HorizontalCollaboraon’ ’’’’’’’’’’’’’’’’’’’’’’–and’its’Poten6al · As leading businesses redefine logistics requirements, new solutions

Professor Alan Waller OBE

Horizontal Collabora6on Workshop

Horizontal Collabora6on – and its Poten6al

Helsingborg, Sweden 20 March 2015

Professor Alan Waller OBE

• Vice President, Solving Efeso Interna6onal

• Visi6ng Professor, Cranfield School of Management

• Immediate Past Interna6onal President, CILT • Leadership Team, Supply Chain Council Europe (SCOR)

• President, Leaders in Supply Chain

• Chairman, ELUPEG Europe • Director and Trustee, Transaid

AGENDA

•  Business Pressures Today

•  The Business Case for Collabora9on

•  Collabora9on in Ac9on

•  The Challenges

•  The Way Ahead

AGENDA






Ever more demanding customers and consumers

Changing market boundaries and new channels

Aggressive global competition

Industry consolidation and alliances

Sustainability/ Risk/ Environmental issues

Financial/Economic pressures

Speed of technology change

Shortening product life cycles

Hypercompetition +

Globalisation

Serving localised customer needs through longer, more complex supply lines

Supply Chain Management in a changing Globalised World

The Emerging Value Chain -‐ The Global Picture

VALUE CHAIN RESPONSE

Retailers v  Increased customer reach v  Enhanced propositions v  Omni Channel v  Increased availability v  Increase SC control v  Responsible sourcing/CSR

Manufacturers v  Focus on core v  Network/outsource v  Agility v  Volume economics v  Supply Chain visibility v  Sustainability/CSR v  Collaboration v  Management of risk v  Process driven

Systems v  ERP v  Bolt-ons /APS v  Joining SC players v  Process driven

Technology v  New products v  New channels v  New customers v  Low cost

Consumers v  Ever more demanding v  Pro-active v  Interactive v  Multi/Omni channel v  Responsible buying

Logistics Companies v  Dedicated solutions v  Value-Added solutions v  Collaborative solutions v  Break the vicious circle v  Sustainability/CSR

Global Supply Chain -‐ Where Will the Next Genera9on Innova9on Come From? (Source: Alan Waller)

New Thinking Of Old Practices

Old Practices / Old Thinking

New Practices and New Thinking

New Practices Designed On Old Thinking

NEW

OLD OLD NEW

Supp

ly Chain Thinking

Supply Chain Practice

•  Collaboration across supply chains creating value added economics

•  Control towers for collaboration •  Responsible sourcing •  Sustainability - social, economic &

environment •  Focus on skills and leadership •  Align supply chain strategy with

business strategy

•  Retail focus on On-Shelf-Availability and In-store logistics

•  Supply Chain design fully integrating risk management principles

•  Extended Supply Chain Network Review

•  Managing Complexity

•  Retail focus on total Supply Chain cost – not just pushing cost upstream

•  Focus on Product/Channel/Customer Profitability - Cost-to-serve

•  Collaboration along Supply Chains to create visibility/synchronisation

•  Supplier Development for Supply Chain performance

•  Manufacturing for Supply Chain performance

Source A. Waller 2013

AGENDA






As leading businesses redefine logistics requirements, new solutions emerge in the market place

Storage Transport Planning

Dedicated Distribution

Logistics Management

Consolidation

Transport Networks

Logistics Networks

Multi User Solutions

1985 1990 1995 2005 2000 2010

Haulage Vehicle Hire

Distribution (C-U)

Express Delivery

Just-in-Time

Typical Market Development-Western Europe

Deg

ree

of V

alue

Add

ed

Complex Services

Base Services

Added-value solutions impact asset utilisation/carbon emissions

Users demand Logis9cs Service Development

Consumer Needs -‐ and the Supply Chain Response -‐ produce fragmented and addi6onal product flows. We need to find ways of combining these flows!

