Visser & J. Francke,
2013, Vereniging Golfkarton)
18
New legislation impacts the e-commerce supply chain
Future trends: Legislation
▪ Consumer rights
– EU legislation moves towards strengthening of consumer rights, e.g. 14 days withdrawal right
▪
and increased price transparency
Especially sellers of fashionable and return intensive products will suffer from these rules
–
Privacy
– An increasing amount of customer specific information will be captured online, which needs
to be safeguarded
▪ Sustainability
– Legislation for provision of green supply chains is expected when retailers, service providers
EU legislation impacts supply
chain by giving more rights
to consumers
and consumers together do not reduce the environmental cost of delivery, returns and
packaging.
14
– Common rules for simplifying cross-border trade will be introduced by legal bodies such as
14
▪ Cross border e-commerce
the EU; for trade outside Europe this will be much harder to achieve
▪ City distribution (urbanization/infrastructure)
– Barriers for 24/7 deliveries in city centers may grow
2%
…days withdrawal right will
be the new standard
…days instead of 30 days
will be the time suppliers
have to refund after
withdrawal
…of global revenue is the
maximum fine for noncompliance with privacy
legislation
EU legislation moves towards strengthening consumer rights, which raises extra challenges for the supply chain. Strong
governmental influence is expected when suppliers and consumers do not reduce the environmental impact of
deliveries, returns and packaging.
© Shopping 2020
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Until 2020 online shopping is expected to double or triple in size
Future trends: Growth of e-commerce
Online penetration
Cross border as a % of total
2020
VOC 2.0 – “Attract
shoppers from
outside of Europe”
24.4%
15.1%
2020
BEST IN EUROPE
– “Boost cross
border sales within
Europe”
22.5%
8.1%
2020
WORLD CLASS
HOME MARKET –
“Accelerate
domestic growth”
21.6%
4.1%
2020
14.3%
“Do nothing”
6.1%
2012
Current state
8.8%
6.1%
NL
Europe
World1
Total
NL
Europe
World1
Total
NL
Europe
World1
Total
NL
Europe
World1
Total
NL
Europe
World1
Total
28.2
2.5
0.0
30.7
28.2
1.1
0.0
29.3
28.2
2.5
2.5
33.2
▪
▪
18.3
1.1
0.0
19.4
▪
9.8
0.6
0.0
10.4
▪
Source: Forrester Research and McKinsey / GFK for Shopping2020
The percentage online spending as
part of total consumer spending is
expected to grow to 28% in 2017
and 36% in 2020
For non-food physical goods the
online market share per segment
differs between 22% and 51% in
2020
Cross border e-commerce will be
15% of total e-commerce at
maximum
Triple size e-commerce will mean a
significant increase in complexity in
producer and retail supply chains
The potential growth to € 28.2 Billion online turnover in the Netherlands and to € 33.2 Billion including cross-border ecommerce will mean a significant increase in supply chain complexity. Winners are expected to be those who are able
to create a ‘total retail experience’ in both online and offline channels.
© Shopping 2020
20
SUPPLY CHAIN TRENDS
Current supply chain trends driving the future supply chain
© Shopping 2020
21
Future trends drive supply chain complexity and information need
Supply chain trends: Overview
SOURCING
SUPPLY CHAIN CONTROL
HANDLING & TRANSPORT
• Product life cycles shorten
• Assortments and customization grow
• Offshore production cost advantages
diminish
• Vertical integration; borders between
retail and product brands dissolve
• Smaller margins require tight control
and efficiency
• Growth of expectations about
delivery speed and options
• Congestion requires bundling
• Growth of ecommerce increases
inefficiencies in stock handling
Supply chain
dimensions
Sourcing
Supply chain control
Inventory &
planning
Handling
Transport
Returns
‘Leftovers’
Information
INVENTORY & PLANNING
INFORMATION
RETURNS & LEFTOVERS
• (Online) shelf availability increasingly
important
• Inventory risk is moved upward in the
supply chain
• # orders increase, order sizes 
• Growing importance of track & trace
and product (meta) data
• Sales and stock information across
channels required
• Growing use of data pools
• Number of returns increases due to
e-commerce
• Customization and fashionability lead
to difficulties in reselling returned
items
© Shopping 2020
22
Shorter product life cycles require responsiveness
Supply chain trends: Sourcing
Trends
▪ Product life cycles shorten:
– Products become more fashionable, which leads to an increase
in assortment changes per year
– Developments in technology result in new innovative products
that replace each other rapidly
▪ Assortments and customization grow
– Due to the ‘one-stop-shopping’ promise and demanding
consumers, assortments are growing steadily
– Customization and exclusivity have become new standards,
resulting in a growing number of variants and semi-finished
products
▪ Offshore production cost advantages diminish
– As a result of an increase in wages in the Far East
Consequences
▪ Need for responsiveness in sourcing and production to minimize
stock risk (risk of sell out or leftovers)
Bottlenecks
▪ Long time to market for new products based on existing contracts
with sourcing partners
▪ Long production, transport and control cycle times overseas
© Shopping 2020
Insatiable demand leads to shorter product
life-cycles
“Most of us have a sense that low prices in Dubuque, US,
have something to do with low wages in Dhaka,
Bangladesh, but that’s just one aspect of the pressure
that we as consumers exert on global supply chains. Our
insatiable demand for variety and novelty has led to
ever-shorter product life cycles. In consumer electronics,
the average product is replaced in just eight months.”
James Surowiecki, quoted in the Economist, May 2013.
Need for responsiveness in production to
minimize stock risk
“Instead of buying lots of inventory with long lead times,
brands wait as long as possible before ordering.” That
way, they can ramp up production if a product takes off
or shut it down if the product bombs... ”
Richard Locke, a political scientist at M.I.T. who is an
expert on global supply chains and the author of the new
book “The Promise and Limits of Private Power,”, quoted
in the Economist, May 2013.
23
(Online) shelf availability is key while stock risk is increasingly high
Supply chain trends: Inventory & planning
Trends
▪ (Online) shelf availability increasingly important
– As competition is just one click away, even in physical stores, shelf availability is key, both online and offline.
High square meter prices and demand for long tail assortments are complicating factors, while online offers
new opportunities to increase availability.
– This also requires stock transparency and correct inventory information (all locations and in transit)
▪ Inventory risk is moved upward in the supply chain
– As retailers can no longer bear the increased inventory risk, they require product brands to work via different
stock ownership models
▪ Increase in number of orders while order sizes become smaller at product brands
– To minimize stock risk in a wholesale model, retailers order more often smaller quantities at product brands
– Direct e-commerce orders lead to smaller (or even individual consumer)
orders at product brands
Bol.com increases assortment & revenue
while avoiding inventory risk
Consequences
In its continuous search for a quick and controlled
▪ (Online) shelf availability and stock visibility across
expansion of its assortment, Bol.com has introduced a
platform called Bolplaza. On this platform, companies
the supply chain are key
with online sales ambitions can offer their products,
requirements while stock risk is growing
with Bol.com merely facilitating (bundling of offer,
classification of information and guarantee of quality).
As such, Bol.com increases its revenue without
bearing inventory risk.
Bottlenecks
▪ Different stock models and sales channels
complicate planning and integral visibility
For more information: see appendix
© Shopping 2020
24
Demanding consumer challenges micro distribution
Supply chain trends: Handling & transport
Trends
▪ Ongoing growth of consumer expectations
– Regarding delivery speed, delivery options (up to 1 hour delivery pilots in
e.g. Silicon Valley), pick up locations and track and trace information
▪ Congestion requires bundling of transport for economic and ecological reasons
▪ Growth of e-commerce increases inefficiencies in stock handling
Consequences
▪ Handling online orders and micro distribution challenges existing patterns
▪ Service providers play an important role for many companies in fulfilling online
orders and matching consumer expectations.
A fixed delivery date and next
day delivery are deal makers
Bottlenecks
▪ E-commerce consumer units and bulk hard to combine
– Store replenishment and e-commerce orders differ in size and frequency
and require different handling and value added services
– Packaging for consumer orders differs from bulk packaging
– Existing mechanization in DC can in most cases not cope with consumer
order units and quantities in an efficient way
– Separating e-commerce stock from regular stock implies inefficiencies in
stock optimization
▪ Distribution to all (European) countries via same partner
…of respondents1 are more
likely to buy online with
next day delivery
31%
…of respondents1 are more
likely to buy online with a
fixed delivery-date
>35%
1
© Shopping 2020
24%
…increase in deliveries
within 24 hours
Post NL: Een andere kijk op online ondernemen,
Deel II: De online consument
25
Return handling becomes substantial part of business
Supply chain trends: Returns & leftovers
Trends
▪ Number of returns increases due to e-commerce
– Consumer is allowed to return online purchases within 14 days without
reason
– Shopping behavior of online consumers lead to many returns
– Companies offer gentle return policies to compete
▪ (Mass) customization and fashionability leading to difficulties in reselling
returned items
Consequences
▪ Returns become important factor in financial bottom line
▪ Speed of getting returned items back in available stock becomes
increasingly important
Bottlenecks
▪ Lacking standardization in sizes and colors causes unnecessary returns
▪ Many companies are not yet equipped for efficient return
handling of e-commerce orders
▪ Outsourcing of return handling may increase throughput time
▪ Returned items in store not belonging to assortment of that particular store
▪ Tracing returns back to original source is currently difficult
How returns drive sales: the story
of Zalando
That ecommerce increases the number of
returns becomes clear when looking at
Zalando, the etailer in shoes and fashion.
Zalando has a return rate that amounts to
50% of deliveries. The free-return-policy
within 100 days of Zalando is part of its
service and reduces the barrier to buy for
consumers. As such, it is an important part
of Zalando’s strategy.
Cheap and effective return handling is
very important for consumers1
100%
75%
50%
25%
0%
Important
Very Important
1
© Shopping 2020
Post NL: Een andere kijk op online ondernemen,
Deel II: De online consument
26
Supply chain control across multiple channels is required
Supply chain trends: Supply chain control
Trends
• Vertical integration: borders between retail and product brands dissolve
– Retailers start with private label products
– Product brands start to sell directly to consumers via own stores,
web shops and market places
– B2B, B2C, B2B2C and C2C business models are converging
▪ Margins have become smaller which requires tight and integrated
supply chain control and elimination of non-value adding activities
Consequences
▪ Companies have to redefine their role in the supply chain and often
have to perform extra / other activities
▪ New performance indicators are required to optimize integral
profitability
▪ Collaboration between supply chain partners is needed to maximize
profit through the entire chain
Bottlenecks
▪ Lack of mutual trust between supply chain partners
▪ Existing performance measures are often conflicting and short term
oriented; this results in inefficiencies between supply chain partners but
also within organizations (between departments like buying, logistics,
sales and marketing).
© Shopping 2020
“Omnichannel retail
requires cooperation
between retailers , even
for vertical retailers.”
Ferry den Hoed
We as Etam Groep have decided
to stay close to our consumer
where and when she is willing to
purchase. This means that we
want to cooperate with
marketplaces but as a matter of
supply chain control , we own
and control stock levels in a
consignment model “
Ferry den Hoed, COO at Etam Groep
27
Growing amount of information to share across supply chain
Supply chain trends: Information
Trends
• Growing importance of track and trace
– Consumers expect information about status of deliveries
and about origin of products
• Increase in product (meta) data
– Product data as presented on web (like pictures,
descriptions etc.)
– Track and trace data (per serial number)
– Pricing, logistical data
– Customer reviews
▪ Sales and stock information across channels required
▪ Growing use of data pools like GS1
▪ Data increasingly important to manage supply chain
– Internet of things / Big data
Consequences
▪ Supply chain partners are facing high volumes of data to
collect, manage, use and share
▪ Need for standardization is inevitable
The amount of global digital information is growing
The forecasted amount of global digital information which will
be created in 2020 is doubling the expected storage capacity.
This will require efficient and effective storage of (only)
relevant information
Source: IDC, Graph in the Economist 2012.
Bottlenecks
▪ Limited ability and willingness to share data
▪ Lack of standardization in supply chains, especially in non-food
© Shopping 2020
28
Philips: Close cooperation in the extended supply chain
Supply chain trends: Information
To maximize product availability in retail outlets,
Philips CL improved its collaboration with retailers in
the areas of product distribution, sales forecasting and
replenishment. The result: excellent product
availability. The driver behind this success is an
improved integral information exchange. Through a
regular information exchange regarding the product
availability per outlet, Philips has been able to set up
an automatic replenishment system. The improved and
integral inventory management not only leads to
higher customer satisfaction but also to reduced
stocks.
