LEADING SUPPLY CHAIN IN THE NEW DIGITAL AGE:DEALING WITH DISRUPTION AND MANAGING CHANGE

Mick Jones

As Leaders in Supply Chain our World is changing fast..

..and its suddenly become a more complicated, serious & a scarier place…

Leadership is about tackling and overcoming at new ways and new challenges

What am I going to talk about & why Me?

Supply Chain Day needs to take some time to think about the current ‘state’ of the industry and the

change that its leaders need to drive in the future.

The next 10 years will be about creatively managing change in our organisations

That is all about understanding the changes and planning the solutions.

Strategy is no longer a fixed, one dimensional long term view of our industry or organisations based

on what we know now – it’s shorter term, its ‘evolutionary’ and it’s based on things we don’t

know yet!

15 years designing and running end to end SCM products and operations in DHL, Danzas, Deutsche

Post and Exel.

8 years at Global VP and SVP level in Lenovo leading end to end supply chain, a $1Bn Logistics &

Manufacturing operation, Strategy and M&A.

Since 2015 I have been advising SC Systems providers, Shippers and Service Providers about the

impact of disruptive forces on their business, and how they can create organisations, networks and

solutions to continue to deliver value..

Why am I talking about it? Why me?

The next 5 – 10 years is going to be a defining period for Logistics and Supply Chain … It is when the real SC ‘superstars’ – individuals and

organisations - will be created. We won’t be those superstars – they will come after us.

As leaders our role is to set the scene, identify the issues and prepare to really create the strategy for our business to succeed within.

So in the next few pages I’m going to define some of the key industry challenges that we will face, detail some of the strategies we will need to adopt and outline some of the solutions that may help us in overcoming

those challenges

Cultural, Socio-Economic, Geo-political

Digitally disruptive technologies

Financial power / availability of capital

As leaders we are facing some absolutely Seismic level disruptions in the way that the world operates – we have to navigate our

organisations through the storm.

Creating a Tsunami of change in Supply Chain. Swim or better Surf! This will be an amazing 10 years!

1

2

3

Major Social, Economic, Geo-Political and Cultural Changes are hitting us

Supply Chains are far more complex than ever before

The Rise and rise of Consumer Democracy

We now live in an ever Changing World

Globalisation is NOT an option

Product Life Cycle’s shortening

.. meaning more SKU’s

Infrastructure & Compliance

complexity

‘Digital Melts the Chain’

Increase sources AND destinations

Supply volatility PLUS…

….Demand variability means ..

… lower Forecast-iblity

Consumer ever increasing

Choice at zero cost

Consumer is ‘in control’

Devalued speed and cost

Omni-channel / e-com

The Amazon ‘bullwhip’ effect

drives cost upstream

65% GDP will reside in 600

Cities by 2025

Oil Price / Stock Market

China Consumerisation &

Near Sourcing

Geopolitical Instability

Middle East, Africa & India as

sources & destinations

Drive massive volatility in supply. Supply

Management and Supply Planning becomes

increasingly difficult!

Variability and Volatility: Demand and Supply out of synch

Demand:• Consumer democracy• Deliver anywhere• Customisation • Mobile economy• Expectations

Supply:• Geo Politics• Risk • Cost / Shoring• Market Sensitivity• Short PL Cycle• More SKU’s

Drive massive variability in demand. Demand Sensing & Planning becomes incredibly

complex!

Two ends ‘out of synch’ leads to realComplexity in matching Supply to Demand

in most chains….

…so companies are responding by reducing their expectations of forecast accuracy at an item level, building

in agility and flexibility into their supply chains.

Far more difficult to link supply can demand and therefore create a synergised and integrated Supply (Materials, Manufacturing, Logistics) and Demand (Sales by item / outlet / timescale) Plans.

The Rise of Consumer Democracy

1. The E-commerce boom:• Online, in-store, click & collect from anywhere in the World

• 25% non food is now bought on-line in USA

• B to C sales expected to be nearly $3 trillion by 2017 – increasing 16% pa

• Omni channel continues to drive activity across all parts of the chain

2. So Consumers have more choice and more ways to get hold of product

3. And we start to see real Consumer Democracy – choice and demand

4. That creates the Amazon effect + the Bullwhip impact back up the chain

More choice More complexity & more cost

• Logistics Providers• Manufacturers• Components• Raw Materials

More Complexity, more cost, changes to networks, more flexibility, more agility, more pressure on the upstream … less profit.

