Post on 06-Feb-2018
"We can't solve problems by using the same kind of thinking we used when we created them."Commonly attributed to Albert Einstein
Welcome!
The Future Value Chain Project, Trends, Opportunities And the Industry Response….Sabine Ritter, The Consumer Goods Forum Jim Flannery, P&G
Objectives:
! Give the retail/consumer goods industry a comprehensive, more “connected”view of trends
! Identify trends (“external forces”) over which the industry has little control
! But that will have significant impact on the way it operates
! Identify trends over which the industry has more control
! And the ability to influence their course or impact
! Identify key areas where companies must collaborate in order to manage the value chain in 2016
2018 @ ECR Australia Conference 2009 Slide
"We can't solve problems by using the same kind of thinking we used when we created them."Commonly attributed to Albert Einstein
Forces and Trends Driving the Future Value Chain
"We can't solve problems by using the same kind of thinking we used when we created them."Commonly attributed to Albert Einstein
Succeeding in a Volatile Market2018: The Future Value Chain
2018 Future Value Chain – Global and Asian focus
Why Asia?• ! 45 million square km.
(! 2 x NA, 5 x Europe)• Home to some of the
earliest retail models• Asia central to Western
and global commerce• Rapidly developing and
massive consumer market
• Major source of ingredients and manufacturing
Major Population Centres in Southeast Asia
Asia has over 40 markets with populations of more that 10 million people2018 @ ECR Australia Conference 2009 Slide
2018 @ ECR Australia Conference 2009 Slide
!Things Move Fast!!Markets are more similar
than they are different !Even though the
challenges are similar across the world, the markets are in different phases of adopting solutions
Findings
Trend #1:Declining economy
! Increased market volatility!Leveling off of economies in emerging markets
ABC News Consumer Comfort Index
2018 @ ECR Australia Conference 2009 Slide
Trend #2:Changing Society
New Middle Class
Urbanisation
Low Income
Aging Population
2018 @ ECR Australia Conference 2009 Slide
Trend #3:Rising Cost (and Scarcity) of Raw Material
2018 @ ECR Australia Conference 2009 Slide
! Continuing rise in cost of energy and raw material! Population spikes put pressure on water and food
supplies! Increasingly volatile climate, affecting production and
the supply chain! Effects of political instability
Trend #4: Increasing awareness and action on sustainability
2018 @ ECR Australia Conference 2009 Slide
! Global!Sustainable lifestyles, regardless of economic
status and ahead of regulation!Consumers demand responsible and ethical
behavior but will not pay extra!Growing corporate awareness and
responsibility!Responsibility for the entire product lifecycle!Financially beneficial sustainability programs
! Asia!Environmental degradation and extreme weather events increase
concern!Pollution will be a key driver of consumer concern!The move towards sustainability will resemble Western patterns. !Government will increasingly step in
Trend #5:Growing consumer access to technology! Asian consumers increasingly at ease with new technology! Asian adoption of technologies matches Western economies! Even faster penetration of new technologies in urban areas! Use of technology extends beyond high-income groups! Many Asian markets can leapfrog developed nations! Access to product information anytime, anywhere! Personalized and consolidated consumer communication will be key
2018 @ ECR Australia Conference 2009 Slide
Trend #6:Changing business models
! Shift from ‘traditional’ to ‘modern’ (or ‘organized’) trade! Boosted by
- increasing consumer purchasing power - availability of technology - information sharing across the supply chain
! As organized retail grows, there are less intermediaries! Rather than polarization, models will merge and new
models develop
2018 @ ECR Australia Conference 2009 Slide
Trend #7: Growing Availability of Supply Chain Information
2018 @ ECR Australia Conference 2009 Slide
! Japan: pushing the envelope!The use of RFID technology will accelerate when investment
costs drop!A ‘consumer-driven supply chain’, based upon consumer
information
! India: Focus on the basics!Enhanced performance as a result of
information sharing
Trend #8:Increasing concern about product safety
! Increasing pressure to disclose product history, safety and wellness information
! Need to share costs and risks involved
2018 @ ECR Australia Conference 2009 Slide
The industry must Develop New Ways of Working Together
Trading Partners must more readily and freelyShare Information
In their Bi-Lateral relationships
The industry must Redefine the 2016 Value Chain
Conclusions: Despite the tough economic, social and environmental climate that we operate in, there are many opportunities for our industry to continue to grow and to better serve our consumers needs.
2018 @ ECR Australia Conference 2009 Slide
The Case for Change
! We have been talking about Collaborative Commerce and Collaboration for years.
