ecr asia pacific conference | 16 october 2008 supply chain & customer collaboration paul h....

ECR Asia Pacific Conference | 16 October 2008

Supply Chain & Customer CollaborationPaul H. Graham

PageECR Asia Pacific Conference | 16 October 2008

What is Collaboration?

2

col·lab·o·rate (kə-lāb'ə-rāt')

1. To work together, especially in a joint intellectual effort to achieve a common goal

The American Heritage® Dictionary of the English Language, Fourth EditionCopyright © 2006 by Houghton Mifflin Company

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PageECR Asia Pacific Conference | 16 October 2008 3

Agenda

Supply Chain & Customer Collaboration

Sustainability

Technology

Cost Pressure

End-Consumer Satisfaction

Partnership Approach

Market Overview – we are in a new economic paradigm


Market Overview: Asia Pacific

During the last decade, the economies in Asia Pacific expanded by an average of 6%* per year. One result of this economic growth is an increase in private consumption, which grew from $1 trillion to $2.5 trillion during the same period.

Asia Pacific is the largest growing region and the largest consumer market in the world:

• 54% of the world’s population lives in Asia Pacific; this population is projected to rise by 16% over the next 2 decades

• 68% of the top 20 countries (relative to the number of households) are in Asia

• 24% of the world’s countries exceeding 7% GDP growth are in Asia

• Over a third of the top 20 manufacturing output countries are in Asia

• 14 Asian countries are above the global average consumer confidence index

*In inflation-adjusted terms

Source: AC Neilson


However, we are facing new economic times!

• The current economic crisis has greatly impacted consumer confidence worldwide, falling to the lowest level in several years

• Asia may escape the worst of this crisis but it is still early days; China is the key player to determine regional confidence and growth

• In this century we are witnessing the rise of the East and a shift of power (especially economic) to the developing world; not since the Industrial Revolution has such evocative change taken place

• These economic challenges emphasize a greater need for collaboration

5

Source: Nielsen Global Consumer Confidence Index, 1st Half, 2008


Agenda


Sustainability

Cost Pressure


Market Overview – we are in a new economic paradigm!

Technology




Cost pressure

Customers continue to come under cost

pressure due to thevolatile price of fuel

and generalcommodities

Sustainability

An increasinginternational andregional focus onsustainability andvehicle utilisation

Technology

Technology is andwill continue to

grow as the key driverfor efficiency,

collaboration andcustomer

satisfaction

CollaborationLogistics companies are acting as the centre of collaborative efforts to reduce costs, increase sustainable

supply chain footprints and aggregate efficiency, with the aim to increase customer satisfaction

End-ConsumerSatisfaction

Growth of moderntrade in Asia willdrive need for

better supply chain performance; on

shelf availability willdrive customer satisfaction andthus increasedbrand loyalty

Partnership approachIncreased complexity of global supply chains create a greater need for strong partnerships and

joint investment in people, systems and solutions


Cost Pressure

• Companies and end-consumers are struggling with the same global issues:

– volatile global energy and property prices – rising commodity prices which impact grocery prices– volatile interest rates and cost of capital – increasing inflation or risk of deflation

Source: AC Neilson; Global Logistics Outsourcing trends: Challenges in managing 3PL relationship

• Many successful companies continue to address cost pressures by outsourcing supply chain activities / processes to third-party logistics companies, allowing them to:

– reach markets faster– leverage economies of scale– add flexibility to supply chains– increase global capabilities – focus on core competencies

• Cost savings can be realized through network re-configuration, further collaborative initiatives in consolidation, fronthaul, backhaul and inventory optimization and utilization of more efficient vehicles


Sustainability: Some Facts

• Water is big business1 – annual turnover of US$400-500 billion for sales of water-related equipment and services

• Millions of Asians could face poverty, disease and hunger caused by rising temperatures and increased rainfall2

• 125 million people in South Asia could be displaced by climate change3

• Higher energy prices are promoting energy efficiency but also causing concern

• Globally, sulfur dioxide (SO2) has decreased but its concentrations remain above the WHO threshold in many cities in developing countries

• If global emissions continue on a ‘business as usual’ path for the rest of the century, Earth will warm by 14˚C by 21004

Source: 1. 2008 Sustainability Yearbook; 2. World Health Organization; 2008; 3. CSR Asia Weekly 2008; 4. Washington Post, March 2008


