Fruit Logistica 2016 Logistics Hub Session 10 lin

‘Anything, anywhere, anytime’: What does this mean for the fresh produce sector?

Danie Schoeman

https://www.linkedin.com/in/danieschoeman


https://twitter.com/scguydan


The anything, anywhere, anytime challenge

© 2016 Danie Schoeman & Company.

Challenges abound

17%

22%

30%

32%

17%

42%

25%

45%

37%

35%

7%

19%

23%

29%

32%

32%

32%

39%

39%

48%

Not enough visibility into our supply chain within our “four walls” (store-store, store-DC, store-direct, etc.)

Not enough visibility into the supply chain outside our “four walls”

Information gleaned from our processes and systems comes toolate to enable corrective action

We do not have the ability to determine optimal (lowest cost)locations for cross-channel order fulfilment

Our supply chain is not designed for the current / projectedvolume of direct-to-consumer shipments

Direct to consumer shipments are not fast enough

We don't have good visibility into how demand flows throughour selling channels

Our stores were not designed for current / projected volume ofomni-channel order fulfilment

Marketing promotions cause unintended consequences onsupply chain

The volume of returns is increasing as a result of consumeromni-channel purchases

Top operational challenges around supply chain execution

Leaders Followers

RSR Research: Retail Supply Chain Execution: New Requirements To Meet New Demand Benchmark Report 2015


Challenges abound

17%

22%

30%

32%

17%

42%

25%

45%

37%

35%

7%

19%

23%

29%

32%

32%

32%

39%

39%

48%

Not enough visibility into our supply chain within our “four walls” (store-store, store-DC, store-direct, etc.)

Not enough visibility into the supply chain outside our “four walls”

Information gleaned from our processes and systems comes toolate to enable corrective action

We do not have the ability to determine optimal (lowest cost)locations for cross-channel order fulfilment

Our supply chain is not designed for the current / projectedvolume of direct-to-consumer shipments

Direct to consumer shipments are not fast enough

We don't have good visibility into how demand flows throughour selling channels

Our stores were not designed for current / projected volume ofomni-channel order fulfilment

Marketing promotions cause unintended consequences onsupply chain

The volume of returns is increasing as a result of consumeromni-channel purchases

Top operational challenges around supply chain execution

Leaders Followers


Omni-channel order fulfilment and returns

Direct-to-consumer speed and volume

Supply chain visibility


Are you ready?

33%

26%

29%

10%

2%

No capability

Inconsistent

Competent

Efficient

High performing

How prepared do you think your organization is to handle omni-

channel retailing?

Nearly one third of the retailers participating in the study said they are not prepared to handle omni-channel retailing.

2015 19th Annual Third-Party Logistics Study.


Let’s try something

10.7%

14.5%

19.2%

20.3%

22.2%

29.3%

36.4%

Order online – in-vehicle pickup

Mobile order – pickup in store

Order online – pickup in store

Order in store – pickup at warehouse

Mobile order – pickup at warehouse

Order in store – deliver to home

Order online – pickup at warehouse

Do you offer / enable cross-channel fulfilment?

3.4%

4.0%

7.4%

11.4%

12.4%

15.4%

16.1%

23.8%

50.0%

Bike/messenger delivery

Drone delivery

Online order with one hour

Locker pickup

Customer delivery

Sunday delivery

Home delivery from stores

Other innovative solutions

None

Which of the following fulfilment strategies are you utilizing / piloting / considering?

Both shippers and 3pls offer a variety of cross-channel fulfilment options, while shippers are testing and using a variety of other fulfilment options.



