D5.3 New Business Models and Practical Guidelines First Version

D5.3 – New Business Models and Practical Guidelines First Version Ref.
Ares(2017)2740769 - 31/05/2017
D5.3 New Business Models and Practical Guidelines

First Version
Dissemination Level: PU
Type of Document: R
Contractual Date Delivery: 31/05/2017
Actual Date Delivery: 31/05/2017
Deliverable Number: D5.3
Deliverable Leader: AUEB
Status and Version: Initial
WP/Task Responsible: CRANFIELD/AUEB
Coordinator (name/contact): Kostas Thivaios, Dr Eleni Zampou
Other contributors: CRANFIELD, LCP, TRT, BARILLA, OPTILOG, INTRA-LU
EU Project Officer: Pasca Ancuta-Florica
Keywords: Business modelling, Business Model Canvas, distribution models, shared
logistics, urban transportation models, city logistics
Abstract (few lines): This deliverable presents the current distribution models that are piloted
within the U-TURN project and how these can be transformed into
sustainable business models that serve the market’s needs.
D5.3 – New Business Models and Practical Guidelines First Version Version: Final, Date: 31/05/2017
Document History
Ver. Date Contributor(s) Description
V0.1 02.09.2017 AUEB First version of ToC
V0.2 04.04.2017 AUEB Second version of ToC
V0.3 19.05.2017 AUEB First Version of the deliverable
First review and input by TRT,

V0.4 29.05.2017 TRT, CRANFIELD
CRANFIELD
Consolidation of input and final

V0.5 30.05.2017 AUEB
release
V0.6 31.05.2017 INTRA-LU, BARILLA Final review of the deliverable
V1.0 31.05.2017 AUEB Final version

TABLE OF CONTENTS
1 Introduction ............................................................................................................................................... 6
1.1 Purpose and scope ............................................................................................................................... 6
1.2 Relation to other tasks and previous deliverables ............................................................................... 6
1.3 Structure of the document ................................................................................................................... 6
2 From Distribution Models to Business Models ......................................................................................... 7
2.1 From DCs to retailers ............................................................................................................................ 7
2.1.1 Consolidating the flows in an Urban Consolidation Centre (UCC) and distributing in urban
retail stores ................................................................................................................................................ 7
2.1.2 Collecting freight from different companies and distributing with a common vehicle .............. 8
2.2 From local producers to consumers ..................................................................................................... 9
2.2.1 Collecting goods from different local producers and distributing with a shared vehicle ........... 9
2.2.2 Collecting goods from different local producers and distributing with the vehicle of a 3PL .... 10
2.2.3 Consolidating local producers’ goods in a UCC and distributing with the vehicle of a 3PL....... 11
2.3 From online retailers to consumers ................................................................................................... 12
2.3.1 Shared micro hubs and shared last mile delivery from micro hubs to the customers’ houses 12
2.3.2 Shared trucks from retailer picking locations to shared micro hubs ......................................... 13
2.3.3 Shared micro hubs where customers collect their orders ........................................................ 14
3 Evaluation of the New Business Models ................................................................................................. 16
3.1 From DCs to retailers .......................................................................................................................... 16
3.2 From local producers to consumers ................................................................................................... 19
3.3 From online retailers to consumers ................................................................................................... 23
4 Insights and Practical Guidelines ............................................................................................................. 26
4.1 Logistics from DCs to retailers in urban areas .................................................................................... 26
4.2 Local producers deliver to urban areas .............................................................................................. 27
4.3 Online retailer logistics in urban areas ............................................................................................... 27
5 Conclusions .............................................................................................................................................. 29
6 References ............................................................................................................................................... 30
DEFINITIONS, ACRONYMS AND ABBREVIATIONS
Acronym Title
FMCG Fast Moving Consumer Goods

UCC Urban Consolidation Centre
3PL Third-Party Logistics
KPI Key Performance Indicator
DC Distribution Centre
B2B Business-to-Business
LCF Local Food Producer
EXECUTIVE SUMMARY
This deliverable presents the new business models that are coming from food distribution models in urban
areas within the context of the U-TURN project. As presented in previous deliverables, the whole idea
behind the U-TURN project is based on three distinct pilot cases in different contexts and countries;
Greece, Italy and UK. The logic behind these pilots is focusing on the specialties of the three different
countries and the peculiarities of the relevant markets in the pilot areas. To make it more clear, the Greek
pilot is focusing on Fast Moving Consumer Goods distribution from the distribution centres of suppliers or
third-party logistics companies to the retail stores in urban areas with special focus on Athens, the Italian
pilot is working behind the distribution alternatives for fresh food produced by farmers in the metropolitan
area of Milan and its transportation to the city centre and, at last, the UK pilot is focusing on the online
grocery sector and, more specifically, to home deliveries and pick-up alternatives for online food sales.
Following the description of the distribution models, a business model transformation approach supported
by the Business Model Canvas framework suggested from Osterwalder has been adopted and all the
building blocks of the new business models have been described. The customer segments and the value
that is transferred to them via the U-TURN services have been analysed alongside with seven more
components; customer relationships, channels, revenue streams, key activities, key partners, key resources
and cost structure. The Business Model Canvas is the most widely used strategic tool used to analyse and
understand the business models and can support pivoting based on the lean approach.
The deliverable is composed of three main sections; the first section gives a short description on the
distribution models of the various pilots, the second focuses on the business value of them and the third is
trying to present some first insights and guidelines from the different pilot cases.
1 Introduction
1.1 Purpose and scope
This deliverable comes as the next step of the Requirements, the piloted Distribution Models and the
Exploitation Strategy that is developed within the U-TURN project. It focuses on the analysis of the new
business models that are occuring for the collaborative urban distribution practices that are proposed and
tested and aims at offering relevant insights and guidelines to the stakeholders and interested parties.
Within this context, the associated task (T5.4 New Business Models and Practical Guidelines) is driving
emphasis on providing the logistics community with the following:
A roadmap to support organisations to plan collaborative transport operations towards more
efficient and green urban food logistics, based on the results of the pilots and the engagement with
industry stakeholders.
A set of guidelines to support industrial partners in the uptake and rollout inside their
organisations of the proposed shared logistics practices.
A “business exploitation perspective” assessment for the alternative business models for the
operation and provision of the U-TURN platform, tools and services (in terms of the value to
involved stakeholders, opportunities, barriers, etc.)
In this first version of the deliverable, we focus more on exploring the various business models that have
been developed and gathering some first insights as a roadmap for organisations that want to examine the
potential adoption of collaborative transportation.
1.2 Relation to other tasks and previous deliverables
As this task and deliverable are related to the business evaluation and exploitation of the different
distribution models that have been developed and examined within the context of the U-TURN project, it is
actually related to all the requirements and pilot activities. The deliverables that are acting as input to D5.3
are D1.2 User Requirements Report, D1.3 Use Case Models, Services and KPIs Definition First Version, D3.3
Simulation Experiments and Impact Assessment Report First VersionD5.1 Pilot Preparation Guide, and D5.2
Pilots Overall Assessment (to be submitted).
1.3 Structure of the document