Consumer

1. More local, ethical, sustainable products!2. What I want, where and when I want it!3. At zero additional cost ….. Please!

Uh…OK!

OUCH!Not Fair!

Data and Analytics

Digital Disruption has changed the landscape of our business

The availability of easy systems, the Cloud & massive processing power

The growth of Collaborative Commerce and leveraging technology

Big Digital Trends have snuck up on us and will change the face of supply chain and logistics forever!

Data: 40 Zettabytes by 2020

80% unstructured / 0.5% analysis

Managing data and storing data

in Data Lakes

Cognitive & Machine Learning

Analytics - Predictive Logistics

Data becomes one of the Key

Purposes of the Chain

Systems more GUI & Connective

Cognitive Computing

$$ Fewer and Off the Shelf

Outside-in - not Inside-out development -

ERP

Cloud based / Open Source / AWS type

approaches – Pay as U Go

New tech lowers the cost of entry and

lessens the gap between big and small

App driven approaches to supply chain

solutions

Growth of collaborative ‘Uber-Type’ Platforms

Using existing individual assets to provide a

service

The Uber-isation of Air & Ocean moves – and

the growth of SC technology: further

commoditizing products:

Domestic Platforms: Cargomatic & Convoy

Empty shipping containers: xChange, 1-stop

Driving new Approaches to Work / Life -

Millennials

Robots, Drones, Wearables and Automation

2.3M US Robots & 1M ‘Foxbots’

Google acquires 8 robotics co’s in 2014

Impacts ‘where we source’ + CTS

‘Learning’ collaborative Robotics – pick

one day / pack the next

Drones: Amazon Prime Air Service

– 30 minutes / 15 miles

FAA ruling severely restricted drone use

for delivery (line of sight etc)

Autonomous vehicles and Drone Ships -

more logical starting point

Disconnect Customer - Physical Address

New set of risks – accident, hacking

VR, Wearables & productivity

3D Printing and IoT

3D print market increased 30%

Near and ‘Next’ Shoring

Impact on Spare Parts Logistics

Amazon 3D printing hubs / trucks –3D

Printing Store online

Lower shipping, transport,

warehousing & inventory

Zero Length Supply Chain

30BN IoT devices by 2020

Proactive replenishment

Pervasive visibility becomes ‘black

box’ and AI

The explosion of the Mobile Economy

A Hyper Connected World

Driven by Mobile & data on the

Move

Growth of the phone .. For

everything

Unbundling of Supply Chains

End to End unbundling of routes

creates value

Product / organisational

unbundling by PLATFORMS

Specialized market operators will

threaten 3PL

..by focusing on partial processes

Digital Disruption has changed the landscape of our business

Big Digital Trends have snuck up on us and will change the face of supply chain and logistics forever!

Unbundling the Value Chains will continue

Service providers will see their services being unbundled by specialized market operators that focus on partial processes or services - breaking down the chain & commoditizing the value

1 Technology enabled unbundling of networks

2 Unbundling Products & Services

VC Cash and e-com size is creating fertile soil for disruption

Start Ups and New VC Models

New VC models – Kickstarter

plus many more

Ease of entry into market

Logistics - from 0.2% to 1.4% of

all Start Ups

Growth of Innovative Logistics

Start Ups

The Power of Cash and Size

Amazon OWN IT ALL …

Versus alibaba CONTROL IT ALL…

.. And an ACQUIRE IT ALL response from the LSP market

Disrupting multiple markets: Cloud, retail, 3PL

Amazon, Google etc – are they disrupting digitally ….

..or is it about sheer size and power?

Wreak havoc by leveraging huge amounts of capital and cash

STILL disruptive but based on raw power of cash and size

Leaders in the Industry will recognise and plan for disruptions

12 key Disruptions that will impact us all over the next 5 - 10 years…...

Here are a number of solutions that we will need to drive in our organisations…

12 key Disruptions that will impact us all over the next 3 – 5 years…...

.….13 areas of development and understanding that will help us.

Shippers views of Service Providers and expectations are changing….We HAVE to ask ourselves the question – are we providing what the customer wants… Are we meeting our

customers expectations … what are the Shippers views of what we do?

‘..continue to focus on cost and

competitiveness for the foreseeable future..’

