Future Supply Chain 2016 PDF

FUTURE SUPPLY CHAIN
2016
Serving Consumers
in a Sustainable Way
The Global Commerce Initiative wishes to thank the following executives for providing their time,
support and valuable insight into the future supply chain:
Alex Bajorinas, Capgemini
Tony Borg, Nestl
Bob Boucher, Colgate-Palmolive
Mark dAgostino, GS1US
Luca DAmbrosio, Reckitt Benckiser
Stuart Dickson, GlaxoSmithKline
Priscilla Donegan, Capgemini
Xavier Franco, Johnson & Johnson
Massimo Frediani, Nestl
Geoff Frodsham, Loblaw Companies Ltd
Thierry Gueguen, Groupe Danone
Ruediger Hagedorn, Global Commerce Initiative
Loes Heinemans, Capgemini
Kees Jacobs, Capgemini
Jeroen Janssen Lok, Sara Lee International
Peter Jordan, formerly Kraft Foods
Bill Lewis, SCA Packaging
Luis Montenegro, British American Tobacco
Lara Moutin, Unilever
Oliver Neubert, Freudenberg Household Products
Ben Pivar, Capgemini
Jochen Rackebrandt, Kraft Foods
Rich Rapuano, Black & Decker
Katrin Recke, AIM/ECR Europe
Sabine Ritter, Global Commerce Initiative
Audrey Rossman, Procter & Gamble
Andreas Ruthenschrer, MGL METRO Group
Logistics GmbH
Stephan Sielaff, Symrise
Tony Spiliotopoulos, LOreal US
Tibor Szandtner, Capgemini
Chrys Tarvin, Wal-Mart Stores, Inc.
Ruud van der Pluijm, Royal Ahold
Ingeborg Veelenturf, Kellogg Europe
Tony Vendrig, Royal Ahold
Ard Jan Vethman, Capgemini
Olivier Vidal, LOreal
Jos Visee, Philips
Acxxowivucv:vx:s
as well as other members of the GCI Steering Group who have contributed to the report, Jesse van
Muylwijck for his cartoons, and the Chicago and Netherlands Accelerated Solutions Environment
(ASE) facilitation teams from Capgemini for their support during the ASE events.
Xavier Derycke, Carrefour Roland Dachs, Crown Europe
Co-Chairmen of the GCI Future Supply Chain Work Team
May 2008 Global Commerce Initiative, Capgemini. All rights reserved.
Foreword 4
Executive Summary 6
1. The Future Challenge 10
2. The Past Does Not Reflect the Future 16
3. A Toolkit for an Innovative Future Supply Chain 22
4. A New Model for Enhanced Supply Chain Collaboration 32
5. Next Steps Toward the Future Supply Chain 44
Appendix: Building the Future Supply Chain 48
Contents
4
FUTURE SUPPLY CHAIN 2016
The big question is: What impact will these
new parameters have on the design of future
supply chains?
5
Vhat docs thc currcnt locus on sustainability havc
to do with onshcll availability and costs in thc
physical supply chain lor consumcr goods: Thc
answcr is cvcrything.
!ncrcasing political momcntum around issucs such as
rcsourcc scarcity, climatc changc, sccurity and ncw
rcgulations brings to light critical challcngcs that our
industry will lacc in thc coming ycars. Thc 2007 8ali
Trcaty and othcr political initiativcs arc driving thc
industry to comc up with brcakthrough solutions.
Such solutions rcquirc ncw thinking, ncw approachcs
and ncw collaboration on inlrastructurcs.
Until now, thc most important paramctcrs lor
supply chain dcsigns havc bccn rclatcd to cost
cllicicncy and onshcll availability. As a rcsult ol
thc growing importancc ol thcsc cmcrging issucs,
ncw lactors arc bccoming incrcasingly critical,
such as trallic congcstion in urban arcas, cncrgy
consumption, C
2
cmissions and thc pcrmancnt
risc in transportation costs.
Thc big qucstion is: Vhat impact will thcsc ncw
paramctcrs havc on thc dcsign ol luturc supply chains:
Thc ambition ol this rcport is to providc rclcvant
thinking, idcas and cxamplcs to hclp answcr
that qucstion.
Thc brcakthrough changc prcscntcd in thc rcport
is bascd on thc joint work ol 24 companics in thc
rctail and consumcr packagcd goods industry. All thc
clcmcnts ol this changc havc bccn brought togcthcr
into an intcgratcd architccturc lor a luturc supply
chain, aimcd at a morc sustainablc broadbascd
solution lor thc industry.
Thc timc to act is now, lor thc bcnclit ol all.
Roland Dachs
\icc Prcsidcnt, Supply Chain
Crown uropc
Xavier Derycke
ircctcur Flux Groupc
Carrclour
Co-Chairmen, Global Commerce Initiative
Future Supply Chain Work Team
Foreword
6
!n thc conclusion ol 2016: Thc Futurc \aluc Chain,
thc 8oard ol thc Global Commcrcc !nitiativc (GC!)
idcntilicd and approvcd thrcc projccts that GC!
would pursuc. Thcsc projccts wcrc dctcrmincd to bc
corc to thc compctcncy ol 8oard mcmbcrs and wcrc
aligncd with thc 8oards stratcgic dircction:
Ncw Vays ol Vorking Togcthcr
!nlormation Sharing
Thc 2016 Futurc Supply Chain
Sincc that timc, GC! and Capgcmini havc workcd
togcthcr on thc Futurc Supply Chain projcct
locusscd on thc lollowing kcy arcas:
Thc challcngcs ahcad that will lorcc companics to
changc thcir opcration.
Thc nccd lor brcakthrough changc, as thc past
docs not rcllcct thc luturc thc industry will lacc.
Thc innovation that currcntly cxists in thc lorm ol
ncw solutions, lcading practiccs, cxamplc supply
chains and ncw ways to calculatc thc impact ol thc
ncw paramctcrs on thc supply chain.
nhanccd collaboration, which is csscntial among
all partics in thc supply chain.
Thc rccognition that now is thc timc lor a stcp
changc to a luturc modcl lcading to sustainability
and ncw busincss opportunitics.
This rcport, Futurc Supply Chain 2016, prcscnts
thc rcsults ol thc projcct.
Serving Consumers in a Sustainable Way

Currcnt supply chain dcsigns arc primarily aimcd
at improving onshcll availability, rcducing cost
and supporting sound linancial ligurcs (likc R! or
rcturn on brand cquity). !n thc luturc, thc industry
must dcsign lor additional paramctcrs likc C
2

cmissions rcduction, rcduccd cncrgy consumption,
bcttcr traccability and rcduccd trallic congcstion. Thc
impact ol thcsc ncw paramctcrs on thc currcnt bottom
linc may not yct bc substantial but will grow in thc
coming ycars and cllicicncy improvcmcnts will almost
ccrtainly bc rcaliscd. Supply chain stratcgy nccds
to look ahcad and givc priority to thcsc paramctcrs.
All stakcholdcrs in thc supply chain will nccd to
play thcir part to accomplish this changc. Consumcr
awarcncss and dcmand lor ncw products and scrviccs
will also accclcratc thc adoption ol ncw practiccs.
How should thc industry build thc luturc supply
chain and what arc thc componcnts: To answcr
that qucstion, lour kcy clcmcnts must bc takcn
into account:
Solution areas: Thc solution arcas covcr cxisting
challcngcs and thosc anticipatcd lor thc coming
dccadc. Thc solution arcas arc locusscd on physical
supply chain innovation. Scvcn kcy solution arcas
wcrc idcntilicd:
!nStorc Logistics: includcs instorc visibility,
shcllrcady products, shoppcr intcraction
Collaborativc Physical Logistics: sharcd transport,
sharcd warchousc, sharcd inlrastructurc
Rcvcrsc Logistics: product rccycling, packaging
rccycling, rcturnablc asscts
1.
2.
3.
Executive Summary
7
The 2016 Future Supply Chain
Characteristics of the 2016 Future Supply Chain
The future model will be based on multi-partner information sharing among key stakeholders: consumers
(the originators of the demand signal, either from home or from a store), suppliers, manufacturers,
logistics service providers and retailers.
After production the products will be shipped to collaborative warehouses in which multiple
manufacturers store their products.
Collaborative transport from the collaborative warehouse will deliver to city hubs and to regional
consolidation centres.
Warehouse locations on the edge of cities will be reshaped to function as hubs where cross-docking
will take place for final distribution.
Non-urban areas will have regional consolidation centres in which products will be cross-docked for
final distribution.
Final distribution to stores, pick-up points and homes in urban and non-urban areas will take place
via consolidated deliveries using efficient assets.
8
cmand Fluctuation Managcmcnt: joint planning,
cxccution and monitoring
!dcntilication and Labclling
llicicnt Asscts: altcrnativc lorms ol cncrgy,
cllicicnt/acrodynamic vchiclcs, switching modcs,
grccn buildings
Joint Scorccard and 8usincss Plan
Leading practices: xamplcs ol cxisting lcading
practiccs arc intcgratcd into thc modcl to show how
thcy hclp to addrcss thcsc solutions arcas. Thcsc
lcading practiccs makc it clcar that bcnclits arc rcal
and achicvablc.
Application to example supply chains: Simplilicd
supply chains arc uscd to dcmonstratc how thc
ncw supply chain modcl can work and how it can
bc adaptcd to individual companics. !n cach casc,
appropriatc ncw solutions arc poscd, taking into
account thc main charactcristics ol thc cxamplc
supply chains.
4.
5.
6.
7.
New ways to calculate the impact on the supply
chain: Thcsc calculation modcls, using thc
ncw paramctcrs, arc an csscntial clcmcnt ol thc
luturc supply chain in dctcrmining thc impact
ol thc lcading practiccs and solutions.
A New Model for Enhanced Collaboration
!ntcgrating thcsc improvcmcnt solutions togcthcr
with collaboration conccpts into a cohcsivc modcl
will providc thc luturc supply chain architccturc that
will hclp bring ncw cllicicncy and cost rcduction lor
thc industry. This analysis dcmonstratcs how thc
dillcrcnt solutions should bc considcrcd in rclation to
cach othcr, and makcs it clcar that a big impact on thc
paramctcrs can bc madc whcn thc lollowing conccpts
arc mcrgcd and implcmcntcd:
!nlormation sharing driving thc collaborativc
supply chain
Collaborativc warchousing
Collaborativc city distribution (including homc
dclivcry and pickup)
Collaborativc nonurban distribution (including
homc dclivcry and pickup)
The Future Supply Chain