This document is divided into three parts. The first part analyses the distribution models from a business
perspective and states their main characteristics; the second part focuses on the business models’
evaluation using the Business Models Canvas, while the third is covering the first insights that have been
accrued from the pilots up to M24 of the project and a first attempt on setting up some collaboration
guidelines for future use by the stakeholders of the project.
2 From Distribution Models to Business Models
In this section, a short presentation of the U-TURN distribution models per pilot and their specific
characteristics is taking place. As the U-TURN distribution models are the main outcome of the project and
are the ones that will be transformed into business model and will support the exploitation phase of U-
TURN, a short description of them follows alongside with an emphasis on business characteristics.
2.1 From DCs to retailers
Starting with the first Pilot, the stakeholders’ interest was focused on two out of the three distribution
models that were presented within the context of WP1; first, consolidating the flows in an Urban
Consolidation Centre (UCC) and distributing in urban retail stores and, second, collecting freight from
different companies and distributing with a common vehicle.
2.1.1 Consolidating the flows in an Urban Consolidation Centre (UCC) and distributing in urban
retail stores
As presented in D5.1 the first business model within the context of the U-TURN Pilot 1 is focusing on urban
deliveries via the use of Urban Consolidation Centres (UCC), that are acting as intermediate facilities in the
supply chain. New hubs are created in urban areas changing the rules of the transportation as we know it
up to now.
Operationally, freight is collected in the UCC one day or some hours before the actual delivery and then it is
transported to the retail stores located in the city centre. The actual benefit that is supposed to come out
of this procedure is both operational and environmental; deliveries from distribution centres to UCCs are
handled using bigger vehicles and costs as well as environmental KPIs, such as CO2 emissions, are lower.
Businesswise, this scenario could be implemented for both 3PLs, suppliers or distributors that are delivering
their products to retail stores and retailers that have distribution centres located far from the city centre
and are travelling longer distances with small vehicles to replenish their stores. Figure 2.1 is describing this
case and shows the benefit that comes out in terms of fill rate and running kilometres.
Figure 2.1: Consolidating the flows in an UCC and distributing in urban retail stores
2.1.2 Collecting freight from different companies and distributing with a common vehicle
The second distribution model that can be applied within the context of Pilot 1 is dealing with collaboration
among different companies that are using mainly subcontracted vehicles to distribute their goods to the
Athens urban area. Such companies can be 3PLs that want to collaborate, suppliers that are distributing to
common retail stores or even retailers that are having close distribution centres and retail stores.
Again, operationally, cost decrease is of utmost importance and the concept of collaboration together with
environmental KPIs that are probably cut off seems to support well the business value that is arising.
Businesswise, this can either work on-call and based on the communication among the stakeholders or be
supported by the U-TURN platform to make the collaboration process easier and it can actually be
implemented among various stakeholders. Figure 2.2 describes this ‘milk-run’ concept in a schematic way.
Figure 2.2: Collecting freight from different 3PL companies and distributing with a common vehicle
2.2 From local producers to consumers

Continuing with Pilot 2, fresh products produced by local farmers are coming in front. Again, based on the
interviews with farmers and the collected feedback, three distribution models show interest: 1) goods
collection from local producers and distribution with a shared vehicle 2) freight collection from local
producers and distribution with a 3PL vehicle 3) freight consolidation in a UCC including the distribution
with a 3PL vehicle. The operational characteristics of the three models are presented below.
2.2.1 Collecting goods from different local producers and distributing with a shared vehicle
As in the second case of Pilot 1, this model is also based on the direct collaboration among two or more
subjects (Local Food Producers, LFP) who share own vehicle to collect the products from the production
zones and distribute them in the city centre of Milan. This type of collaboration can be easily developed as
it does noτ require any investment cost or specific equipment because producers have already all the
necessary assets for transport operations. Typically, farms are located in the coutrysyide aroung Milan, so
vehicles can be used among nearby-located producers who want to apply the concept of sharing economy.
The next figure also represents the way of collaboration in this model.
TO-BE
Shared vehicle between farmers
RURAL AREA URBAN AREA

