Brian Girouard of Capgemini on the Future Supply Chain in 2016
What does the current focus on sustainability have to do with on-shelf availability and costs in the physical supply chain for consumer goods? The answer is "everything."
Increasing political momentum around issues such as resource scarcity, climate change, security and new regulations brings to light critical challenges that our industry will face in the coming years. The 2007 Bali Treaty and other political initiatives are driving the industry to come up with solutions that require new thinking, new approaches and new collaboration on infrastructures.
To address this issue, the Global Commerce Initiative (GCI), Capgemini and representatives from 22 retail and consumer packaged goods companies have worked together on the "Future Supply Chain" project focused on the following key aspects:
To address this issue, the Global Commerce Initiative (GCI), Capgemini and representatives from 22 retail and consumer packaged goods companies have worked together on the "Future Supply Chain" project focused on the following key aspects:
- The challenges ahead that will force companies to change their operations
- The need for breakthrough change, as the past does not reflect the future the industry will face
- The innovation that currently exists in the form of new solutions, leading practices, example supply chains and new ways to calculate the impact of the new parameters on the supply chain
- Enhanced collaboration, which is essential among all parties in the supply chain as well as between competitors
- The recognition that now is the time for a step change to a future model, leading to sustainability and new business opportunities
Serving Consumers in a Sustainable Way
Current supply chain designs are primarily aimed at improving on-shelf availability, reducing cost and supporting sound financial figures. In the future, the industry must design for additional parameters, like CO2 emissions reduction, reduced energy consumption, better traceability and reduced traffic congestion. The impact of these new parameters on the current bottom line may not yet be substantial but will grow in the coming years, and efficiency improvements will almost certainly be realized. Supply chain strategy needs to give priority to these parameters.
The starting point to build the future supply chain is to identify solution areas that cover existing problems and those anticipated for the coming decade. Seven key innovation areas necessary for tomorrow's supply chain were identified:
- In-Store Logistics: Improvements in the store will add value to the consumer and reduce business costs; solutions include in-store visibility, shelf-ready products, shopper interaction.
- Collaborative Physical Logistics: This involves sharing physical infrastructure to simplify the overall physical footprint, and to consolidate flows to improve service and asset utilization.
- Reverse Logistics: Solutions will include product recycling, packaging recycling and returnable assets.
- Demand Fluctuation Management: Demand fluctuations will require new models to smooth the demand signal coming from customers; solutions will include joint planning, execution and monitoring.
- Identification and Labeling: This will become more prevalent through the use of barcodes and RFID tags.
- Efficient Assets: Efforts by companies will occur to modify existing or design new equipment or buildings to enhance productivity and reduce environmental impact.
- Joint Scorecard and Business Plan: A suite of industry-relevant tools will be designed to measure the extent to which trading partners are working collaboratively, and the business metrics aimed at measuring the impact of that collaboration.
Enhanced Collaboration
Integrating these innovative solutions with collaboration concepts into a cohesive model will provide the future supply chain architecture necessary for new efficiency and cost reduction for the industry. This analysis demonstrates how the different solutions should be considered in relation to each other, and makes it clear that a big impact on the parameters can be made when the following concepts are merged and implemented:
- Information sharing
- Collaborative warehousing
- Collaborative city distribution (including home delivery and pick-up)
- Collaborative non-urban distribution (including home delivery and pick-up)
The total impact of this supply chain redesign could potentially reduce transport costs per pallet by more than 30 percent, cut handling costs per pallet by 20 percent, reduce lead time by 40 percent as well as lower CO2 emissions per pallet by 25 percent, while also improving shelf availability. Additional energy cost savings can stem from more efficient assets such as green buildings and fuel-efficient/aerodynamic and jumbo trucks. These benefits and others are expected to be achievable when all the elements of the future supply chain are in place. They are expected to provide clear benefits for our society, for the industry, for individual companies, and ultimately for consumers and shoppers.
"The Future Supply Chain 2016" report can be downloaded at www.gci-net.org