Philips
Jos Visee
Close cooperation is the key to success
“The key to success is close cooperation between retailer and supplier combined with well-defined
agreements regarding the management of the extended supply chain. Regarding data, both the
standardization of data and the ability to manage large amounts of data is crucial. When it comes to the
broader implications: the improved cooperation between parties in E2E value chain results in the increase
of sales and customer satisfaction. The more intense and improved cooperation, as well as the chosen
solution for automatic replenishment is applicable for all sales channels, including online & bricks-clicks”
Jos Visee, IT Business Partner O2C at Philips
© Shopping 2020
29
Current initiatives illustrate supply chain trends
Supply chain trends: Reference cases
Coolblue – Customer
centric
Hunkemöller – Click
and collect
Tesco UK – Supply
Chain Analytics
Carnegie
Mellon –
In store robots
•
•
•
•
•
For Coolblue the customer comes first
Customer service is the competitive advantage of Coolblue
Delivery and return options underline this
Coolblue offers customers many flexible options aiming at convenience
Besides this, options for delivery and returns are clearly explained
• Hunkemöller customers have a free store pick-up for their orders
• Consumers are able to online reserve products in a store
• Until seven days after reservation products can be fit and picked-up
• Tesco UK saves cost significantly by use of so called Supply Chain Analytics
• Extensive analysis of supply chain data is done
• Tesco identifies opportunities to:
• Reduce waste
• Optimize promotions
• Match inventory with fluctuations in demand
• Carnegie Mellon Campus Bookstore is currently performing a pilot with robot-driven
•
•
•
inventory management in the store
The robot monitors shelves and assesses inventory levels and signals misplaced products
This information is presented to store personnel on their tablets
Inventory levels and other relevant information are also presented to consumers (via apps)
© Shopping 2020
30
Current initiatives illustrate supply chain trends
Supply chain trends: Reference cases
Miele –
Drop shipments for
etailers
Bol.com –
Pop-up
• Miele would like to preserve its quality brand in a changing online environment
• New distribution contracts with severe requirements on product information and brand
communication came in place
• Delivery to and service for consumers is done by Miele via drop shipments
• Bol.com has opened a physical store in underground station of Rotterdam
• Pictures of products are shown at a wall and can be scanned via QR-codes
• Scanning means ordering and afterwards products can be paid for and picked-up in the
•
Dell –
Demand shaping
• Dell gathers and shares valuable customer data with suppliers to increase accuracy of
•
•
Home Depot – CrossDocking
store
An extra shopping moment is created in this way
forecast, but at the same time to influence demand
Two information loops, internally and externally, make sure Dell is aware of articles to be
produced
When products cannot be delivered in time Dell responds with promotion of products,
which are available
• Home Depot is the largest DIY retailer in the world. Since 1979 only focus on expansion
•
•
•
and revenue. At start of 21st century this did not work out anymore
In 2007 a reorganization of the supply chain started: replenishment of stores via Rapid
Deployment Centres (RDC’s)
In RDC’s central ordering of products with cross-docking to stores at last moment is done
Store replenishment has improved and empty shelves have disappeared
© Shopping 2020
31
BUSINESS MODELS
Business models defining a basis for the future supply chain
© Shopping 2020
32
New business models arise, four main models emerge
Business Models: Main characteristics
Own product
brand?
Own stock?
(Legal) owner of Wide or deep
customer?
assortment?
Customer motivation for choosing
this model
No
No
Multiple brands
No
Both possible
• The convenience of
‘one place fits all’
• Looking for unique things
1
Marketplace
(E.g. Ebay, Kieskeurig)
2
Generic reseller
(E.g. Amazon, V&D)
No
Yes
Multiple brands
Yes
Wide
• Reliability of a trusted party
3
Specialist reseller
(E.g. Camerashop,
Run2Day)
No
Yes
Multiple brands
Yes
Deep
• Need for specialist advice
• Looking for a product that is
unique or difficult to obtain
Yes
Single brand
Yes
Deep
4
Brand direct-toconsumer
(E.g. Apple)
• Love for the brand
• Certainty of finding a specific
product or service
Yes
In the current and future (online) market a lot of new commercial business models emerge. Many companies are
already selling via different sales channel partners and as such via different and combined business models. Moreover
they may focus on multiple product – market combinations in different models. The expert group Shopping 2020
Business Models distinguishes between 4 basic models with different main characteristics, which are used in related
supply chain models.
© Shopping 2020
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Emerging business models impact supply chain
Business models: Supply chain characteristics
1
2
3
4
General
characteristics
Information
characteristics
Control and collaboration
characteristics
Marketplace
• Focus on completeness and
‘unmanaged’ long tail (many
categories and product variants)
• Stock availability and delivery
options achieved through different
partners
• Coordination of information quality • Main focus on commercial
across many partners/sources
collaboration, sometimes extended
• Increasing relevance of stock
with logistics collaboration
information across partners
• Plug and play solutions for partners
• Consumer feedback used to
important
maintain quality standards
Generic
reseller
• Focus on completeness of product
categories
• Demand/stock management and
coordination of supply is key to
ensure immediate availability
• Coordination of information quality • Focus on collaboration with supply
across own sources and partners
chain partners
• Reliable stock information is
important
Specialist
reseller
• Focus on depth of assortment in
• Rich product information is key
small number of product categories • Reliable stock and lead time
• Demand/stock management is key
information is important
to handle mix of fast movers and
long tail
Brand
direct-toconsumer
• Focus on completeness of own
assortment (including new
introductions, customization and
long tail)
• All aspects of retailing become
relevant
• Collaboration can be intensified
because of limited number of
partners and long-running
relationships
• High consumer expectations
• Focus in collaboration on service
regarding rich product information,
providers and horizontal
knowledge, configuration and
collaboration
experience
• Dependent on type of product
collaboration with consumers is
possible
© Shopping 2020
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Emerging business models have their specific supply chain models
Business models: Translation into supply chain models
▪
▪
▪
▪
The set up of a company’s supply chain is largely dependent on the business model. It
determines assortments and volumes to offer, what information needs to be exchanged
and what partnerships are needed to fulfill consumer needs.
We have translated the four basic business models into their accompanying supply
chains. Generic and specialist resellers have been combined into one supply chain
model.
The next slide is a visualization of these supply chain models. It clearly shows the
increased complexity companies have to deal with, especially when they act in multiple
business models which may change over time.
The visualization only shows ‘happy flows’ of
physical goods. When returns, information
and money flows are added, the increased
complexity becomes even more clear.
© Shopping 2020
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Supply chain models in an omni-channel world
Business models: Overview supply chain models
Pick up points
Logistics packaging (collies, crates, pallets, shrinks)
Individual items
Manufacturer
Pick up at pick up point
Online store
replenishment
Brand
direct
E-fullfilment center Pick up in store
product brand(s)
Product brand
Eur. DC / Reg. DC
Private
label
(R)Etail /
From store to
door/pick in store
Store replenishment
Home
Mono brand stores
Manufacturer
Cross dock
Wholesale
Consignment/VMI
Between
stores
Store replenishment
Concession / shop in shop
Retail chain stores
Pick up at pick
up point
Online store
replenishment
Home delivery from
small retailer
Pick up in store
E-fullfilment center
(r)etailer(s)
Pick up at pick up point
Concession
Wholesale
From store
to door/pick
in store
Retail Distribution
center
Reseller
Market
place
Direct delivery from
product brand
Specialist store
Home delivery from
online retailer
Home delivery from
market place DC
Market place DC
© Shopping 2020
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C2C
SCENARIOS 2020
Scenarios revealing possible future supply chain developments
© Shopping 2020
37
Future scenarios are based on trends & uncertainties
Scenarios 2020: Scenario planning method
Many of the trends listed in this document may already be known. These trends may
continue to grow in strength, sometimes faster than generally expected like mobile
usage. These ‘known trends’ have to be taken into account when creating a future
vision. However, there are also uncertainties of which the outcome will significantly
influence the future supply chain. Scenario planning is a strategic planning method that
organizations can use to make flexible long-term plans by limiting the number of
possible futures considering uncertainties. Scenarios help people to create a common
view on the course of a company, industry or area.
A scenario is comprised of two main uncertainties that will influence future supply
chains significantly. Each uncertainty has two possible ‘extreme’ (but not unrealistic)
outcomes. Scenarios are portraits of plausible future worlds. Per scenario, the major
supply chain consequences have been derived. Via this methodology it has been
ensured that main uncertainties and its effects have been taken into account in
building the future supply chain.
The following main uncertainties in building the future supply chain have been defined
by the Shopping 2020 expert group(s):
Cross border
(e)Commerce
Supply chain
coordination
Digitization
of products
Delivery
times
© Shopping 2020
Number
of stores
Scenario A
Scenario B
Scenario C
Scenario D
Source: Wikipedia & Prof. Kitty Koelemeijer
Environmental
orientation
Fashionability
38
Each uncertainty has two possible ‘extreme’ outcomes
Scenarios 2020: Uncertainties and their extreme outcomes
Markets
merely
local
Dominant
orchestrator/
convergence of roles
3D
printing
explodes
Cross border
(e)Commerce
Supply chain
coordination
Digitization
of products
Global markets
Fragmented
supply chain
3D printing
remains niche
1 hour
delivery
standard
Number of
stores decreases
significantly
Environmentally
responsible
Fast
fashion
Delivery
times
Number of
stores
Environmental
orientation
Fashionability
Delivery times
long
Number of stores
stabilizes
Consumption
focused
Strong seasonal
patterns
© Shopping 2020
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‘Extreme’ outcomes will significantly impact supply chain (1)
Scenarios 2020: Uncertainties and their extreme outcomes
Cross border
(e)Commerce
Will cross border commerce grow significantly towards 2020 or will free trade within Europe being downsized?
Competing in an international marketplace is not possible without a proper international supply chain that can meet
consumers requirements, international integration standards and international competition
Extreme outcomes: either back to fragmented local markets caused by high borders (i.e. rules and regulations, politics) or
acceleration towards a fully global marketplace in which foreign large players will dominate the Dutch market.
Supply chain
coordination
Will large foreign players like Google and Amazon dominate the entire market in sales and fulfillment in 2020?
Powerful international players like Amazon and Google may be able to become ‘the single starting point’ for online
shopping and integrate offerings from ‘all’ other retailers into their platforms and fulfillment services like 1 hour delivery.
With increasing collaboration the need for exchanging information also increases. If not, fragmented supply chains keep
their individual characteristics, which need to be managed and will require standardization by non-commercial parties.
Extreme outcomes: either dominant orchestrators or fragmented supply chains
Digitization
of products
Will 3D printing develop very quickly and already play a significant role for consumer products in 2020?
The impact on supply chain may be significant if 3D-printing will be applied broadly. Need for raw materials and product
designs will increase, need for stock of final products will decrease and complete supply structures will change.
Extreme outcomes: either 3D-printing ‘explodes’ or it remains a niche.
Delivery
times
Will 1 hour delivery become the new standard for e-commerce orders?
The current trend of shortening delivery times may go further and make 1 hour delivery the new standard. Such high
requirements on delivery times put a high demand on stock flexibility, stock locations and integration of services.
Extreme outcomes: either very short delivery times (1 hour delivery as a standard) or more differentiated and longer
delivery times, as it is now.
© Shopping 2020
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‘Extreme’ outcomes will significantly impact supply chain (2)
Scenarios 2020: Uncertainties and their extreme outcomes
Number of
stores
Will the amount of physical stores further decrease and are shopping streets really different in 2020?
Physical stores still represent local stock points and offline ordering. With a very limited number of stores stock flexibility
and related delivery times become an integral challenge for supply chains and may require other stock locations near the
consumer, while e-commerce will grow even faster.
Extreme outcomes: either the number of stores stabilizes or decreases significantly
Environmental
orientation
Will companies and consumers strive for ultimate environmental friendliness, or will consumptive behavior win?
It is questionable to what extent care for our planet will dominate shopping behavior and whether consumers are really
willing to pay for this.
Extreme outcomes: Environmental friendliness really becomes the new standard or consumptive behavior will come back
in its extremes
Fashionability
Will “fashionability” dominate in many product segments and collections disappear for continuous assortment changes?
The main question is whether this current trend will row further and is also going to dominate many of the consumer
products segments, or whether it will stay “as is” with it’s main impact within fashion.
Extreme outcomes: extreme fashionability leading to “fast fashion” in many product segments, or supply chain cost will
raise so high that many segments return to “old school” (seasonal, yearly) collection patterns.
“Change is the law of life. And those who look only to the past or
present are certain to miss the future.”
John F. Kennedy
© Shopping 2020
41
Imagine global orchestrators will dominate the market (1)
Scenarios 2020: Scenario planning results
Dominant orchestrator / convergence of roles
Bolhalla
Amazonization
Markets
merely local
Global
markets
Local heroes
Global network economy
Fragmented supply chain
© Shopping 2020
42
Imagine global orchestrators will dominate the market (2)
Scenarios 2020: Scenario details
Dominant orchestrator / convergence of roles
Bolhalla
Amazonization
A few big local players act as dominant
selling platforms for all local supplies
A few big global players act as the dominant
selling platforms for all global and local supplies
Supply chain impact
• Product portfolio management with local competition
• Local hubs with inventory needed to meet delivery requirements
• Need for integration and (local) standardization of product and
stock data and transactional data
• Vertical integration may prosper
• Local players can leverage on local and location based marketing
and create new opportunities by joining
Supply chain impact
• Product portfolio management with international competition
• Local hubs with inventory needed to meet delivery requirements
• Need for integration and international standardization of product and
stock data and transactional data
• Vertical integration may prosper
• Local players can leverage on global and location based marketing
and create new opportunities by joining
Markets
merely local
Global
markets
Local heroes
Global network economy
Fragmented, mainly local supply chains and sales
channels form the market with limited synergies
Fragmented, mainly global supply chains and sales
channels form the market with limited synergies
Supply chain impact
• Need to participate in many local initiatives to reach their online
consumers
• Demand and inventory have to be managed across multiple local
channels
• Information sharing might be based on multiple different
requirements and local ways of working
Supply chain impact
• Need to participate in many international initiatives to reach their
local and foreign online consumers
• Demand and inventory have to be managed across multiple local
channels and with stock locations across multiple countries
• Information sharing might be based on multiple different
requirements and local ways of working, requiring extreme flexibility
in information sharing and partnerships
Fragmented supply chain
© Shopping 2020
43
Imagine 3D printing and 1 hour delivery become the new standard (1)
Scenarios 2020: Scenario planning results
3D printing explodes
Printing at producer
Print in store/at home
Delivery
times long
1 hour
delivery
standard
Long tail /
Make-To-Order at producer
Long tail / Assemble in store
3D Printing remains niche
© Shopping 2020
44
Imagine 3D printing and 1 hour delivery become the new standard (2)
Scenarios 2020: Scenario details
3D printing explodes
Printing at producer
Printing in store / at home
3D printing remains costly and consumers accept longer
delivery times. Printing customized products at producers will suffice.