‘..Freight Forwarders will disappear over the next 5 – 10 years..’

‘..Increased outsourcing? We are increasingly

outsourcing execution and in-sourcing intellect..’ ‘..Collaboration is the new value frontier

– we have waited for 3PL’s to drive this

for us for the last 10 years..’

‘..subject matter and geographical expertise

will to be important but more and more (this)

will be incorporated into cognitive analytics..’

‘..Omni-channel has

opened up Pandora’s Box

– now we can’t close it..’

‘..to survive (3PL) they need to be able to supply operational and cost data at a rate that allows THEIR CUSTOMERS to orchestrate the supply chain..’

‘..(SC) will run through digitisation & analytics in

the near future – companies will be looking to

orchestrate their own supply chain eco-systems..’

‘..LSP’s HAVE to become more

relevant to their Customers..’

‘.. to a large degree anticipation of Anderson’s 1996

creation (4PL) became a legend before it actually

came of age ..and it petered into just another layer

of supply chain bureaucracy....’

• Big Data Strategy: How to drive data and identify how to create capability• Dashboards tend to show what is happening and not why

• Only 11% of companies have capabilities needed to evaluate “what-if analysis”.

• Lenovo model (1) Outsourcing Analytics; (2) Supply chain CoE - $20M benefit

• Creation of Supply Chain Apps: Sourcing, DoI, Cost to Serve, Aged Parts, POF, Risk of Loss

• Find a good BI Tool – BOARD, ClickView etc – buit don’t forget simple Excel and Access

• Supply chain data analytics provides proven results & high levels of value • Manage trade-offs of inventory, customer service + costs of supply chain source/make/deliver

• Increasing cyber risks: Ashley Maddison, Microsoft, Sony Pictures

Our role needs to become ‘all about the data’..

The ‘Ripple’ Effect Cyber Attacks:120,000 per day in 2014

1

Leaders will need to define new networks2

Additive & ‘on the move’ manufacturing and new inventory models driven by new demands on the supply chain – create greater complexity and cost and drive a requirement to develop AGILITY and FLEXIBILITY in our processes and networks

Commodity / Raw

Material Manufacture Logistics

Distribution Centre

Re-seller Retailer Consumer

3. Complexity demands new inventory models• Synchronise complex & volatile supply to

very variable demand• Final mile becomes the new SC ‘ballet’• Strategic Stock – Inventory Financing DS VMI• E2E inventory visibility (collaboration?)• Amazon ‘Dark Stores’ in Cities – Walmart?

2. Flexibility requires end to end manufacturing approach:• Additive Manufacturing (Short runs)• Variable Sourcing and 3D Printing• Near, Far and Next Sourcing (HuaWei)• Configure to Order (CTO) & Postponement• Value Add Services (VAS)

Ethical, Local, Sustainable, Customised

Unique requirements drive smaller

shipments

Shorter Life Cycle products –increase end of

life overlap

Manufacturer able to create a direct link with

consumer

New delivery models – deliver

and fit

Risk & Cost creates sourcing

changes

Choice, Speed, delivery location

Retailer becomes ‘shop front’ – delivery

to home

E-com / Retail pressures

bypass re-seller

Automation drives sourcing

decisions

Flexibility –from stock

holding to cross dock

Growth of Omni Channel solutions

1. Agility demands that we control networks end to end:• Match manufacturing to

supply and demand• Inbound to

Manufacturing (I2M)• Ex Works pick-up

4. Consumer demands drive a need for multiple routes to market:• Omni or Multi Channel retailers / consumers• Integrated stock • New delivery models – Uber, Local solutions,

Crowd sourced delivery• City Logistics will create future restrictions

Regional Solutions are being Considered

HuaWei have developed new ‘Next Sourcing’ operations in Panama – creating inventory flexibility across LAS / NA.

• Core manufacturing in PRC

• Final assembly in PAN after customer order.