in Emerging Markets
Many of the trends, issues and changes discussed in this report are
based on the industry supply chain primarily in Western markets. In a
report of this nature it is not possible to envision the future situation in all
geographies. History has shown that many of the emerging nations follow
the trends set by Western markets and that they often do so by moving
there more rapidly than was done in established markets. New technology
often leads to leapfrogging developments, skipping the evolutionary phase.
A good example is the widely accepted use of satellite technology in some
developing markets over the more traditional land lines. At the same time,
established markets may be hampered by existing legacy systems.
Readers are encouraged to assess what the changes discussed in this
report might mean for both the established as well as the developing
markets across their distribution channels. Geographies, economies and
social groupings will always be diverse, but many will be subject to the
trends and changes identified in this report.
9
Vhilc individual cxamplcs ol thcsc conccpts alrcady
cxist, thc kcy to thcir broadcr implcmcntation across
thc industry will bc improvcd collaboration. !mproving
such collaboration dcmands ncw ways ol working
togcthcr in thc physical supply chain, a lramcwork
lor which has bccn dcvclopcd by GC! and is bcing
addrcsscd by a scparatc work tcam.
Thc total impact ol this supply chain rcdcsign (cvcn
taking into account thc usagc ol currcnt transport and
storagc tcchnology) could potcntially rcducc transport
costs pcr pallct to thc ordcr ol morc than 30, cut
handling costs pcr pallct to thc ordcr ol 20, rcducc
lcad timc by 40 and lowcr C
2
cmissions pcr pallct
to thc ordcr ol 25, whilc also improving onshcll
availability. This docs not includc additional cncrgy
cost savings stcmming lrom morc cllicicnt asscts such
as grccn buildings and luclcllicicnt/acrodynamic and
jumbo trucks.
Thcsc bcnclits and othcrs arc cxpcctcd to bc
achicvablc whcn all thc clcmcnts ol thc luturc
supply chain arc in placc. Thc luturc supply chain is
cxpcctcd to providc clcar bcnclits lor our socicty, lor
thc industry, lor individual companics, and ultimatcly
lor consumcrs and shoppcrs.
Taking the Next Steps
Thc rcalisation ol thc collaborativc conccpts that
comprisc thc 2016 luturc supply chain architccturc
will rcquirc a numbcr ol initial ncxt stcps, drivcn by
industry lcadcrs. Thcsc stcps arc as lollows:
stablish buyin on thc vision by a group ol
kcy stakcholdcrs (such as lcading rctailcrs and
manulacturcrs, mayors ol big citics).
Chcck thc conccpts busincss casc with thc
involvcmcnt ol all kcy stakcholdcrs.
Pilot thc conccpt (or possibly lcvcragc and cnhancc
cxisting pilots).
valuatc thc implcmcntation and sharc lcarnings.
Thc lollowing pagcs providc insight into thc
dcvclopmcnt ol a luturc supply chain that will
rcact to and hclp satisly tomorrows consumcrs in a
sustainablc way. (Notc that lurthcr dctails ol lcading
practiccs, cxamplc supply chains, calculation modcls,
thc intcgratcd modcl and a glossary ol tcrms can bc
lound in thc scparatc, lrccstanding Appcndix that
accompanics this rcport.)
The future supply chain is expected to provide

clear benefits for our society, for the industry,
for individual companies, and ultimately for
consumers and shoppers.
Future Supply Chain 2016 on the Web
More information about the Future Supply Chain
2016 report and project, including the freestanding
Appendix, can be found at www.gci-net.org and
www.capgemini.com.
10
11
The Future Challenge
A view of the drivers of change and their
impact on the future supply chain.
12
This ncw rcport locuscs on thc luturc physical supply
chain and thc critical rolc that collaboration will
play moving lorward. Thc lirst stcp toward dclining
appropriatc sccnarios lor thc luturc supply chain is
undcrstanding thc rclcvant lorccs and trcnds that arc
anticipatcd in thc coming ycars.
FORCES AND TRENDS THAT WILL IMPACT THE FUTURE SUPPLY CHAIN
Driving the value chain
Managing
complexity
through
transparency
Sustainability and
the scarcity of
natural resources
Redesigning
supply chains
Regulatory
Ecological
Demographic
New
Technologies
New rules,
new compliancy
Graying and
urbanisation
Explosion of information
Consumer Behaviour
I
n
f
o
r
m
a
t
i
o
n

F
l
o
w
P
r
o
d
u
c
t

F
l
o
w
Economic
New markets and a new
economic balance
External forces impacting the future supply chain will include economic issues, ecological issues, changing demographics, new technologies and
regulatory forces. These external forces are difficult to influence but will have an effect on the future supply chain. However, the industry can be
part of shaping the future supply chain around key industry trends in the areas of consumer behaviour, information flow and product flow.
Arc you rcady lor 2016: That was thc qucstion poscd
in thc vision rcport titlcd 2016: Thc Futurc \aluc
Chain, publishcd by thc Global Commcrcc !nitiativc
in conjunction with Capgcmini and !ntcl. Thc rcport
concludcd that: !mprovcd collaboration bctwccn all
partics in thc valuc chain will bc csscntial in ordcr to
achicvc a morc cllicicnt and cllcctivc valuc chain to
bcttcr scrvc thc nccds ol thc consumcr.
13
External Forces Driving Change
Vhcn wc look ahcad, wc scc a numbcr ol cxtcrnal
trcnds that will shapc thc industry in thc coming
10 ycars, which arc largcly outsidc thc control ol
thc industry. 8ut rctailcrs and consumcr products
companics must considcr thc impact ol thcsc cxtcrnal
lorccs on thcir busincss and dctcrminc how bcst to
rcspond to thc changcs that will bc brought about as a
rcsult ol thcir impact.
Economic trends: new markets and a new economic
balance. 8razil, Russia, !ndia, China, Alrica and
Korca will bc major markcts to considcr in thc coming
ycars. ach ol thcsc markcts will cvolvc much morc
quickly, comparcd with thc parallcl changcs that
occurrcd in North Amcrica and Vcstcrn uropc.
Thcrc will also bc changcs in thc balancc bctwccn
local and global sourcing.
Ecological trends: sustainability and the scarcity of
natural resources. Sustainability will bc a primc
considcration lor luturc sccnarios. Thc industry will
nccd to convincc consumcrs that it is opcrating in
an ccologically rcsponsiblc manncr. Thc 2007 8ali
Trcaty and othcr political initiativcs arc challcnging
thc industry to comc up with brcakthrough solutions
by 2020. Prcscrving cncrgy and raw matcrials and
othcr rcsourccs likc watcr will bccomc a crucial aspcct
in luturc supply chains, as costs will likcly rcmain
volatilc and supplics will continuc to dwindlc.
Demographic trends: graying and urbanisation. Thc
luturc will bc dramatically changcd by shilting
dcmographics, such as thc graying ol Vcstcrn
countrics and thc incrcasc in urban population. For
cxamplc, it is projcctcd that 51.3 ol thc worlds
population will bc urban by 2010.
1
1
http://news.ncsu.edu/releases/2007/may/104.html
1. THE FUTURE CHALLENGE
14
New technology trends: explosion of information.
Moorcs Law will continuc to scalc thc cllccts ol ncw
tcchnologics in ways ncvcr bclorc sccn. For cxamplc,
RF! tcchnologics will play a big rolc in thc luturc.
!n addition, thc adoption and usc ol ncw tcchnologics
by consumcrs and shoppcrs (in homc, in storcs,
onthcgo) will grow rapidly.
Regulatory trends: new rules, new compliancy. !n
addition to consumcr prcssurc and companics own
growing cmphasis on corporatc social rcsponsibility,
govcrnmcnts will cnact morc rcgulations, particularly
targcting arcas such as sustainability. This will
bc donc by govcrnmcnt and rcgulatory bodics at
dillcrcnt lcvcls: local, national and intcrnational.
!n addition, somc currcnt labour rcgulations must
bc rcpcalcd (lor cxamplc, lor morc llcxiblc working
timcs) to allow inlrastructurcs to bc uscd to thcir
lull capacity with lcss strcss on thc cnvironmcnt.
Industry Trends Driving Change
Thcrc will also bc kcy industry trcnds that will allcct
thc luturc valuc chain, particularly in thc arcas ol
consumcr bchaviour, inlormation llow and product
llow. !n contrast to thc cxtcrnal lorccs, thc industry
docs havc thc powcr to shapc how this changc will
takc placc, at lcast to somc dcgrcc.
Consumer behaviour: driving the value chain.
Consumcrs and shoppcrs will continuc to bccomc
morc dcmanding and cmpowcrcd. !n lact, thcy
will bccomc activc partncrs in thc supply chain
and will dircctly drivc product dcvclopmcnt and
rcplcnishmcnt. Thcy will incrcasingly intcract
(including ordcring and buying) via dillcrcnt
channcls (onlinc, instorc, mobilc),
2
and will
rcquirc othcr dclivcry mcchanisms bcsidcs thc
storcs, including, lor cxamplc, ncighbourhood
distribution and homc dclivcry.
Product flow: redesigning supply chains. Ncw
industry challcngcs ncccssitatc ncw supply
chain solutions. Urban structurcs will rcquirc
spccial attcntion. Currcnt transportation and
inlrastructurcs arc incrcasingly congcstcd and
hampcr thc rcquircd scrvicc lcvcls. !n addition,
cncrgy priccs and govcrnmcnt rcgulations (lor
cxamplc, rclating to city distribution) will havc a
signilicant impact on transportation. Thc industry
will nccd to rcthink how products arc distributcd.
Information flow: managing complexity through
transparency. Supply chains in thc luturc will bc
cvcn morc complcx than thcy arc today. Companics
will nccd to dctcrminc how bcst to work togcthcr
to cllcctivcly match supply with dcmand. pcn
inlormation sharing will bc an important loundation
to hclp companics anticipatc dynamic consumcr
dcmands. Collaboration should locus on arcas ol
common intcrcst, without allccting thc compctitivc
positioning ol companics.
2
Future Consumer: How Shopper Needs and Behaviour Will Impact Tomorrows Value Chain, Capgemini.
The coming years will see a new era for
industry collaboration, which will become
an important factor for future success.
15
Conclusion:
Critical Changes Need to be Made
True collaboration will be imperative. Thc coming
ycars will scc a ncw cra lor industry collaboration,
which will bccomc an important lactor lor luturc
succcss. !n many cascs, this will rcquirc companics
to rcthink thcir arcas ol compctitivc advantagc.
Somc busincss arcas that arc now considcrcd to bc
corc dillcrcntiators may wcll bccomc candidatcs lor
collaboration with compctitors, such as rcplcnishmcnt
in inncr citics. !n addition, industry collaboration will
bc csscntial to cncouragc govcrnmcnts to cnact morc
appropriatc rcgulations.
Supply chain managers will need new capabilities.
Addrcssing all ol thcsc challcngcs will rcquirc ncw
ways ol working, ncw tool scts and thus ncw supply
chain managcmcnt capabilitics. Ncw typcs ol supply
chain managcrs will look not only at cllicicncy, but
will also undcrstand thc potcntial ol innovation and
collaboration. Thc mindsct rcgarding thc currcnt
managcmcnt capabilitics should bc changcd in ordcr
to rcalisc thc vision. Achicving this ncw mindsct will
rcquirc additional training and dcvclopmcnt ol ncw
skills and tools. ducation programmcs should bc sct
up to addrcss thcsc bchavioural issucs and to dcvclop
a ncw approach to lcadcrship.
This ovcrvicw ol trcnds that will impact and drivc
luturc supply chain sccnarios makcs clcar that thcrc
arc critical changcs thc industry will nccd to makc.
Thc ncxt chaptcr cxplorcs thc changcs to thc physical
supply chain that will bc ncccssary in ordcr to movc
toward 2016.
1. THE FUTURE CHALLENGE
16
17
The Past Does Not
Reect the Future
Individuals, companies and nations must move to adopt
more sustainable supply chains, begin to measure against
a new set of sustainability KPIs and report progress on
their reduction.
18
Today thc industry laccs issucs that rcmain dillicult
to solvc. For cxamplc, companics arc still challcngcd
to put lull truckloads on thc road. utolstocks
continuc to bc a pcrcnnial problcm. Rcsults lrom a
rcccnt CR uropc study on outolstocks show that
thc loss ol rcvcnuc lor all groccry storcs in Francc
alonc is cstimatcd at 200 million pcr quartcr. Thc
industrys inlrastructurc rcmains complcx. ncrgy
costs continuc to risc as thc pricc ol a barrcl ol oil
incrcascs. Urban distribution rcmains an issuc,
bccausc thc modcl is outdatcd: Ncw inlrastructurcs
and ncw rulcs such as congcstion chargcs will lcad to
major adjustmcnts in managing llows.
Thcsc issucs havc changcd littlc in thc past 10
ycars, yct rcal solutions havc not bccn lound and
implcmcntcd. !ts clcar that thc currcnt way ol
working is not sullicicnt and that thc industry must
takc a ncw approach.
The Future Value Chain 2016
Thc rcport titlcd 2016: Thc Futurc \aluc Chain
dclincd a uniquc vision ol thc total valuc chain,
including a broadbascd supply chain pcrspcctivc that
starts with sourcing, progrcssing to manulacturing,
thcn through distribution to thc rctailcr and consumcr.
3
Kcy aspccts ol this vision arc as lollows:
Thc ovcrarching goal is to grcatly rcducc thc lcad
timc lrom sourcc to thc consumcr by trcating
thc valuc chain as a wholc, not as a scqucncc ol
scparatcd silos.
This rcquircs rccvaluation ol thc physical layout
ol thc supply chain and improvcd mcchanisms to
synchronisc production with actual dcmand.
Rcaltimc, llcxiblc and standardiscd inlormation
sharing along thc valuc chain is loundational lor
this, with consumcrdrivcn dcmand data as thc
starting point.
Homc shopping and ncighbourhood distribution
will cmcrgc in cocxistcncc with thc cvolvcd
storcoricntcd supply chain.
3
For purposes of the future supply chain project, manufacturing is treated as a black box, although certainly manufacturing will also face existing and
new challenges over the next decade, including issues such as ethical sourcing and fair trade.
EVOLVING VALUE CHAIN OF 2016
19
New Measurements Required
Achicving this vision ol thc luturc valuc chain will
rcquirc a dillcrcnt approach to mcasurcmcnt that
must bc dcsigncd lor ncw paramctcrs. Most supply
chains today arc mcasurcd by Kcy Pcrlormancc
!ndicators (KP!s) such as availability to thc consumcr
(pcrccnt instock) and cost rcduction, as wcll as
linancial KP!s likc rcturn on invcstmcnt (R!),
rcturn on brand cquity and invcntory.
Although currcnt KP!s can bc uscd to mcasurc
supply chain cllicicncy, thcy do not adcquatcly
addrcss supply chain sustainability. For this purposc,
additional KP!s such as cncrgy consumption, C
2