3D printing is cost efficient and available for
everyone. Short delivery times are key.
Consumers ‘produce’ either in store or at home
Supply chain impact
• Production planning and management of raw materials/semifinished goods is key in Make-To-Order environments
• Consumers will customize their own designs, which requires flexible
production processes and smart facilitation of customizing without
losing efficiencies in production
• Retailers remain stock locations for standard printed products and
may become advisor in design/customization
Supply chain impact
• Availability of raw materials in stores and at home becomes crucial
• Certified product designs may be required for safety reasons
• Producers will focus on product design and supply of raw material
• Retailers will become print locations with design inspiration and
printers for more complex products and parts
Delivery
times long
1 hour
delivery
standard
Long tail / Make-To-Order at producer
Long tail / Assemble in store
3D printing remains niche and consumers
accept longer delivery times. Customization
needs are fulfilled via a long tail or make to order.
3D printing remains niche but consumers require
short delivery times as well as a large or customized
assortment to select from
Supply chain impact
• Production planning and management of raw materials/semifinished goods is key in Make-To-Order environments
• Making long tail available in efficient way will probably lead to
many direct sales or drop shipments by producer
Supply chain impact
• Complex stock management to ensure broad availability of long tail
• Modularity for assembling at store becomes key
• Increasing role for reseller in final production/assembling steps as
well as in client advice
• Inventory risk as a result of long tail availability in store may not be
bearable for retailers
3D Printing remains niche
© Shopping 2020
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Imagine 1 hour delivery in a world with very few stores (1)
Scenarios 2020: Scenario planning results
Number of stores decreases significantly
Drop shipments
City hubs
Delivery
times long
1 hour
delivery
standard
Showrooms full of experience
Pick (up) in store
Number of stores stabilizes
© Shopping 2020
46
Imagine 1 hour delivery in a world with very few stores (2)
Scenarios 2020: Scenario details
Drop shipments
Number of stores decreases significantly
City hubs
Less retail implies a power shift to producers.
It also implies that demand for ‘the long tail’
should be met by producers delivering directly to consumers
Stock is needed close to where consumers
live to ensure fast delivery
Supply chain impact
• Regional DC’s of producers will suffice, economies of scale
become relevant
• Producers have to organize for small e-commerce orders
and micro distribution instead of large bulk picking
• Horizontal collaboration may be required
• Limited number of experience centers and extensive
online product information will facilitate shopping process
Supply chain impact
• Multiple stock locations scattered around the country at
1 hour distance from consumers
• Increased importance of stock and supply chain visibility
• Horizontal collaboration to facilitate storage, handling and
transport in an efficient way
• Limited number of experience centers and extensive online
product information will facilitate shopping process
Delivery
times long
1 hour
delivery
standard
Showrooms full of experience
Pick (up) in store
Retail uses square meters to offer an experience
and a broad and deep assortment, which is
offered partly via physical stock and partly via screens
Store play an important role in delivering to
consumers, as they act both as sales and as
distribution point.
Supply chain impact
• Regional DC’s of producers will suffice, economies of scale
• Producers have to organize for mix of small e-commerce
orders and bulk picking for store replenishment
• Stock models become complex as stock is divided among
multiple channels and locations
Supply chain impact
• Increased importance of stock and supply chain visibility
• Track and trace and reliability become key success factors
• Complex process of combining local picking and delivery
from central warehouse into complete orders at store floor
• Role for producers remains more traditional
Number of stores stabilizes
© Shopping 2020
47
Imagine fast fashion in a corporate responsible market (1)
Scenarios 2020: Scenario planning results
Fast fashion
Shop until you drop
Sustainable fashion
Environmentally
responsible
Consumption
focused
Ethical & classical
Black Friday
Strong seasonal patterns
© Shopping 2020
48
Imagine fast fashion in a corporate responsible market (2)
Scenarios 2020: Scenario details
Fast fashion
Shop until you drop
Sustainable fashion
Consumers expect to be surprised every single time
they revisit a store or online shop. Collections are
continuously changing. Negative environmental effects like extra
stock obsolescence or ‘irresponsible’ but cheap production have little
weight compared to the drive to facilitate consumers in their buying
appetite.
Consumers are passionate shoppers and
expect to have good shopping experiences
and choice of “green” products. Customer needs are analyzed in
detail to be able to offer the exact right products and minimize stock
obsolescence. Fun shopping means a good experience above a large
product offering.
Supply chain impact
• Supply chains are designed for speed, large assortments and high
turnovers. Impulse buying needs to be facilitated.
• Inefficiencies are accepted as long as consumer need is fulfilled
Supply chain impact
• Big data, co-creation and other concepts to fulfill consumer
product needs in detail without risking stock obsolescence
• “Green” as an important requirement in supply chain design
Environmentally
responsible
Consumption
focused
Black Friday
Ethical & classical
Consumers are buying in high volumes and
product offerings still follow strong (seasonal) patterns.
This results in high volume peaks around sales periods.
Consumers reward “green” and local for
local product offerings. Seasonal patterns are
accepted and quality goes above volume and choice.
Supply chain impact
• Push and volume oriented supply chains
• Economies of scale dictate supply chain designs
Supply chain impact
• Local for local
• Quality and “green” are important design criteria
• Relatively low speed
Strong seasonal patterns
© Shopping 2020
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Scenarios clearly show the importance of supply chain flexibility
Scenarios 2020: Conclusion
▪
Extreme outcomes of current uncertainties (combined with ‘certain’ trends) may significantly
impact supply chain:
– When a large (foreign) orchestrator is able to dominate the market, the only way to survive for
(local) companies is to join, which requires sharing high quality product and stock information
– When one hour delivery becomes the new standard, this means creation or storage of
consumer products close to consumers and a change of current logistical patterns
– When 3D printing will explode this means a disruptive change of entire supply chain structures
– The future number and function of physical stores will significantly influence supply chains in
many aspects
– A very strong growth of environmental consciousness may force big changes in supply chains,
choice of sourcing locations and (product) information requirements
Future scenarios show the importance of supply chain flexibility and transparency
© Shopping 2020
50
BUILDING THE FUTURE SUPPLY CHAIN
Recommendations to achieve crucial supply chain capabilities
© Shopping 2020
51
Fast change is required. Will you be ready in time?
Building the future supply chain: Examples showing the speed of change
Google Shopping Express: The service, which offers same-day delivery from Target, Walgreens, Toys R Us, American Eagle, Staples,
Office Depot and a few local shops, has just opened its doors to testers in the San Francisco Bay Area. After signing up on Google's
microsite, you'll be on your way to six months of unlimited free deliveries from select retailers. The service competes with similar
offerings from Amazon and eBay, and, well, doesn't exactly seem like an obvious fit for Google. We're eager to see how it pans out
-- hopefully, if it does turn out to be a worthwhile venture, it won't succumb to the search giant's annual "spring cleaning" ritual.
The company is only accepting "a limited number of shoppers" right now, so if you're eligible, sign up at the source link ASAP.
Source: Engadget.com – Zach Honig
Amazon PrimeAir: The world's largest online retailer, is testing unmanned drones to deliver goods to customers, Chief Executive
Jeff Bezos says. The drones, called Octocopters, could deliver packages weighing up to 2.3kg to customers within 30 minutes of
them placing the order, he said. However, he added that it could take up to five years for the service to start. "I know this looks
like science fiction, but it's not," Mr Bezos told CBS television's 60 Minutes programme. "We can do half-hour delivery... and we
can carry objects, we think, up to five pounds (2.3kg), which covers 86% of the items that we deliver. From a technology point of
view, we'll be ready to enter commercial operations as soon as the necessary regulations are in place”.
Source: BBC News – Technology, 2 December 2013
Online department store Wehkamp.nl starts end of this year (2013) with the building of an automated distribution center in
Zwolle, has Gert van de Weerdhof, CEO of RFS Holland Holding, the mother company of Wehkamp.nl, announced. The investment
in the new construction amounts to more than a hundred million euro. The distribution center will have a capacity of 61 million
items a year. The DC in Dedemsvaart will close. The warehouse in Maurik stays open, a spokesman of Wehkamp.nl states. The
automated warehouse system, at logistics business park Hessenpoort near Zwolle, will consist of almost 480.000 picking locations
for the different products. Products will be supplied through 468 automated shuttles. According to Wehkamp.nl this will be ‘the
largest automated warehouse in the world’ for online retail.
Source: Logistiek.nl – Bas Dijkhuizen
36% 1 to 52% 2 of shopping purchases will be done online in 2020!
Will your supply chain be ready in time?
1 Source: McKinsey & GFK Shopping2020 survey, 2013 2 Source: GFK consumer panel “Hoe shop jij in 2020?”, 2013
© Shopping 2020
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Fast and continuous change characterizes the future supply chain
Building the future supply chain: Impact on the supply chain
Many of the trends listed in this document may already be known. These trends will continue to grow in strength,
even faster than one may expect. These “known trends” have to be taken into account when creating a vision on
the future. Combined with the possible future scenarios as derived by combining the main – supply chain relevant –
uncertainties, the impact on the future supply chain can be summarized:
▪ Competitive landscape changes:
▪
▪
▪
▪
– Consumer needs will fluctuate more then ever
– New business models and partnerships arise
– Large online players will leverage their traffic and take dominant ‘orchestrating’ positions
– Foreign market entrants may be expected
– The function of retail stores will change towards experience centers, showrooms and pick up points
– Borders between B2B and B2C and between online and offline channels will dissolve
– 3D printing will ultimately mean a disruptive change in multiple supply chains
Mobile, (big) data and information play a significant role in the new way of shopping
Stock risk increases and will be pushed upward in the supply chain where possible, while short delivery times
require multiple stock locations near the consumer.
Consumer, sustainability and profitability requirements require efficiency in handling and (micro) distribution.
Triple size e-commerce means a significant increase in complexity in the product brand and retail supply chains
The impact on the supply chain of the current trends and possible future developments will be strengthened by the
predicted growth of e-commerce. As a result, the supply chain landscape will continuously change. Dutch companies
have to prepare themselves for this new rapidly changing competitive landscape. Some key capabilities become crucial
to survive and compete.
© Shopping 2020
53
Fast and continuous change requires key supply chain capabilities (1)
Building the future supply chain: Key capabilities required
Sourcing
Inventory &
planning
Flexibility
Handling
Transport
Information
Returns
‘Leftovers’
Collaboration
integral
revenues
and cost
© Shopping 2020
54
Fast and continuous change requires key supply chain capabilities (2)
Building the future supply chain: Key capabilities required
Think about your role
▪ In the new competitive landscape it is essential to determine and claim one or more specific roles in which a
company clearly delivers added value and which will give a competitive advantage. This may be making the best
product or offering the best retail experience but can also be an orchestrating or aggregating role.
Seek flexible partnerships
▪ Horizontal and vertical collaboration between supply chain partners becomes crucial. This is the only way
expectations of customers can be met. Partnerships (like with Amazon or Zalando or with service providers) may
continuously change over time and need to be flexible.
Create transparency across the chain
▪ Collaboration starts with trust. Trust can be achieved via transparency, in a way that all supply chain partners can
earn a fair share for their real added value.
Create flexibility in sourcing and stock
▪ To cope with increased stock risk, the growth of e-commerce and new consumer needs, maximizing inventory
turnover becomes vital. Flexibility in sourcing and making all stock available for all channels will be a crucial
capability.
Invest in standardization and information exchange
▪ Supply chain visibility (stock, tracking and tracing) is a key success factor. Information becomes a competitive
advantage. Companies must Invest in ICT and standardization to remain a valuable business partner.
Manage integral profitability
▪ Instead of measuring and rewarding short term and isolated results like purchasing discounts, companies have to
measure and steer on integral profitability across the entire value chain.
© Shopping 2020
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Key capabilities must be developed in all dimensions
Building the future supply chain: Recommendations
Supply chain
models
Supply chain
dimensions
To achieve the key capabilities across the supply chain will require change
in many dimensions of the supply chain. Per supply chain dimension
recommendations will be given how to achieve these capabilities.
© Shopping 2020
56
Sourcing (1)
Building the future supply chain: Recommendations
Recommendations
• Differentiate in sourcing locations
• Shift focus from production orders to capacity contracts and increase control
• Change production process to realize flexibility and enable customization
• Consider vertical integration to improve responsiveness
© Shopping 2020
57
Sourcing (2)
Building the future supply chain: Recommendations
Differentiate in sourcing locations
▪
Production overseas is no longer attractive for all products. One of the reasons is the rising wages in these regions. However, more
important is the required time to market and sometimes lacking control. Especially for fashionable products it is worth having
alternative production locations nearby like in South-East Europe. Differentiation will be unavoidable to achieve the necessary flexibility.
For scarce production resources multiple suppliers may need to be contracted. Apart from flexibility advantages, local sourcing may also
be beneficial for transparency and trust in terms of corporate and environmental responsibility.