Product Line Proliferation

Full Loads Large Trucks

Part Loads Small Trucks

Rapid Replenishment

Local Production

Distant Production

Offshoring

Short Deliveries

Distant Deliveries

Reaching New Markets

Dense Flows

Fragmented Flows

Local sourcing

Distant sourcing

Global Sourcing

Local Production

Distant production

Focussed Manufacturing

Retail Therapy Collection

Home delivery

Home shopping

Dense flows

Fragmented flows

Omni Channel Developments

Local sourcing

Remote Sourcing

All year seasonal produce

Asset U9lisa9on across Europe TRUCKS • 85 billion km pa empty running • U6lisa6on less than 20% 40% full 40% running • 10%+ effec6veness also lost through moving to smaller trucks? • 10%+ effec6veness also lost through conges6on?

WAREHOUSES • 100 m m2 unused capacity

The typical improvement focus is on the carbon impact and efficiency of the asset. -‐We should be focussing on how effec6vely the asset is being used

SOURCE: ELUPEG Surveys/ Research 2003 to 2008

World Economic Forum Supply Chain Study 2009

≡  24% of freight vehicles in the EU are running empty

≡  Average loading of the rest is 57%

≡  Overall efficiency: 43%

≡  Flow imbalances only explain half of this loss

≡  Mirror image in the US

How long can this continue?

rel.1 2008/mm/dd Solving Efeso © 2008

EU Logistics Strategy EU Transport White Paper 2011: Ø  Reduce Europe's dependence on imported oil Ø  Cut carbon emissions in transport by 60% by 2050 Ø  Modal shiY: 30% off road by 2030 – 50 % by 2050 Ø  Mul9-‐modal: European corridor network (low carbon/green)

Efficiency

Effectiveness

Sustainability

Supply Chain

Supply Chain

Supply Chain

Supply Chain

Cross Supply Chain Optimisation

What is needed? Ø  Improve efficiency, effec6veness, sustainability simultaneously Ø Bundle and reduce freight flows Ø  Scale up for intermodal (rail/barge/short sea)

Ø Dras<c innova<on is needed

AGENDA






Reason

§  Both had empty running §  Recognized opposite transport flows

Horizontal Collabora9on is not new Example A -‐ Nestle & United Biscuits

Accomplishments

§  Reduced mileage by 280,000 kms

§  Reduced 85,000 litres of fuel consump9on

§  Reduced 223 tons of CO2

Obstacles

§  Culture, brand protec9on

§  Rates, insurance, safeguarding product integrity.

Method

§  Used technology available to both organiza9ons to manage stock movement, deliveries, and invoicing

Source: WPCarey School of Business, September 2007

Horizontal Collabora9on is not new Example B -‐ Pillsbury & Seneca Foods

Reason

§  Pillsbury’s core competency was growing vegetables; not producing and canning

Accomplishments

§  Pillsbury: New products to market 50% faster

§  Pillsbury: Op. margin increased from 8.3% to 13.3%

§  Pillsbury: Reduced corporate assets by more than $700 million

§  Seneca: Pillsbury accounts for over half of its produc9on volume

§  Seneca: Increased volumes led to greater margins

Obstacles

§  Trust; brand protec9on

§  Safeguarding product integrity and know-‐how

Method

§  Outsourced produc9on of Green Giant brand to Seneca Foods

§  Sold off manufacturing plants

Source: WPCarey School of Business, 1993

•  FMCG manufacturer in Turkey evaluated its Route to Market as part of a business strategy to focus investment and efforts on key ci9es and areas.

•  By aligning the supply chain to the new marke9ng strategy the company were able to increase sales, reduce opera9ng costs and turn a loss into a profit within 12 months.