cmissions, trallic congcstion and inlrastructurc
simplilication havc also bccn incorporatcd into
thc dcvclopmcnt ol thc luturc supply chain modcl.
This sct ol KP!s will addrcss thc currcnt and luturc
sustainability issucs as wcll as onshcll availability
and busincss cost.
Lcts look morc closcly at thcsc ncw KP!s.
Energy consumption. Companics and organisations
must strivc to usc morc rcncwablc cncrgy sourccs
and usc lcss cncrgy ovcrall in thcir opcrations.
According to thc !ntcrnational ncrgy utlook
2007 (!2007) rcport, total markctcd world cncrgy
consumption is projcctcd to incrcasc 57 lrom 2004
to 2030.
CO
2
emissions arc mcasurcd in tonncs ol C
2
. For
transportation, thc amount ol C
2
cmittcd is dircctly
attributcd to wcight, modc and distancc travcllcd. For
warchousc and storc locations, thc amount ol C
2

cmittcd is dircctly attributcd to thc typc ol cncrgy
consumcd to opcratc thc lacilitics.
New KPIs for the
Future Supply Chain
Current KPIs
Availability to consumer (percent
in-stock)
Cost reduction
Financial KPIs
Return on investment (ROI)
Gross Margin Return on X
(GMROX)
Return on brand equity
Inventory
Traceability
Sustainability KPIs
Energy consumption
CO
2
emissions (greenhouse gases)
Traffic congestion
Water consumption
Security compliance
Infrastructure simplification
2. THE PAST DOES NOT REFLECT THE FUTURE
20
!ncrcasingly, govcrnmcnts arc making commitmcnts
and lcgislation to drivc rcduction in C
2
cmissions.
For cxamplc, thc 8ritish Climatc Changc 8ill
publishcd in midNovcmbcr 2007 sct a lcgal targct
lor 8ritain to cut national carbon dioxidc cmissions by
60 by 2050. r thc cncrgy bill in thc Unitcd Statcs
that calls lor gasolinc milcagc rcquircmcnts lor cars
and trucks to incrcasc to an avcragc ol 35 milcs pcr
gallon by 2020, a 40 improvcmcnt.
Traffic congestion is a ncw mcasurc that is bcing
uscd by various govcrnmcnts and rcgulatory bodics
as a disinccntivc lor urban trallic congcstion and
pollution. Scvcral citics ol varying sizcs havc adoptcd
programmcs whcrc vchiclcs arc taxcd or cntircly
prohibitcd lrom cntcring urban gcographic rcgions.
For cxamplc, thc London congcstion chargc is a lcc
lor somc motorists travclling within thosc parts ol thc
city dcsignatcd as thc Congcstion Chargc Zonc. And
in Amstcrdam, whcrc 5,000 trucks pcr day cntcr thc
city ccntrc, thcrc arc rcstrictions on truck lcngth and
wcight and limitcd timc slots lor rcplcnishmcnt.
Water consumption will bc a big issuc in thc luturc.
Acccss to drinking watcr will bccomc incrcasingly
scarcc and cnvironmcntal changcs will occur as
a rcsult. Govcrnmcnts and nongovcrnmcntal
organisations havc implcmcntcd awarcncss
programmcs and policics to addrcss thc growing
conccrn.
Security compliance will also bc a kcy locus in
thc coming ycars. Rccovcry action plans both lor
inlormation and physical proccsscs must bc intcgratcd
into cvcryday proccdurcs. Sccurity rcquircmcnts in
warchousing and transport must bc rcinlorccd lor
thc salcty ol pcoplc and thc traccability ol goods in
compliancc with rcgulations. Futurc supply chains
will havc to dcmonstratc thcir rcliability cvcn in
largcr and complcx collaborativc modcs. Companics
should monitor thcir lcvcl ol compliancc.
Lastly, infrastructure simplification is a mcasurc in
cubic mctrcs ol a companys physical lootprint so
that going lorward a basc casc can bc cstablishcd and
mcasurcd against. Thc goal would bc to optimisc thc
ovcrall spacc occupicd and rclocatc warchouscs and
distribution ccntrcs in morc appropriatc locations.
Now that wc havc dclincd and considcrcd thc
changcs that should bc applicd to thc physical supply
chain, wc turn to thc solutions availablc to makc this
happcn. Thc ncxt scction introduccs thc toolkit lor
making thc dcsircd changcs to thc supply chain.
Future supply chains will have to demonstrate
their reliability even in larger and complex
collaborative modes.
21
Major Sustainability
Activities and Regulations
A number of global events and recent regulations make clear the urgency
of addressing sustainability issues. Consider a few examples:
Kyoto Protocol, December 1997. This treaty was signed by 36 industrial
countries in 1997 in Kyoto, Japan, and called for all industrialised nations
to reduce their collective emissions of greenhouse gases by 5.2% versus
1990 levels. The goal was to lower average emissions of CO
2
and five other
greenhouse gases.
United Nations Climate Meeting, Bali, December 2007. Twelve thousand
delegates from 190 nations gathered in Bali for two weeks of talks on
climate change. A decision was finally reached to approve a roadmap for
two years of negotiations on a broad pact to succeed the Kyoto Protocol
from January 1, 2013.
Carbon Disclosure Project (CDP).
4
The CDP is an independent not-
for-profit organisation aiming to create a lasting relationship among
shareholders, purchasers and corporations regarding the implications for
shareholder value and commercial operations presented by climate change.
Increasingly, focus is shifting from companies own emissions to their
supply chains, where, for many sectors, the majority of greenhouse gas
(GHG) emissions are generated. Corporations require better information
to develop and deliver robust and effective carbon management strategies
and incorporate climate change into supply chain decisions.
EU Directive on Renewable Energy, January 2008. On January 23, 2008 the
European Commission put forth an integrated proposal for climate action.
This includes a directive that sets an overall binding target for the European
Union of 20% renewable energy by 2020 and a 10% minimum target for the
market share of biofuels by 2020, to be observed by all member states.
2. THE PAST DOES NOT REFLECT THE FUTURE
4
www.cdproject.net
22
23
A Toolkit for an
Innovative Future
Supply Chain
Solution areas, leading practices, example supply
chains and calculation models are the tools needed
to build an innovative future supply chain model.
24
Taking into account thc considcrablc lorccs that arc
driving changc, togcthcr with thc changcs that will
nccd to bc madc to thc physical supply chain, how
should thc industry build thc luturc supply chain and
what arc thc clcmcnts: To answcr this qucstion, lour
kcy componcnts must bc takcn into account:
Solutions areas: Thc solution arcas addrcss
cxisting challcngcs and thosc anticipatcd lor thc
coming dccadc.
Leading practices: xamplcs ol cxisting lcading
practiccs arc intcgratcd into thc modcl to show
how thcy hclp addrcss thc solutions arcas.
Application to example supply chains: Simplilicd
supply chains arc uscd to dcmonstratc how thc
modcl works.
New ways to calculate the impact on the supply
chain: Thcsc includc both macrolcvcl and micro
calculation modcls.
This scction looks at cach ol thcsc componcnts.
Howcvcr, it is important to notc that thc componcnts
do not stand alonc, thcy intcract with cach othcr. At
thc samc timc, thcy arc not sct in stonc. !ndividual
companics can play with thc clcmcnts and apply
thcm to thcir own spccilic situation. Thc rcsults
providc a rcalistic picturc ol a companys own supply
chain and ollcr insight into which solutions will bc
important in thc luturc and thc potcntial bcnclits.
Solution Areas and Leading Practices
All ol thc solution arcas locus on physical supply
chain innovation. xamplcs ol rcalworld lcading
practiccs hclp illustratc thc achicvablc bcnclits in cach
solution arca. Applying thcsc solutions and lcading
practiccs to cxamplc supply chains will hclp idcntily
potcntial improvcmcnt opportunitics.
Thc lollowing solutions arcas arc cxamincd in
morc dctail:
!nStorc Logistics: includcs instorc visibility,
shcllrcady products, shoppcr intcraction
Collaborativc Physical Logistics: sharcd transport,
sharcd warchousc, sharcd inlrastructurc
Rcvcrsc Logistics: product rccycling, packaging
rccycling, rcturnablc asscts
cmand Fluctuation Managcmcnt: joint planning,
cxccution and monitoring
!dcntilication and Labclling
1.
2.
3.
4.
5.
llicicnt Asscts: altcrnativc lorms ol cncrgy,
cllicicnt/acrodynamic vchiclcs, switching modcs,
grccn buildings
Joint Scorccard and 8usincss Plan
1. In-Store Logistics. Solutions in this arca involvc
improvcmcnts within thc storc and locus on adding
valuc to thc consumcr and rcducing busincss costs.
Thcsc solutions cncompass products cntcring thc
storc at thc back and products pickcd by or lor thc
consumcr in thc storc.
An cxamplc is instorc visibility. RF! tcchnology
can bc uscd to cnablc rcaltimc insight into invcntory,
with alcrts via computcr whcn supplics arc running
low or whcn thclt is dctcctcd. Anothcr cxamplc is
shcllrcady products, which arrivc as a mcrchandisc
unit that is casy to idcntily, casy to opcn and can
casily bc put on thc shcll. Shcllrcady products aim to
improvc shcll rcplcnishmcnt and cnhancc visibility.
Shoppcr intcraction is anothcr instorc logistics
solution and rcquircs improvcd availability ol
consumcr data lor both thc manulacturcr and rctailcr.
PS data should bc availablc and uscd to build a
data warchousc, which providcs analysis and rcports
that lit to thc KP!s ol thc manulacturcr and rctailcr.
Shoppcr intcraction may involvc thc usc ol mobilc
dcviccs such as clcctronic labclling, mobilc paymcnts
and mobilc dcvicc markcting, and instorc kiosks and
narrowcasting to prcscnt inlormation dcsigncd to
stimulatc purchascs.
2. Collaborative Physical Logistics. This solution arca
is dclincd as thc sharing ol physical inlrastructurc
such as warchousc storagc and transportation vchiclcs
in ordcr to simplily thc ovcrall physical lootprint,
and to consolidatc llows to improvc scrvicc and
assct utilisation. Sharing and collaboration can
takc placc both bctwccn and across various nodcs
ol compctitivc supply chains and it can apply to