Wrong supply chain decisions
A lot of companies have outsourced their production activities to Asia or Eastern
Europe. Recent research by Treville and Trigeorgis (2013) shows that
conventional financial models can lead to wrong supply chain decisions. These
models do not take into consideration advantages of local production like
flexibility and direct control. Their research shows that by giving value to
flexibility and direct control local production can be more profitable than
outsourcing
Replenishment
Bulk
Shift focus from production orders to capacity contracts and increase control
▪
Large production orders months upfront will generate the highest buying discounts and as such appeal to buyers. However when
demand is increasingly fluctuating these discounts may disappear suddenly when looking at integral profitability. On time availability of
production capacity becomes the key success factor, creating the opportunity to postpone the decision which specific products will be
produced at what quantity. Contracts with suppliers require flexibility to realize agility in the market and may shift from production
orders to capacity contracts and service level agreements. Apart from the contractual part, it is advisable to increase control on external
production via on site presence, integration of information (systems) and short and agreed communication lines.
© Shopping 2020
58
Sourcing (3)
Building the future supply chain: Recommendations
Change production process to realize flexibility and enable customization
▪
Production of smaller batches is another way to accomplish flexibility.
Although more expensive in the short run, it may result in a higher
integral profitability. Another way of creating flexibility is late assembly
of semi-finished products. The inventory of semi-finished products is
multi-purpose until a later stage in the process, which reduces the
chance of obsolete stock and increases stock flexibility. The customer
order decoupling point is driven upstream. Assemble- to-order concepts
may also be useful in enabling customization. In case of customization,
consumers are more willing to accept longer delivery times.
Ultimate forms of flexibility are printing on demand or 3D printing by
consumers or retail shops.
Nike: Customers design own shoes
Customers are given the opportunity to order
own products. Publicity is booming by having
fans “in charge”. Another advantage is
decreasing inventory and waste because of a
better match between demand and supply.
For more information: see appendix
Consider vertical integration to improve responsiveness
▪
It is very difficult to respond timely to changes in demand when companies are dependent on other companies. Vertical integration backwards for retailers or forwards for producers – can provide the wished responsiveness. Companies are in control of a large part of
the supply chain and can much easier translate the latest consumer trends into design and adaptive production plans. Short
communication lines within the organization are essential to make this work.
Increased responsiveness and earning all margin
within one company will create a higher profitability.
As long as these profits are invested in innovation,
well-organized verticals have a good chance to
remain sustainable competitive.
© Shopping 2020
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Zara: the integrated supply chain
Building the future supply chain: Reference case Sourcing
The typical example of vertical integration is Zara, a company
that produces where it sells, and that includes its store
personnel in generating input for design teams. This front-toback integration creates short lead times for new fashion ideas.
Zara beats the industrial average of 6 months for fashionable
items with its 2-month lead time. As Forbes states “The tight
integration of design, planning, merchandising and production in
La Coruna enables the company to be flexible and therefore able
to respond quickly to any market need”. Although (labor) costs
in Spain may be higher, the enormous flexibility of Zara clearly
outweighs this disadvantage.
Zara
A Successful Strategy
The integrated supply chain model is part of a successful strategy by Zara to buy fabrics in bulk and add details
later to incorporate as many current customer preferences as possible. The products are then distributed in
small batches to its stores to keep demand high and to create a sense of ‘exclusivity’.
“The system makes production costlier, but the model has also proven successful during the economic downturn
of recent years, because Inditex [owner of Zara] can adapt more quickly to the ebb and flow of demand.”
The Wall Street Journal, March 2012
© Shopping 2020
60
Inventory & Planning (1)
Building the future supply chain: Recommendations
Recommendations
• Acknowledge complexity in planning and professionalize
• Collaborate to improve forecasting
• Use online opportunities like demand sensing to improve forecasting
• Reconsider stock ownership models
• Introduce ‘inventory captain’ role to optimize stock availability across (external) sales channels
• Maximize online stock availability through stock visibility and digital stock
© Shopping 2020
61
Inventory & Planning (2)
Building the future supply chain: Recommendations
Acknowledge complexity in planning and professionalize
▪
Planning becomes more difficult. Assortments keep growing. At the
same time product lifecycles become shorter and product portfolios
need to be adjusted constantly. This will result in a continuous
changing environment of products, suppliers and supplying countries.
Sales is done via multiple channels with multiple stock locations.
Demand differs per region, even within the Netherlands. Aggregation
of demand in forecasting (across locations and channels and
combining alternative products) will be necessary but complex and
challenging. This requires good system support in forecasting and
highly skilled people. Companies should be aware of the importance
and complexity and organize this function in a very professional
manner. Merchandisers need to be analytically skilled and Excel may
no longer be the ideal forecasting tool. Education and training must
be aligned with this need for analytical competences.
“Planning together with retail
and manufacturer gives less
inventory and more margin”
Rens Tap
“Planning the distribution for the
fashion season together with
retailer and manufacturer reduces
the amount of no sales, the
financial risk in the overall supply
chain and the inventory levels,
thereby increasing the total margin.
What it takes is mutual trust and
cooperation.”
Rens Tap, senior consultant at Modint
Collaborate to improve forecasting
▪
Close collaboration between retailer and producer is essential on forecasting and replenishment. Both parties really must work
together in this area. Sales information at the retailer is important for the producer in production planning and will dictate
replenishment in combination with inventory levels at the retailer. Producers can aggregate data from many sales points (across
retailers) and as such achieve more reliable demand predictions. Trust and open information sharing are crucial. In this way
inventory in the total chain will be minimized as peaks and overproduction will be reduced.
© Shopping 2020
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Walmart and P&G: The future of partner-information exchange?
Building the future supply chain: Reference case Inventory & Planning
An example of two supply chain partners that work
together for collecting, sharing and managing data are
Walmart and P&G. The companies use common
performance indicators and collaborate on forecasting and
stock-replenishment within a common team. The
advantages are two-fold: on the revenue side, a better
customer response leads to increased sales. On the cost
side inventories are lower, there is a lower risk of failure
and costs of information exchange have decreased (as a
result of automation).
Walmart and P&G
Benjamin
Grugeon
Joint forecasting and ‘open book forecasting’ the future of collaboration in retail
“As a principle P&G provides the maximum of relevant information within legal boundaries to create a
win/win situation. In most cases this is marketing, sales and logistics data. For example, expected market
share build up, selling out data from other launches, redemption data or relevant stock data. The advantages
are decrease of the bullwhip effect and prevention of out of stocks/lost sales. In my opinion "joint
forecasting“ will further develop in the future and "a type of open book forecasting" will become the
standard operating procedure between partners in the retail landscape.”
Benjamin Grugeon, Supply Chain Manager at Procter & Gamble
© Shopping 2020
63
Inventory & Planning (3)
Building the future supply chain: Recommendations
Use online opportunities like demand sensing to improve
forecasting
▪
E-commerce offers new opportunities to improve forecasting. Via very
accurate forecast techniques like demand sensing. Forecasts then respond to
real-world events such as market shifts, weather changes, natural disasters,
consumer buying behavior et cetera including current data from the supply
chain. E-commerce and online clicking behavior can provide much suitable
information within a short time frame. Feedback on e.g. product introductions
or commercial promotions can be received very quickly via the online channel
as well. Also social media can be used to predict demand, e.g. to derive
predictions from conversations within target groups. For forecasting purposes
responses in social media to a newly launched product are also important.
This will help in predicting the future success of the product and can be
translated into forecasting figures.
One step further is to influence demand based on planned supply, e.g. via
dynamic (online) pricing. In some cases this can even be done fully automated
based on accurate stock information. Although this may look ‘ideal’ from a
logistics perspective, dynamic pricing is not an irreproachable concept from a
client perspective.
© Shopping 2020
The rise of social media for
forecasting
In line with the idea that social media can
predict demand, firms have started to help
companies utilize this potential. One such
firms is Wisewindow. According to the
Economist “WiseWindow [a marketing
firm based in Irvine, California], uses
social-media activity to forecast demand
for products. Its clients include Paramount
Pictures and Belkin, a consumerelectronics firm”. Its activities include
collecting, analyzing and classifying billions
of consumer comments on for example
Twitter to give companies a ‘live-stream’
of consumer sentiment. The question
remains though: can computers be trusted
to successfully filter out things like double
meanings and sarcasm? Or does it remain
a human exercise after all?
64
Inventory & Planning (4)
Building the future supply chain: Recommendations
Reconsider stock ownership models
▪
Striving for a decrease of stock in the supply chain
in general leads to inventory being moved upwards
in the chain. Products are hold in central stock high
in the supply chain as long as possible and are only
distributed as late as possible based on real
demand. Short (e-commerce) delivery times,
fashionable items and shelf availability
in stores put this general concept under pressure
and lead to inventory pushed forward in the supply
chain. It becomes however harder and harder for
retailers to bear all inventory risk. This declares the
rise of more differentiated stock models and the
general trend to move inventory risk upward in the
supply chain. Concepts like consignment (stock
managed by retailer and available in store, but
owned by supplier) and shop-in-shop (stock
managed and owned by supplier, but available in
store) work along these lines and are particularly
suitable to offer and manage a long tail
assortment.
Amazon: moving stock upwards with the Vendor-flex experiment
Amazon knows like no other company that a reliable promise to the
customer is key. But what to do when your network includes thousands of
warehouses? The ecommerce giant has come up with vendor flex: in this
pilot, Amazon brings its own staff into the warehouses of its suppliers, where
they basically manage their logistics and online retailing. It does so primarily
for bulky items like diapers and toilet paper. According to the Wall Street
Journal, October 2013, “For Amazon, co-location reduces the cost of storing
bulky items like diapers and toilet paper and frees up space for the Web
retailer to stock higher-margin goods in its own distribution centers.”
Source: Wall Street Journal, 2013
© Shopping 2020
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Microfashion: Consignment model as example of collaboration
Building the future supply chain: Reference case Inventory & Planning
You believe in the consignment model for fashion. Why?
Van der Zee: “We strongly believe in supply chain collaboration. When you want to increase profitability of the wholesaler and the
retailer in the fashion industry, you have to collaborate with each other. The advantage of consignment, products not taken into stock
by the retailer but being paid for only after being sold to customers, is twofold. The retailer lowers the needed working capital, money
which can be released for other purposes. And the wholesaler will get a better position on the store floor with a higher availability and
a wider assortment. “
Is the consignment model a response to vertically integrated chains like Inditex and H&M?
“That is correct. They can respond very fast to demand in stores. That model is also possible for wholesalers and retailers. A
prerequisite for this is digital communication between partners, based on EDI. Therefor I am glad that I have been asked to become a
member of the GS1 Business Council. GS1 is the appointed party for realizing standardization and uniformity in a fragmented industry.
It is good that an institute like this exists.”
Source: GS1 Nederland, interview with Harry van der Zee, CEO MicroFashion (originally in Dutch)
© Shopping 2020
66
Inventory & Planning (5)
Building the future supply chain: Recommendations
Introduce ‘inventory captain’ role to optimize stock
availability across (external) sales channels
▪
Drivers determining inventory location
For product brands the ultimate stock optimization is across
all sales channels, including multiple competing retailers. This
is not an easy game for product brands, but even more
important when inventory risk is moving upward in the chain
to them. Keeping stock as long as possible at a central level
and at the same time provide adequate stock levels in retail
stores is a balancing act, specifically for fashionable products
and with short e-commerce delivery times. Specialization in
this field will develop further in future. For product brands
which are not capable of playing this game themselves or not
willing to take on this hassle, outsourcing and / or automation
of these activities might be a good option. The retail channel
has to collaborate in such a model and share stock data.
Auction-like principles can be used to make it work across
competing retail partners.
To determine which product(group)s will be distributed to stores
and which products will only be kept merely at central stock is a
balancing act. What are the drivers in this? Some guidelines may
help here:
• Value: the more valuable products are, the more they will be
kept centrally
• Size/weight: the smaller products are, the more they will be kept
in stores
• M2 price: the more expensive store space is, the less products
will be kept in store
• Impulse: the more likely products are impulse purchases, the
more they will be kept in stores
• Turnover rate: the higher the turnover of products is, the more
they will be kept in stores
• Fashion: the more fashionable products are, the more they will
be kept in stores
• Delivery times: the shorter expected delivery times by
consumers are, the closer to consumers products will be stored
• Replenishment: the more often stores are replenished, the more
volume of products can kept centrally
• Re-distribution: the easier products can be re-distributed
between stores, the more will be kept in store
• Local differences: the more local differences in sales are
expected, the more products are kept centrally for latter
distribution to the preferred region
© Shopping 2020
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The balancing act of inventory, capital, availability and control
Building the future supply chain: Background
Supply chain models impact inventory risk and working capital
The demanding consumer is putting pressure on the supply chain, for example
because of the increasing need for diversity in assortment. This leads to
shorter product lifecycles, more product variants and an increased inventory
risk. To cope with these requirements, it is theoretically wise to keep
inventory ‘high’ in the chain as long as possible to optimize flexibility. This is
now under pressure, as consumers expect products to be delivered at home
faster and faster, even on the same day. Or as we have seen in Silicon Valley,
within an hour. This would mean that inventory must be available much
nearer to consumers and as such downstream in the chain. Inventory risks will
increase based on this. Traditionally (r)etailers bear these risks. In the current
market it is getting more difficult for (r)etailers to do so. In successful supply
chains product brands take on their responsibility more and more. Vertically
integrated supply chains, mono brand stores and web shops of product brands
are examples of this. But also multi-brand (r)etailers adapt more often logistic
models like concession and consignment in which product brands have a large
role in replenishment. Ultimately this would mean that (r)etailers become
showrooms and market places and will be paid for services
delivered. This means a reduction of inventory risk
and of working capital in the total chain, with a shift to
product brands. However, this asks for a ‘well-heeled sit’
at these companies…
Inventory
Shelf
availability
Control
burden
Working
capital
Source: blog post by Axel Groothuis on Shopping 2020.nl
© Shopping 2020
68
Inventory & Planning (6)
Building the future supply chain: Recommendations
Maximize stock availability through stock visibility and
digital stock
▪
Online ‘shelf’ availability is crucial. Consumers switch to other
online shops within one click. To maximize stock turn, preferably all
stock in all locations is made available for all channels anytime.
