gra - what will future supply chains look like?
TRANSCRIPT
Shanaka Jayasinghe
Manager
GRA Sydney
Shanaka is on a mission to build in technological and environmental sustainability into
Australian supply chains. Marking a positive contribution by reducing waste and
increasing national productivity.
Shanaka is always in pursuit of the next innovation in supply chain with a view to
practically apply such innovations to allow his clients to achieve online supply chain
competitive advantage. He is drawn to connect the dots of how influential companies
such as Uber, Amazon, and Google are shaping the supply chain landscape of tomorrow.
GRA is Australia’s premier, expert consulting firm specialising in supply chain & logistics strategy, planning and execution. We offerconsulting, professional services, supply chain systems, training & education and benchmarking across a broad range of industries.
© GRA 2015
We turn supply chains into a competitive advantage
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Disruptions change the status quo – how we do certain things a certain way.
This shapes our expectation of how things should be done and in doing so prompts change in how things can be done.
Once we know things should and can be done differently, this is ultimately how things are done.
Of course only until the next disruption…
This whitepaper looks to stretch your thinking. It will explore how things are currently done in the supply chain andhow they possibly could and should be done tomorrow…
Increased consumer
expectations
Pressure on supply chains
Step change in capability
Disruptions shaping future supply chains
The Disruption Cycle
Disruptions that will shape our future supply chains…
© GRA 2015
Mobile Technology New channels for Last-mile Delivery Connectivity - Big Data and the Internet of Things Predictive Analytics3D Printing Automation* Green Supply Chains*
*not covered in this whitepaper
Visionary
Game-changerNiche Player
Challenger
Mobile Technology
New Channels for Last-mile Delivery
Connectivity - Big Data and the Internet of Things
Predictive Analytics
3D Printing
Complete supply chain disruptor
Change is happening
now
Niche supply chain disruptor
Change is happening tomorrow
The Magic Quadrant of Supply Chain Disruptors
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*Green Supply Chains
*Automation
*not covered in this whitepaper
3D Printing
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3D printing, or additive manufacturing, is the process of making three dimensional solid objects from a digital file.
The supply chain implication of 3D printing is a significant disruption to manufacturing supplychains and how they are designed today.
Though manufacturing in certain locations can be low-cost, managing a global logistics network isnot, especially when considering Australia, with low population densities and a vast geographicexpanse leading to high transportation costs. 3D printing is able to reduce these costs by enablingbusinesses to station local manufacturing centres closer to strategic markets, reducing the lengthof the supply chain, inventory levels and helping reduce carbon footprint.
We will first see changes in highly complex spare parts operations with challenging logistics. Thechallenge in such supply chains is often expensive parts, stored in many locations where demandis sporadic and difficult to statistically forecast. What 3D printing will enable is lower inventorylevels by holding a ‘vanilla set’ of raw materials capable of producing ‘x’ number of parts. This isas opposed to holding ‘x’ number of parts.
Aviation and the Defence Forces have been early adopters and rightly so. Consider an aircraftengine which has in excess of 25,000 componentry parts. If we were to service this engine in anairbase in Western Australia we potentially require all 25,000 parts to be available in somequantity, on-site (in WA) at any given time. This is a significant inventory holding challenge, and italso puts a strain on our working capital. Using 3D printing we can hold a mix of raw materials andcomponents to maintain the capability requirement whilst lowering our overall inventoryfootprint in our network. This will improve our working capital and overall serviceability.
Case Examples include:
Defence Forces (particularly the US Military)
GE Aviation (First engine parts becoming operational)
Automotive (e.g. Mercedes, BMW and General Motors)
Health-care (from bionic limbs to organs)
Clothing & Wearables e.g. Nike (custom shoes)
Amazon (patent for a mobile 3D Printing Delivery Trucks)
Now
Production Prototypes Small MFG runs of High Value/Complexity Dental/Aural healthcare forms/aids
Soon
Almost all service parts Complex high volume/high value forms Products related to fashion/trends - high volume/short lifespan
Later
Mass produced fast moving consumer goods
Automotive/Aviation
Mobile Technology
© GRA 2015
Mobile technology – your Apple or Android device which enables companies to access highly personalised data.