Behind closed doors

12%

30%

38%

30%

25%

43%

45%

3%

13%

19%

36%

48%

52%

52%

We are still organized with separate silos for eachchannel

Marketing's increasing influence internally is drivingunintended supply chain consequences

New channels to the consumer are emerging fasterthan we can assess their impact or support

We haven't figured out how to align incentives forsales credit for cross-channel sales

Our supply chain metrics are too focused on efficiencyat the expense of flexibility

Lack of confidence in inventory accuracy

Lack of coordination between supply chain,merchandising, and marketing

Top organizational inhibitors to making supply chain execution improvements

Leaders Followers

Lack of coordination/collaboration, lack of investment and antiquated metrics are the main inhibitors.



65%

53%

77%

75%

42%

55%

61%

74%

Too many inventorytransfers between stores

Too many out of stocks instores

Too much inventory instores

Inaccurate inventorylevels in stores

Agreed or Strongly agreed: "We have..."

Leaders Followers

An aching, persistent pain

Inventory accuracy and levels continue to be a stumbling block.



73%

76%

82%

65%

94%

97%

Increase flexibility by holdingmore work-in-processinventory, rather than

finished goods

Source more from emerging,lower-cost markets as existingmarkets get more expensive

Source/replenish closer to thepoint of demand

Agreed or Strongly Agreed: “Our supply chain currently needs to…

Leaders Followers

The endless search for lowest-cost sources

Retail leaders show more concern about keeping what’s been working for them i.e. sourcing from emerging lower-cost markets while simultaneously having a more agile supply chain via more localized sourcing and replenishment closer to the point of demand.



… causing increased complexity and fragility

As global sourcing and international transportation volumes grow, so do the risks and complexities, making the supply chain evermore fragile.

Full of risk


Sea piracy

Based on info from IMO, IMB, ReCAAP


Cargo theft

FreightWatch International


Corruption

2014 Transparency International


Customs “integrity”

Brazil

Russia

India

ChinaSouth Africa

Morocco

Rwanda

Nigeria

Gabon

Ghana

Ethiopia

Benin

Angola

Uganda

Cameroon

Gambia

Kenya

Egypt

Hong Kong

Indonesia

Korea, Rep.

Malaysia

Philippines

Singapore

Taiwan

Thailand

0

0.2

0.4

0.6

0.8

1

1.2

0 1 2 3 4 5 6 7

Cu

sto

ms

Tran

spar

ency

Ind

ex

Irregular Payments (1 = common, 7 = never occurs)

Honest Joe’sHonest Crooks

AngelsDark Horses

DS&C Analysis, WEF ETI (2014)

Ready or not, here IoT comes


HomeChore automation

and security$200B−350B

The Internet of Things (IoT) brings huge opportunity …

HumanHealth and

fitness$170B−1.6T

OfficesSecurity and

energy$70B−150B

FactoriesOperations and

equipment optimization$1.2T−3.7T

VehiclesAutonomous vehicles and

condition-based maintenance$210B−740B

OutsideLogistics and navigation

$560B−850B

CitiesPublic health

and transportation$930B−1.7T

WorksitesOperations optimization/

health and safety$160B−930B

Retail environmentsAutomated checkout

$410B−1.2T

Enable new business models

For example, remote monitoring enables anything-

as-a-service

Transform business processes

Predictive maintenance, better asset utilization, higher

productivity

Types of opportunities

9 settingsgave us a cross-sector view of

a total potential impact of$3.9 trillion–11.1 trillion

per year in 2025

McKinsey Global Institute (MGI): The internet of things: mapping the value beyond the hype, 2015


… but also creates great peril

Almost all cyber attacks can be classified by 9 patterns

0.1%

0.7%

0.8%

3.9%

4.1%

15.3%

20.6%

25.1%

29.4%

Payment card skimmers

Point of sale intrusions

Cyber espionage

Denial of service attacks

Web app attacks

Physical theft and loss

Insider and privilege misuse

Crime ware

Miscellaneous errors

72%ON AVERAGE

of the incidents in an industry can be described by just three of the nine patterns.