cxisting inlrastructurc or to ncwly built collaborativc
inlrastructurc. xamplcs includc:
Shared transport: A collaborativc approach
bctwccn manulacturcrs, bctwccn rctailcrs, and
bctwccn manulacturcrs and rctailcrs and possibly a
thirdparty logistics providcr to sharc transport, it
involvcs sharing load planning and truck capacity.
Shared physical infrastructures: Manulacturcrs,
rctailcrs and possibly thirdparty logistics
providcrs collaboratc to sharc warchouscs and
distribution ccntrcs lor activitics such as storing
goods or crossdocking.
6.
7.
25
Shared information: Sharing inlormation to
managc llows among manulacturcrs, rctailcrs and
thirdparty logistics providcrs in ordcr to combinc
dclivcrics lrom morc than onc sourcc towards
multiplc storcs via a warchousc or distribution
ccntrc.
As an cxamplc ol collaborativc physical logistics,
CR uropc has sct up a projcct with thc objcctivc
to hclp companics in thc supply chain rcducc thc
cnvironmcntal impact ol transport in a way that is
cconomically and socially sustainablc. Thc projcct
will dclivcr a practical roadmap and scllasscssmcnt
tool, which will allow organisations to idcntily,
plan and mcasurc improvcmcnts in thcir transport
opcrations. Ultimatcly such collaborativc sustainablc
transport cllorts will bc mcasurcd in lcwcr and
lricndlicr milcs.
Thcsc solutions can bcnclit lrom cllicicnt assct
solutions, lor cxamplc grccn buildings and morc lucl
cllicicnt transport.
3. Reverse Logistics. This is dclincd as logistics
dcsigncd to rcproccss asscts, matcrials, packaging,
products or othcr componcnts that can bc rccyclcd,
rcuscd or rcmanulacturcd. Solutions includc
traditional backhauling, product rccycling, packaging
rcusc and packaging rccycling.
Rcvcrsc logistics solutions cncompass thc rcusc ol
asscts in thc supply chain that arc not dircctly product
rclatcd, such as pallcts and cratcs. For cxamplc, an
automatic pallct labclling solution may incorporatc
Flag Tag, a lcaturc that makcs it possiblc to tag all
pallcts with onc typc ol tag, such as an RF! chip.
THE TOOLKIT FOR THE FUTURE
3. A TOOLKIT FOR AN INNOVATIVE FUTURE SUPPLY CHAIN
26
AT A GLANCE: SOLUTION AREAS, KPIS, LEADING PRACTICES
Solution Areas
KPIs Leading Practices
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Company Leading practice
In-Store Logistics Schuitema Implementing RFID on crates with
ready-to-cook vegetables. Sales have
increased by 10% to 12%.
Collaborative
Physical Logistics
Carrefour,
Bndicta,
Nutrimaine,
Lustucru,
FM Logistics
A multi-player approach has resulted in
benefits such as a 34% increase in average
delivery frequency and a 115% increase in
average load per delivery.
ECR Europe ECR Europes sustainable transport project
is designed to help companies reduce the
environmental impact of transportation.
Reverse Logistics HP, Braun/
Gillette, Sony,
Electrolux
Together the companies founded the
European Recycling Platform to encourage a
competitive market for Waste Electrical and
Electronic Equipment (WEEE), which is
expected to reduce costs by more than 50%.
Demand
Fluctuation
Management
Scotts Scotts use of consumer-driven
replenishment has led to improved fill rates
(98%), in-stock service (95%), inventory turns
and order forecast.
Philips Philips Collaborative Planning, Forecasting
and Replenishment programmes with several
customers have created a consumer-driven
supply chain, resulting in an increase in
forecast accuracy to above 80%, a reduction
in stock levels in the supply chain by more
than 30%, and an increase in on-shelf
availability to about 95%, driving sales and
consumer satisfaction in the process.
Identification &
Labelling
GS1 The GS1 System of Standards provides a
world-wide open standard, supported by
published guidelines and precise allocation
rules. Leading practices include GTIN, GLN,
SSCC and Data Bar.
Efficient Assets Macys Macys and SunPower Corporations solar and
energy efficiency initiative has reduced energy
consumption by about 40%.
Metro Through the integration of EURO-5 trucks into
its distribution network, MGL Metro decreased
CO
2
emissions by 25% between 2003 and 2006.
It is aiming for an 84% reduction by 2009.
Joint Scorecard &
Business Plan
Wal-Mart Implementing a packaging scorecard for
suppliers is Wal-Marts next step in moving
toward achieving a 5% reduction in packaging
by 2013.
Source: Global Commerce Initiative, Capgemini
27
4. Demand Fluctuation Management. cmand
lluctuations rcquirc ncw modcls to smooth thc
dcmand signal coming lrom customcrs. Thcsc ncw
modcls transccnd traditional approachcs to rctailcr
supplicr intcgration and collaboration.
\crtical solutions includc promotion/introduction
calcndars and supply/dcmand capacitics to align
introductions and promotions. An additional
solution is collaboration on cxccution, that
is, joint supply/dcmand anticipation bascd
on rcaltimc visibility ol thc physical llow ol
goods and consumcr (salcs) bchaviour. Also,
collaboration on monitoring, which involvcs
joint, rcaltimc acccss to rcsults ol introductions
and promotions, bascd on sccurc systcms.
5. Identification and Labelling through thc usc ol
barcodcs and RF! tags. !dcntilication is about
providing all partncrs in thc valuc chain with thc
ability to usc thc samc standardiscd mcchanism to
uniqucly idcntily partics/locations, itcms and cvcnts,
with clcar rulcs about whcrc, how, whcn and by
whom thcsc will bc crcatcd, uscd and maintaincd.
Labcls currcntly arc thc most widcly uscd mcans
to communicatc about rclcvant sustainability
and sccurity aspccts ol a ccrtain product toward
consumcrs and trading partncrs.
6. Efficient Assets. This solution arca cncompasscs
cllorts by companics to modily cxisting or dcsign ncw
cquipmcnt or buildings, to cnhancc thcir productivity
and rcducc thcir cnvironmcntal impact.
Transportation solutions includc morc cllicicnt and/or
acrodynamic and jumbo vchiclcs, utilising altcrnativc
or multiplc modcs ol transportation, and switching
to dillcrcnt transport modcs. Solutions involving
buildings includc thc adoption ol a grccn building
policy by using altcrnativc lorms ol sustainablc cncrgy
or improving cxisting building cncrgy cllicicncy.
Thcsc typcs ol solutions makc morc cllicicnt usc ol
kcy rcsourccs likc cncrgy, watcr, land and matcrials.
For cxamplc, grccn buildings will typically usc 25
to 30 lcss cncrgy than convcntional buildings, will
havc lowcr pcak consumption, will typically gcncratc
rcncwablc cncrgy onsitc, and most likcly will usc
grid powcr gcncratcd lrom rcncwablc cncrgy sourccs.
Mctro scrvcs as a lcading practicc casc lor
consolidation and thc usc ol cllicicnt asscts by
a rctailcr. Vith thc awardwinning
5
conccpt ol
procurcmcnt logisticsa collaborativc approach
across all catcgorics and storc lormats (lood,
nonlood, apparcl, !Y and consumcr clcctronics)
that is consolidating llows and warchouscsMctro
alrcady statcd in 2002 positivc cnvironmcntal cllccts
and conscrvativc savings on thc ordcr ol 150
million pcr ycar through highcr lill ratcs and lowcr
waiting timcs.
!n addition, through thc intcgration ol UR5
trucks into its distribution nctwork, MGL Mctro
dccrcascd C
2
cmissions by 25 bctwccn 2003 and
2006. !t is aiming lor an 84 rcduction by 2009. Thc
usc ol GPS modulcs, trallic monitoring, planning
systcms and wclltraincd stall has dclivcrcd major
cllicicncics and improvcd assct utilisation, producing
somc 40,000 additional driving hours pcr ycar lrom
thc samc asscts.
7. Joint Scorecard and Business Plan. This solution
consists ol a suitc ol industryrclcvant mcasurcmcnt
tools lalling into two broad catcgorics: qualitativc
tools, which arc a sct ol capability mctrics dcsigncd
to mcasurc thc cxtcnt to which thc trading partncrs
(supplicr, scrvicc providcr and rctailcr) arc working
collaborativcly, and quantitativc tools, which includc
busincss mctrics aimcd at mcasuring thc impact
ol collaboration.
Thc accompanying tablc (At a Glancc: Solution
Arcas, KP!s, Lcading Practiccs) providcs an
ovcrvicw ol thc solution arcas and thc rclatcd KP!s
as wcll as cxamplcs ol cxisting lcading practiccs. Thc
dctails ol thc lcading practiccs can bc lound in thc
scparatc, lrccstanding Appcndix that accompanics
this rcport.
5
MGL Metro, Deutscher Logistikpreis, 2002; MGL Metro, ECO Performance Award, 2007.
28
Understand and Reinvent
Example Supply Chains
Simplilicd cxamplcs ol currcnt supply chains arc uscd
to show how supply chains work today. Although
thcrc may bc a widc varicty ol supply chains lor thc
samc typc ol activity, thc cxamplc supply chains
arc dcscribcd according to thc samc structurc (scc
accompanying diagram).
Vc havc sclcctcd particular situations, which do not
dcscribc all cascs, in ordcr to illustratc how solutions
can bc applicd. A distinction is madc among rcgular
rcplcnishmcnt, promotional llow and scasonal llow.
Thc main charactcristics ol thc livc cxamplc supply
chains choscn arc idcntilicd in thc accompanying
tablc (lacing pagc). Thc rcsults ol this cxcrcisc
should providc inspiration to companics to adapt
thc cxamplcs to thcir own products.
Following arc somc illustrativc thoughts on how thc
solutions can bc applicd in thc contcxt ol thc spccilic
charactcristics ol thcsc livc cxamplc supply chains.
Thc asis llows ol thc livc cxamplc supply chains
can bc lound in thc scparatc, lrccstanding Appcndix
that accompanics this rcport.
Cereals. Thc ccrcals supply
chain is charactcriscd by
scasonal raw matcrial
production, rcgular
consumption pattcrns (but
inllucnccd by promotions) and rcmotc as wcll as local
sourcing (dcpcnding on thc country). vcrall, thcrc is
improvcmcnt potcntial on stock lcvcls and thc lcngth
ol stay ol stocks at distribution ccntrcs and on
rctailcrs shclvcs. Also, transportation and storagc
lacilitics could bc improvcd in rcspcct to thcir C
2