! Efficient Consumer Response was founded on the Strategies of:
• Efficient Assortment• Efficient Replenishment• Efficient Promotion• Efficient New Item Introduction
Yet today’s Supply Chain is STILL filled with waste….
2018 @ ECR Australia Conference 2009 Slide
2018 @ ECR Australia Conference 2009 Slide
““Stores are over Stores are over SKUSKU’’dd””New SKUs New SKUs RegisteredRegistered
1980 2,899
2005 10,651
2007 85,000
Average Items in a Average Items in a Typical SupermarketTypical Supermarket
1987 24,500
1997 30,000
2007 45,000
2018 @ ECR Australia Conference 2009 Slide
Inventories are too highInventories are too high
“There is too much of the stuff consumers don’t want and not
enough of what they do.”
2018 @ ECR Australia Conference 2009 Slide
Trading partners Trading partners continue to focus on continue to focus on business minutiae business minutiae
instead of shoppersinstead of shoppers
2018 @ ECR Australia Conference 2009 Slide
Manufacturers Retailers
JOHNSON & JOHNSON CARREFOUR
NESTLÉ KROGER CO.
PROCTER & GAMBLE METRO GROUP
KRAFT FOODS WAL-MART
UNILEVER TESCO
J.M. SMUCKER WEGMANS
COCA-COLA SAFEWAY
Legal Counsel
Brenda C. BARNESChairman & Chief Executive OfficerSARA LEE CORPORATION
Jean-Paul AGONChief Executive OfficerL’OREAL
Eckhard CORDESChairman of the Management Board& Chief Executive OfficerMETRO AG
Colleen GOGGINSWorldwide Chairman, Consumer GroupJOHNSON & JOHNSON
A.G. LAFLEYChairman, President & Chief Executive OfficerTHE PROCTER & GAMBLE COMPANY
Sir Terry LEAHYChief Executive OfficerTESCO PLC
Jeff NODDLEChairman & Chief Executive OfficerSUPERVALU
Stefano PESSINAExecutive ChairmanALLIANCE BOOTS
Paul POLMANChief Executive Officer DesignateUNILEVER
New Ways of Working TogetherProject Leaders
Lars OloffsonChief Executive OfficerCARREFOUR GROUP
New Ways of Working TogetherEliminate value chain disruptions, enable growth
Industry Track (Collaborate)
Best Practices/ Standards
Documentation, Education,
Communication
Guiding Principles and Frameworks
Share Results
• StrategyAlignment
• JAG Framework
Focus on
Consumer
• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
• Knowledge, Skills & Capabilities
• Incentives & Rewards
• organisation Design
Prepare People for New World
• Sustainability• Cross
Industry Integration
• Integrated Supply Chain
Share Our Supply Chain
Trading Partner Track (Competitive Advantage)
Strategic Issues Between Trading
PartnersCommon Goals,
Common MeasuresSpecific Measures
& PrioritiesOther Data
Sharing Opportunities
Consumer/ Shopper
Satisfaction
2018 @ ECR Australia Conference 2009 Slide
*Note: Utilizations of Industry Standards
New Ways of Working TogetherEliminate value chain disruptions, enable growth
Industry Track (Collaborate)
Best Practices/ Standards
Documentation, Education,
Communication
Guiding Principles and Frameworks
Share Results
• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
• Knowledge, Skills & Capabilities
• Incentives & Rewards
• organisation Design
Prepare People for New World
• Sustainability• Cross
Industry Integration
• Integrated Supply Chain
Share Our Supply Chain
Trading Partner Track (Competitive Advantage)
Strategic Issues Between Trading
PartnersCommon Goals,
Common MeasuresSpecific Measures
& PrioritiesOther Data
Sharing Opportunities
Consumer/ Shopper
Satisfaction• StrategyAlignment
• JAG Framework
Focus on
Consumer
2018 @ ECR Australia Conference 2009 Slide
*Note: Utilizations of Industry Standards
2018 @ ECR Australia Conference 2009 Slide
! Encourage bi-lateral collaboration• Based on clear, fact-based
understanding of market context and trends
! Embrace joint long-term planning• Annual planning is often insufficient• IP protection and trust
! Implement longer term planning processes
Focus on
Consumer
• Five step process building a three-year rolling JAG plan
• Annual milestones to be set• Program reviewed
throughout the year• Buyer-Seller accountable for
functional liaison, planning coordination, agreement and execution follow-up
• Cross-functional teams drive analysis and planning to support Buyer-Seller
JAG process
• Help trade partners build rationale for their growth strategy
• Demonstrate the objective selection of relevant growth levers
• Allow reliable quantification of the opportunities and expected ROI
Fact based
Step 5Monitor &
adapt
Step 1Review the economic and shopper environment
Conditions for success
Step 2Review
sales and agree on