Horizontal Collabora9on in Developing Markets -‐ Example driven by an FMCG manufacturer

§  Company was losing £10m per annum with high route to market costs

§  Small deliveries driven by tradi9onal nature of Turkish supply chain

§  Analysed current situa9on, iden9fying and assessing tac9cal and strategic opera9onal improvements

§  Achieved local management commitment to radical changes in their route to market

−  Establishing shared distribu9on plakorm with a porkolio of complementary products from strategic partner manufacturers bought by the same outlets

−  Ra9onalising distributor network, improving controls and op9mising frequencies

18

Collaboration in Action- 1 "   Asset Pooling (UK)

Opportunity

v  Two Competing Breweries run own delivery using own barrels

v  Three deliveries to outlets per week for each brewery

Approach

v  One consolidated delivery per week-or more-using common barrels

v  Third party buys the barrels

v  RFID tags on barrels

v  Announced Sept 2003

Benefits

v  Reduced Barrel investment

v  Reduced Supply Chain Inventory

v  Reduced Distribution Costs

Players

v  Scottish Courage

v  Carlsberg-Tetley

v  Trenstar

19

Collaboration in Action - 2 "   Fleet Pooling (UK)

Opportunity

v  Two Competing Dairy Businesses collect 4.5 m litres of milk from 7,500 farms using 500 trucks in the UK

Approach

v  Consolidated collection using common LSPs

v  6 month project to set the strategy

v  Announced Aug 2003 to start Autumn 2003

Benefits

v  Increased fleet utilisation

v  £8m pa saving

Players

v  First Milk

v  Dairy Farmers of Britain

v  Wincanton

v  Lloyd Fraser

v  Bibby

v  Interoute

Collaboration in Action - 3

Manufacturing/Retailing Consolidation Centre (UK) Opportunity - Historically independent logistics hubs

Approach - Single Consolidation Centre serving manufacturers with consolidated deliveries to retailer DCs -

Benefits - Increased delivery frequency

- Improved forecast accuracy

- Lower inventory

- Reduced pressure on stores

- Cost/Pallet savings of 20%

Players - Del Monte plus 62 other Manufacturers

- Tesco plus 3 other retailers


Collaboration-Making it Happen

"   Road-Map to Mutual Cost/Service Benefits

"   Find Suitable Partners

"   Find The Value

"   Enable The Value

"   Extract The Value

"   Share The Value

"   Share The Experience

"   Find More Partners


European Logis6cs Users Providers and Enablers Group

Created in 2001 to add value to business supply chains by introducing HORIZONTAL COLLABORATION

Collaboration in Action-Early Successes Manufacturing Consolidation Centre (NL)

Opportunity - Historically independent logistics hubs serving each manufacturer and separate delivery to retail DCs

Approach - Single Consolidation Centre serving both manufacturers with consolidated deliveries to retailer DCs - - Start-up Feb 2003


- Fewer truck movements

- Increased on-time performance

- Lower inventory/Fewer out-of-stock situations

- Reduced Carbon emissions and congestion

Players - Lever Health and Personal Care

- Kimberly Clarke (NL)

Collaboration in Action-Early Successes Manufacturing Consolidation Centre (France)

Opportunity - Historically independent logistics hubs serving each manufacturer and separate delivery to retail DCs

Approach - Single Consolidation Centre serving both manufacturers with consolidated deliveries to retailer DCs

- Conceived 2004/ Developed 2005/ Start-up 2007


- Reduced costs

- Increased on-time performance

- Lower inventory/ Fewer out-of-stock situations

- Reduced Carbon emissions and congestion

Players - Reckitt Benckiser, Colgate, Henkel, K&N


COLLABORATION IN ACTION

ELUPEG Early Projects have been driven primarily through user-driven Collaborative Working Groups

•  High Tech/Electronics Collaborative Working Group

e.g. Sony, Samsung, Philips, Panasonic

•  Automotive Collaborative Working Group e.g. Ford/PAG, GM, Honda, Pirelli, Unipart, Renault-Nissan

•  CPG/FMCG Collaborative Working Group e.g. Kimberly-Clark, Georgia-Pacific, Heinz, Diageo, Nestle

•  Chemical/Industrial Collaborative Working Group e.g. Sabic, Nova, Dow

Ireland -‐ Collabora6ve Distribu6on

ELUPEG – Early Projects

Scope: Collabora9on could bring substan9al benefits to all par9cipants in terms of cost reduc9on and service enhancement.