cmissions and cncrgy consumption.
Somc illustrativc solutions lor this cxamplc supply
chain includc shipping largcr volumcs or cross
docking, sharing transport to storcs, cllicicnt
and acrodynamic vchiclcs (cspccially lor city
rcplcnishmcnt) and sharcd warchousing on combincd
catcgorics using grccn lacilitics.
White Goods (large household
appliances). Thc main
charactcristics ol thc whitc
goods supply chain includc
long lcad timc lrom sourcc to
shoppcr, yct somctimcs thc product lilccyclcs can bc
short, invcntory lcvcls could bc improvcd, cspccially
at rctailcrs (many rctailcrs hold invcntory cvcn though
it nccds to bc dclivcrcd), stocking locations could bc
rcduccd, signilicant physical distribution and rcvcrsc
logistics, collaboration and intcgration with othcr
partics could bc improvcd, homc dclivcry could bc
morc llcxiblc, and opportunitics cxist involving
standardisation ol products.
xamplcs ol suitablc solutions to apply includc thc
usc ol pointolsalc data lor production planning,
collaboration on lullilmcnt bctwccn manulacturcr
and rctailcr, improvcd lorccasting and invcntory
managcmcnt and SKU rationalisation, sharcd
warchouscs and standardisation ol product
componcnts.
SUPPLY CHAIN STRUCTURE
Remote sourcing/
production
Local sourcing/
production
Non-urban nal mile
Urban nal mile
Distribution
29
Beverages. Thc
bcvcragcs supply
chain is charactcriscd
by rclativcly high
invcntory costs and
opportunitics to rcducc transport and lucl costs. Also,
thcrc is improvcmcnt potcntial rcgarding thc
collaboration on both lorccasting and logistics (cithcr
upstrcam lrom thc raw matcrial supplicrs and
manulacturcrs or downstrcam lrom manulacturcrs
and rctailcrs or among manulacturcr compctitors).
This is also thc casc lor data cxchangc, which still
involvcs a lot ol manual handling.
Suitablc solutions to apply includc sharcd warchouscs,
pooling opportunitics run by logistics scrvicc
providcrs, sharcd transport with othcr manulacturcrs,
thc usc ol mixcd, cllicicnt and acrodynamic transport
modcs likc (jumbo) trucks, rails and bargcs, and
rcducing thc numbcr ol stocking locations and ncw
invcstmcnts in asscts, likc grccn warchouscs. Thcrc
is also signilicant potcntial in lull inlormation
transparcncy through data cxchangc (pointolsalc),
both upstrcam and downstrcam.
Vegetables. Thc main
charactcristics ol thc
vcgctablcs supply
chain arc local and
global sourcing,
short cyclc timc
(thc product should rcach thc markct as quickly as
possiblc), thc critical importancc ol product quality
and lrcshncss, scasonality ol somc vcgctablcs, and llow
charactcriscd by many milcs lrom sourcc to consumcr.
Suitablc solutions to bc applicd includc thc usc
ol standardiscd totcs to rcducc handling, sharing
inlrastructurcs (possibilitics ol bulk bcing turncd
into consumcrrcady units), dillcrcntiatcd supply
chain nctworks (intcrmcdiatc prcproccssing
ccntrcs, including consolidation, valucaddcd prc
proccss), rcducing touchcs altcr thc initial larm or
prcproduction, cllicicnt asscts likc solarpowcrcd
rclrigcratcd trucks and solar pancls on thc rool, and a
grccn indcx on scorccards.
Coffee. Thc collcc supply
chain includcs opportunitics
rcgarding thc invcntory stay
at warchouscs. Collcc is a
highvaluc product,
collaboration among
manulacturcrs could bc improvcd, and thcrc arc
dclinitcly opportunitics lor morc involvcmcnt ol
logistics scrvicc providcrs. vcrall, thc chain consists
ol a numbcr ol stcps.
KEY CHARACTERISTICS OF EXAMPLE SUPPLY CHAINS
Product Group Final Mile Retail Distribution Production Sourcing
Example
Supply Chain A
Cereals Store, urban
Regular
replenishment
Collaborative
warehouse
Continuous
Remote
and local
Example
Supply Chain B
White Goods
Home
delivered
Seasonal Reverse logistics
Short product
lifecycle
Remote
Example
Supply Chain C
Beverages Store Promotional
Direct store
delivery
Highly
continuous
Local bottler
Example
Supply Chain D
Vegetables
Store,
non-urban
Seasonal
Cross-dock,
crates
Small local
farms
Local
Example
Supply Chain E
Coffee Local pick-up Promotional
Endcap/gondola
end material
Discontinuous
Remote
co-operation
of farmers
30
Suitablc solutions to apply in this supply chain
includc collaborativc physical logistics (such as
sharcd warchouscs bctwccn collcc manulacturcrs
and bctwccn dillcrcnt kinds ol manulacturcrs, and
thc involvcmcnt ol logistics scrvicc providcrs in
warchouscs and transport). !n addition, packaging can
bc donc closcr to thc consumcr. 8cttcr inlormation
on l luctuation managcmcnt and promotions will
improvc lorccasting. PS data nccds to bc availablc to
improvc rcplcnishmcnt (rcgular as wcll as promotions).
!mprovcmcnts also can bc madc rcgarding thc usc ol
cllicicnt asscts likc grccn warchouscs.
New Ways to Calculate the
Impact on the Supply Chain
Finally, calculation modcls arc an csscntial tool lor
thc luturc supply chain to dctcrminc thc impact ol
thc lcading practiccs and solutions. As thc industry
trics to improvc scvcral paramctcrs in thc supply
chain, how can it comparc solutions that may havc
conllicting impact on, lor cxamplc, C
2
cmissions
vcrsus supply chain costs: This scction cxamincs thc
gcncral charactcristics ol such calculation modcls.
Thc scparatc, lrccstanding Appcndix providcs morc
dctail on actual cxamplcs ol such calculations.
!n thc calculation modcls uscd in thc luturc
supply chain rcscarch, thc lollowing paramctcrs
arc considcrcd:
Supply chain cost rcduction (mainly on handling,
storagc and transport)
C
2
cmissions (grccnhousc gascs)
Trallic congcstion
!nlrastructurc simplilication
Thc impact ol thcsc paramctcrs on thc bottom linc
can always bc cxprcsscd in tcrms ol multiplying a cost
drivcr and a volumc drivcr. For instancc, thc impact
ol transport on thc bottom linc can bc cxprcsscd in
tcrms ol thc cost pcr kilomctrc lor thc particular typc
ol transport multiplicd by thc numbcr ol kilomctrcs
travcllcd. Rcductions can cithcr bc madc by rcducing
thc cost drivcr (chcapcr transport) or by rcducing thc
volumc drivcr (lcwcr kilomctrcs through lullcr trucks
or rcdcsign ol thc nctwork).
Vhilc working through thc dillcrcnt calculation
modcls, it was lound that thc rclativc impact ol thcsc
paramctcrs on thc bottom linc was not cqual. For
paramctcrs that alrcady rcprcscnt a largc pcrccntagc
ol thc bottomlinc costs (likc handling and transport),
changcs to thcsc lactors havc substantial impact on
thc bottom linc. For othcr paramctcrs, thc impact is
(not yct) as big.
IMPACT ON THE BOTTOM LINE

Parameter Cost Factor Cost Driver Volume Driver Impact on Bottom Line
Supply Chain
Cost Reduction
Handling
Storage
Transport
$ manhours
$/m2/day
$/km
# transfers, etc.
# storage points,
storage time
# kilometres
High
Medium (depending
on value of goods)
High
CO
2
Emissions CO
2
taxation $/kg CO
2

(modality dependence)
# kilometres Relatively low
Traffic Congestion Delays Manhours lost
Delayed replenishment/
out-of-stocks
# vehicles delayed,
storage of m2/day
Medium
Infrastructure
Simplification
Duplication Duplication of costs
in the supply chain
# storage points/
# of separate chains
High
31
Fivc calculations arc availablc in thc Appcndix,
but thc main conclusions arc sharcd hcrc as an
introduction to what thc total luturc supply chain
should look likc:
Collaborative city replenishment involvcs conccpts
whcrc thc rcplcnishmcnt ol products lor scvcral
rctailcrs into an urban arca is consolidatcd at translcr
points at thc boundary ol that urban arca. Thc total
impact on C
2
cmissions and congcstion can bc
improvcd rclativcly casily, but typically at thc cost ol
introducing cxtra handling. Futurc solutions in this
arca thcrclorc nccd to link closcly with upstrcam
storagc and translcr choiccs, in ordcr to avoid
introducing unncccssary handling. At thc samc timc,
congcstion chargcs will tip thc balancc in lavour ol
collaborativc city rcplcnishmcnt.
Collaborative warehouse and distribution looks
at opportunitics lor manulacturcrs to consolidatc
warchousc opcrations and transport lrom production
to thc rctailcr translcr point. !t is clcar that thc
combination ol warchousing and distribution can
hclp providc thc dcsircd bcnclits. nly looking at
consolidatcd transport can lcad to cxtra handling and
inlrastructurc complication (instcad ol simplilication).
Collaborativc warchousing also ollcrs C
2
and cost
bcnclits through dcploying grccncr buildings and
(transport) asscts. An altcrnativc combination ol
collaborativc city rcplcnishmcnt and collaborativc
warchouscs is distribution ccntrc collaboration lor
rctailcrs. Thc aggrcgation ol transport and storagc lor
scvcral rctailcrs can havc similar bcnclits as thc modcl
lor collaborativc warchousing.
Neighbourhood delivery considcrs improvcmcnts in thc
dclivcry ol goods to thc linal consumcr, cithcr coming
lrom onlinc ordcring or thc homc dclivcry ol products
ordcrcd in a storc (such as whitc goods). Thc solution
can bc sought in consolidating thcsc strcams at
consolidation ccntrcs at thc boundary ol thc city and
thcn dclivcring cvcrything in cllicicnt urban dclivcry
routcs or through ncighbourhood pickup points.
A dillcrcnt (and oltcn lorgottcn) vicwpoint is thc
amount ol C
2
cmissions causcd by consumcrs who
drivc by car to thc storc. Rcscarch shows that, lor
cxamplc, ovcr 60 ol thc total C
2
cmissions lor
thc transportation and storagc ol 1 kg ol applcs lrom
Ncw Zcaland to a UK consumcrs homc is causcd
by consumcrs who usc thcir cars lor shopping trips.
6