Web orders and demand from customers in any local store can then
be fulfilled with central stock, stock from any other local store and
sometimes even with stock directly from suppliers. Assortments at
retail stores then consist of physical stock and “digital stock” via
displays connected to the webshop / back office. A reliable promise
to customers at time of ordering is also key. To provide for this, real
time insight in the complete supply chain inventory is needed.
Processes must be in place to support delivery from local stores to
other stores and consumers (mostly via post and parcel service).
The realized decrease in inventory and risk of obsolete stock may
weigh out the additional delivery costs. Reduction of inventory risk
at retailers is key. E-tailers who are nowadays opening physical
stores, also try to limit their store inventories to what is needed for
the “showroom and experience” function.
© Shopping 2020
Aktiesport integrates online and offline stock
‘If a product is not on stock in store, the system searches for
a location where the item is available. It takes several
factors into account. If the product is a fast mover in one
store and a slow mover in another store, it will be picked
from the latter store. A store entry system counts store
visitors and is connected to the inventory system. In this
way an e-commerce order can be assigned to a store where
personnel has probably enough time to handle it. Such a
new way of working is a demanding change for your
organization. It requires significant changes in your ERPP
system. Your sales organization and store personnel have to
fully support the system and need to be motivated and
committed’.
Source: Twinkle Nr 9, 2013
69
Kijkshop: pilot in combining physical and digital stock
Building the future supply chain: Reference case Inventory & Planning
Kijkshop recently opened a pilot store in Tilburg. The store
has replaced a large share of its showcases with touch
screens. Rather than keeping all products and related
inventory in-store, the pilot store only has fast movers on
stock, the rest of the products can be picked up the next day
or will be delivered at home. If the pilot is a success, Kijkshop
reduces both its store floor space and inventory on a larger
scale.
Kijkshop
Robin
Tichler
Less inventory and higher ITO
“The first results of the pilot are promising. Since 6 months now we have started the new pilot store and the
results are positive. With a 60% lower stock than in the average store and a 11% higher ITO we are on the right
track. With a new integrated touch screen application, different assortment and a flexible city distribution
model we have achieved this. The combination of physical stock and “digital” stock resulted in a 50% higher
number of internet orders out of the stores being 20% of the store sales. We need to adapt the assortment
because a different location of the stores also means that customers have different product requirements
compared to other stores.”
Robin Tichler, Manager ICT & Logistics at Kijkshop
© Shopping 2020
70
Handling & Transport (1)
Building the future supply chain: Recommendations
Recommendations
• Determine stock locations based on delivery times to consumer
• Organize stock flexibility and efficiency across bulk and consumer units
• Offer different delivery options and centralize personal preferences
• Facilitate detailed tracking and tracing and product identification
• Optimize transport to consumers through bundling and peak shaving
• Offer fully integrated distribution across Europe
© Shopping 2020
71
Handling & Transport (2)
Building the future supply chain: Recommendations
Determine stock locations based on delivery times to consumer
▪
Delivery times will be shortening for e-commerce. In 2020 next day and same day delivery
will be common for many product groups. This asks for delivery from nearby stores or
from e-commerce warehouses located relatively close to consumers, at least within the
Netherlands. For fast movers (supplier managed) warehouses nearby cities may be an
option to respond to these delivery requirements. They can also play a role in store
replenishment (for normal sales and pick up in store). This will most probably require
‘horizontal integration’ to achieve an affordable solution.
Organize stock flexibility and efficiency across bulk and consumer units
▪
Given growing e-commerce volumes it becomes increasingly important to merge “online
and offline” stock, either physically or making them ‘mutually available’. A physical
merge has an even greater impact. Next to flexibility between types of stock also
efficiency is key. Mechanization of handling of bulk stock is different from handling of
single units. For the latter efficiency is even more important because of the workload
generated by the number of parcels in combination with the intenseness of activities like
picking, packing, shipping and identification. Fashion retailers as an example move to
managing individual items for both store replenishment and online orders. Product
identification on item /serial number level increases quality and insight in stock
information. Single item packaging (appropriate for e-commerce deliveries) already used
at suppliers increases flexibility and efficiency as well. Two-step picking for online orders
opens the opportunity to “merge” stock without integrating all processes completely.
For packaging material itself also optimization is possible. In the expert group Ecology
problems with packaging are addressed like oversized packaging formats, too thin
packaging material, marketing oriented packaging material instead of functional
packaging material and standard large packaging for small products.
© Shopping 2020
Amazon’s Warehouse Spree
As Bloomberg reports on Amazon’s huge
investment: “The e-commerce giant has
invested roughly $13.9 billion since 2010
to build 50 new warehouses, more than
it had cumulatively spent on storage
facilities since its 1994 founding”, the
expansion in number and size of
Amazon’s warehouses increases the
company’s same-day delivery rate.
Bloomberg Businessweek August, 2013
See also appendix
Impact on the environment
The optimal solution for package
design
= Sustainable development
Not sufficient packaging
Source: Vereniging Golfkarton, 2013
Too much packaging
72
Handling & Transport (3)
Building the future supply chain: Recommendations
Offer different delivery options and centralize personal
preferences
▪
Consumers require many different delivery options and delivery
moments. Some may still opt for home delivery, others will choose for
pick-up points located in retail stores, outside city centers or along
highways (unstaffed). Acknowledgement in legislation of pick-up points
as non-retail is important, which will decrease requirements for such a
location. Additionally different delivery moments will be required.
Central registration of preferences per consumer may increase customer
satisfaction while increasing efficiency at the same time. For retailers
and producers investment in delivery options is needed to meet
expectations of consumers.
>30% of consumers want to
indicate very precisely when the
ordered product should be
delivered
Environment not yet a key-issue
for consumers but increasing
willingness to make realistic
sacrifices and importance of
track&trace1
50%
40%
30%
20%
10%
0%
At-door
At-door
I find it
delivery is bad delivery is not important to
for the
necessary, I
be able to
environment can pick it up
follow my
at a location purchase with
close by
track&trace
Important
1
© Shopping 2020
Agree
GfK: Hoe shop jij in 2020?
Enquete, 2013
Totally Agree
73
Handling & Transport (4)
Building the future supply chain: Recommendations
Facilitate detailed tracking and tracing and product
identification
▪
Google Glass provides for transparency
Customer expectations and legislation will require detailed
and continuous tracking and tracing of purchased items. The
origin of products and ingredients or parts must be traceable
as well . Based on ‘internet of things’ whole chains will be
opened up with on every link of the supply chain relevant
information about the product. This information will be
accessible via the internet anytime. This will further increase
the need for product identification at item and serial number
level. Companies need to further integrate tracking and
tracing and product identification in their processes.
Wearable computers like Google Glass are able to support
supply chain activities. It will not cause large breakthroughs in
supply chain models, but will make supply chains more efficient
and transparent. In warehouses orders can easily be picked
hands free with Google Glass as the ‘drill instructor’ for picking
locations and as the tool for scanning of picked products. Also
when delivering goods to third parties Google Glass may be
Environment not yet a key-issue
used to capture the handing over of the goods and documents.
for consumers but increasing
Via a picture at location, evidence is created for this handover.
willingness to make realistic
Next to this Google Glass can play a role at the front of the
sacrifices and importance of
supply chain. Consumers can scan their groceries immediately
track&trace1
when taking them out of the shelves and pay afterwards via
Google Glass based on this scanning. Altogether Google Glass
leads to further enhancements in supply chain transparency.
© Shopping 2020
74
Handling & Transport (5)
Building the future supply chain: Recommendations
Optimize transport to consumers through bundling and
peak shaving
▪
E-commerce will increase the number of (near) home deliveries
within urban areas. To minimize congestion and CO2 pollution new
concepts will be needed. Bundling of transport within and across
companies is needed. Logistic service providers need to prove their
added value in facilitating this. Advantages will be achieved as a
result of collaborative planning and physical bundling. In addition,
different pricing of delivery times can be used to shave peaks in
trucks and work force and improve capacity optimization.
Harmonized regulations for city distribution will further support
efficiencies in handling and transport.
Bundling of transport at Transmission
Transmission is the largest alliance of independent
transporters in the Netherlands and Belgium. Participants
in Transmission bundle their cargo. This means faster and
more efficient transport. Overnight, during non peak
hours, small parcels are gathered with large trucks. These
parcels are delivered to partners or to the central Hub. In
the morning deliveries are done from this central hub.
With less CO2 pollution more kilometers are driven with
more return.
Source: MVO Nederland
Offer fully integrated distribution across Europe
▪
Internet increases the cross border (e-)commerce opportunities.
Fast delivery at affordable cost is an important prerequisite. Local
presence and/or speedy distribution is therefor needed. Logistic
service providers need to become true European partners for
warehousing and transport. This means one contracting party with
one set of tariffs, uniform warehouses in multiple European
countries and transport across Europe. Unified legislation (tax,
duties, customs, documents) is needed to lower the administrative
burdens across entire Europe.
© Shopping 2020
75
Returns & Leftovers (1)
Building the future supply chain: Recommendations
Recommendations
• Implement clear return policy and charge reasonable cost
• Professionalize and speed up return process
• Prevent returns via product information, standardization and consumer interaction
• Consider specialized partners for return and repair handling
• Optimize value of returned products
© Shopping 2020
76
Returns & Leftovers (2)
Building the future supply chain: Recommendations
Implement clear return policy and charge reasonable cost
▪
High rates of returns in e-commerce are common. In fashion, rates of 50% are reached.
For consumers it will become clear that free return policies are only possible under
certain conditions. In other situations returns can be charged for. Further restrictions
may be applicable for some products like customized ones. Clear explanations about the
policy must be available for consumers via all channels.
Top 3 for consumers when it
comes to returns:
1
already 20% of the respondents
find that companies should
charge a reasonable fee)
Professionalize and speed up return process
▪
Consumers need the opportunity to return products via different channels (in store, via parcel
service). Retailers must be able to handle all returns at all locations, including e-commerce only
and long tail products in their stores. This means that in every retail store the complete
assortment must be known. Due to short product lifecycles, it is highly important to reduce the
throughput time of returned items back to sales points. To achieve this, a rule based logic can
determine the location with the highest sales chance. When consumers register a return and
hand it in at a certain pick up point or store, the barcode can already be related to the best sales
location and facilitate a quick and direct transfer to that specific location. This kind of solutions
evidently requires stock visibility across multiple locations.
Free Returns (although
2
Clear instructions of return
process
3
Quick money transfer
Prevent returns via product information, standardization and consumer interaction
▪
An important way of preventing returns is providing very good product information such as
clarifying visuals, all kind of product characteristics and information for use. Further
standardization in e.g. sizes and colors will also reduce the risk of returns. Immediate customer
contact when a consumer is registering a return online may also help to prevent unnecessary
returns, e.g. in case customers do not understand how to use a product. In some industries ‘no
trouble found’ rates are over 70%.
1
© Shopping 2020
GfK: Hoe shop jij in 2020?
Enquete, 2013
77
Returns & Leftovers (3)
Building the future supply chain: Recommendations
Consider specialized partners for return and repair handling
▪
As return handling and repair can be considered as a task for specialists,
collaboration with partners may be advisable. Especially for knowledge
intensive products like mobile phones it is likely that centralized return
centers across multiple sales channels benefit from synergies.
Advantages of outsourcing may consist of additional expertise in for
example return policies, bundling of transport for returns with other
companies and efficiency gains in processes. Alignment with other
processes within the organization remains important.
Companies can leverage their channels for
second-hand sales….and for leftovers?
Optimize value of returned products
▪
Besides an adequate return process other solutions are available which
are aiming at making the best of returns. First of all returns in store offer
an additional sales opportunity for other products. When a product is
returned, re-use in the same or in another setting may be possible. In
some cases the product needs to be repaired or refurbished first to
become ‘ready-for-use’ again. Another option is facilitation of secondhand sales by consumers via channels of the company. This is not only
applicable for returns, but also for used products.
© Shopping 2020
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Supply chain control (1)
Building the future supply chain: Recommendations
Recommendations
• Focus supply chain control on integral profitability
• Measure profitability across channels
© Shopping 2020
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Supply chain control (2)
Building the future supply chain: Recommendations
Focus supply chain control on integral profitability
▪
There is a need for integral supply chain performance measures. This
means that partners in the supply chain measure and reward based on
common performance indicators. For most companies this will require
a change from more traditional ‘isolated’ KPI’s (Key Performance
Indicators) to KPI’s reflecting integral profitability of the entire supply
chain. From supply chain partners this will ask for transparency about
cost, revenues and profits.
Such an integral control framework has to address industry specific
characteristics. For example control of (fresh) food chains will focus on
throughput times and expiration dates while non-food chains will focus
on responsiveness and efficiency.