LFPn
LFP1
All possible
LFP2 destinations for
the products
LFPn
Figure 2.3: Scheme of the to-be scenario 1 for pilot 2
2.2.2 Collecting goods from different local producers and distributing with the vehicle of a 3PL
Following the previous scenario, the second distribution model is following the same concept of a common
distribution vehicle, but it uses a contracted 3PL one. As shown in figure 2.4, a 3PL’s vehicle (owned by a
third-party subject) manages the transport operations.
As it has also been proven in the steps of Requirements Analysis and Pilot Preparation, the commitment of
the deliveries to an external transport operator that uses his own vehicles or a 3PL operator is usually
adopted by medium-large size companies, where the additional costs of the transport service do not
compromise the business. Thus, it is a typical scenario that can be undertaken from the local producers that
are not actually able to face such costs by their own. However, given that this collaborative model shares
again the same equipment and operations, it could reduce the costs per producer becoming more
convenient than separate transports. In advance, the more the producers sharing the vehicle and using this
service, the better the cost and the agreements with the transport provider.
Although such a scheme foresees to include an external subject to set up the collaboration, it could be
more easily implemented; no normative issues would obstacle thanks to the coherence between the
transporter and the provided service (this is not the case when a farmer operates as a transporter), nor the
producers need to share information on their business (e.g. their customers) with other farmers. The
collaborative strategy lies in the grouping of their interests (i.e. the optimization of their logistics) and the
common action to identify the best solution for the management of the deliveries.
TO-BE
Shared vehicle of the 3PL

3PL
LFP1
All possible
the products
LFPn
2.2.3 Consolidating local producers’ goods in a UCC and distributing with the vehicle of a 3PL
The third model within the context of Pilot 2 is based on the context of the Urban Consolidation Centre; the
local producers transport all their products (that must be delivered in the city centre) to the UCC using their
own vehicles, then a third-party subject manages the last mile delivery. The use of UCC allows consolidation
of the products for a more efficient loading of the vehicle in the last mile delivery, with many drop-offs in
the urban area. Most likely this is the case of a 3PL provider that offers stock capacity to meet the different
needs of the producers in terms of delivery time. However, given that we are talking about fresh products
the advantage of stock capacity is not always possible.
The use of this distribution model seems again to cover the market needs and distribution costs seem,
again, to be lower. Typically, the implementation of a UCC leads to increase the customer satisfaction and
service can be better organized (e.g. more time windows are offered and last mile deliveries are more
organised and well operated). However, given that the UCC means an intermediate reloading, it has also
operational costs and procedures that must be followed and, therefore, a relevant feasibility study has to
take place. Previous studies and the results of Pilot 1 show that the operational costs of UCC are quite
significant to be shared between a few partners and the size has to be examined.
TO-BE
Urban Consolidation Centre
LFP1
UCC 3PL
All possible
the products
LFPn
2.3 From online retailers to consumers
Ending this chapter with the third pilot will give the reader a clear overview of the distribution models that
are used in the case of the U-TURN project. Pilot 3 is focusing on the online retailers and is trying to provide
some insights on the urban transportation regarding the part from the online retailers and their distribution
centres to the final consumer. The existing situation in the online UK grocery market is totally competitive,
without any kind of collaboration in distribution among the retailers. It is important to note that the four
significant retailers possess around 80% of the total online grocery market based on market sales. The
online retailers in the UK provide two options to their consumers: i) home delivery services and ii) Click &
Collect services. In the first option, the end-consumers select a day and a time slot to receive their grocery
orders delivered to their houses, while in the second choice, the retailers transport the consumer’s orders
to a predefined collection point (known as the Click & Collect point) where the end-customers must collect
their orders during a predefined time interval on the selected day. Both services incur a delivery charge for
the end-consumers but for the time being this charge does not cover the additional transportation cost.
Especially, the home delivery services are a “burning” task for the online retailers, as they are highly costly
(the average cost is around £21, Ocado, 2016) and it increases the degree of complexity in logistics.
Operational goals such as cost reduction, compliance with the customers’ time windows and factors related
to the quality of the distributed food products, especially when we are dealing with fresh products
categories are changing the routing algorithm and are making the situation even more difficult. Based on
the D5.1 Pilot Preparation Guide (U-TURN, 2017) the Pilot 3 team proposed three distribution models that
can be used; i) shared micro-hubs and shared last mile delivery from micro hubs to the customers’ houses,
ii) shared trucks and routing from retailer picking locations to shared micro hubs, and iii) shared micro hubs
where customers collect their orders.
2.3.1 Shared micro hubs and shared last mile delivery from micro hubs to the customers’
houses
The first distribution model that is applied within the context of Pilot 3 includes retailers’ collaboration in
the last mile of the delivery with a shared vehicle for home deliveries. In practice this is similar to the case
of the UCC as it was applied in the previous two pilots; the micro hub is a small shared facility where the
cross docking is taking place.
Figure 2.6: First business model: Shared vehicles for the last mile
After the cross-docking, a common fleet of vehicles is used to operate the home delivery to the final
customer. Thus, all the operational procedures are under the responsibility of the micro hub operator;
products preservation, especially when food, time constraints and customer satisfaction KPIs.
as-is to-be
Figure 2.7: As-is and to-be situation for the first business model: Shared vehicles for the last mile
2.3.2 Shared trucks from retailer picking locations to shared micro hubs
The second business model that is applied within the context of Pilot 3 is focusing on the activities that are
taking place before the micro hub. In this case, the regular transportation from the retailers’ facilities to the
micro hub is transformed into other collaborative transportation. Thus, retailers use a shared fleet of trucks
to transport the orders from their exclusive picking locations to the shared micro hubs. Again, the micro
hubs are shared facilities that all retailers could use as a cross docking facility.
Figure 2.8: Second business model: Shared vehicles for the stem mile
Given that in this business model, the collaboration is during the transport from the picking location to the
micro hub and it is depicted in the figure below.
as-is to-be
Figure 2.9: As-is and to-be situation for the second business model: Shared vehicles for the stem mile
2.3.3 Shared micro hubs where customers collect their orders