The supply chain implications here are many, lets look at two that come to mind for retailers.
Today, a demand-driven retailer for instance might forecast at a SKU or group level and a more sophisticatedretailer at a SKU by store (location) level. In doing so, the retailer pre-positions inventory in the network tooptimise service level availability/responsiveness at the lowest cost.
Tomorrow, imagine a retailer forecasting at a SKU by customer level where the customer is not the store,but you. That is, the demand signal comes from your phone and cascades upstream all the way to the rawmaterials supplier to trigger the manufacturing process and time-phased distribution in the network. Theretailer here would be pre-positioning inventory in the network for YOU based on your shopping habits, yourmovements and other data in your mobile device.
Mobile technology enables real-time, personalisation and location data. This is incredibly valuable in terms oflast-mile fulfilment for online purchasing. Last mile fulfilment, particularly in Australia is one of the mostsignificant challenges in online fulfilment.
DHL, Amazon and Audi have partnered to propose a solution to this challenge. How does it work? You orderfrom Amazon and goods move though the network to the DHL courier who confirm your vehicle location usingthe data in your mobile device, DHL on arrival at your vehicle have a one-time electronic access code to theboot of your vehicle where they can deliver the ordered goods.
Raw Materials
ManufacturerDistribution
CentreCross-Dock Store
YOU (Customer)
New channels for last mile delivery
© GRA 2015
Peer-to-Peer Transportation – Uber is the obvious case study, however I would encourage you to focus on theconcept of peer-to-peer supply chains where Uber is the technology enabler.
Uber started as Uber Black, a network of privately licenced drivers and has since introduced (albeit withsome resistance) UberX, a network of random drivers. These drivers are in essence a distribution network.Uber tomorrow is likely to leverage its distribution network to transport packaged goods (not just people) –enabling anyone to effectively become a courier on their daily commute.
‐ In the build up to Christmas, major retailers in the United States have partnered with Uber to pilotlast mile fulfilment of online orders. Beyond these pilot efforts, imagine a world where it is assimple as typing into Google Maps you are traveling from A B and then receiving a propositionto deliver a package from somewhere near ‘A’ to somewhere near ‘B’. Note, trust is a significanthurdle here and relies heavily on the highly personalised data profile in your mobile device.
Click & Collect – huge in Europe, we are at the tip of the ice berg in Australia.
Think grocery, you have the option now to order online and pick up from store. Woolies have taken this astep further, partnering with EBay, so you can now make a purchase on EBay and pick up in store at yourlocal Woolies. These partnerships in click & collect will become more prevalent as both parties ‘win’. Thewin for Woolies is they get greater online presence and more traffic in store and the win for EBay is adistribution footprint via the Woolies store network.
‐ My question to you is to look beyond this. Imagine what the next partnership will look like? Couldan online retailer take the next step and partner with a public transport provider? Perhaps SydneyTrains? That way, as a phase one, we could order online and pick up goods at our local train stationon our daily commute, or better yet, a phase two, we could tap into peer-to-peer transportation inrail (much like the Uber concept for road).
Drone Technology – no this is not science fiction, it’s already here.
Imagine a world where apartments are being designed with drone landing pads to enable them to deliversmall goods to densely populated areas.
Noting the above, perhaps there is hope for online retail to become quite profitable even in a country likeAustralia with a massive geographic expanse and low population density.
For retailers, last mile delivery in the past was as simple as transporting goods from a distribution centre to store where you as the customer would pick up the goods, whilst shopping…
Today there exists a multitude of ways for your product to find its way to you. Let’s explore three potential game-changers…
2015 Data
Connectivity - Big Data and the Internet of Things
© GRA 2015
Data is on the rise. As a species, in 2015, we are creating in 2 days the amount of data that was created in the entire year of 2003.