• Similar operations in Europe (Dell and Lenovo) and Singapore

• Ownership of vanilla considered - APPLE

3

• Road Transportation is STILL highest element of supply chain cost breakdown:• EMEA: Average. utilisation 53% & 25% trucks empty running; 25% road occupancy

• Environmental impacts, population density and urban congestion

• Integration into SMART CITY Logistics Strategies across the World

• ‘Building Site Logistics’ a key development in Cities – growth plus congestion

• City GDP grows + choice + home delivery + increased service to elderly at home• Delivery to crowded urban areas -> requires an effective CL strategy

• Focus on mobility, sustainability and livability

• Changes to freight operations

• City hub and spoke – restricted city access, measurable efficiency

• Urban freight solutions – low emissions, use of public transport

• New nationalisation- collaborative private – public sector arrangements

Create your own City Logistics strategy..4

New Partners: LSP’s under increasing pressure to make money in this ‘newly’ disrupted market 5

$18.93 trillion worth of goods imported/exported in 2015. 90% of global trade is seaborne.700 million containers every year + 185 billion tonne-km are flown annually.

Product commoditisation – invest in profitable – further commoditisation

Eroding margins Crowded market + M&A’s Culture problems: ‘Turning the Tanker’! Customer expectations increasing:

More sophistication Shorter contracts & lower price Provider consolidation More spot rates but improved reliability

Outsource execution / insourced intellect The digital ART of ‘last mile’ logistics… ..Versus an unsophisticated B2B operation Largely untouched by tech innovation

Some general enterprise: slow to roll out Carrier Direct moves by capacity owners Emerging players: Amazon, Alibaba, Google:

Alibaba Cainiao -$7.7Bn > DHL DGF

LSP are under massive pressure to change

Fight back against multiple ‘shocks’ More tech driven:

Manage complex info flows real time Integrate with customers ecosystem Provide end to end visibility Analytical and predictive More ‘Outside in’ – App and GUI driven

Quicker and more agile culture More collaborative True Strategic Partner:

Share pain and gain Approach to Risk / Responsibility

Tangible and Intangible Value Reliability, Quality, Trust , Transparency (-

>) Reputation (->) Profitability

Vested / Strategic Partnerships: Buy mutual results, not activities

LSP’s of the future will need to be different

Collaboration will deliver future value –very difficult to deliver

Supply chain ‘overlay’ offers an insight into the new opportunities to deliver significant value

Collaborative modelling – data and projects – find platforms that drive it (collaborative CRM’s)

Needs to be Intra Organisational AND Inter-Organisational – e2e inventory good start

Potentially massive payback along whole chain:

Lenovo / Targus shared PI space – saved $1.6M annually

BUT Plan the approach

80% fail: CEO commitment, mid-level understanding, poor value share, culture etc

BMS, return based (NOT biggest), win-win, solid footing NOT biggest gap etc

Leaders will drive New Collaboration6

Leaders will deliver new Control Structures7

‘Another layer of bureaucracy and cost in supply chains’ - Brand has devalued: Everybody has a 4PL Supply Chain IS now a strategic differentiator + area of key focus for EVERY organisation Success in Supply Chain is about Data and Owning Data - Organisations unwilling to give away their intellect Asset neutrality - Freight is becoming a commodity – carrier neutrality is difficult to deliver over a 5-year contract Managing a pool of digitally-connected 2 and 3 PL’s is easier – so the 4PL work are is being ‘squeezed’

The ‘old’ 1999 version of 4PL has largely failed to deliver

Ownership: Shipper owns data & ecosystem Information: Data heavy - analytics driven ‘Outside-in’ from the BEST tech solutions True procure to pay: e2econtrol / visibility Fulfilment, transportation, supply, demand On-board new technology Lower Cost of Entry: Pay as you go / AWS Many of the Consultants starting to design

New Control Tower thinking – an analytics centre of excellence - is changing the focus of 4PL

The old vision of 4PL is completely suited to the new data rich and agile supply chain ecosystems – but the old version wont work in the new supply chains.

Value is known and accessible Ultra-collaborative ecosystems

Leaders will us the best new Technology in Supply Chains!

New Technology can destroy the differential between large and small Service Providers – and significantly lower the barriers for SME’s to create highly efficient digital supply chains

8

Online Freight Forwarding

BI / Analytics

End to end visibility & trade management

CRM, Project Management &

collaboration platforms

Collaborative capacity platforms

A few others

B2B supply chains – relatively tech light

Slow to adopt new technology

Tendency to be very ‘inside–out’ approach

Most industries adopted tech & transformed –

Hotel, Taxi, Farms …logistics slow to react?

Hardware solutions will have a massive impact

in the future … some Software and platform

solutions are available NOW

More and more of them as VC cash – breeding

ground for Logistics tech!

Some of it is BRILLIANT!