The third proposed distribution model used in Pilot 3 is focused on Click & Collect services and has
significant differences to the previous two. In this case, the micro hub is a shared Click & Collect point.
Thus, retailers work collaborative to satisfy the online demand, deliver their orders to the shared Click &
Collect point and customers could collect their orders in a predetermined time window from the shared
facilities of micro hubs.
The hub organizes the way the orders come and leave its facilities and, of course, is again responsible for
providing the product with the respective situation, e.g. preservation facilities.
Figure 2.10: Third business model: Shared Click & Collect point
The idea behind this is that the Click & Collect points are again shared and the business model is an
assignment model with time windows where the space in the micro hub must be assigned to specific
demand for a predetermined time window from when it is delivered by the retailer’s truck until it is
collected by the customer.
The full As-Is and To-Be perspectives are presented in Figure 2.11 below.
as-is to-be
Figure 2.11: As-is and to-be situation for the third business model: Shared Click & Collect point
3 Evaluation of the New Business Models
After analysing all the distribution models that are examined and implemented within the context of the
project, what plays a significant role is to evaluate how sharing models could be implemented and the
platform commercialised and what value they offer to their customer segments. Given that the three pilots
are focusing on three different markets, three separate analyses will follow. A business model describes the
rationale of how an organization creates, delivers, and captures value. For the development of the business
model we shall rely on the ‘Business Model Canvas’ 1, from Osterwalder, Pigneur and Smith. This is
probably the most popular tool used to design the operations of a new or refocused business. The model
identifies nine essential building blocks for the business that need to be designed to work supportively
together, shown in the next three Figures and explained briefly below.
3.1 From DCs to retailers

Within the context of Pilot 1, the business model focuses on delivering products from distribution centres
to retail stores. Thus, U-TURN is providing the market with two alternatives for this case; a UCC operation
scenario and a direct collaboration scenario that can be implemented with the use of a platform or not.
Figure 3.1: Pilot 1 Business Model
Customer Segments
1
Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, Osterwalder and Pigneur, Strategyzer,
2010
Two are the most important parts when defining a business model; Customer Segments and the Value we
are creating for them. In terms of Pilot 1, U-TURN is trying to deliver collaborative practices to 3PLs, FMCG
Suppliers and Retailers.
For whom are we creating value?
We are creating value for 3PLs, FMCG Suppliers and Retailers that want to collaborate in urban
transportation. With the implementation of U-TURN services, these stakeholders will have the ability and
the opportunity to perform collaborative distribution in urban areas. This will enhance the collaborative
spirit among them and they will be able to share the benefits that accrue from this collaboration and
establish some new ways of operation in this market.
Who are our most important customers?
U-TURN concept includes these three big customer segments and the significance among them does not
differ. The scalability potential that is offered to them is the same either it is for a 3PL, a supplier or a
retailer.
Where are they located?
Pilot’s 1 outcomes may have accrued from the Greek market but the potential that arises iσ not
geographically limited. Based on our research, European market seems to need similar services and global
trends are also supporting this fact. Thus, the roadmap for this model would be to start from Greece,
especially within the context of the project, expand European-wide and, then, go globally following the lean
approach.
Are the customers financial powerful?
Given that we are focusing on these three big customer segments, they can be classified into two groups:
 Third-party logistics companies, that are offering warehousing and logistics services to suppliers
and are organised into relevant associations, such as the Hellenic Logistics Association, and
 Suppliers and Retailers in the FMCG sector that are working under the ECR initiative or other
industry groups.
Both groups have quite high financial power and the bigger players in each market have strong negotiation
skills. However, the more value of the offered service is getting higher, the more players get into the
collaborative service and the generated benefit is acting as a significant argument over U-TURN.
Value Proposition
By value proposition we mean the collection of products and services a business offers to meet the needs
of its customers and the actual value it offers to them. According to Osterwalder, a company's value
proposition is what distinguishes itself from its competitors. The value proposition provides value through
various elements such as newness, performance, customization, "getting the job done", design,
brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability. The value
propositions may be either quantitative – price and efficiency or qualitative – overall customer experience
and outcome. U-TURN Pilot 1 will be focused on efficiency with high quality and innovative outcome on
collaboration among various stakeholders in the FMCG sector.
What value do we deliver to customers?
U-TURN service delivers two alternatives for supply chain horizontal collaboration; the case of UCC and the
direct collaboration among two or more players which can actually be ICT-supported (i.e. U-TURN platform)
or not. Both are creating cost minimisation regarding distribution and better service quality to the
customers of the model (i.e. retailers) given that they offer more often deliveries. Last but not least, other
environmental KPIs are met including CO2 emissions and noise pollution decrease.
Which one of our customer’s problems are we solving?
U-TURN is actually both solving market problems and enhancing society KPIs, low fill rates in transportation
and societal KPIs such as service level are quite significant. Moreover, last mile deliveries optimisation and
entrepreneurial spirit enhancement are important as well.
Channels
Describing how a company communicates with and reaches its customer segments to deliver its value
propositions. A company can deliver its value proposition to its targeted customers through different
channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient
and cost effective. An organization can reach its clients either through its own channels (store front),
partner channels (major distributors), or a combination of both. For defining the channels we are answering
the following questions:
Through which channels do our customers want to be reached?
Digital content and information like online public relations and trade shows are necessary to reach B2B
clients as the ones targeted within the U-TURN context. Another channel to reach our final customers is
through direct collaborations with game changers and relevant associations, such as the ECR initiative and
the Hellenic Logistics Association which were approached from the first month of the project and were
highly engaged in sharing data and interest for the project. B2B sales play a significant role and have to be
done carefully and by offering the respective information.
Which channels work best?
Direct collaborations with B2B sales will provide to U-TURN a direct channel to its final customers too.
Taking this into account apart from the online digital channel of communication and dissemination used for
informing the public and to provide a wider audience of customers, it is fundamental to build a strong
communication with the rest stakeholders’ categories in order to reach the final customer of the U-TURN
service.
Which ones are the most cost-efficient?
Direct collaborations with relevant associations is the most cost-effective approach based on the fact that
these are made upon previous contacts of the consortium participants and bring great effects at no or low
cost.
Customer Relationship Management
U-TURN aims to build its customer relationship based on strategic partnerships and personalized services to
reach a wide range of industrial working groups. Our customers are expecting personal assistance during
the implementation and execution processes. A tight contact with the customer will be necessary to use U-
TURN, especially when talking about the platform based scenario. Thus, a specific customer supporting
policy will be built aiming at enhancing customer satisfaction KPIs and providing better service to the B2B
customers
Revenue Streams
Based on all the above, revenues are generated mainly with three different ways; licensing fees for
platform use, standard or per use fees for both collaborative scenarios, UCC and ‘milk-run’ and of course
charges for extra training and consulting services to the potential customers. Licensing fees include
standard fees per month for the use of the platform while per-use fees are percentage revenues generated
when a user makes transactions through the platform or the UCC service.
Key Resources
The key resources are actually related to the project partners in a both technical and innovation
perspective. Technical infrastructure and other related, developed platform and tools will be used to serve
U-TURN scope.
Key Activities
There are key activities related to the U-TURN service success. The domain experts of the consortium AUEB
and OPTILOG) are always working on developing/ improving and supporting their product and service
portfolio with a key development team that will ensure new services focused on technology transfer and
key factors for entrepreneurial success. This activity will be necessary for U-TURN while at the same time
existing tools and methods integration is also fundamental. Matching algorithms development together
with integration are quite important. It is necessary to promote U-TURN in the distribution through close
relationships with the stakeholders in order to engage them in their contribution actions. Last but not least,
key activity towards U-TURN success is the promotion of U-TURN to all possible stakeholders and
customers categories across Europe.
Key Partnerships
The key partners are the U-TURN project partners that will validate the new service/product and contribute
to the testing of the entire hypothesis that will be established for the business model, also checking if the
model will be repeatable and scalable. System integrators working on enterprise systems, transport
companies that are undertaking the deliveries part and, of course, UCC operators are the most significant
ones.
Which key resources are we acquiring from partners?
We will acquire knowledge and technology from the first validators of the service and significant support
from the rest categories. Given that U-TURN is not going to implement a UCC itself, the assistance in
operations from another is crucial. Moreover, system operators are essential for the technical and
commercial success of U-TURN.
Cost Structure
U-TURN has a value-driven approach from the very beginning given that industrial working groups were
brought on board from the first month. Although this approach has to be transferred to business structure,
cost has to be minimised. Sales and Support are the main costly areas for the commercial success of U-
TURN. Sales costs, the highest will be mitigated taking advantage of the already existing contacts and
commercial interest from various players in the Greek market. These can actually act as proof of concept to
the next ones and as a Trojan horse for the next ones or the international subsidiaries of them.
3.2 From local producers to consumers