Measure profitability across channels
▪
The Fresh food supply chain:
strong platform control at DeliXL
DeliXL intends to strengthen its fresh image through
collaboration with local partners. The solution of DeliXL is
in a common e-commerce platform for its partners. Next
to sales via this platform DeliXL provides administrative
and logistics support to its partners. A recommended
roadmap to increase use of capacity and knowledge and
to change the rules of the game: regionally-oriented
supply chains.
For more information: see appendix
Environmental control at Puma
As all sales and distribution channels will mutually effect each other in
an omni-channel environment, integral profitability must be judged
across all channels. This will also facilitate the future omni-channel
internal organization
© Shopping 2020
Puma calculated the total damage to the environment of
its activities in 2011 and presented the results in an
‘Environmental Profit and Loss Account’ (EP&L). In 2012
Puma added the figures for damage of individual products
to the environment. Information has been gathered in all
of the supply chain of Puma and helps Puma with
improvements. Besides this Puma creates transparency to
consumers and Puma is willing to share its knowledge
with other companies for
a better world.
Source: MVO Nederland
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Information (1)
Building the future supply chain: Recommendations
Recommendations
• Build information exchange with partners on cross industry standards
• Manage data quality
• Enable a more granular identification of your products
• Prepare for the Internet of things
© Shopping 2020
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Information (2)
Building the future supply chain: Recommendations
Build information exchange with partners on cross industry
standards
▪
If you want to sell through additional channels and if consumers
require more data about the items they buy, the use of data standards
will become inevitable. A company simply can not adapt their own
systems to comply with data feed requirements of any partner. As
online sector borders blur, cross industry data standards are the best
way forward when building or adapting IT systems. GS1 is an
important reference when it comes to cross-industry standards for the
exchange of product master data, orders, dispatch advices, logistics
information and invoices. They also can help with unique identification
keys. The combination of a GS1 pallet label with a unique ID and an
electronic dispatch advise can speed up the unloading of trucks at the
distribution center by 80%.
Food retail wants to speed up goods receiving
process by 80%
Dutch food retailers, already known for their fast supply
chain processes, have started a joint initiative together
with their suppliers to speed up their good receiving
process by 80 %. In order to achieve this all parties
involved will implement bar-coded pallet labels and
electronic dispatch advices based on the cross industry
GS1 standards. When a truck unloads at the distribution
center only the pallet barcode needs to be read to clear
in the goods received instead of today’s manually
checking of the pallet’s content. These procedures will
save time and money for both retailers and suppliers. A
supplier with an average number of 200 shipments per
week might save between € 34.000 and €147.000 a year.
Transparency in chain at Eosta
Eosta - distributor of biological vegetables and fruit - gives consumers
insight into the way products are grown and marketed. This increases
trust in and commitment to products and suppliers. Eosta explains about
quality of products, consequences of production for the environment
and social consequences of production.
Source: MVO Nederland
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Information (3)
Building the future supply chain: Recommendations
Manage data quality
▪
Automatic data feeds into the IT systems of partners mean increased
efficiency, but sending out wrong data will have a negative impact for all
parties connected to this system. Also consumers require detailed insight
into the supply chain, “24/7” and via different touch points. The smaller
the screen of their device is, the more specific and targeted the
information must be. Moreover wrong or unclear information may cause
unnecessary costly returns. Data Quality is therefore a key issue to
manage. Research in the Dutch food industry showed that in April 2014
only 30 % of the manufacturers where able to provide product data
with an accuracy level of 95 % or more. Taking into account the growth
in supply chain partners that e-retailers are connected with, as well as
the growth of the number of product data elements that will be
exchanged, Data Management will become a key competence for both
(r)etailers and manufacturers.
© Shopping 2020
Intergamma requires correct product data for
online retailing
Intergamma (Gamma and Karwei bouwmarkten)
recently started an online webshop. During the
preparation phase a lot of attention was given to the
collection process of product data. During a suppliers’
meeting at their head office the Operations Director of
Intergamma made a clear statement: suppliers who do
not intend to share product data through electronic
data synchronization based on GS1 standards, would
jeopardize their often long term relation with this
market leader.
Source: GS1 Nederland
83
Information (4)
Building the future supply chain: Recommendations
Enable a more granular identification of your products
▪
Consumer and product safety legislation and the consumer ‘s
information needs will require a more granular identification of
products. For example specific batch information is needed for
information on product quality. Customization, efficient warranty
and returns handling may even require identification of each single
item (the instance of a product). GS1 offers several options to cover
such needs. Create a grid of sectors, business processes to be
supported and the required identification level to determine the
best solution.
NGPI: new generation product identification
In 2013 the 50 largest retailers and manufacturers in
the world started a project to determine how to
handle product identification in the next 20 to 40
years. Although the project has still to be finalized we
can expect that today’s barcode will continue to be at
the core of product identification. At the same time
new possibilities will appear: products might get an
additional batch number, expiry date or serial number.
(R)etailers might benefit from serial number use in
their return processes: they can easily determine
where they had originally sourced the returned
product or whether the same product is returned as
the one that was initially sold.
Source: GS1
© Shopping 2020
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Information (5)
Building the future supply chain: Recommendations
Prepare for the Internet of things
▪
In today’s world product data is pushed to the next link in the supply chain directly
or through a data pool. As the amount of data increases and certain data elements
become more dynamic, a new approach is needed. The speed and reliability of
tomorrow’s Internet makes it possible to pull data from each supply chain partner
when needed. This means that retailers and other supply chain partners can avoid
ever growing Product Data Management systems.
Manufacturers and other partners can
add data via publishing on the Internet.
Once again, also this data needs to
be structured according to cross
industry standards in order to be
interpreted correctly by partners
involved.
Metro’s traceability approach and
more
World wide retailer Metro has used RFID to
follow pallets in its supply chain process for
several years. Every time a pallet passes a
scanner the RFID chip reports its identification
number to the reader, which posts number,
time, place and why of the transaction on the
internal web server of Metro. In the near
future Metro will use the same technique, but
with a serialized GS1 barcode to track and
trace consumer items of fish in order to
comply with new legislation on fish
traceability. Metro will not only be able to
trace the partners in the supply chain of a
certain item but will also be able to request
specific information from them concerning
topics like production or handling methods,
certification, quality etc. This way the product
data flow turns from push to pull, avoiding
extremely large and difficult to handle product
databases at the retail side.
Source: GS1
© Shopping 2020
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Two additional topics: 3D printing and small retailers
Building the future supply chain: Recommendations
▪
▪
▪
Apart from the ‘standard’ supply chain dimensions we have addressed two additional topics that
deserve attention:
– 3D printing may cause a disruptive change in the supply chain
– Small retailers may have to reinvent their function and capabilities to respond to trends and
possible future developments
Around these two topics additional recommendations have been formulated
The next slide is a visualization of supply chain
models. 3D Printing has been added as a new
additional supply chain model. It clearly shows
the increased complexity companies have to
deal with, especially when they act in multiple
business models which may change over time.
© Shopping 2020
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Supply chain models in an omni-channel world
Building the future supply chain: Overview supply chain models
Raw materials
Logistics packaging (collies, crates, pallets, shrinks)
Individual items
3d printing at home
3D
printing
Pick up points
3d printing at print shop
Print shop
Manufacturer
Pick up at pick up point
Online store
replenishment
Brand
direct
E-fullfilment center Pick up in store
product brand(s)
Product brand
Eur. DC / Reg. DC
Private
label
(R)Etail /
From store to
door/pick in store
Store replenishment
Home
Mono brand stores
Manufacturer
Cross dock
Wholesale
Consignment/VMI
Between
stores
Store replenishment
Concession / shop in shop
Retail chain stores
Pick up at pick
up point
Online store
replenishment
Home delivery from
small retailer
Pick up in store
E-fullfilment center
(r)etailer(s)
Pick up at pick up point
Concession
Wholesale
From store
to door/pick
in store
Retail Distribution
center
Reseller
Market
place
Direct delivery from
product brand
Specialist store
Home delivery from
online retailer
Home delivery from
market place DC
Market place DC
© Shopping 2020
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C2C
3D printing (1)
Building the future supply chain: Recommendations
Recommendations
• Aggregate demand for raw materials
• Facilitate consumers in production
• Implement raw materials transport to consumers
• Take care of leftovers in 3D production
• Provide for supporting information for 3D printing
© Shopping 2020
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3D printing (2)
Building the future supply chain: Recommendations
Sourcing
Inventory &
planning
Handling
Aggregate demand for raw materials
▪ For 3D printing it is all about raw materials. Consumers are printing their own products
based on these raw materials. For suppliers/producers it is not about predicting
demand for products and product groups anymore. The demand for products, which
are mostly not known, needs to be translated into demand for raw materials.
Facilitate consumers in production
▪ In 3D printing retailers will become superfluous and producers will deliver raw
materials to consumers. Also here new roles emerge like design (help) for consumers
and quality control of 3D printing. These paths need to be explored in future.
Implement raw materials transport to consumers
▪ For 3D printing raw materials are shipped to consumers. First of all
this needs to be done in handy packaging like cartridges. When
manageable packaging is arranged for, products can be picked from
the warehouse like other packaged goods. Also transport can be
combined with transport of other products to consumers.
Transport
© Shopping 2020
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3D printing (3)
Building the future supply chain: Recommendations
Returns
‘Leftovers’
Take care of leftovers in 3D production
▪ Besides returns of raw materials with 3D printing returns are as a rule not applicable.
Also 3D printing may be used for repair of products by consumers. The question is
however what will be done with products with failures or leftovers from 3D production.
A environmental friendly way of disposing of these products must be developed. Also
government can play a role here.
Provide for supporting information for 3D printing
▪ For 3D printing new kinds of information will be shared. Consumers will be interested in
designs, which will definitely work, next to own scans. Also information about
characteristics of raw materials and which materials to be used in what situation, need
to be made available to consumers. Further information can be shared about produced
items (like performance, characteristics etcetera) en leftovers.
Information
Although the speed of introduction of 3D Printing in the supply chain is hard to predict,
it finally will mean a disruptive change in the supply chain. Fashion, bags, toys and many spare parts can already be
printed. The current use mainly focuses on the creation of prototypes, like Adidas and Nike do. 3D printers may
become a standard element in every household, but one can also think of a revival of the ‘copy shops’ as 3D printing
stores.
© Shopping 2020
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Small retailers (1)
Building the future supply chain: Recommendations
Recommendations
• Participate in buying groups and shared services to create buying power
• Collaborate to reach and service the consumer
• Invest in information technology and shared delivery services
© Shopping 2020
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Small retailers (2)
Building the future supply chain: Recommendations
Participate in buying groups and shared services to create buying power
▪ Certainly small retailers, but also small product brands, will face major challenges to survive in this market on
their own. It is crucial to receive competitive conditions when sourcing. Bundling of power is a good way to bring
this about. Via buying groups even small companies can form a power block. Moreover, small retailers can share
facilities and large investments, like back office systems and services.
Collaborate to reach and service the consumer
▪ Reaching consumers via the internet currently requires major investments in online marketing. Small retailers
have to ‘horizontally’ collaborate to reach consumers online via aggregated models such as high traffic market
places or local initiatives like Negen Straatjes in Amsterdam. Especially when location based search is applied,
this offers new opportunities for small local retailers. Small retailers often remain attractive for consumers
because of their ‘niche’ specialisms (like handcrafts) and their bond with the local community. If local players
are able to collaborate in stimulating and marketing these specialisms, this will increase their vitality. Vertical
collaboration is necessary to offer the long tail without unbearable stock risk.
Invest in information technology and shared delivery services
▪ Sharing information (product data, stock data) and speedy delivery services is needed to meet the requirements
of these large platforms (like Google Express). One has to invest in information technology to be able to play a
role in the future shopping landscape. Delivery services often can be sourced from third party service providers.
Again, collaboration and bundling of buying power may become necessary to make those services available at
feasible cost.
© Shopping 2020
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CONCLUSIONS
Winning the supply chain battle!
© Shopping 2020
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Conclusions: Think ahead and start now!
Shopping 2020: Supply Chain
Conclusions: Winning the battle!
In order to win the ‘battle of the supply chains’ in 2020, it is essential to develop key supply chain capabilities
around ‘Flexibility’, ‘Collaboration’ and ‘Information’. These are the key elements:
1. Flexibility: Think about your specific role in the new competitive landscape. Focus on distinguishing added
value you can bring. Create flexibility in sourcing and stock in order to have all stock available to all channels.
2. Information: Invest in standardization and information exchange by building an information exchange with
partners on cross industry standards. Supply chain visibility (stock and tracking & tracing) and operational
excellence in data quality will become key.
3. Collaboration: Seek flexible partnerships and ‘dare to share’ information with your partners. Create
transparency. As a ‘small retailer’: work together in buying groups and consumer marketing.
And: in order to win in 2020: start now!