Sustainable Solutions: Customer Demand

• Companies such as DHL have the economic power and global reach to act decisively and contribute to the world’s social and economic future

• DPWN, parent company of DHL, is spearheading the sustainable supply chain approach, having made a commitment to reduce its carbon footprint by 10% by 2012, and by 30% by 2020

• Our investment in sustainable supply chain consulting expertise provides programs and guidance to customers to help them understand how to measure carbon footprints and collaborate and work together with DHL to reduce them

Increasing pressure from customers for sustainability-based logistics solutions


Distribution Centre

Regional Distribution

CentreRetail

Manufacturing/

Production

Home

Distribution Centres• Pollution risk from product and fuel spills• Noise, vibration and light• Waste • Packaging use

• CO2 emissions• Other emissions• Energy use• Water consumption

Environmental Impact of Supply Chain Logistics

Transport (all routes)• Fuel use• CO2 emissions & other emissions• Pollution risk from product and fuel spills• Noise and vibration• Congestion


Sustainable Supply Chain Logistics

• Network design and route planning

• Employee training, monitoring

• Water recycling (i.e. grey water)

• Rail and intermodal transport

• Urban logistics centers (consolidation)

• High loading factors, KPI’s

• Fleet optimization

• Better management of energy use

• New vehicles with diesel particle filters

• Vehicles with alternative clean fuels / technologies (CNG, Hybrid, Biofuels, etc.)

• Solar panel installation on building rooftops

• Temperature controlled warehouse facilities w/ energy conservation features

Sustainable initiatives include:


Technology: RFID

• Increasing customer demand for local and limited deployment / roll-out

– RFID deployment will be demand driven; retailers will drive RFID adoption

– Extending inventory visibility beyond the warehouse will be a differentiator for 3PLs

– Considerable industry roll-outs with METRO, Sony and fashion customers in France

• RFID will improve processes in the Supply Chain

– Tracking promotional displays, reducing out-of-stocks and improving shipping and receiving accuracy

– Fast and accurate handling in unit-tracking; speeding up lead time in the supply chain

– Secure data and shipment quality providing increased transparency

– Continual tests in various pilots leading to stability of sub-processes

• DHL has ample experience to implement RFID technology in our supply chain operations

– A variety of RFID projects have been implemented successfully

– Standardized RFID solutions for specific sectors have been developed (i.e. fashion)

– Strong DHL internal knowledge about RFID

RFID opportunities in logistics replenishment, distribution and inventory management will enable a closed-loop supply chain to monitor and measure business benefits of unit-level

visibility with item-level tagging


DHL SmartSensor Solution Inventory Management & Replenishment

Temperature monitoring service along the entire supply

chain

• Temperature measurement unit with RFID interface

• Designed for temperature sensitive products (i.e. drugs, food, flowers)

• Unique wireless reading at inspection points of temperature / history

data

Benefits

• Full control of product quality along entire supply chain

• Real time status information at inspection points

• Convenient web portal to monitor status information

• Ease of product handling due to comprehensive DHL services

• Notification to customer / DHL in case of critical conditions allows

proactive reaction

• Product integrity from wireless reading without opening the package

• Solution excellence due to synergy of partnerships


DHL Smart Shelf SolutionTemperature Tracking, Clinical Trials, Cool Chain Solutions

Manual Stock Replenishment Process

Healthcare Hub

Inbound

Stock

Hospitals

Order Fulfillment, DHL

Legend

Information Flow

ReturnUS Suppliers

EU Suppliers

Return

Outbound

Vietnam

Brunei

Indonesia

Singapore

Med Device

Med Device

Med Device

Med Device

Med Device

Med Device

Med Device

Pharma

Present day solution: consignment of pharmaceutical products


DHL Smart Shelf SolutionTemperature Tracking, Clinical Trials, Cool Chain Solutions

RFID Smart Shelf Solution: consignment of pharmaceutical products

Healthcare Hub

Inbound

Hospitals

ReturnUS Suppliers

EU Suppliers

Return

Outbound Singapore

Local Delivery

Med Device

Med Device

Med Device

Stock

Med Device

Med Device

Med Device

Med Device

Stock

Med Device

Computer

Computer

Smart Shelf

Smart Shelf

Medical Devices Tag with RFID Tags

Pharma

Order Fulfillment, DHL

Legend

Information Flow


RFID Project – DHL & METRO Group, France

• METRO‘s RFID strategy is to support all relevant processes with RFID in the next 10

years – a multidimensional task!