prioritized growth levers
Step 3Define and agree on
3-year JAG plan
Step 4Execute the
JAG plan
• Five step process building a three-year rolling JAG plan
• Annual milestones to be set• Program reviewed
throughout the year• Buyer-Seller accountable for
functional liaison, planning coordination, agreement and execution follow-up
• Cross-functional teams drive analysis and planning to support Buyer-Seller
JAG process
• Five step process building a three-year rolling JAG plan
• Annual milestones to be set• Program reviewed
throughout the year• Buyer-Seller accountable for
functional liaison, planning coordination, agreement and execution follow-up
• Cross-functional teams drive analysis and planning to support Buyer-Seller
JAG processJAG process
• Help trade partners build rationale for their growth strategy
• Demonstrate the objective selection of relevant growth levers
• Allow reliable quantification of the opportunities and expected ROI
Fact based
• Help trade partners build rationale for their growth strategy
• Demonstrate the objective selection of relevant growth levers
• Allow reliable quantification of the opportunities and expected ROI
Fact basedFact based
Step 5Monitor &
adapt
Step 1Review the economic and shopper environment
Conditions for successConditions for success
Step 2Review
sales and agree on
prioritized growth levers
Step 3Define and agree on
3-year JAG plan
Step 4Execute the
JAG plan
New Ways of Working TogetherEliminate value chain disruptions, enable growth
Industry Track (Collaborate)
Best Practices/ Standards
Documentation, Education,
Communication
Guiding Principles and Frameworks
Share Results
• StrategyAlignment
• JAG Framework
Focus on
Consumer
• Knowledge, Skills & Capabilities
• Incentives & Rewards
• organisation Design
Prepare People for New World
• Sustainability• Cross
Industry Integration
• Integrated Supply Chain
Share Our Supply Chain
Trading Partner Track (Competitive Advantage)
Strategic Issues Between Trading
PartnersCommon Goals,
Common MeasuresSpecific Measures
& PrioritiesOther Data
Sharing Opportunities
Consumer/ Shopper
Satisfaction• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
2018 @ ECR Australia Conference 2009 Slide
*Note: Utilizations of Industry Standards
! Common Goals and Common Measures
• Based on a common language
! GS1 “Trading Partner Performance Management”Standard
! Global Data Synchronization
Connected Business
Information
2018 @ ECR Australia Conference 2009 Slide
Six Key Sales Measures
2018 @ ECR Australia Conference 2009 Slide
Focus on
Consumer
Connect our
Business
Information
Prepare
People for
New World
Share Supply
Chain
• Item Master Data Accuracy %• Item Data Synchronisation %
• Order to Delivery Cycle Time• On-time Delivery %• Finished Goods Inventory Cover• Out of Stock %• Service Level / Fill Rate %TPPMTPPM
SalesSales Supply ChainSupply Chain
OperationsOperations Data AccuracyData Accuracy
•Sales Growth %•Share•Retail Item Gross Margin %•Retail Gross Profit Margin %•Sales Forecast Accuracy %
• On Time Payment % • Invoice Accuracy %• Order Item/Quantity Change %• Unsaleables%
All definitions include formulas, conditions, parameters and examples.
Markdown %•
New Ways of Working TogetherEliminate value chain disruptions, enable growth
Industry Track (Collaborate)
Best Practices/ Standards
Documentation, Education,
Communication
Guiding Principles and Frameworks
Share Results
• StrategyAlignment
• JAG Framework
Focus on
Consumer
• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
• Sustainability• Cross
Industry Integration
• Integrated Supply Chain
Share Our Supply Chain
Trading Partner Track (Competitive Advantage)
Strategic Issues Between Trading
PartnersCommon Goals,
Common MeasuresSpecific Measures
& Priorities Other Data
Sharing Opportunities
Consumer/ Shopper
Satisfaction• Knowledge, Skills & Capabilities
• Incentives & Rewards
• organisation Design
Prepare People for New World
2018 @ ECR Australia Conference 2009 Slide
*Note: Utilizations of Industry Standards
2018 @ ECR Australia Conference 2009 Slide
Change
Vision Skills Measures /Rewards Resources
ActionPlan
Change
Skills Measures /Rewards Resources
ActionPlan Confusion
Vision Measures /Rewards Resources
ActionPlan
Anxiety
Vision Skills ResourcesActionPlan
GradualChange
Vision Skills Measures /Rewards
ActionPlan
Frustration
Vision Skills Measures /Rewards Resources False
Starts
Five Elements of Change?