© Shopping 2020
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APPENDICES
• Details Expert Group members and interviewees
• Shopping 2020 general information
© Shopping 2020
EXPERT GROUP AND INTERVIEWEES
Supply Chain
© Shopping 2020
96
Expert group Supply Chain
Shopping 2020: Supply Chain
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Name
Henk-Jan Groeneveld
Kees Jan Roodbergen
Theo Heemskerk
Jacco Timmerman
Erwin Grondman
Robin Tichler
Pieter Aarts
Rens Tap
Martijn Arkesteijn
Jos Visee
Hans Elshout
Benjamin Grugeon
Bart Lammers
Rowell Versleijen
Ferry den Hoed
Erik Velthoven
Maarten van Welsem
Jerry Tracey
Frank Balder
Frits van den Bos
Axel Groothuis
Company
Bugaboo
Rijksuniversiteit Groningen
V&D
BCC elektro-speciaalzaken
Telegraaf Media Groep
Kijkshop.nl
Intergamma
Modint
AkzoNobel Decorative Coatings
Philips
S&H Productfulfilment
Procter & Gamble
Technische Unie
Plus Retail
Etam Groep
Casio Benelux
Eurogroup Consulting Nederland
GS1 Nederland
Eurogroup Consulting Nederland
GS1 Nederland
Eurogroup Consulting Nederland
© Shopping 2020
Position
Global Supply Chain Director
Professor of Quantitative Logistics
Director Logistics
Senior Manager Logistics
Manager Operations
Manager ICT & Logistics
Head of Supply Chain Projects
Senior Consultant
Information Manager
IT Business Partner O2C
Director
Commercial Supply Chain Manager BNL
Manager Supply Chain Management
Director Logistics
COO
Sales Manager
Senior Manager
Sector Manager DIY & Garden
Partner
Manager Innovation
Partner
97
Interviewees
Shopping 2020: Supply Chain
▪
▪
▪
▪
▪
▪
▪
▪
▪
▪
Name
Alex Jonker
Eric Koch
Sandra Verhoef
Jasper Zeelenberg
Steven Witteveen
Eelco Schuller
Arjan van der Heijden
Maarten Tibosch
Melbert Visscher
Bart Sanders
Company
HEMA
Ahold
Wehkamp.nl
Retailisation
FashionUnited Indicia
Coolblue
Just Brands
LEGO
CB
CB
© Shopping 2020
Position
Director Supply Chain and E-commerce
VP Global Supply Chain e-Commerce
Supply Chain Manager
Director
Co-founder / partner
Manager Logistics
Operational Manager
Senior VP Value Chain Innovation
Chief Commercial Officer
Business Development Fashion
98
PROGRAM INFORMATION
Shopping 2020
© Shopping 2020
99
About the Shopping 2020 research program
How do consumers shop in 2020?
Shopping 2020 is a research program whose goal it is to answer the following central question:
“How do consumers shop online in 2020 and which actions need to be undertaken on an
national, sector and company level upon that Dutch B2C selling companies can act on this
successfully, nationally, within Europe and globally.”
The motive for this research program is that the current retail, finance and travel
landscape is changing rapidly and despite the current economic crisis, companies
have to reposition themselves in order to survive beyond 2020:
•
•
•
•
•
•
Changing consumer behavior (from single- to omni-channel);
Disintermediation of the value chain (producers sell direct);
Rise of new media (Google glasses, voice/virtual recognition)
Product digitalization (gaming, 3D printing);
Internationalization and global hyper competition (Amazon, Wallmart);
etcetera…
Many of the developments are universal and reach across multiple
Industries and sectors.
© Shopping 2020
Source: www.zazzle.nl
100
19 key themes were defined to create a Shopping2020 Vision & Actionplan
In each expert group experts from the scientific, political and business community are participating
Future Trends
Shopper
Behaviour
Cross border
(e)Commerce
Technological
Future
Touchpoints
Ecology
Customer Journey
Political / Legal
Key Themes
Orientation
Selection
Shopping2020
Vision
Transaction
Delivery
Action Plan
Shopping2020
Customer Care
Customer
Data Value
Management
Travel
Action plan
Retail Action
plan
Finance
Action plan
…
Action plan
© Shopping 2020
Business
Models
Omnichannel
Organization
Security & Fraud
The New Shopping
Street
Smarter
shopping
Supply Chain
Online
Entrepreneur-ship
…
101
In total more than 460 experts are working for half a year on Shopping2020
© Shopping 2020
102
The Shopping2020 has been made possible by a large community
Of Founding Partners, Hosts, Industry Organizations, Knowledge, Network & Media Partners
Commissie van
Aanbeveling
Ed Nijpels (voorzitter)
Bernard Wientjes (VNO-NCW)
Arie van Bellen (Directeur ECP)
Martijn van Dam (kamerlid PvdA)
Jan Kees de Jager (vml. Min. Fin.)
Cor Molenaar (Erasmus Universiteit)
Kitty Koelemeijer (Universiteit Nyenrode)
Walther Ploos van Amstel (VU)
Erik Fledderus (Directeur TNO)
Heleen van Oord (Directeur DQ&A)
Giovanni Colauto (CEO Bijenkorf)
Harry Bruijniks (CEO Euretco)
Ronald van Zetten (CEO Hema)
Joost Romeijn (CEO Sundio Group)
Paul Nijhof (vml. CEO Wehkamp)
Annemarie van Gaal (CEO van Gaal)
Herna Verhagen (CEO PostNL)
Nick Jue (CEO ING NL)
Michiel Buitelaar (COO Sanoma Media)
Danny van der Eijk (Chairman Achmea)
Harry van Dorenmalen (CEO IBM Europe)
Program
Board
Program mgt: Jorij Abraham
Mar/Com: Inge Demoed
Research: Eveline Poerink
Congres: Marin Wiellersen
Support
Team
Travel
Dymfke Kuijpers
Key Themes
Axel Groothuis
…
Founding Partners:
…
…
…
…
Expertgroep
Orientation
…
Expertgroep
Technologisch
Expertgroep
Business
models
Expertgroep
Online ondernemen
Customer
Journey
Arjen Bonsing
Expertgroep
Cross Border
(e)Commerce
Expertgroep
Shopper
Behaviour
Future
Trends
Retail
…
Expertgroep
Selection
…
Kennis partners:
…
Expertgroep
Omnichannel
Organisatie
Expertgroep
Veiligheid / Fraude
Expertgroep
Transaction
…
…
Expertgroep
De Nieuwe
Winkelstraat
Expertgroep
Customer
Care
Expertgroep
Delivery
Wetenschappelijke partners:
© Shopping 2020
Expertgroep
Supply Chain
…
…
…
Expertgroep
Politiek /
Juridisch
Expertgroep
Ecologisch
Expertgroep
Future Touchpoints
…
…
Finance
…
Netwerk partners:
Smarter
Shopping
Expertgroep
Customer data
value management
…
Media partners:
103
REFERENCE CASES
Supply Chain
© Shopping 2020
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Bol.com – Bolplaza – Restriction of inventory
Summary
Shopping 2020 – Supply Chain – Example
•
•
•
•
Bol.com would like to expand its assortment
How can Bol.com expand quickly and in a controlled way?
Bol.com offers a platform for companies with online sales ambitions
Bol.com performs role of agent and doesn’t bear any inventory risks
Situation and challenge/ issue / goals / vision?
• Bol.com would like to expand in assortment and in choice within the assortment without
bearing too many risks
Quantitative figures
• Expansion of assortment is on
going and network of partners has
been connected
Requirements for success
• Strong brand with consumers
Solution / Example
• Bol.com only plays role of aggregator of supply and of market place (Bolplaza)
• Moreover Bol.com takes care of the bundling and classification of information for
consumers and for guarantee of quality
• Bol.com has an agent model, in which compensation consists of a percentage of sales via
Bolplaza
• No inventory is held by Bol.com and delivery of products is not executed by Bol.com
Advantages
• Bol.com uses its reputation to expand quickly to other product groups without taking too
much risk
Applicability Shopping2020
• Etailer doesn’t need to take risks to be successful
• Strong etail brands can function as market places without taking care of e-fulfilment, but leaving this to partners
Acknowledgement
• Bol.com; Bolplaza
© Shopping 2020
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Coolblue – ‘Customer centric’
Summary
Shopping 2020 – Supply Chain – Example
•
•
•
•
•
For Coolblue the customer comes first
Customer service is the competitive advantage of Coolblue
Delivery options and returns are confirming this
Coolblue offers customers many flexible options aiming at convenience
Besides this options for delivery and returns are clearly explained
Situation and challenge/ issue / goals / vision?
• Coolblue is customer centric in its way of working
• The question is what this means for delivery options and the return process?
Solution / Example
• A clear description is available for delivery options and return process
• Delivery options: free delivery, at appointment, ‘delivery today’, pick-up in stores and pick-up
Quantitative figures
• >200 webshops, 5 physical stores
• 14 days return window
• Free returns
• When returning money back
within 5 days
• NPS (Net Promoter Score): 62
Requirements for success
• Customer centric organization
• Focus on simplicity
• Transparency about options,
requirements and restrictions
points
• Coolblue offers customers many possibilities to contact Coolblue about returns and to return
products
• In addition, Coolblue is transparent regarding returns and restrictions are clearly indicated
Advantages
• Guarantee of customer experience during complete process from buying to returning
• All activities are focusing on customer loyalty
• Less attention and time needed for disputes with customers
Applicability Shopping2020
• Maximum customer experience in terms of delivery options
• Importance of transparency and customer focus in returns
• Decrease of costs by simplicity in return process
Acknowledgement
• www.Coolblue.nl
© Shopping 2020
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Hunkemöller – Click and collect
Summary
Shopping 2020 – Supply Chain – Example
•
•
•
•
Hunkemöller customers have a free store pick-up for their orders
Consumers are able to reserve products in a store online
Until seven days after reservation products can be fitted and picked-up
Requirement is that stores do have products on stock
Situation and challenge/ issue / goals / vision?
• Multichannel strategy of Hunkemöller is all about convenience for customers
Solution / Example
• Consumer chooses a store and is able to reserve a product when on stock
• Online purchases can be delivered at home, but can also be put aside in a store for seven
days
• Consumers are allowed to fit clothing in the store and decide afterwards about the
purchase
Quantitative figures
• Number of stores: 400
• Revenue : 200 million Euro
• Start service: March 2013
• App downloaded 80.000 times
Requirements for success
• Products need to be in stock to
avoid disappointments
• Integration of different systems
and advanced website/webshop
for correct handling of
reservations
Advantages
• More traffic to stores
• Online and offline channels strengthen each other
• Higher service level to consumers: consumer has a choice
Applicability Shopping2020
• Companies can use reservations to generate traffic to stores and are able to reinforce success of different channels
Acknowledgement
• http://www.hunkemoller.nl/nl_nl/klantenservice/clickandcollect.html
• http://twinklemagazine.nl/nieuws/2012/09/hunkemoller-komt-met-internationale-site-en-reserveeroptie/
© Shopping 2020
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Tesco UK – Supply Chain Analytics
Summary
Shopping 2020 – Supply Chain – Example
• Tesco UK saves significantly by use of so called Supply Chain Analytics
• Extensive analysis of supply chain data is done
• Identification of opportunities:
• To reduce waste
• To optimize promotions
• To match inventory with fluctuations in demand
Situation and challenge/ issue / goals / vision?
• Since 2006 Tesco UK is using Supply Chain Analytics intensively to reduce costs
• Goal is to build forecast models based on sales in combination with other factors like
weather
• Also analyses of discounts and promotions have led to optimization of the supply chain
Solution / Example
• Reorganization of own data infrastructure
• Specific team to create forecast models
• (Supply chain) actions defined to realize future savings
Advantages
• Improved matching of supply and demand (decrease of surplus and fewer stock-outs)
• Improved workflow for planning and monitoring discounts and promotions
• Significant financial savings
Quantitative figures
• 3146 stores
• 16 million Tesco Clubcardmembers
• 1500 pick-up points
• 150 drive-thrus
Requirements for success
• Data structure in place
• Know-how available regarding
data modelling
• Sufficient customer-/sales
information available
Applicability Shopping2020
• Enormous potential of supply chain savings when data structure is in place, customer information is available and models work for
type of business
Acknowledgement
• www.tescoplc.com
• http://www.information-age.com/technology/information-management/123456972/tesco-saves-millions-with-supply-chain-analytics
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Carnegie Mellon – In store robots
Summary
Shopping 2020 – Supply Chain – Example
• Carnegie Mellon Campus Bookstore is currently performing a pilot with robot-driven
•
•
•
inventory management in the store
The robot monitors shelves and assesses inventory levels and signals misplaced
products
This information is presented to store personnel on their tablets
Inventory levels and other relevant information are also presented to consumers (via
apps)
Situation and challenge/ issue / goals / vision?
• To provide consumers with product information, inventory information and location
information in physical store
• To present inventory levels and misplaced items to store personnel
Quantitative figures
• Pilot phase
Requirements for success
• Available technology
• Adjustment of processes to
technology
Solution / Example
• In store robots based on Kinect sensor, image processing and machine learning
algorithms, 2D and 3D views on products and a shelve plan/map of the store
Advantages
• Inventory management decoupled from human discipline
• Integration of offline and online shopping for consumer
• Cost reduction by less FTE
Applicability Shopping2020
• Use of robot technology in supply chain
• Integration of offline and online business based on real-time data
Acknowledgement
• http://www.engadget.com/2012/06/30/carnegie-mellon-andyvision-bot-takes-retail-inventory/?a_dgi=aolshare_twitter&a_dgi=aolshare_twitter
• Pilot Carnegie University en Intel
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Miele–Drop shipments for etailers
Summary
Shopping 2020 – Supply Chain – Example
• Miele would like to preserve its quality brand in a changing online environment
• New distribution contracts with severe requirements on product information and
brand communication
• Delivery to and service for consumers by Miele via drop shipments
Situation and challenge/ issue / goals / vision?
• The question is how Miele can guarantee ‘end-to-end’ consumer experience when
consumers buy at etailers?