• Project marks stepping stone for large-scale use of RFID in the logistics industry

• METRO Group is a new partner of the DHL Innovation Initiative, this partnership will

jointly advance technology projects and turn them into business successes

• Full pallet RFID tracking for METRO Group in France

– All DHL shipments to METRO Cash & Carry France will use RFID

– 1.3 million pallets per year will be fitted with the RFID tags

Collaboration between DHL, METRO and technology partners to create solutions that will ultimately benefit the end-consumer



• There have only been minimal improvements in on-shelf availability between 2004 – 2008 as over time product availability has become more challenging with more fresh products offering greater supply chain challenges, particularly for organic and Fairtrade products

Customer demand for better quality logistics solutions to meet end-consumer demand

Shift toward more efficient value-add logistics services

Source: ECR UK

OOS SEL

OOS No SEL

Available


Pallet ThaiBringing goods more quickly & efficiently to the end-consumer!

• Door-to-door palletized collection and delivery

• Guaranteed next business day and day 2 service

• Scheduled line-hauls each night between Bangkok and regional hubs

• No minimum nor maximum number of orders

• Centralized customer service contact

• Web-based track and trace with immediate proof of delivery

• Quarter and a half pallet rates for smaller consignments

Pallet Thai applies the concept of Express logistics to pallet distribution. It allows SMEs the same access to wide distribution networks as large MNCs, without having to ship

large volumes.


Pallet Thai: How does it work?

Order placed by telephone, fax or e-mail

Collection of goods byclosest hub to point of origin

- Network traffic control center- Consolidation goods at collection hub

Scheduled vehicles runningdaily between hubs

Local distribution by closest hub to point of destination

Cross-dock operations onto delivery vehicles


Agenda


Sustainability

Cost Pressure


Market Overview – we are in a new economic paradigm!

Technology



Partnership Approach & Developing Relationships



• Moving past collaboration, partnerships between 3PLs and customers will strengthen customer supply chains, with 3PLs continually providing innovative supply chain solutions with a focus on customer needs, including:

– Cost Savings

– Sustainability

Cost pressure

Customers arecontinuing to come

under costpressure due to theRising price of fuel


Sustainability


Technology


grow as key driverfor efficiency,


satisfaction



End-CustomerSatisfaction

Growth of moderntrade in Asia will

drive need forbetter supply chain

performance; onshelf availability will

drive customer satisfaction andthus increasedbrand loyalty

Partnership approachIncreased complexity of global supply chains create a greater need for a strong partnerships and


Cost pressure

Customers arecontinuing to come

under costpressure due to theRising price of fuel


Sustainability


Technology


grow as key driverfor efficiency,


satisfaction





End-CustomerSatisfaction

Growth of moderntrade in Asia will

drive need forbetter supply chain

performance; onshelf availability will

drive customer satisfaction andthus increasedbrand loyalty

Partnership approachIncreased complexity of global supply chains create a greater need for a strong partnerships and


– Technology

– End-Consumer Satisfaction



• Joint planning and investment between 3PLs and their customers will become increasingly important in the future as competition will strengthen and greater visibility will be the key to success

• Customer access to partner 3PL’s information systems will provide them with visibility of available warehouse and trucking space, trucking destinations, etc., from point of supply to point of sale

• Rising investment costs, global standards and best practice processes will continue to drive a partnership approach


Looking ahead …

25

• In the current environment this could be limited to 24 hours!

• We will see a growing trend of customers looking to outsource more and more of their supply chain activities – replenishment, manufacturing, data and financial management – increasing the need for closer economic and strategic ties between 3PL’s and their customers

• Many of today’s companies will become pure ‘brand’ entities and will hand over the arms and legs of their physical operations to supply chain entities; a growing combination of strategic partnerships from sourcing to end-delivery will allow the ‘brand’ to focus purely on brand development and R&D

• Asia will, in many ways, be a leader due to its long term growth, early adoption of new business models and huge tide of new consumers who will drive supply chain execution, excellence and excitement

• DHL looks forward to being a partner on this journey!


THANK YOU FOR YOUR ATTENTION

ecr asia pacific conference | 16 october 2008 supply chain & customer collaboration paul h....

Documents

years asia

economic growth

new economic paradigm

largest consumer market

graham slide

impacted consumer confidence

economic challenges

new economic times