Verizon 2015 Data Breach Investigations Report


Typical cyber attack incidents for retail and transport & logistics

70% 11% 10%Retail

POS intrusion Crimeware Payment card skimmer

24% 16% 16%Transportation

Cyber-espionage Insider and privilege misuse Web app attacks

PAYMENT CARD SKIMMERSThe physical installation of a “skimmer” on an ATM, forecourt gas pump or POS terminal, to read your card data as you pay.

CRIMEWARECrimeware is a broad category, covering any use of malware (often web-based) to compromise systems such as servers and desktops. This pattern includes phishing.

POINT-OF-SALE (POS) INTRUSIONSWhen attackers compromise the computers and servers that run POS applications, with the intention of capturing payment data.

WEB APP ATTACKSWhen attackers use stolen credentials or exploit vulnerabilities in web applications — such as content management systems (CMS) or e-commerce platforms.

INSIDER AND PRIVILEGE MISUSEThis is mainly by insider’s misuse, but outsiders (due to collusion) and partners (because they are granted privileges) show up as well. Potential culprits come from every level of the business, from the frontline to the boardroom.

CYBER-ESPIONAGEWhen state-affiliated actors breach an organization, often via targeted phishing attacks, and after intellectual property.

Verizon 2014 & 2015 Data Breach Investigations Report

Last mile killed the e-tailer star


The last mile to nowhere

• These failed e-tailers staked out “the last mile“ delivery to consumers as their basis of competition

• They tried to combine the convenience of online ordering with nearly “instant gratification“ of bricks-and-mortar retailers

• Unfortunately, physical delivery does not benefit from the network effect that supports other types of information-economy businesses

The last mile led these e-tailers to the gallows rather than to the promised land …

(1998-2001)

(1999-2001)

(1998-2000)

strategy+business: The Last Mile to Nowhere: Flaws & Fallacies in Internet Home-Delivery Schemes, 2000


The last mile is the expensive killer

Collection4% Sorting

6%

Line haul37%

Last Mile Delivery

53%

The last mile element of the home-delivery model represents more than 50% of the total logistics cost and is fraught with challenges.

Mark Millar: Global Supply Chain Ecosystems - Strategies for Competitive Advantage in a Complex, Connected World, 2015


Food creates traffic for the last mile

169.6 158.5133.7 133.9

101.565.1 51.3 27.5 20 20.1

8.8

255.7 244.5

186.3161.3

150

105 60.831.1 25.3 24.5 10.6

Total number of deliveries (m) generated by online orders by product type

2013 2018

Barclays: The Last Mile - Exploring the online purchasing and delivery journey, 2014

Food is responsible for the third highest number of deliveries on the last mile.


How consumers want to be serviced

2.4

8.7

1.9

5.4

5.8

2.9

82.2

32.7

71.8

2.2

18.5

Collection at courier’s depot

Collection at post office

Home delivery friend via the retailer vehicle

Home delivery friend via a courier

Home delivery friend via postal service

Click & collect, different shop

Home delivery via postal service

Home delivery via the retailer vehicle

Home delivery via a courier

Collection at locker or collection point

Click & collect, shop you ordered from

-14.5

-11.8

-10.7

-11

-10.7

-8.9

-5.4

-4.2

-4.4

-9.5

-5.6

6.2

7.4

6.8

7.7

7.4

12.5

10

10

10.6

19.4

18.5 12.9

9.9

4.6

3.6

-3.3

-3.3

-3.9

-4.4

-8.3

6.2

5.8

Barclays: The Last Mile - Exploring the online purchasing and delivery journey, 2014

Percentage of consumers using different delivery methods for goods purchased online over the past 12 months

Percentage of consumers using different delivery methods over

the next year, compared to the last

Consumers anticipate that they will use in-store click & collect or locker collection services more frequently in the future.