Prepare People for New World
! Understand the Barriers and Enablers to long term, shopper focused business planning
! Transform people performance incentives and rewards
! Build knowledge, skill and capability sets
! Design organisational structure around consumer needs and drivers
Prepare People for New World
2018 @ ECR Australia Conference 2009 Slide
New Ways of Working New Ways of Working Together: Prepare Together: Prepare our our People for the New WorldPeople for the New World
GCI/Childs Davidson Global Study
DISCOVERYDISCOVERY--
WhatWhat’’s holding us back?s holding us back?
GCI NWWT Project
• “Expert Panel” workshops in multiple markets around the world:– Ahold, Carrefour, Kroger, Metro, Safeway, Tesco,
Wal*Mart, Wegmans – Coke, J&J, Kraft, Nestle, P&G, Smuckers, Unilever
2018 @ ECR Australia Conference 2009 Slide
Lack of focus on the consumerLack of focus on the consumer
“Wrong assortment, layout and promotions.”
2018 @ ECR Australia Conference 2009 Slide
Lack of focus on the consumerLack of focus on the consumer
“My buyer explained that he would rather
have a slower growing category with a higher per unit gross margin
percent because that’s what he is evaluated
on.”
“He kept telling me that I had access everything they had.…”
One dimensional, functionally One dimensional, functionally siloedsiloed goalsgoals
2018 @ ECR Australia Conference 2009 Slide
One dimensional, functionally One dimensional, functionally siloedsiloedgoalsgoals
“Many of the merchants in her company began
pushing back on her efforts to fix the quality defects.”
New Capability Model
Processes and tools
Skills and knowledge
Attitudes, beliefs and behaviours
Rewards and incentives
Structures and resources
KPIs
Goals
Creating the skills and process disciplines to target shopper satisfaction.
Enabling the organisationto embrace joint value creation for shoppers.
Measuring shopper satisfaction and building it into integrated KPIs and rewards.
New Capability Model
4. Structures & Resources
1. Goals
2. Key Performance Indicators
5. Attitudes, Beliefs and Behaviours
6. Skills and Knowledge
7. Processes and Tools
3. Rewards and Incentives
1.1 Satisfied shoppers
2.1 Sales
Growth
2.2 Margin
2.3 Market Share
2.4 Brand Equity
3.1 Rew-ards hard-
wired to KPIs
3.2 Long-and short-
term balance
3.3 Integrated outcomes rewarded
3.4 Cult-ure rein-forces KPIs
5.1 Long-term,
sustainable
5.2 Joint development
oriented
5.3 Proactively seeking cost reductions
5.4 Flexible about shopper
solutions
5.5 Actively building trust
6.1 Knows trading partner
needs & practices
6.2 Can explain and sell
programs
6.5 Creative about activation
6.3 Skilled application of
insights
6.4 Disciplined use of tools &
methods
7.1 Shopper and
consumer logic
7.2 Category methods drive
strategy
7.3 Agreed decision
model
7.4 Terms of engagement,
escalation
7.5 Systematic cost-to-serve
analysis
7.6 End-to-end supply chain
efficiency
7.7 Rapid efficient date sharing
4.1 Empo-wered cross-
functional teams
4.3 Shopper Marketing function
4.4 Res-ourced to engage
4.2 Can deliver at
POP
New Ways of Working TogetherEliminate value chain disruptions, enable growth
Industry Track (Collaborate)
Best Practices/ Standards
Documentation, Education,
Communication
Guiding Principles and Frameworks
Share Results
• StrategyAlignment
• JAG Framework
Focus on
Consumer
• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
• Knowledge, Skills & Capabilities
• Incentives & Rewards
• organisation Design
Prepare People for New World
Trading Partner Track (Competitive Advantage)
Strategic Issues Between Trading
PartnersCommon Goals,
Common MeasuresSpecific Measures
& PrioritiesOther Data
Sharing Opportunities
Consumer/ Shopper
Satisfaction• Sustainability• Cross
Industry Integration
• Integrated Supply Chain
Share Our Supply Chain
2018 @ ECR Australia Conference 2009 Slide
*Note: Utilizations of Industry Standards
!Industry and trading partners must do things differently
!Adopt more sustainable business practices
!Collaborative Transport Management, Empty Miles
Share Our Supply Chain
2018 @ ECR Australia Conference 2009 Slide
Key trends driving the report
• Increased awareness of CO2
• Increased urbanisation• Regulatory restrictions• Economics of supply
chain• Innovation• …
2018 @ ECR Australia Conference 2009 Slide
Solutions all focusing on thephysical supply chain INNOVATION
1. In store logistics• In store visibility• Shelf ready products• Shopper interaction
2. Collaborative physical logistics• Shared transport (pooling etc)• Shared warehouse (including x-dock)• Review & Share infrastructure
3. Reverse logistics• Products Recycling• Packaging Recycling• Returnable assets
4. Fluctuations Management forPromotions
• Joint Planning, Execution & Monitoring
5. Identification / Labeling
6. Efficient assets (vehicles / building)• Alternative energies• Efficient / Aerodynamic vehicles• Switching modes• Green building
7. Joint Scorecard & Business plan
8. Regulatory & Environment
2018 @ ECR Australia Conference 2009 Slide
Conclusions
• True collaboration will be imperative
• Innovation rapidly applied
• Supply chain managers will need newcapabilities.