Homc dclivcry can improvc this signilicantly (pcrhaps
rcducing thc last milc C
2
cmissions by hall).
!t is cvidcnt that thcsc modcls should also bc
considcrcd in rclation to collaborativc city
rcplcnishmcnt to storcs, and whcrc possiblc sharc
a similar inlrastructurc.
Lead-time reduction looks at various ways in which
thc total lcad timc ol thc product can bc rcduccd.
!nlrastructurc simplilication is an important
ingrcdicnt lor this, taking away unncccssary storagc
points can havc a big impact on invcntory costs, but
also on thc chain rcsponsivcncss (and thcrclorc shcll
availability ol thc product). Howcvcr, taking away
onc storagc point usually complicatcs thc opcration
ol thc morc upstrcam storagc point. For instancc,
crossdocking at a rctailcr distribution ccntrc (instcad
ol kccping stock) typically rcquircs thc manulacturcr
to dclivcr storc ordcrs instcad ol consolidatcd
rcplcnishmcnt ordcrs.
CO
2
emissions reduction through local sourcing
considcrs thc tradcolls lor rcmotc sourcing bctwccn
lowcr production cost and highcr transport cost and
C
2
cmissions. !t quickly shows that C
2
taxation
nccds to bc quitc scvcrc to motivatc morc local
sourcing. Howcvcr, a combination ol highcr cncrgy
priccs and C
2
cmission taxation could tip that
balancc in thc luturc.
From this discussion ol thc dillcrcnt improvcmcnts
it is apparcnt that thc luturc supply chain should bc
considcrcd as an intcgratcd architccturc compriscd
ol thcsc various conccpts. Thc ncxt chaptcr docs
cxactly that, it shows how thc componcnts can bc put
togcthcr into onc cohcsivc architccturc lor thc luturc
supply chain.
6
Lean and Green, doing more with less, David Simons and Robert Mason, ECR Journal, Vol. 3, No. 1.
32
Integrating improvement solutions and collaboration
concepts into a cohesive model will provide the future
supply chain architecture necessary to bring new
efciency and cost reduction to the industry.
A New Model for
Enhanced Supply
Chain Collaboration
33
34
Can thc industry allord to limit itscll to just
implcmcnting incrcmcntal improvcmcnts by
individual companics: Thc answcr is clcarly no.
\igorous stcp changcs arc nccdcd to signilicantly
improvc C
2
cmissions, trallic congcstion,
inlrastructurc simplilication and supply chain costs,
whilc at thc samc timc rcducing outolstocks.
Thc luturc supply chain architccturc rcquircs a
structural changc combining individual improvcmcnt
solutions and intcgratcd collaboration conccpts.
This ncw intcgratcd modcl rcprcscnts thc tangiblc
cxprcssion ol thc vision outlincd in thc carlicr
2016 rcport.
Vhy should you carc: Vcll, what il you could rcducc
thc lollowing by morc than 20:
Transport costs pcr pallct
Handling costs pcr pallct
Lcad timc
C
2
xtcnsivc analysis lound that thc KP!s lor transport
costs, handling costs, total truck kilomctrcs, C
2

cmissions and lcad timc could all bc improvcd
substantially in this intcgratcd modcl, and this docs
not takc into account additional cncrgy cost savings
stcmming lrom morc cllicicnt asscts such as grccn
buildings and luclcllicicnt/acrodynamic trucks.
Thc prcvious scction sct lorth thc toolkit that will bc
rcquircd lor thc luturc supply chain. Collaboration
will bc thc kcy to bringing and holding togcthcr
all thc clcmcnts into a ncw modcl or architccturc.
Thc modcl includcs a numbcr ol dillcrcnt

collaboration conccpts that can bc pullcd togcthcr into
a cohcsivc collaboration modcl, which scrvcs as thc
ncw architccturc. !t is important to notc that this is
only onc way in which thc conccpts can work togcthcr.
illcrcnt rcgions, dillcrcnt markcts, dillcrcnt
companics will havc to asscss how thcsc conccpts
should bc combincd to rcalisc thc maximum cllcct.
Thc lollowing lour collaboration conccpts arc at thc
hcart ol thc ovcrall luturc supply chain architccturc:
supply chain
Collaborativc city distribution, including homc
dclivcry and pickup
Collaborativc nonurban distribution, including
homc dclivcry and pickup
Vhilc individual cxamplcs ol thcsc conccpts alrcady
cxist, thc kcy to thcir broadcr implcmcntation
across thc industry will bc improvcd collaboration.
!mproving such collaboration dcmands ncw ways
ol working togcthcr in thc physical supply chain, a
lramcwork lor which has bccn dcvclopcd by GC!
and is bcing addrcsscd by a scparatc work tcam.
1.
2.
3.
4.
The 2016 Future Supply Chain
Characteristics of the 2016 Future Supply Chain
The future model will be based on multi-partner information sharing among key stakeholders: consumers
(the originators of the demand signal, either from home or from a store), suppliers, manufacturers,
logistics service providers and retailers.
After production the products will be shipped to collaborative warehouses in which multiple
manufacturers store their products.
Collaborative transport from the collaborative warehouse will deliver to city hubs and to regional
consolidation centres.
Warehouse locations on the edge of cities will be reshaped to function as hubs where cross-docking
will take place for final distribution.
Non-urban areas will have regional consolidation centres in which products will be cross-docked for
final distribution.
Final distribution to stores, pick-up points and homes in urban and non-urban areas will take place
via consolidated deliveries using efficient assets.
35
4. A NEW MODEL FOR ENHANCED SUPPLY CHAIN COLLABORATION
36
Supply chain collaboration can only bc cllcctivc
with sullicicnt inlormation transparcncy. This is
particularly important lor collaborativc approachcs to
improvc onshcll availability (SA).
!nlormation about thc actual status ol itcms in thc
supply chain, at any momcnt, is csscntial to corrcctly
coordinatc all thc combincd logistics strcams in thc
ovcrall 2016 luturc supply chain architccturc.
Sharing ol standardiscd data (bascd on thc usc ol
GS1 kcys and transaction mcssagc standards) is thc
corncrstonc lor this. Thcrc is csscntial mastcr data
that should bc sharcd in standard lormat to corrcctly
idcntily products throughout thc supply chain (corrcct
idcntilication prcvcnts mistakcs and rcwork):
Product !dcntilication (GT!N)
Attributcs
Classilication inlormation
GLN
1. Information Sharing Driving the Collaborative Supply Chain

37
thcr mastcr data rclating to locations such as nodc
location and lcad timc bctwccn nodcs must also bc
sharcd and aligncd.
To prcvcnt outolstocks, dcmandsignal data, likc
PS salcs data, !ntcrnct shopping salcs data and
othcr mobilcsourccd shopping data, must bc sharcd
in a standard and timcly manncr. This principlc also
applics to inlormation about itcm location, quantity
and status.
vcnts in thc supply chain, such as ncw product
launchcs and promotions, disrupt thc rcgular llow
ol goods. Thc lrcc llow ol data and associatcd
inlormation is csscntial il thc industry is to propcrly
managc thcsc cvcnts and achicvc high lcvcls ol product
availability whcn and whcrc consumcrs want it.
2. Collaborative Warehousing
Collaborativc warchousing, with conccpts that go
lar bcyond thc warchousc collaborations that cxist
today, is a corc componcnt ol thc luturc supply chain
architccturc. Thc kcy clcmcnt is that both rctailcrs
and manulacturcrs must bc part ol such collaborativc
warchousc conccpts, thcy should not just cncompass
warchousc sharing by manulacturcrs alonc.
For cxamplc, collaborativc warchouscs in carclully
sclcctcd locations will collcct (possibly combincd)
shipmcnts lrom a numbcr ol manulacturcrs, and lrom
thcrc combincd shipmcnts will bc madc to distributc
to onc or morc rctailcrs covcring dillcrcnt modcs ol
transport owncrship, lormats and channcls (via ncw
urban and nonurban distribution modcls, scc latcr
discussion). This implics that storc picking can bc
donc lrom thc sharcd warchousc.
A rcpositioning ol warchouscs is likcly to bc rcquircd
to improvc thc ncw supply chain KP!s. This will bc
important in ordcr to shortcn thc chain and incrcasc
llcxibility in allocating invcntory to dcmand.
Standardisation ol data is critical to makc this
possiblc, so this conccpt rclics hcavily on improvcd
data sharing. Not all products can bc put into onc
warchousc, ol coursc, and dillcrcnt collaborativc
warchouscs will nccd to bc dcsigncd lor dillcrcnt
catcgorics, prclcrably aligning thcmsclvcs on
downstrcam distribution nctworks.
Collaborativc warchousing should improvc
scvcral KP!s:
Capacity utilisation ol thc total warchousc
Transport optimisation through sharcd dclivcry
lrom thc warchousc
C
2
and cncrgy rcduction through thc usc ol
thc latcst tcchnologics (such as cncrgycllicicnt
buildings and luclcllicicnt trucks)
To succccd, this conccpt will rcquirc high lcvcls ol
trust and commitmcnt among manulacturcrs, rctailcrs
and logistics scrvicc providcrs, but it is a crucial cnablcr
lor rcalising intcgratcd sustainability improvcmcnts.
38
Thc luturc supply chain architccturc anticipatcs ncw
collaborativc modcls lor city distribution that nccd
to bc applicd in urban inlrastructurcs. For transport
into urban arcas, congcstion and C
2
cmissions
arc thc main challcngcs that nccd to bc addrcsscd.
Sharing inlrastructurc lor dclivcry into urban arcas is
thcrclorc dcsigncd to limit thc amount ol (polluting)
trucks going into thc city.
Mcrging thc dillcrcnt strcams that go into thc city
onto onc inlrastructurc will bc a big stcp lorward.
Thc kcy clcmcnt will bc socallcd city hubs with a
collaborativc crossdock opcration.
Thc linal solution will bc applicd dillcrcntly pcr
shipmcnt catcgory:
Full truckloads lor storc rcplcnishmcnt
Lcssthanlull truckloads lor smallcrstorc
rcplcnishmcnt
Parccls, including homc dclivcry nccds
For thc lirst catcgory, changcs in thc cllicicncy and