Following pilot 1, the next pilot is working on fresh food distribution from local food producers to the final
customer in the city centre; restaurants, retailers and end-consumers.
Customer Segments
Following Pilot 1, Pilot 2 business model is easier to be explained as it follows the same logic in most of the
cases. The main differences lies in the area of the customer segments, given that we are now talking for
fresh food.
The main customers of this model are local farmers that need to deliver fresh local food in the city centre of
Milan to many points that are far away from each other and with different requirements, restaurants and
retailers that are getting supplied by local farmers or those who are willing to be supplied with fresh local
food. In general, all the potential customers of farmer’s markets are potential beneficiaries of these
models.
In this case, it is clear that the most significant customer segment is the local producers, as if they don’t
want to get this service, then, no meaning will exist for the others.
Farms are mainly located in the countryside around Milan, where the production of food takes place, it
includes fresh fruit and vegetables, milk, dairy products, eggs, meat and relevant products that need not
only to be transported to the city centre but also be handled on the proper way (cold chain etc.). The big
challenge faced by Pilot 2 is strictly linked with the distances between the production sites and the delivery
areas in the city centre and its feasibility is also conditioned by the routing problem. The potential benefit
that could be achieved is in fact related with the travel distance in the collaboration. Therefore, the higher
the number of farmers who collaborate, the smaller the possibility to have production sites far away from
each other with a decrease in travel distance among them.
What about the representativeness of the customer segments?

In the case of Pilot 2, what matters for the business model success is the representativeness of the
customer segments. Thus the potential of this business model is actually consequence of the number or
farmers who collaborate and use the service.
Value Proposition