How retailers want to service consumers

21.4

19.3

8.6

18.2

2.5

29.2

Home delivery via postal service

Own delivery vehicle

Third party click & collect

Home delivery via a courier

Locker or collection point

Own click & collect

Chart Title

Series1

-10.7

-10.0

0.0

-10.7

-6.5

-7.3

7.1

8.1

0.0

13.4

9.4

15.5

Chart Title

Use less Use more

8.3

2.9

2.8

0.0

-1.9

-3.6

Barclays: The Last Mile - Exploring the online purchasing and delivery journey, 2014, *DSC Analysis

Retailers are spot on with click & collect, but are missing a trick with locker collection points. They might also over invest in delivery fleet.

Retailers’ preferences for delivery methods(Percentage of respondents)

Percentage of consumers using different delivery methods over the

next year, compared to the last*


Most important factor for consumers when choosing a delivery option:

1. Cost

2. Speed

3. Flexibility

4. Reputation

5. Service

What consumers want

Barclays: The Last Mile - Exploring the online purchasing and delivery journey, 2014, *DSC Analysis

Waste not want not


We waste billions

Every year around the globe

1.3 BILLION TONNES OF

Global quantitative food losses and wastefor each commodity group per year

In industrialized countries, consumers throw away 286 million tonnes of cereal products.

CEREALS

30%

FISH AND SEAFOOD

FRUITS AND VEGETABLES

MEAT

OILSEEDS AND PULSES

ROOTS AND TUBERS

DAIRY PRODUCTS

20%

45%

20%

20%

45%

35%8% of fish caught globally is thrown back into the sea. In most cases they are dead, dying or badly damaged.

In Europe alone, 29 million tonnes of dairy products are lost are wasted every year.

Along with roots and tubers, fruit and vegetables have the highest wastage rates of any food products; almost half of all the fruit and vegetables produced are wasted.

Of the 263 million tonnes of meat produced globally, over 20% is lost or wasted.

Every year, 22% of the global production of oilseeds and pulses is lost or wasted.

In North America & Oceania alone, 5 814 000 tonnes of roots and tubers are wasted at the consumption stage alone.

is

that is

OF ALL FOODPRODUCED FORHUMAN CONSUMPTION

lost or wasted

⅓FAO


Food loss as a supply chain issue

WEF: Enabling Trade - From Farm to Fork, 2014

Production, 19%Production, 31%

Handling and storage, 17%

Handling and storage, 33%

Processing and packaging, 4%

Processing and packaging, 4%

Distribution and Market, 9%

Distribution and Market, 16%Consumption, 52%

Consumption, 16%

Developed countries Developing countries

Chart Title

Food loss and waste occur in different stages of the supply chain in developed and developing countries.

Share of total food available that is lost or wasted

0.81 (quad. kcal) 0.68 (quad. kcal)


Food loss is a supply chain issue

17 17 23 23 28 32 39623 12

2122

3737

9

2 54

6

47

7

11 9

1817

1513

6146 52

34 2813 5

North Americaand Oceania

IndustrializedAsia

Europe North Africa,West and

Central Asia

Latin America South andSoutheast Asia

Sub-SaharanAfrica

Chart Title

Production Handling and Storage Processing Distribution and Market Consumption

World Resources Institute: Reducing Food Loss and Waste, 2013

42%

Food Lost or Wasted By Region and Stage in Value Chain, 2009(Percent of kcal lost and wasted)

25% 22% 19% 15% 17% 23%

Share of total food available that is lost or wasted

Food loss and waste can be curbed by improved supply chain practices and collaboration.


A case study: Kenyan avocados

WEF: Enabling Trade - From Farm to Fork, 2014

Domesticmarket

Exports Transport PackagingTransport to

portSea shipment

to Europe

Transport

Total

Consumption

Distribution Consumption

Distribution

~5-6% loss• Avocados falling over • First layers of

avocados sun-exposed

~1-5% loss• Overripe avocados• Avocados losing weight

Limited

~10% rejectionsQuality check for European standards

Total

The Kenyan avocado supply chain – as it is structured today for exports to Europe –still suffers from around 15% food loss at the different stages of the avocado journey from farm to importer.