cmissions ol thc trucks could bc sullicicnt, but thc
othcr two catcgorics can bc consolidatcd outsidc thc
city in city hubs and bc brought into thc city with
altcrnativc modcs ol transportation (likc strcctcars or
clcctric vchiclcs).
!n addition, to addrcss thc cxpcctcd growth in
homc dclivcry and thcrclorc parccls coming into
urban arcas, altcrnativc modcls lor homc dclivcry
and ncighbourhood distribution should mcrgc
with thc urban rcplcnishmcnt modcl. This implics
consolidation ol dillcrcnt dclivcry strcams (dillcrcnt
products bascd on dillcrcnt ordcrs lrom dillcrcnt
onlinc ordcring lacilitics, all lor thc samc shoppcr)
via city hubs.
Ncw ncighbourhood distribution modcls will havc
pickup points or dropoll boxcs to cnablc cllicicnt
dclivcry ol thc parccl strcam in a consolidatcd way.
Consumcrs will bc givcn thc choicc to cithcr havc
thcir onlincordcrcd goods dclivcrcd at homc,
or to collcct thcm at spccilic pickup points or
dropoll boxcs. !n both cascs consumcrs will causc
considcrably lowcr C
2
cmissions, comparcd with
using thcir cars to go shopping.
3. Collaborative City Distribution
39
This collaborativc conccpt should impact thc
lollowing KP!s:
Trallic congcstion
C
2
cmissions and cncrgy rcduction
4. Collaborative Non-Urban Distribution
For nonurban arcas, thc challcngcs, and thcrclorc thc
solutions, arc slightly dillcrcnt. Thc longcr distanccs
to thc linal storc or homc arc such that transport
optimisation is thc main objcctivc. Full truckloads
lrom collaborativc warchouscs can bc movcd in thc
most cllicicnt way to thc rcmotc arca, possibly using
altcrnativc modcs ol transport likc trains.
A rcgional consolidation ccntrc can havc a similar
lunction as thc city hubs, consolidating thc storc
ordcrs lrom various collaborativc warchouscs into
dcdicatcd storc rcplcnishmcnt routcs. At thc samc
timc, thcsc consolidation ccntrcs arc nccdcd to
mcrgc thc longdistancc strcams with thc local
product strcams to crcatc cllicicnt rcplcnishmcnt
into thc storcs.
Just as with urban rcplcnishmcnt, parccls and
homc dclivcry modcls should bc considcrcd
in conjunction with thc storc rcplcnishmcnt
modcls. Thcsc llows could also bc crossdockcd
at similar consolidation ccntrcs to improvc
thc lill ratc lor thc linalmilc routcs.
Again, as with city distribution, thc kcy will bc
consolidation ol dclivcry strcams (dillcrcnt products
bascd on dillcrcnt ordcrs lrom dillcrcnt onlinc
ordcring lacilitics, all lor thc samc shoppcr) via thcsc
consolidation ccntrcs. Thcrc will bc a convcrgcncc
bctwccn homc shopping and ncighbourhood
distribution via pickup points. Consumcrs will bc
givcn thc choicc to cithcr havc thcir onlincordcrcd
goods dclivcrcd at homc, or to collcct thcm at spccilic
pickup points or dropoll boxcs, which in both cascs
will rcducc thc C
2
cmissions that thcy currcntly
causc by driving to storcs.
This collaborativc conccpt should primarily impact
thc lollowing KP!s:
C
2
cmissions and cncrgy rcduction
New Ways of Working Together

Thc common thcmc lor all thc luturc supply
chain sccnarios is collaboration. 8ut just idcntilying
thc bcnclits ol collaboration is not cnough to makc
it happcn.
Thcrc arc numcrous stakcholdcrs across thc physical
supply chain and in ordcr to changc thc chain, it
is important to not only havc a sharcd pcrspcctivc
ol what nccds to bc donc, but also to considcr thc
individual pcrspcctivcs and uniquc challcngcs lacing
cach stakcholdcr:
Consumers and shoppers incrcasingly valuc
sustainability aspccts in thcir choiccs.
7
8ut thcy arc
lcss willing to pay cxtra lor it. Consumcrs want to
bc bcttcr inlormcd about thc sustainability impact
ol thcir shopping choiccs (including, lor cxamplc,
about thc C
2
cmissions involvcd in using thcir
car to go shopping).
Retailers arc motivatcd to scrvc shoppcrs in thc
most optimal way, in ordcr to bc prolitablc and
achicvc sustainablc growth. Rctailcrs wclcomc
collaboration and standardisation, but only il
this docs not impact thcir ability to dillcrcntiatc
thcmsclvcs towards shoppcrs.
Thc ambition ol manufacturers and suppliers is
to manulacturc, markct and supply thc products
that consumcrs nccd and want in a costcllicicnt
manncr. Thcy arc motivatcd to improvc thc
sustainability ol thcir supply chain, but thcir
ability to achicvc substantial improvcmcnts
rcquircs closc (and standardiscd) collaboration
with rctailcrs and shoppcrs.
Logistics service providers lacilitatc thc
distribution proccss lrom supplicr to consumcr.
Thcy arc motivatcd to bccomc a proactivc partncr
in thc consumcr goods busincss lor mutual
sustainablc growth, but this rcquircs longcrtcrm
contracts and common proccsscs and data standards.
7
Future Consumer: How Shopper Needs and Behaviour Will Impact Tomorrows Value Chain, Capgemini.
40
Company culturcs, KP!s and capabilitics insidc many
organisations could bc showstoppcrs lor moving
collaborativc initiativcs lorward in any scrious
lashion. Thc biggcst challcngc is how to prcparc our
pcoplc lor thc ncw world ol collaboration. Thcrc arc
a numbcr ol pcoplcrclatcd changcs that will nccd to
takc placc, including:
Incentives and measures. This includcs sharcd
succcss mcasurcs across linancial, opcrational
and consumcrbascd dimcnsions (KP!s) that
drivc outcomcs throughout thc valuc chain and
grcatcr ovcrall valuc lor rctailcrs, manulacturcrs
and consumcrs. A critical succcss lactor will bc
scnior managcmcnt involvcmcnt to align intcrnal
mctrics to support thcsc KP!s. Mctrics that arc
transparcnt and visiblc across both organisations
will bc impcrativc.
Capabilities. A compctcncy modcl lor ncw
skills and knowlcdgc lor thc ncw ways will bc
rcquircd to support thc agrccdupon compctcncics.
Companics should considcr cxccuting this jointly.
Organisational resources and design. Clcar
rolcs and rcsponsibilitics lor kcy pcoplc must bc
dclincd, particularly thc rolc ol a tcam lcadcr or
rclationship managcr.
The Benefits of an Integrated Model

!t sccms obvious that thc industry will bcnclit lrom
cach ol thcsc collaboration conccpts, on top ol thc
individual improvcmcnts that companics can achicvc
by implcmcnting innovativc solutions (as suggcstcd
in thc prcvious chaptcr). 8ut what will bc thc rcal
syncrgctic valuc ol bringing this all togcthcr into a
truc industry solution:
To illustratc how this could work, thc dillcrcnt
calculation modcls havc bccn combincd into onc
intcgratcd modcl. This modcl comparcs a typical
currcnt situation with a luturc situation, which
combincs thc collaborativc conccpts ol collaborativc
warchousing, inlormation sharing, lcadtimc
rcduction, sharcd transport to urban arcas and sharcd
transport to nonurban arcas.
Thc modcl lor thc currcnt situation (lacing pagc)
considcrs cight manulacturcrs dclivcring cqual
amounts ol products pcr day to lour dillcrcnt
rctailcrs. !n thc cxisting situation (as is), thcsc cight
manulacturcrs cach havc thcir own warchousc
and thc lour rctailcrs cach havc thcir own rcgional
distribution ccntrc (RC). clivcry to thc lour
urban storcs and lour nonurban storcs is donc by
cach rctailcr lrom its RC using dillcrcnt urban and
nonurban routcs.
41
AS-IS SITUATION
Retailer Distribution Centre
2
3
4
Urban Stores
Warehouse A
Warehouse B
Warehouse C
Warehouse D
Warehouse E
Warehouse F
Warehouse G
Warehouse H
Manufacturer A
Manufacturer B
Manufacturer C
Manufacturer D
Manufacturer E
Manufacturer F
Manufacturer G
Manufacturer H
Non-Urban Stores
1
Characteristics of As-Is Situation
Stakeholders are manufacturers and retailers.
Consumers and stores are located in both urban and non-urban areas.
Each manufacturer has its own warehouse.
Each retailer has its own distribution centre.
The manufacturer ships its products to each of the four distribution centres.
A retailer ships the products from its distribution centre to each of its stores.
No physical supply chain collaboration takes place among manufacturers, among retailers, and between
manufacturers and retailers.
42
!n thc ncw modcl (lacing pagc), thc cight
manulacturcrs arc arrangcd into two groups ol
lour, cach running a collaborativc warchousc. From
thcsc collaborativc warchouscs, storcpickcd ordcrs
arc shippcd in lullcr truckloads to cithcr a city
hub or a rcgional consolidation ccntrc, whcrc thc
dillcrcnt strcams arc cllicicntly mcrgcd into storc
rcplcnishmcnt routcs.
!n thc casc ol urban rcplcnishmcnt, altcrnativc
transport is uscd into thc city, rcducing not only thc
total numbcr ol city kilomctrcs, but also rcducing thc
C
2
cmissions pcr city kilomctrc. !n thc casc ol non
urban rcplcnishmcnt, storcs ol dillcrcnt rctailcrs arc
consolidatcd into morc cllicicnt storc rcplcnishmcnt,
such as onc routc pcr villagc or municipality.
From this dcscription, it should bc clcar that to
rcalisc this tobc modcl, all thc collaborativc conccpts
discusscd prcviously arc nccdcd.
Thc rcsult ol thc combination ol thcsc conccpts
providcs an indication that thcsc modcls can indccd
rcinlorcc cach othcr and crcatc a syncrgctic cllcct
(an ovcrvicw ol thc dctailcd paramctcrs that arc uscd
in thcsc calculation modcls can bc lound in
thc scparatc, lrccstanding Appcndix.)
An cxamplc run lrom thc modcl indicatcs that
all KP!s lor transport costs, handling costs, total
truck kilomctrcs, cmissions and lcad timc could bc
improvcd substantially in this intcgratcd modcl:
Almost 40 rcduction in transport costs pcr pallct
20 rcduction in handling costs pcr pallct
25 cut in total truck kilomctrcs travcllcd
25 rcduction in C
2
40 cut in lcad timc
At thc samc timc, it is important to notc that this will
not ncgativcly impact customcravailability paramctcrs.
!n addition, it should bc notcd that onc ol thc
important undcrlying assumptions in this modcl is
that storc ordcrs can bc asscmblcd in thc collaborativc
warchousc and consolidatcd at thc city hub or
consolidation ccntrc. This mcans that thc rctailcr
distribution ccntrc can bc bypasscd. Thc transition
modcl to this luturc statc may not bc casy. As long as
somc portion ol thc storc ordcrs arc still asscmblcd
in thc RC, it cannot bc takcn out ol thc picturc.
Howcvcr, thc part ol thc assortmcnt that is pickcd at
thc collaborativc warchousc can bc crossdockcd at or
llown through thc RC, and this should still havc
a positivc impact on thc lcad timc ol thc chain.
Thc modcl clcarly shows that intcgrating thc
collaboration conccpts can gcncratc signilicant
improvcmcnts, with clcar bcnclits lor our socicty, lor
thc industry, lor individual companics, and ultimatcly
lor consumcrs and shoppcrs.
All KPIs for transport costs, handling costs,