Solution / Example
• Miele has a schedule of requirements for websites and brand advertisements for etailers
• Online orders are delivered by Miele (drop shipment)
Advantages
• Perseverance of quality and completeness of product information
• Miele itself guarantees consumer experience and desired quality level
• Consumer experiences service suiting the brand
• Miele gets to know consumers better (directly)
• Decrease of stock in chain
• Fewer returns because of professional installation
• Increased control of product life cycle management
Quantitative figures
• Miele piloted this way of working
in the Netherlands
Requirements for success
• Strong product brand with ability
to impose requirements on
etailers
• Professional fulfilment operation
by supplier
• Clear distribution contracts with
agreements about customer
ownership/customer data
• Information
integration
with etailers
Applicability Shopping2020
• Producers/suppliers may take over supply chain control of (r)etailers to better guarantee quality
• Shortening of the supply chain by use of drop shipments
Acknowledgement
• Magnus, Mtec, 2013
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Bol.com – Pop-up
Summary
Shopping 2020 – Supply Chain – Example
• Bol.com has opened a physical store in underground station of Rotterdam
• Pictures of products are shown at a wall and can be scanned via QR-codes
• Scanning means ordering and afterwards products can be paid for and picked-up in
•
Quantitative figures
• First pop-up shop Bol.com
the store
An extra shopping moment is created in this way
Situation and challenge/ issue / goals / vision?
• Bol.com would like to create an extra shopping moment for consumers
• A normally ‘lost’ moment is used for shopping
Requirements for success
• Ease of use
• Availability of products
Solution / Example
• A physical store with a limited number of products, related to the location
• Ordering these products can be done in a pleasant way with use of the latest technology
Advantages
• Use of presence of consumers
• Creation of special shopping experience by use of technology
• Limited space and capacity needed
Applicability Shopping2020
• Pop-up store principle can be used for different products in different settings (dependent on searched image)
• Creation of additional shopping moments for consumers
Acknowledgement
• http://www.hyped.nl/nieuws/bolcom-opent-popup-store-op-rotterdam-centraal.html#.UgDz_1OPVJO
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Tesco Homeplus – Pop-up
Summary
Shopping 2020 – Supply Chain – Example
• Tesco has a limited number of stores in South-Korea labeled Homeplus
• A creative concept is required to grow under difficult market circumstances
• Tesco Homeplus has started virtual shops in underground stations to facilitate
consumers in mobile shopping at ‘lost’ moments
Situation and challenge/ issue / goals / vision?
• Koreans have a busy life, travel a lot and don’t have much time available for shopping
• The challenge for Tesco is to become number 1 retailer of South-Korea under these
circumstances
Solution / Example
• Virtual shops: walls in underground stations with posters with fresh food shelves of super
markets with QR-codes to facilitate ordering by consumers
• Delivery at same day as order (reliable delivery concept)
Advantages
• Strong knowledge of target group and local culture and relevant application of mobile
platform to create sales moment and to build customer loyalty
Quantitative figures
• Revenue 2012/13: £5,311 billion
• 520 stores
• 6 million customers a week
• 76% rise in newly registered users
• 130% rise in online sales
• App > 1 million downloads
• Several nominations and prizes for
concept
Requirements for success
• Thorough knowledge of target
group and local culture
• Reliable delivery concept
Applicability Shopping2020
• This format is strongly situational, but next to food it may be used in other industries nationally and internationally
• Important attention points are the correct combination of online and offline tools and a matching delivery concept for customer
experience reasons
Acknowledgement
• http://bit.ly/jD13QA ; http://bit.ly/112d6d9 ; http://bit.ly/1586VJw
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Dell – Demand shaping
Summary
Shopping 2020 – Supply Chain – Example
• Dell gathers and shares valuable customer data with suppliers to increase accuracy of
•
•
forecast, but at the same time to influence demand
Two information loops, internally and externally, make sure Dell is aware of articles to
be produced
When products cannot be delivered in time Dell responds with promotion of
products, which are available
Situation and challenge/ issue / goals / vision?
• Dell is constantly searching for to ways to reduce waste, time and costs
Solution / Example
• Dell gathers large amounts of customer data and shares this data with purchasing and
sales departments, but also externally with suppliers
• To be able to successfully forecast demand two information loops are in place, one
between customers and sales and one between sales, purchasing and suppliers
• In case of demand for products which are not available, Dell launches marketing actions
for products which are available or which can be delivered quickly by suppliers, to shift
attention and consequently demand for these products
Advantages
• Based on data, Dell has good insights, into future production and is able to produce fast
• Information of suppliers is used by sales team to define promotions for products
• Dell does not have surplus stock or high inventory levels, but products are in perception
of customer always available and are delivered quickly
Quantitative figures
• Correct forecast ofsales: 75%
• 95,000 employees
• Revenue 61 billion dollar
• Profit 3 billion dollar
Requirements for success
• Well-defined agreements with
suppliers and willingness to share
valuable information
• Advanced systems and software to
process vast amounts of data
• Flexible suppliers, which are able
to constantly meet with changing
demands
Applicability Shopping2020
• By use of sales information, companies can provide for a decrease in surplus stock and a decrease of inventory levels, by improved
forecasting of demand
Acknowledgement
• http://www.reliableplant.com/Read/7129/dell-supply-chain
• http://www.fastcompany.com/51967/living-dell-time
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Amazon– Demand shaping
Summary
Shopping 2020 – Supply Chain – Example
• Amazon not only is interested in following demand of consumers, but also in steering
•
•
this demand
To enable this, Amazon uses information based on online transactions in the past
This offers Amazon the opportunity to generate demand for products preferred by
Amazon
Situation and challenge/ issue / goals / vision?
• Amazon would like to steer demand of consumers. In this way sales can be boosted and
supply chain efficiency can be increased
• Examples: offer extra product in same line (extra book), offer accompanying product with
main product (paper with printer), offer available products, decrease prices to smoothen
capacity load in time, increase prices of products to avoid inventory shortage
Solution / Example
• Amazon has a lot of information about needs of consumers based on online purchase
behaviour in the past
• This information is used to steer demand of consumers in a ‘logical’ way
Advantages
• In general consumers are positive about service with relevant proposals for purchases
• Amazon is able to sell products, which they would like to sell
Quantitative figures
• Amazon is largest etailer in the
world
Requirements for success
• Sufficient relevant data to
generate valuable information
• Adequate ICT support for demand
shaping
Applicability Shopping2020
• Demand shaping is online and offline applicable for influencing demand. As a rule online information gives the opportunity to
respond faster
Acknowledgement
• http://www.dcvelocity.com/articles/20110718demand_shaping/
• http://emcien.com/demand-sensing-and-demand-shaping/Amazon
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Home Depot – Cross-Docking
Summary
Shopping 2020 – Supply Chain – Example
• Home Depot is the largest DIY retailer in the world. Since 1979 only focus on
•
•
•
expansion and revenue. At start of 21st century this did not work out anymore
In 2007 start of reorganization of supply chain: replenishment of stores via Rapid
Deployment Centres (RDC’s)
In RDC’s central ordering of products with cross-docking to stores at last moment
Store replenishment has improved and empty shelves have disappeared
Situation and challenge/ issue / goals / vision?
• Home Depot has had a focus on number of stores and sales at the expense of customer service
and operations
• Supply chain was inefficient with empty shelves in stores and high costs
• Revenues and value of the company decreased in the beginning of the 21st century; change was
needed
Quantitative figures
• 2300 stores
• Revenue 75 billion
• 5% of all sales online
• About 150 million online visitors
per year
Requirements for success
• Strategic locations for RDC’s
• Good information exchange
between different parts of
operations
Solution / Example
•
•
•
•
Home Depot decided to centralize ordering at supplier at Rapid Deployment Centres (RDC’s)
Home Depot built 24 RDC’s, with replenishment of 100 stores per RDC
RDC’s are only used for cross-docking and products may stay in the centres for only 24 hours
For e-commerce additional DC’s are built
Advantages
• 75% van products are ordered centrally, large advantages at bulk purchasing
• Improved store replenishment because only at the last moment it is decided where to ship goods
to
• Decrease of empty shelves and inventory costs
Applicability Shopping2020
• Centralization of inventory leads to cost reduction and support of hubs to facilitate distribution
Acknowledgement
• http://logisticsviewpoints.com/2012/11/05/home-depot-drops-the-e-off-of-e-commerce/
• http://www.dcvelocity.com/articles/20090801verticalfocus/
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Nike – Mass customization
Summary
Shopping 2020 – Supply Chain – Example
•
•
•
•
Nike offers customers opportunity to design and to order own products
Focus is mainly online, but also some physical stores are available
Publicity is booming by having fans ‘in charge’
Supply chain advantages are decrease of inventory because of better match between
demand and supply
Situation and challenge/ issue / goals / vision?
• Nike started in 1999 with the concept of ‘self-design’, but the real breakthrough only
came in 2005 after an ‘upgrade’ of the site
• Nike has created real brand ambassadors by letting customers make their own designs
and has generated supply chain advantages at the same time
Solution / Example
• Mass customization where customers accept longer delivery times and higher costs
because of unique proposition
• Co-creation: Self-design of products by customers in a pleasant online shopping
environment
• Addition to this concept by physical stores and mobile applications
Advantages
• Improvement in matching of demand and supply and herewith decrease in inventory
• Fewer inefficiencies of mass production: less loss (of time) because of bad forecasts
• Satisfied customers despite longer delivery times and higher costs
Quantitative figures
• Revenue >$100 million per year
• >20% of total ‘store revenue’
• >2 million facebook fans
• >3 million website visitors a month
Requirements for success
• In fashion industry only a strong
brand -with fans- is capable of
implementing mass customization
• Transparency in delivery times and
costs
• Professional logistics and
fulfilment operation
Applicability Shopping2020
• Mass customization within fashion is applicable in case of a strong brand. In addition it is a method of creating supply chain
advantages (amongst others decrease of costs)
Acknowledgement
• Huffington post, “NikeID Makes $100M+: Co-Creation Isn't Just a Trend”, juli 2010 (http://huff.to/b40wpb)
• Crossroad innovation, “NIKE ID – THE FIRST EXAMPLE OF MASS CUSTOMIZATION DRIVING REVENUE?”, september 2010 (http://bit.ly/mob5VS)
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Amazon – Close to customer
Summary
Shopping 2020 – Supply Chain – Example
• Amazon was not yet present in Europe
• How is Amazon able to enter Europe and to serve customers adequately?
• Amazon chooses for local presence and local distribution power to be able to deliver
fast to customers
Situation and challenge/ issue / goals / vision?
• The question is how Amazon can optimally serve consumers in the European market?
Solution / Example
• Amazon chooses for strong physical presence in Western Europe
• It has about twenty distribution centres in Europe with amongst them centres in
Germany, England and Italy
• In this way Amazon is always close to consumers and is able to realize short delivery
times to customers
Advantages
• By local presence Amazon is capable of getting ‘market sense’ and fast delivery
Quantitative figures
• Amazon is largest etailer in the
world
• About 20 distribution centres
around Europe (Emerce, 2011)
• In 2012 the company opened up
20 new distribution centres. The
worldwide total is now 89.
Revenue in 2012: 51,73 billion
dollar compared to 42 billion
dollar in 2011
Requirements for success
• Financial possibilities to invest in
infrastructure
• Marketing power to engage
consumers in new countries
Applicability Shopping2020
• For players, entering the Dutch market, local proximity/presence is important
• Local presence for ‘market sense’ and speed of delivery
Acknowledgement
• Emerce, Amazon vergroot Europese distributiekracht, juli, 2011
• http://www.analist.nl/berichten/2013/01/30/11909/Koers+Amazon+schoot+omhoog+naar+publicatie+cijfers+2012
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Deli XL – Local for local
Summary
Shopping 2020 – Supply Chain – Example
• Deli XL would like to strengthen fresh image
• How can Deli XL use its infrastructure to provide local players with a platform?
• Via ‘Vers 24/7’ Deli XL offers local players the opportunity for profiling
Situation and challenge/ issue / goals / vision?
• Deli XL would like to strengthen its position in fresh food
• Moreover Deli XL has a positive attitude towards local players
Solution / Example
• Deli XL takes care of a platform for local players and of a professional presentation of the
offering
• The administrative and logistics support is done by Deli XL
• Via internet bundling of the supply takes place with e-fulfilment by Deli XL
Quantitative figures
• About 40 partners
• More than 1.000 local products
Requirements for success
• Good integration of information
with partners
• Standardization of product data
• No competition between supplier
of platform and partners: Deli XL
has supporting role for local
partners
Advantages
• For Deli XL it means a use of capacity and knowledge
• Local players do have better opportunities for profiling and are able to use experience of
Deli XL
Applicability Shopping2020
• Set-up of regionally oriented supply chain means a new way of competition
• Cooperation in the supply chain between large and small parties is possible when they are not each others competitors
Acknowledgement
• Artikel: Nieuwe website Vers 24/7: ruim 1.000 lokale producten
© Shopping 2020
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BUILDING THE SHOPPING 2020
SUPPLY CHAIN
For more information please contact:
Eurogroup Consulting
Gooimeer 5-39
1411 DD Naarden
035-6996069
www.eurogroupconsulting.nl
Axel Groothuis
+31 (0)6-51243288
a.groothuis@eurogroupconsulting.nl
GS1 Nederland
Amsterdamseweg 206
1182 HL Amstelveen
020-5113888
www.gs1.nl
Frits van den Bos
+31(0)6-50654722
frits.vandenbos@gs1.nl
© Shopping 2020