The value that could be achieved implementing these collaborative models is dual, the reduction in the
travel distance for farmers and the opportunity to increase the number of customers served into the urban
area. Transport operations are, for farmers, a secondary activity as consequence of any indirect selling of
products to restaurants, retailers, end-consumer etc. Therefore, the cost supported has sensible
repercussion on farmer’s earnings. Moreover, a reduction on travel distance could lead to making those
sale channels more affordable where transport is needed.
In case of UCC implementation the customers could receive a more suitable service with joint delivery from
different farmers.
The U-TURN business models, supported by the U-TURN platform, are addressed to those farmers who are
used to deliver their local food production to customers, mainly located in Milan, by own private trucks
with a low level of efficiency for loading factor and travel routing. Some selected KPIs have been identified
to give evidence on benefits that would be gained through the collaborative logistics models.
Channels
The channels for intermediation are for pilot 2 the same as pilot 1: B2B sales, direct contacts and fair
participation.
Through which channels do our customers want to be reached?
The models we present are addressed to all subjects involved in the short supply chain of food production
from farmers to consumers. The direct involvement of farmers through one to one meetings, led to collect
helpful feedback for the platform development and the current business model assessment. Same as Pilot
1, the direct communication is in fact always more effective in B2B sales rather than with public
dissemination events.
Which channels work best?
Direct meetings and collaboration lead to easy communication with private stakeholders that are more
profit oriented than public stakeholders. Within pilot 2, also some joint meetings were organized among
different stakeholders, both private companies and public authorities with the aim to meet common
objectives.
Which ones are the most cost-efficient?
Direct collaborations and associations approach remain the most cost-effective approach based on the fact
that they usually have significant results on lead generation and new customer acquisition.
As in the context of Pilot 1, U-TURN aims to build its customer relationship based on strategic partnerships
and personalized services to reach a wide range of industrial working groups. The attempts on building a
database of farmers in the greater area of Milan have already brought the first results and the U-TURN
customers will be experiencing personal assistance during the implementation and execution processes.
Again, tight cooperation with the customer will be necessary to use U-TURN, especially when talking about
the platform based scenario.
Revenue Streams
Based on all the above, revenues are generated mainly with three different ways; licensing fees for
platform use, standard or per use fees for all three collaborative scenarios and, potentially, charges for
extra training and consulting services to the potential customers following the same logic as in Pilot 1
Key Resources
The key resources are actually related to the project partners in a both technical and innovation
perspective. Technical infrastructure and other related, developed platform and tools will be used to serve
U-TURN scope.
Key Activities
There are key activities related to the U-TURN service success; TRT has already performed the pre-market
analysis and approached a measurable base of potential clients. The consortium is working on developing/
improving and supporting their product and service portfolio with a key development team that will ensure
new services focused on technology transfer and key factors for entrepreneurial success by taking new
customer requirements and demand into account. This activity will be necessary for U-TURN while at the
same time existing tools and methods integration is also fundamental. However, technical parts are also
playing a key role; matching and implementation require again some attention.
Moreover, it is necessary to promote U-TURN in the distribution through close relationships with the
stakeholders in order to engage them in their contribution actions. Last but not least, key activity towards
U-TURN success is the promotion of U-TURN to all possible stakeholders and customer segments across
Europe and not only Italy.
Key Partnerships
The key partners are the U-TURN project partners that will validate the new service/product and contribute
to the testing of the entire hypothesis that will be established for the business model, also checking if the
model will be repeatable and scalable. Farmer associations and collaboration with local authorities are
quite important to develop the right environment to support the proposed business models. However,
farmers and eventually transport companies that are undertaking the deliveries part and, of course, UCC
operators remain the most significant ones because they are directly responsible to set up any
collaboration.
We will acquire knowledge and technology from the first validators of the service and significant support
from the rest categories. Given that U-TURN is not going to implement a UCC itself, the assistance in
operations from another is crucial. Moreover, system operators are essential for the technical and
commercial success of U-TURN.
Cost Structure
The business models presented in pilot 2 follow two different approaches when talking about costs. The
pure logistics sharing among farmers, does not include any extra cost for the transport service as well as for
the warehouse. The collaboration takes place using private trucks already owned by farmers where just
business and operational costs must be taken into account (e.g. fuel costs). On the other side, we have
considered two scenarios where extra services are need for delivering and storing. Therefore, the
competitiveness of the last two scenarios becomes higher when the number of the collaborating farmers
increases in order to reduce the cost per farmers.
3.3 From online retailers to consumers

Pilot 3 business model is focusing on providing value for online grocery retailers that want to serve their e-
customers.
Customer Segments
Pilot 3 business model somehow differ from the previous two in the customer approach again. Here we are
talking about online retailers that want to find ways to collaborate on the distribution activities to satisfy
their online orders (either for home delivery or Click & Collect services).
As it may be obvious, the main customer segment of the U-TURN service of Pilot 3 is online retailers selling
groceries.

Given that the customer segment is only one, we cannot distinguish any significant customers against
others that are not. However, it is clear that bigger ones should be handled differently than smaller.
Given that they operate in the online world, online retailers may be located anywhere. However, within the
context of the U-TURN the focus is on big city centres where retailers are distributing and optimisation
margin has been identified.
Are the customers financial powerful?
Testing this pilot in the UK market, many major players with extensive market and negotiation power exist.
If you take into consideration firms such as Tesco and ADSA , the U-TURN service seems at first to have
benefits. However, firms like those may have such high order volumes that they are actually able to
consolidate their orders quite well themselves or they even have the capacity to build and operate micro
hubs or similar services themselves. On the other hand, medium and smaller online retailers have
significant needs to increase their drop density in the field and also more limited financial and negotiation
power.
Value Proposition