total truck kilometres, emissions and lead
time could be improved substantially in this
integrated model.
43
TO-BE SITUATION INTEGRATED MODEL
City Hub
Regional
Consolidation
Centre
Non-Urban Stores
Urban Stores
Manufacturer A
Manufacturer B
Manufacturer C
Manufacturer D
Manufacturer E
Manufacturer F
Manufacturer G
Manufacturer H
Collaborative
Warehouse
Collaborative
Warehouse
Characteristics of To-Be Integrated Model
Stakeholders are manufacturers and retailers.
The manufacturers have a collaborative warehouse, possibly run by a logistics service provider. In this
example four manufacturers share a warehouse.
The retailers do not have their individual distribution centres anymore; products will be cross-docked by
either a city hub for urban areas, or by a regional consolidation centre for non-urban stores.
Transport from the city hub/regional consolidation centre will be shared and goes to the stores of the
different retailers. Full truckloads will be realised more easily.
44
45
Next Steps
Toward the Future
Supply Chain
Feasibility studies and collaborative supply chain
scenario pilots are among the critical next steps that
must be taken to ensure that the future supply chain
reacts to and satises tomorrows consumers.
46
Thc road toward thc 2016 luturc supply chain
architccturc will bc pavcd with a combination
ol individual improvcmcnts by companics and
collaborativc initiativcs by groups ol rctailcrs,
manulacturcrs, supplicrs and othcr companics in
thc valuc chain (such as logistics scrvicc providcrs).
Vhilc individual company improvcmcnts will bc
implcmcntcd bascd on asscssmcnts ol thc addcd valuc
ol ccrtain solutions in thcir spccilic situations, that
will not bc cnough lor collaborativc initiativcs. Thcsc
collaborativc initiativcs nccd industry lcadcrship in
ordcr to movc lorward.
Thc rcalisation ol thc collaborativc conccpts that
comprisc thc 2016 luturc supply chain architccturc
will rcquirc a numbcr ol initial ncxt stcps, drivcn by
industry lcadcrs. Action must bc startcd in onc or
morc ol thc lollowing arcas:
supply chain
Collaborativc city distribution (including homc
dclivcry and pickup)
Collaborativc nonurban distribution (including
homc dclivcry and pickup)
Ncw ways ol working togcthcr in thc physical
supply chain (including managcmcnt ol rcquircd
invcstmcnts, capabilitics, organisational rcsourccs
and dcsign, inccntivcs and mcasurcs, social
rcgulations likc working hours, ctc.)
Thc actions should bc structurcd as lollows:
stablish buyin on thc vision by a sclcct group
ol kcy stakcholdcrs (such as lcading rctailcrs and
manulacturcrs, mayors ol big citics).
Chcck thc conccpts busincss casc with thc
involvcmcnt ol all kcy stakcholdcrs.
Pilot thc conccpt (or possibly lcvcragc and cnhancc
cxisting pilots).
valuatc thc implcmcntation and sharc lcarnings.
Call to Action
!mplcmcnting thc proposcd ncw modcl will not bc an
casy task givcn thc lcgacy ol cxisting inlrastructurcs
and cstablishcd proccsscs. Companics will run pilot
projccts (scc sidcbar, Futurc Collaborativc Supply
Chain Sccnario Pilots). A GC! Projcct Tcam will
bc cstablishcd composcd ol companics involvcd to
coordinatc and surlacc issucs rclcvant to thc wholc
projcct and thc community.
Thc main objcctivcs ol thc projcct tcam will includc:
Providing support lor an implcmcntation tcam
composcd ol companics activcly using solutions
proposcd in this rcport.
Capturing, idcntilying and rcsolving potcntial
implcmcntation issucs.
nabling and driving thc mcasurcmcnt ol progrcss
ol thc implcmcntation introducing onc or morc
ncw itcms in thc Global Scorccard.
rganising rcgular (ycarly) lollowup mcctings ol
involvcd partics to maintain and dcvclop thc luturc
supply chain modcl.
Providing lor a pcrmancnt platlorm lor thc
cxchangc ol implcmcntation cxpcricncc (wcb
prcscncc, ctc.)
Thc GC! Futurc Supply Chain 2016 tcam will
continuc to cncouragc thc cstablishmcnt ol ncw
projccts to drivc a sustainablc supply chain lor thc
rctail and consumcr goods industry.
47
Future Collaborative
Supply Chain
Scenario Pilots
Embarking on specific future collaborative supply chain pilots will be one of the
critical next steps that the industry and individual companies must focus on to
help realise the future supply chain scenarios. Examples of such pilots include
the following:
Sharing of information. Sharing of information about product movements along
the supply chain is an essential part of the following collaborative processes.
Collaborative warehousing. The first priority for effective collaborative
warehousing is to set up pilots and check their business case: The results should
be reviewed, and a go/no-go decision made about a pilot approach. A collaborative
warehousing pilot would be an enormous undertaking so commitment at the top
level and alignment across the board would be imperative.
Collaborative warehousing will happen because of good collaboration among
manufacturers, among retailers and between them both. New ways of working will
include collaborative order handling and standardised deliveries.
Collaborative transport. The first step towards implementation of collaborative
transport is to set up pilots. Following that those existing pilots should be leveraged
on a wider basis.
City replenishment/non-urban replenishment/home delivery. The first step towards
effective implementation of last mile replenishment (to city stores, local stores
and home delivery via shared facilities) is to further detail the vision and to conduct
feasibility studies. Based on this, companies should align with local city authorities.
5. NEXT STEPS TOWARD THE FUTURE SUPPLY CHAIN
48
49
cvcloping thc luturc supply chain rcquircd timc,
insight and input lrom a widc rangc ol industry
playcrs, including rctailcrs, consumcr products
manulacturcrs, industry standards organisations and
tcchnology companics.
Thc working group gathcrcd initially in Capgcminis
Accclcratcd Solutions nvironmcnt (AS) in
Utrccht, thc Ncthcrlands, lor an intcnsivc twoday
workshop. Participating companics consistcd ol
Carrclour, Crown uropc, Frcudcnbcrg Houschold
Products, GlaxoSmithKlinc, Kcllogg uropc,
Lrcal, Ncstl, Philips, Rcckitt 8cnckiscr, Royal
Ahold, Sara Lcc !ntcrnational and Unilcvcr. Also
participating wcrc rcprcscntativcs lrom A!M/CR
uropc, GC!, GS1US and Capgcmini.
Thc objcctivcs ol this scssion includcd:
Conlirming and cxtcnding thc KP!s that thc
group had carlicr sct.
Formulating a sct ol solutions that mct thc KP!s.
csigning a dralt vcrsion ol thc luturc supply
chain architccturc.
Cralting an agrccd timclinc and approach lor thc
linal architccturc and accompanying rcport.
Using this input, thc projcct tcam ran a sccond,

twoday workshop in Capgcminis AS in Chicago
in thc U.S. Companics participating in this scssion
consistcd ol 8ritish Amcrican Tobacco, 8lack &
cckcr, Carrclour, ColgatcPalmolivc, Crown
uropc, Frcudcnbcrg Houschold Products, Group
anonc, Johnson & Johnson, Kralt Foods, Loblaw
Companics Ltd., Lrcal, Ncstl, Philips, Proctcr
& Gamblc, Rcckitt 8cnckiscr, Royal Ahold, SCA,
Symrisc and Unilcvcr. Also participating wcrc GC!,
GS1US and Capgcmini.
To dcvclop potcntial collaboration conccpts, thc
workshop group idcntilicd and built out thc toolkit
lor thc luturc supply chain consisting ol solution
arcas, lcading practiccs, cxisting supply chain
cxamplcs and calculation modcls.
Thc rcsults ol both workshops, as wcll as numcrous
additional mcctings, providcd thc input lor this rcport.
Appendix: Building the Future Supply Chain
50
About the Global Commerce Initiative (GCI)
Thc Global Commcrcc !nitiativc (GC!) was
cstablishcd in ctobcr 1999 as a voluntary platlorm.
!ts mission is to lcad global valuc chain collaboration
through thc idcntilication ol busincss nccds and thc
implcmcntation ol bcst practiccs and standards to
scrvc consumcrs bcttcr, lastcr and at lcss cost.
!t is a nctwork crcatcd by thc mcmbcr companics and
sponsors to simplily global commcrcc and link thc
valuc chains to improvc consumcr valuc.
GC! opcratcs through an xccutivc 8oard composcd
ol scnior rcprcscntativcs ol morc than 45 companics
drawn cqually lrom manulacturing and rctailing
that do busincss across contincnts or via global
supply chains. !t works closcly with cight partncr
organisations thc rcgional CR !nitiativcs and
\!CS, lour tradc associations (A!M, C!S, GMA
and FM!) and thc standards organisations GS1
and GS1US rcprcscnting morc than 1 million
companics in thc world.
For morc inlormation about thc Global Commcrcc
!nitiativc and qucstions raiscd by this rcport,
plcasc contact:
Sabine Ritter
Global Commcrcc !nitiativc (GC!)
49 221 947 14 423
sabinc.rittcrCgcinct.org
Ruediger Hagedorn
Global Commcrcc !nitiativc (GC!)
49 221 947 14 444
rucdigcr.hagcdornCgcinct.org
or visit our wcbsitc at www.gcinct.org.
About Capgemini and the Collaborative
Business Experience
Capgcmini, onc ol thc worlds lorcmost providcrs ol
Consulting, Tcchnology and utsourcing scrviccs,
has a uniquc way ol working with its clicnts, callcd
thc Collaborativc 8usincss xpcricncc. 8ackcd by
ovcr thrcc dccadcs ol industry and scrvicc cxpcricncc,
thc Collaborativc 8usincss xpcricncc is dcsigncd
to hclp our clicnts achicvc bcttcr, lastcr, morc
sustainablc rcsults through scamlcss acccss to our
nctwork ol worldlcading tcchnology partncrs and
collaborationlocusscd mcthods and tools. Through
commitmcnt to mutual succcss and thc achicvcmcnt
ol tangiblc valuc, wc hclp busincsscs implcmcnt
growth stratcgics, lcvcragc tcchnology, and thrivc
through thc powcr ol collaboration. Capgcmini
cmploys approximatcly 83,500 pcoplc worldwidc and
rcportcd 2007 global rcvcnucs ol 8.7 billion curos.
Morc inlormation about individual scrvicc lincs, olliccs
and rcscarch is availablc at www.capgcmini.com.
For additional inlormation plcasc contact:
Kees Jacobs
Capgcmini
31 6 53 292 832
kccs.jacobsCcapgcmini.com
Ard Jan Vethman
Capgcmini
31 6 533 94 872
ardjan.vcthmanCcapgcmini.com
Brian Girouard
Capgcmini
1 952 212 0417
brian.girouardCcapgcmini.com
vsicxixc :nv :o+6 Pnvsic~i Suvviv Cn~ix
We cant solve problems by using
the same kind of thinking we used
when we created them.
Commonly attributed to Albert Einstein
www.gci-net.org
www.capgemini.com
TT-COC-002533
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FUTURE SUPPLY CHAIN

Serving Consumers in a Sustainable Way

The Future Supply Chain

The future supply chain is expected to provide

IMPACT ON THE BOTTOM LINE

Thc modcl includcs a numbcr ol dillcrcnt

1. Information Sharing Driving the Collaborative Supply Chain

For thc lirst catcgory, changcs in thc cllicicncy and

New Ways of Working Together

The Benefits of an Integrated Model

All KPIs for transport costs, handling costs,

Using this input, thc projcct tcam ran a sccond,

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