2003 Data Data is changing the way we think, how decisions are made and the landscape of global markets.
Traditionally supply chains were designed to use structured, clean data. But it turns out that in today’s environment, the mostimportant data for the supply chain is often unstructured data in the form of for example customer service call data, socialmedia data, warranty and return information, customer rating and review data. Over the next decade, supply chain processeswill need to listen, test and learn based on the sensing and pattern recognition from big data technologies.
For the supply chain, data is only useful when it is connected. The Internet of Things is seeking to make such connections.
Imagine as a supply chain director, a world where you know exactly where your cargo is and also whether it is at the correcttemperature, whether it has been dropped or damaged, whether the truck driver braked hard or is currently stuck in traffic –or better yet, who the driver is with a reliability rating included. This is the world of the Internet of Things.
Imagine a supply chain so connected that management have in their hand the lever to influence in real-time, the entire flowof a banana from farm to store.
How would this work? Take the farm to store example CISCO advertised in 2014.
The banana anticipated the early harvest based on its pigmentation which told the servers to alert the logistics providerwho arranged the new delivery time with the supermarket chain.
The supermarket chain placed the current stock of bananas on sale, and the shopping cart with its tablet drivenadvertising, just to be extra helpful, suggested a delicious banana dessert recipe to drive down the current stock. (CISCO, 2014)
Think about how these companies are using data today…
Predictive Analytics
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Companies today, leveraging data, are getting to know and understand their customers more than ever imagined in the past.
The last decade has focused on the use of linear optimisation and statistics based on historicaldata to drive forecasting and improve supply chain decisions. Business rules have been simple ‘ifthen’ statements. As supply chains become more complex and the needs are greater, these ‘ifthen’ statements are moving towards ‘what if modelling and pattern recognition technologies.
Online and Mobile shopping has resulted in a completely new channel to customer and althoughthis has stretched the warehousing and distribution capabilities of the supply chain, this newform of data has also given greater insight and new meaning into previously less explored areassuch as forecasting. For instance, retailers can finally measure lost sales accurately throughquantitative webpage data, rather than anecdotal evidence from stores.
Additionally, using login information companies are not only better understanding real demandand lost sale data, but additionally, better understanding your purchasing habits, patterns andtrends – leveraging this information to then prompt highly focused marketing campaigns as wellas improved management of clearance stock items.
Take Amazon for example who recently obtained a patent for a concept known as‘anticipatory shipping’ or ‘yesterday shipping’. The idea here is Amazon analyse you user-profile data and based on your cursor movements, check-out strike rate, etc. will crunchalgorithms to predict the probability of you purchasing certain items – before you actually do.
‐ Based on this data and probability, Amazon will then send you this item and give youthe ‘option’ to buy it at your door, or, preposition the inventory in the network lettingyou know its able to be delivered within ‘x’ hours. The icing on the cake is whenAmazon then incentivise you to purchase it by offering ‘x %’ off to seal the deal.
Generally, companies see the value in using predictive analytics and big data in their supplychains, however the foundation capability is often missing and the cost of deployment is stilldeemed too high.
© GRA 2015
Increased consumer
expectations
Pressure on supply chains
Step change in capability
Disruptions shaping future supply chains
Supply Chain Strategy of the future must embrace disruption.
www.gra.net.au
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The Future of Supply Chain Strategy
Supply Chain Strategy
Business Strategy
Traditional:
Business Strategy
Supply Chain Strategy
Emerging:
Traditionally, Business strategy drives supply chain strategy.
For example, a business strategy of operational excellence would drive supply chain strategy via
leaner operations to reduce cost e.g. a centralised distribution network – the trade-off
here is often responsiveness to customer.
Supply chain investments often involve long term payback cycles and as such we want to ensure there is
a strict long term alignment with business strategy.
As the rate of change increases in the world, business strategy must evolve accordingly, so when making
investment decisions in the supply chain we must also drive the business strategy decision.