• New ways of working
2018 @ ECR Australia Conference 2009 Slide
! Focus on the Consumer will not work if there are not common goals and common measures, if there are not enabling rewards and incentive systems that reinforce the right behaviour.
! Connect our Business will not work if it is not linked to long term, shopper focused business plan; if the ability to share and use data for vertical trading partner, integrated or enterprise level goals are not reinforced; or if the supply chain is still viewed as “yours versus mine” and not shared.
! Prepare our People will be insufficient if there is not a clear, shopper focused business plan focusing the organisation, or if there are not the common goals, common measures and information visibility to act on.
! Share our Supply Chain will not be possible without understanding how every decision made impacts the shopper, today and for the long term; if the information we are looking, the supply chain visibility can not be compared up and down the supply chain; or if we still try to optimize each component of the supply chain, but sub-optimize the whole via siloed goals.
• StrategyAlignment
• JAG Framework
Focus on Consumer
• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
• Knowledge, Skills & Capabilities
• Incentives & Rewards
• organisation Design
Prepare People for New World
• Sustainability• Cross Industry
Integration• Integrated Supply
Chain
Share Our Supply Chain
An Integrated Approach to Better Business Results
2018 @ ECR Australia Conference 2009 Slide
Get Started• You identify the “WHAT”
– Trading Partners- Pick a problem to solve or an opportunity to progress.
– ECR-A - Pick a problem to solve or an opportunity to progress.
• Use the New Ways of Working Together Framework as the “HOW”
54
Industry Track (Collaborate)
New Ways of Working TogetherEliminate supply chain disruptions, enable growth
Best Practices/ Standards
Documentation, Education,
Communication
Guiding Principles and Frameworks
Share Results
• StrategyAlignment
• JAG Framework
Focus on
Consumer
• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
• Knowledge, Skills & Capabilities
• Incentives & Rewards
• Organization Design
Prepare People for New World
• Sustainability• Cross
Industry Integration
• Integrated Supply Chain
Share Our Supply Chain
Trading Partner Track (Competitive Advantage)
*Note: Utilizations of Industry Standards
Strategic Issues Between Trading
Partners
Common Goals, Common Measures
Specific Measures & Priorities
Other Data Sharing
Opportunities
Consumer/ Shopper
Satisfaction
Industry Track (Collaborate)
New Ways of Working TogetherEliminate supply chain disruptions, enable growth
Best Practices/ Standards
Documentation, Education,
Communication
Guiding Principles and Frameworks
Share Results
Best Practices/ Standards
Documentation, Education,
Communication
Guiding Principles and Frameworks
Share Results
• StrategyAlignment
• JAG Framework
Focus on
Consumer
• StrategyAlignment
• JAG Framework
Focus on
Consumer
• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
• Common Goals & Measures
• Information Sharing*
• EPC• Data Sync
Connected Business
Information
• Knowledge, Skills & Capabilities
• Incentives & Rewards
• Organization Design
Prepare People for New World
• Knowledge, Skills & Capabilities
• Incentives & Rewards
• Organization Design
Prepare People for New World
• Sustainability• Cross
Industry Integration
• Integrated Supply Chain
Share Our Supply Chain
• Sustainability• Cross
Industry Integration
• Integrated Supply Chain
Share Our Supply Chain
Trading Partner Track (Competitive Advantage)
*Note: Utilizations of Industry Standards
Strategic Issues Between Trading
Partners
Common Goals, Common Measures
Specific Measures & Priorities
Other Data Sharing
Opportunities
Strategic Issues Between Trading
Partners
Common Goals, Common Measures
Specific Measures & Priorities
Other Data Sharing
Opportunities
Consumer/ Shopper
Satisfaction
Consumer/ Shopper
Satisfaction