13-18%

N/A

Rej

ecte

d a

voca

do

s ar

e re

dir

ecte

d t

o

loca

l mar

kets

Harvesting

~7% loss• Manual harvesting

(e.g. avocados falling on the ground)

Collaborate or perish


Collaboration is critical for future success

Farmers

Transporters

Processors

Transporters

Exporters

Shippers

Retailers

Consumers

Both vertical and horizontal collaboration within the supply chain are important.

Horizontal Collaboration Vertical CollaborationWEF: Enabling Trade - From Farm to Fork, 2014


A framework for supply chain collaboration in the agri-food industry

Managing Trust

Supply Chain Collaboration

Managing Power

Designing & Governing SC Activities

Establishing & MaintainingSC Relationships

Managing Dependence

Sharing Risks

Selecting Partner(number of

entries)

Selecting Information

& DataSharing

Techniques &TechnologiesCollaboration

Width(SC activities)

CollaborationDepth

(Strategic, tactical,operational)

Sharing Rewards

Adapted from A. Matopoulos, M. Vlachopoulou, V. Manthou, B. Manos, (2007),"A conceptual framework for supply chain collaboration: empirical evidence from the agri-food industry", Supply Chain Management: An International Journal, Vol. 12 Iss: 3 pp. 177 - 186

The 3PL agenda


3PLs - part of the solution

Shared DCs36%

DCs by channel

16%

Outsourced15%

Mix33%

How do you manage fulfilment by channel?

3.6%

9.2%

9.9%

9.9%

10.2%

13.5%

19.1%

20.1%

26.3%

26.3%

26.6%

31.3%

38.2%

Picking & waving logic

Long-term DC leases

Expedited delivery

Return management

Pick/Pack efficiency

Efficiency

Technology

Order management

Inventory control

Inventory accuracy

Inventory visibility

System integration

Order flexibility

What is your largest issue in fulfilling orders across multiple channels? (select top 3)

Retailers & shippers use a mix of solutions including 3PLs to manage fulfilment, but fulfilling orders across multiple channels creates certain issues.



Providing the necessary infrastructure

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

$1 billion in-storesales

$1 billion e-commerce sales

Logistics Space (square meters)

As e-commerce volumes grow due to omni-channel, so will the need for more logistics space further up the distribution chain

E-commerce users require 3x the logistics space, or more, as compared with brick-and-mortar

LEGACY Supply Chain Services: Keeping Up with the Retail Consumer - The Impact of E-Commerce on Retail Supply Chains.


But IT remains a problem

89%85%

91% 90% 92% 92% 92%88%

94% 93% 94%98% 96%

27%33%

4… 40%35%

42%37%

42%

54% 54% 53% 55%60%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

IT Capabilities Necessary Element of 3PL Expertise

Shippers Satisfied with 3PL IT Capabilities


The “IT Gap” exhibits continuing convergence, but it needs to close faster.

The

“IT

Gap

”


What are the three things you hope to achieve?

“Demosthenes, the greatest of Athenian orators, was asked what the three tests of a great speech were. “Action, action and action‟ was his reply.” James C. Humes


Danie Schoeman+27 82 940 [email protected]

There’s more to talk about, so let’s have coffee …






Disclaimer

This document has been prepared by Danie Schoeman and Companyto provide background information on the subjects mentioned herein,the forecasts, opinions and expectations are entirely those of DanieSchoeman and Company. This presentation was prepared with theutmost due care and consideration for accuracy and factualinformation; the forecasts, opinions and expectations are deemed tobe fair and reasonable. However there can be no assurance thatfuture results or events will be consistent with any such forecasts,opinions and expectations. Therefore the authors will not incur anyliability for any loss arising from any use of this presentation or itscontents or otherwise arising in connection herewith. Neither will thesources of information or any other related parties be held responsiblefor any form of action that is taken as a result of the proliferation ofthis document.

Fruit Logistica 2016 Logistics Hub Session 10 lin

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