Surely the value from pilot to pilot does not change that much; distribution cost reduction and better
service level to the final customers remain at the top two priorities and are the main value that are coming
out of the model. However, the creation of the collaboration spirit alongside with complying with
environmental and social KPIs are following.
The main problems that are addressed via these three offered services are the lack of satisfaction in the
final customer in terms of time windows and the high cost (around £21 per home delivery) that grocery
online distribution requires.
Channels
Saying that the targeted groups are medium-sized, small-sized or even bigger online retailers, B2B sales
remain at the top priority. Direct collaboration with customers and supportive B2B sales approach will be
implemented focusing on the specific characteristics of the market and the online grocery retailers’ culture.
All business models presented in the U-TURN follow the same approach; they aim to build its customer
relationship based on strategic partnerships and personalized services to reach a wide range of industrial
working groups and consortium contacts.
Revenue Streams
Based on all the above, revenues are generated mainly with three different ways; licensing fees for the U-
TURN services, standard or per use fees for both collaborative scenarios and revenue accruing from
specialised consulting or supporting activities. Again, the approach here is the same. The offered services
are either charged per use or on a fixed monthly/yearly rate.
Key Resources
As in the previous models, the key resources are related to the project partners in a both technical and
innovation perspective. Technical infrastructure and other related, developed mathematical modelling and
tools will be used to serve U-TURN scope.
Key Activities
There are key activities related to the U-TURN service success. Cranfield and LCP are mostly working on
building upon previous and new contacts and communications to develop and support these services. The
key development team will ensure new services focus on technology transfer and key factors for
entrepreneurial success by taking new customer requirements and demand into account. Given that this
market, related to the previous two, is bigger, has significant players and is more demanding, these factors
are quite crucial. However, technical parts are also playing a key role; mathematical modelling for
operations is one of them.
Moreover, it is necessary to promote U-TURN in the distribution through close relationships with the
stakeholders to engage them in their contribution actions. Last but not least, key activity towards U-TURN
success is the promotion of U-TURN to all possible stakeholders and customer categories across Europe.
Key Partnerships
The key partners are the U-TURN consortium that is working behind this business model; both technical
and business development is taking place in-house. Big market stakeholders and relevant associations can
contribute and have significant roles in the business model development. Moreover, transport companies
and logistics operators (i.e. micro hubs) should also be included.
Transport companies and logistics operators that are maintaining the micro-hubs and distribution part of
the supply chain are actually the ones that are operating in the market, so, apart from providing feedback
and contacts as the first category of partners, provide their facilities and work with the U-TURN services to
enter the market.
Cost Structure
Once again, cost related issues include development and commercialisation of the U-TURN services. Given
that the development is related to the project activities, commercialisation is mainly based on sales.
Related to the previous one, in this business model clients are more difficult to come, but once you get the
first few, success is coming closer.
4 Insights and Practical Guidelines
In this last chapter, we include a first attempt to provide some first insights that came forward from the
pilots’ assessment and transform them into business and practical guidelines for potential users and
interested organisations.
4.1 Logistics from DCs to retailers in urban areas
As presented in the second chapter, two alternatives have been already tested for the transportation of
products from distribution centres to retail stores in urban areas; the case of the UCC which includes last
mile delivery with common vehicles and the case of direct collaboration with common means of transport
from the distribution centre of a suppliers or a 3PL to the retail store.
The two different pilots that have already been approved from the two Industrial Working Groups, the one
with the 3PLs and the other with the ECR representatives, and have been tested within the context of the
project give a first impression and some first insights for the commercial adoption of them. These insights
that could act as guidelines to everyone that wants to adopt such collaborative practices are summarized
here.
Optimisation possibilities require large scale applications
Horizontal collaboration in the supply chain as the one described in the two aforementioned models within
the context of Pilot 1 is one of the possible ways of collaboration across the supply chain. However, smaller
scales do not seem to give the desirable outcomes. Markets as the Greek which are quite centralized do not
have extended margins of improvement and a bigger number of players is needed in order to be able to
enjoy the benefits.
More ‘disruptive’ solutions need higher degree of maturity
Continuing with the same approach as in the previous bullet, the examination of the benefits that accrue
from more ‘disruptive’ solutions need more players and higher degree of maturity from the market side.
When testing new models, you have to be flexible, but again bigger scale gives more accurate and precise
results and can act as a real-life pilot.
Existence of room for wider synergies with significant social benefits
Apart from the strategic and operational benefits that accrue from this type of applications, more insights
on social improvements can arise. Environmental footprints and, of course, decrease in the use of the
resources are both quite important when deciding about the new business models that will be
implemented.
Complexity acts as an enemy
Not only when it comes to collaboration, but even in more simple activities, complexity is not a friend of
success. More work needs to be done in simplifying things and the level of maturity especially in Greek
market is not that high. Collaboration is not in the list of the top three priorities of every company and even
in the case of the Greek pilots more companies began working on this and then they left the working
groups. Economic benefit is not always clear and, if you take into consideration the various issues that you
have to manage, it I not easy to decide in favour of these practices.
Collaborative distribution, and collaboration in general, is not always a ‘quick-win’ situation

Although people seem to understand collaborative practices as a way to gain money easily and decrease
costs, this idea differs significantly to reality. Most of the time collaboration requires set-up costs, such as
the setup of a UCC, or organisational change that is quite difficult to have, especially when talking about
big, established organisations.
Distribution is changing through the new regulatory framework
New laws and regulations seem to affect the collaboration issue. New frameworks and new ways of
distribution are actually pushing the situation towards a more effective and collaborative network. Use of
UCC is becoming a need and companies are forced to follow the new regulatory policies.
Market trends affect also the distribution
Apart from these regulatory frameworks, market trends and need are also pushing the market. Cost
minimisation, better service quality and the economic situation are urging for changes and new ways of
achieving the goals and the KPIs and collaborative distribution seems a good option.
4.2 Local producers deliver to urban areas

Regarding the three-different business models for pilot 2, the pure collaborative scenario among farmers
has been already tested by the U-TURN Platform using real life data collected from the farmers engaged. At
this first stage the case has considered 24 farmers, each of them acting as transport carrier or loading
supplier. The test will continue considering different inputs and changing the platform parameters to assess
the feasibility of different scenarios. The results will be then shared and discussed with farmers and other
relevant stakeholders, as public authorities. The first insights that came forward from the assessment of the
test can be summarized as follows:
the most relevant variable that influences the economic feasibility of the collaborative model is the
travel distance in the TO-BE scenario, compared to the same value in the AS-IS scenario,
the travel distance in the collaborative scenario depends mainly on the distance between pick-up
points therefore,
collaboration is more convenient if farmers are located close to each other.
4.3 Online retailer logistics in urban areas

As presented in the second chapter, two alternative business models exist in the UK online grocery retail
market. The first model is about home delivery services while the second one is for Click & Collect services.
Based on these two business models we have proposed three different collaborative models for the online
retailers (two for the home delivery case and one for the Click & Collect case). We know that 85% of the
customers in the UK prefer home delivery, while only 15% selects Click & Collect services for receiving their
online-purchased groceries. The examined models in Pilot 3 propose collaboration in different aspects
(stem mile, last mile, and Click & Collect point) of the logistics activities for the online grocery market.
These insights could act as guidelines to the stakeholders who want to adopt collaborative activities in the
online grocery market. Guidelines are summarised under the estimation of the demand for groceries
purchased online, the lack of willingness to collaborate, the impact of distribution network, complexity, and
market trends.
Estimation of the demand for groceries purchased online