Par6cipants: Argos, Diageo, HJ Heinz, Henderson Group, Irwin’s Bakery, Moy Park, Royal Numico – Nutricia Ireland, SCA Packaging – Ireland Target: Cost reduc6on through: •  Fewer deliveries / increased vehicle u<lisa<on •  Enhanced customer service •  Reduced distribu<on costs (inbound and outbound) •  BeYer u<lisa<on of warehousing resources Iden8fied Savings exceeding £700K, Revenue enhancements exceeding £500k, plus enhanced customer service. PLUS Reduced truck movements and CO2 emissions.

France -‐ White Goods Distribu6on

ELUPEG – Projects

18 Manufacturers have accepted to join

Data sharing Common distribution strategy Common approach to customerss

External Consultant

Manufacturer Assoc.

7 manufacturers 1677 common Delivery addresses

8 manufacturers 2336 common Delivery addresses

Major Players are embracing Collaboration

UNILEVER:-

v  UNI-ONE – Collapse Business Units (20 networks) into One

v  Double size of business and reduce CO2 by 40% by 2020

v  Focus on Vehicle Fill/Modal Switch/W/H Energy Reduction/Network Changes/Technology

v  Encourage participation from outside Unilever

KRAFT/MONDALEZ -

v  Move to around 6 collaborative sourcing networks (400+ suppliers)

v  Each network consolidates flows with strategically located warehouses

v  Re-tender European Logistics to implement concept

v  Encourage participation from outside Mondalez

Major LSPs are embracing Collaboration and promoting this as a competitive advantage

DHL:-

v  Move to promote Collaborative Supply Chains (Pro-Actively from 2013)

v  Trade Team (95) as model for manufacturing-led multi-customer model

v  Carrefour as model for retailer-led multi-supplier model

v  DHL Collaboration with K&N on Co-Packing

CEVA:-

v  Move to promote Collaborative Supply Chains (Pro-Actively from 2014)

v  City of Books – Milan (2010) 90m books to 4,000 delivery points in Italy. Pooled resources improved asset utilisation from 67% to 85% with improved service.

v  City of Pharma – Milan (2013) Multi-market distribution to 13,000 pharmacies, 500 Hospitals and 400 re-sellers across Italy/Europe.

v  City of Tyres under development

AGENDA






Barriers to collabora6on

© Cologicol 2004

Reasons Given for not Collaborating v  Too difficult to start and do v  No technology to help v  Confidentiality issues v  Anti-competition fears v  Uncertain savings/ROI v  Insufficient proof of success v  Difficulty in sharing benefits v  It is not my job Source: ELUPEG Survey

Opportunity: Cost and carbon reduc6on

•  Increased efficiency of our own supply chain will reduce both carbon and cost –  Network Op6misa6on –  Rou6ng and Scheduling –  Fleet selec6on –  Vehicle design –  Driver training –  Warehouse design –  Warehouse management –  Vehicle design –  Technology –  Etc…… BUT-‐ There are big cost and carbon savings to be found if we look outside our own organisa6on

Collabora6on – but how?

‘We have been taught how to compete, but we have not been taught how to collaborate’

Quote of the week-‐Supply Chain Standard 2004. ( Alan Waller )

How to find partners and opportuni6es for horizontal collabora6on? ⇒  Iden6fy appropriate partners ⇒  Iden6fy your compe66ve advantage How to manage horizontal collabora6on? What are the legal issues? How to find a neutral Trustee when managing horizontal collabora6on? => Be mindful of confiden6ality How to share benefits/ investments/ risk through the par6cipants?