A new tech revolution in Logistics?

Leaders will define the digital environment and describe the response9

Digital strategy is the process of specifying an organization's vision, goals, opportunities and related activities in order to maximize the business benefits of digital initiatives to the organization.”

Gartner’s Hype Cycles 2016

Organisations focus on making this quarters numbers – worse in new start ups – and ignore the longer term

Create a Digital Disruption Strategy alongside existing Business Strategy: Impact of Digital Disruptors v time

Areas of focus for the business and a timeline for the impact and influence of which digital technology

innovations are most relevant to your organisation

Strategy is probably the wrong word – Scenario Planning – drives tech, people, skills, acquisitions etc

Develop a response – some organisations are developing Digital Immersion Teams - Proof of Concept process

Disruptive

None

High

Middle

1 – 2 years 3 – 5 years 5 – 10 yearsNow3D Printing

IoT

Imp

act

on

my

Sup

ply

Ch

ain

DronesDriverlessTrucks

City LogisticsCognitiveComputing

Impact Area

Leaders will solve issues with new Talents and Skills10

Four Areas of Concern:

1. Demand for New Talent: All industries and all positions US Statistics – US jobs in Logistics will grow at 26% - all positions drivers to CEO’s Demand could exceed supply by 6 to 1 Inability to attract Gen Y / Millennials – mismatch in culture – an ‘unsexy’ industry

2. Supply Chain Talent Gaps: Gap between demand and availability will get wider 76 M Baby boomers are turning 65 at the rate of one every 8 seconds 60M BB’s will exit the workforce by 2025 – 40M new bodies will enter ‘Hollowed out’ Middle and Senior Management positions

3. Growing Skills Gap: Transition from Industrial economy to an information economy Hard Analytical Skills, Leadership, cross functional competence and global capability SC involved in businesses a higher level - skills will need to encompass organisational

politics, be globally aware and multi-culturally sensitive 60% of new jobs in 21st Century will require skills that 20% of the workforce possess

4. Academic Shortages: Have we got the capacity in academia to create the new talent? Are the programmes focussed on the right future capabilities? Enough facilities? Is there enough linkage between industry and academia to drive the demands?

Only 18% have a strategy in place

Keep what you have:

Focus on creating the right Talent

Management Programmes

Career Road maps

Compensation & Incentives

Map your talent needs ahead of demand

Focus on Retention

Invest in Talent / Leadership Development

‘Buy Early’ –soccer academies – Ford

Get creative – use mentors / part time

Use the departing talent – don’t make the

same mistakes twice

What can Leaders do about it?

We are probably the only group of Leaders in Supply Chain in History who have had to adapt and learn about how to manage 4 very different generations of talent in our organisations. Major barrier preventing innovation!

One eye on the future – a leader needs to cast his or her mind forwards

The management of networks will go through a revolution.. I met a good friend the other day ….

Here he is….

..dressed for work..

..and relaxing at home..

..we talked about an amazing new Supply Chain operating model…

An autonomous and homogenous system for managing the network.. Owned by all .. for the good of all stakeholders (and society) … no human intervention (was it Skynet or Blockchain?)..

Leading in Supply Chain is ALL about CHANGE and INNOVATION

‘..Think left and think right and think low and think high. Oh, the thinks you

can think up if only you try!..’..

The Cat in the Hat, 1957

‘One ought never to turn one's back on a threatened danger and try to run away

from it. If you do that, you will double the danger. But if you meet it promptly and

without flinching, you will reduce the danger by half…’,

Winston Churchill, 1941

Supply Chain needs to become the Creative CORE of the Organisation

Thank-you!How to contact me:Mick Jones - greym4tter supply chain solutions• mick@greym4tter.com / michjon59@gmail.com• https://uk.linkedin.com/in/mickjonessupplychainsolutions• @greym4tter

Amazon and Alibaba

OWN it all versus CONTROL it all

Amazon licence to act as a wholesaler of container

shipping

5 year lease on 20 planes in USA – start air cargo

network – plus the right to buy stock in ATSG

Wilmington Hub in Ohio

Dragon Boat Plan and Amazon

This incredible capacity has been a slow build, with the online retailer is doing everything from building warehouses around the country to mixing in robots alongside human workers.Amazon’s supply chain includes predictive technology that helps it know what customers are going to order before they actually order it.

165 FF Centres around the world

165 FF Centres around the world