An accurate estimation of online grocery demand is difficult to achieve. We work based on secondary
demand data and we have developed a model that generates the demand for the major six online UK
retailers (Tesco, Sainsbury’s, Asda, Ocado, Waitrose, and Morrisons). The three proposed models use the
estimated demand from secondary data and based on this we evaluate and measure the benefits that
could arise from a potential collaboration among online retailers. Each retailer knows better the real
demand that has to face and will be able to estimate the benefits that could arise from collaboration.
Major retailers are not willing to collaborate with their competitors
The major retailers know that the existing distribution model makes significant losses, but for the time
being they do not use any collaborative activities with their competitors. In the UK, the cost per home
delivery of groceries is estimated to be around £21 (including the picking cost), an extremely high amount
when the minimum order value imposed by retailers on consumers to be eligible for home delivery is £40.
As the profit margin in grocery market is around 30%; these services are not sustainable, based on the
transportation cost. One of the challenges that the U-TURN has to face is to provide not only the economic
benefits but also the environmental and social benefits that could arise from a potential collaboration only
in the logistics activities. During the preliminary results these benefits seem to be important, as there is a
reduction of 10% in the total travelled distance and a reduction around 20% in the total time that the
retailer’s fleet of trucks are on the streets.
Impact of the picking locations
The benefits that arise from the collaboration depend on the locations of the picking facilities. We are
aware of this factor based on the different setups that we have already run for the second and the third
proposed models. We do not propose any modifications to retailers’ distribution network, since it is too
costly for retailers to change their existing distribution network to achieve short term cost savings and
emission reduction. It would be useful if the retailers could design their distribution networks, or for a 3PL
that will provide these services to define in advance the optimal location of the picking facilities. Moreover,
the online retailers know better the real cost and whether they are willing to invest a significant amount of
money on the relocation of the existing picking locations.
Complexity acts as an enemy
Despite the complexity of the routing problems, the stakeholders work on heuristics algorithms. For these
algorithms, an important factor about the solution quality (not exact solutions) is the computation time.
Thus, there is a cut off point for receiving the online orders and it is not possible to receive another order
after the cut off time. On the other hand, the cut off time could be a crucial factor about how the
customers select their online retailer.
Market trends affect retailers’ policies about the distribution of the online orders
The sales of the UK online grocery retail market accounted for £8.5 billion in 2015 and it is estimated to
reach £16 billion by 2020 and to be around 10% of the whole grocery market (Mintel, 2016). Moreover, it is
the second biggest market in the world (in terms of size) after the Chinese online grocery market (IGD,
2016). The market estimations set the real retailers’ requirements, especially for the new players that want
to enter this market. The market is expected to grow with new players, but some consolidations among the
existing small players will be inevitable.
5 Conclusions
The presented deliverable focused on the analysis of the current distribution models that are used within
the U-TURN context and can be transformed into sustainable business models in all three pilots’ cases. At
first, we began with a short presentation of the distribution models and then we tried to identify their
business attributes and present them based on the Business Model Canvas framework introduced by
Osterwalder. As this is the main framework that is used by big companies (e.g. consulting firms like
McKinsey or technical like SAP) in order to compose the value a new product/service may have to the
potential customer segments, we made a first attempt to define the different components that would
assist in the market exploitation of the U-TURN outcomes.
Thus, apart from the value and the customer segments that were analysed in detail, seven other significant
parts of the business models have been analysed aiming at completing this first round of the new business
models evaluation. The different building blocks including: customer relationships, channels, key
partnerships, key activities, key resources, cost structure and revenue streams.
Given that all pilotσ are now collecting feedback and second round requirements regarding their
distribution and business models, one of the issues under investigation is the correctness of what is being
described regarding the business models and their value to the customer segments. Thus, the new version
of the deliverable that will be released in M36 will include an updated version of what is described in D5.3
and will focus on more practical issues on both the business models (e.g. estimations on cost and revenues)
and business insights and guidelines to whoever wants to adopt such solutions.
6 References
Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers, Osterwalder
and Pigneur, Strategyzer, 2010

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D5.3 – New Business Models and Practical Guidelines First Version Ref.

D5.3 New Business Models and Practical Guidelines

Ver. Date Contributor(s) Description

V0.1 02.09.2017 AUEB First version of ToC

V0.2 04.04.2017 AUEB Second version of ToC

V0.3 19.05.2017 AUEB First Version of the deliverable

First review and input by TRT,

Consolidation of input and final

V0.6 31.05.2017 INTRA-LU, BARILLA Final review of the deliverable

V1.0 31.05.2017 AUEB Final version

DEFINITIONS, ACRONYMS AND ABBREVIATIONS

FMCG Fast Moving Consumer Goods

1.1 Purpose and scope

1.2 Relation to other tasks and previous deliverables

1.3 Structure of the document

2 From Distribution Models to Business Models

2.1 From DCs to retailers

2.2 From local producers to consumers

RURAL AREA URBAN AREA

Figure 2.3: Scheme of the to-be scenario 1 for pilot 2

RURAL AREA URBAN AREA

Figure 2.4: Scheme of the to-be scenario 2 for pilot 2

RURAL AREA URBAN AREA

Figure 2.5: Scheme of the to-be scenario 3 for pilot 2

2.3 From online retailers to consumers

2.3.3 Shared micro hubs where customers collect their orders

3 Evaluation of the New Business Models

3.1 From DCs to retailers

Figure 3.1: Pilot 1 Business Model

Customer Relationship Management

3.2 From local producers to consumers

Figure 3.2: Pilot 2 Business Model

What about the representativeness of the customer segments?

What value do we deliver to customers?

Customer Relationship Management

3.3 From online retailers to consumers

Figure 3.3: Pilot 3 Business Model

Who are our most important customers?

What value do we deliver to customers?

Customer Relationship Management

4 Insights and Practical Guidelines

4.1 Logistics from DCs to retailers in urban areas

Collaborative distribution, and collaboration in general, is not always a ‘quick-win’ situation

4.2 Local producers deliver to urban areas

4.3 Online retailer logistics in urban areas

Estimation of the demand for groceries purchased online

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