Collabora9on and Compe99ve Advantage • Some companies believe it means giving up a measure of compe99ve advantage. “This is old fashioned thinking. Companies that collaborate to save supply chain costs will have a compe66ve advantage over those that don’t”,argues Alan Waller, Vice President at consultancy Solving Efeso.“The recession has pushed down volumes leaving the fixed costs exposed…companies must either take out fixed costs or increase volumes, and the best way to do that is to collaborate with other organisa6ons. There are huge opportuni6es, but you can only get those opportuni6es by focussing externally” The Times June 24 2009

AGENDA







Collaborative Opportunities

"   Thought-Provokers for Asset-Sharing "   Seasonality

"   Inbound/ Raw’s Consolidation

"   Flow Synchronisation

"   Empty Running

"   Tractor/Trailer/Tanker Sharing

"   Fleet Maintenance

"   Multidrop Distribution

"   Combined Delivery

"   Reverse Logistics/Returns

"   Common Warehousing

"   New Market Development

"   Others………

Source-‐ELUPEG Survey

© Cologicol 2004

Collaboration savings (hoped for)

0 5 10 15 20 25 30

0-5%

6-10%

11-15%

16-20%

21% or more

Savings predicted from collaboration – 6-20% incremental


Between September 2011-‐2014, the European Commission ac6vely promote and supported

horizontal collabora6on

“Collaborative Concepts for Co-‐Modality (CO³)” was a EU sponsored consortium to create a legal framework, a scientific body of knowledge, an educational package and a number of inspiring test implementations for

horizontal collaboration and bundling in transport and logistics. The ultimate goal is to make the European

logistics market more competitive and more sustainable.

CO3 Consor9um

•  French retailers demand full truckload (FTL) deliveries from suppliers to their warehouses throughout France BUT strongly focus on fixed assets reduc6on.

•  Vendor Managed Inventory (VMI) makes the suppliers responsible for the inventory replenishment at the warehouses.

•  A group of four suppliers led by Mars collaborate to fulfil the FTL delivery requirement and to keep logis6cs cost & performances under control.

CO3: Retail Collabora9on in France

CONCLUSIONS •  European Supply Chains are the most advanced in the world.

•  The penalty for this maturity is poor asset u6lisa6on. •  Horizontal collabora6on provides the opportunity to address these issues to the

benefit of all stake-‐holders in terms of reduced costs and improved customer service.

•  All this PLUS environmental sustainability. •  Improved asset u6lisa6on reduces carbon emissions and reduces conges6on. •  Consolidated flows also generate real opportuni6es for intermodal developments. •  Collabora6on has been slow to take off as it is perceived to be difficult and does

not fall naturally on the business agenda. •  There are now clear signs that forward-‐looking businesses are embracing

collabora6on and reaping significant rewards. •  There are also significant ini6a6ves targeted at understanding the barriers to

collabora6on and providing prac6cal ways for all businesses to move forward.

Think outside the Box !! Collaborate!

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ELUPEG Future Group Meetings 2015 Meetings arranged "   Valencia 15/16 April 2015

"   Vienna 9/10 June 2015

"   Hamburg 16/17 September 2015

2016 meetings to be arranged "   Sweden? Port?

ELUPEG Meetings "   Tour/Dinner day 1/Meeting day 2

"   Hosted by companies (dinner/venue/lunch)

ELUPEG IS INCLUSIVE - EVERYONE IS WELCOME!

For further informa9on contact

• Professor Alan Waller OBE • email: [email protected]

• Home Business: +44(0)1933 403712 • Mobile:+44(0)7802 170507

Documents

HorizontalCollaboraon’ ’’’’’’’’’’’’’’’’’’’’’’–and’its’Poten6al · As leading businesses redefine logistics requirements, new solutions