Navigating the Road Ahead: insights from CSCMP s State of Logistics Report

Size: px
Start display at page:

Download "Navigating the Road Ahead: insights from CSCMP s State of Logistics Report"

Transcription

1

2 Navigating the Road Ahead: insights from CSCMP s State of Logistics Report May 1, 2017 Rick Blasgen, President & CEO Council of Supply Chain Management Professionals (CSCMP) Sean Monahan, Partner A.T. Kearney

3 A Professional Association: Evolution and Relevancy National Council of Physical Distribution Management 1985 Council of Logistics Management Council of Supply Chain Management Professionals A.T. Kearney CSCMP 3

4 CSCMP What You can Experience! EDUCATION CAREER RESOURCES CONNECTIONS NETWORKING RESEARCH A.T. Kearney CSCMP 4

5 Join us in Atlanta, Georgia for CSCMP s 2017 Annual Conference, September hours educational hours dedicated SCM professionals under one roof content networking Register today! cscmpconference.org A.T. Kearney CSCMP 5

6 Goal CSCMP s Evolving Role Connect, Educate and Develop the world s Supply Chain Professionals! Supply Chain Concierge Service Join the Community visit CSCMP.org! A.T. Kearney CSCMP 6

7 Meet A.T. Kearney 90 year history Diverse global management consulting firm Known for Operations expertise, but full service Digital Transformation; Strategy; Leadership, Change & Organization Industry Expertise Aerospace & Defense Automotive Chemicals Comms, Media, & Technology Consumer Products & Retail Financial Institutions Health Metals & Mining Oil & Gas Private Equity Public Sector Transportation, Travel, & Infrastructure Utilities A.T. Kearney CSCMP 7

8 Our objectives today Share key insights from last year s report and preview of perspectives from the 2017 report Stay tuned for June release! Challenges on the road ahead Infrastructure Ecommerce Digital disruption A.T. Kearney CSCMP 8

9 State of Logistics State of Logistics Report is a collaborative effort I Focused economic analysis II Interviews with logistics industry leaders III Logistics industry context and point of view I V Trends and deep dives: global trends, sector trends, regulation, technology A.T. Kearney CSCMP 9

10 State of Logistics US Business Logistics Costs totaled $1.4 Trillion in 2015 US business logistics costs $ billion 1, % CAGR 2.6% 1,400 1,300 1,200 1,100 1,000 1,169 1,243 1,245 1,063 1,127 1,223 1,273 1,321 1,373 1, Source: CSCMP s 27 th Annual State of Logistics Report, A.T. Kearney A.T. Kearney CSCMP 10

11 State of Logistics As a percentage of GDP, USBLC declined 6 basis points to 7.85% US business logistics costs as a share of nominal GDP (%) % 8.46% 8.44% 7.88% 7.93% 7.91% 7.88% 7.53% 7.37% -6 bp 7.85% Note: bp is basis points. Source: CSCMP s 27 th Annual State of Logistics Report, A.T. Kearney A.T. Kearney CSCMP 11

12 State of Logistics Motor Carrier and Inventory are the major drivers of U.S. Logistics Costs U.S. Business Logistics Costs 2015 $ billion $1,500 $1,250 $1,000 $750 $500 $250 $0 LTL Dedicated / Private Truckload Intermodal Carload Pipeline Water & Ports Air Motor Carrier Parcel Rail Other Modes Inventory Carrying Other Financing Storage Support/Admin 1,408 Total Source: CSCMP s 27 th Annual State of Logistics Report, A.T. Kearney A.T. Kearney CSCMP 12

13 State of Logistics U.S. benefits from a highly efficient logistics system U.S. 7.9% GDP Asia 17% GDP China 18% GDP Europe 13% GDP India 13% GDP Japan 11% GDP Mexico 14% GDP Economy Higher Output GDP Better use of resources Multi-use Infrastructure Businesses Market Access Market Integration Cost Efficiency Consumers More Goods and Services Wider Availability Lower Prices/Income A.T. Kearney CSCMP 13

14 U.S. supply chain leverages an infrastructure of tremendous proportion Infrastructure 8.4 million lane miles 46,6320 Interstate highway miles 140,000 miles of rail 599,766 road bridges 360 commercial sea and river ports 9,627 miles of inland waterways Source: U.S. Department of Commerce A.T. Kearney CSCMP 14

15 However, despite importance to U.S. Economy, that infrastructure is at risk 2017 Infrastructure Report Card Key Logistics Categories ($ billions) Infrastructure Surface Transportation Rail Waterways & Ports Roads Bridges Waterways Ports Grade D C+ B D C+ Needs ( 2025) $2,042 $1,541 $37 Funding $941 $124 $22 Gap $1,101 $29 $15 Total $1,145 Funding Gap Source: American Society of Civil Engineers 2017 Infrastructure Report Card, A.T. Kearney A.T. Kearney CSCMP 15

16 Ecommerce Online is growing rapidly at 15% CAGR and the Food & Bev category is underpenetrated Growing Rapidly Impacting Major Categories Online Sales (US $B) E-Commerce Online Penetration, % of Total Category (US 2016) 58% $343 $395 $ % $532 $610 $696 Underpenetrated 16% 19% 2-3% 7% F 2018F 2019F 2020F No Signs of Slowing Down Online growing 3X faster than traditional B&M channel From 2012 to 2016, ecommerce grew from 5.4% to 8.1% of retail sales Source: Statista., Euromonitor 2017, United States Census Bureau, A.T. Kearney analysis Food and Beverage Health & Personal Care Widespread Adoption Consumer Electronics Apparel and Accessories Books, Media All cohorts buying online (boomers, millennial) and penetration is growing for all categories Current penetration is low for Food & Bev, however is forecasted to have a sales growth rate of 16% CAGR A.T. Kearney CSCMP 16

17 Accelerated growth in Food & Bev as consumers focus on convenience and price Year over year online channel usage Ecommerce Grocery (fresh) Food & Bev (packaged) Pet food & supplies Baby food & products Auto parts Home improvement items US Online Channel Forecast Sporting goods 15% Home furnishings Last 12 months Next 12 months 8% 26% 14% 28% 18% 25% 6% 13% 16% 22% 15% 19% 18% 22% 23% Convenience Price Assortment Key Drivers Merging channels shop anytime, anywhere Hassle-free no commuting, crowds, auto-replenishment Click-and-collect service becomes commonly offered Instant comparison of price and promotion across retailers Free shipping as a source of attraction Provides an opportunity to expand product offering e.g., endlessaisle Promotional and specialty item access Source: AlphaWise, Morgan Stanley Research A.T. Kearney CSCMP 17

18 Ecommerce Challenge for grocery is unfavourable ship-margin economics for Food & Bev low price-point items Illustrative Ship-Margin Economics Example DTC Fulfilment Unit Economics Traditional Fulfillment CPG Producer CPG DC Transportation Retailer DC Transportation Retail Store Home Handling Retailers Illustrative Fulfillment Cost Cost per Case CPG $1.00 Retailer $1.75 $0.75 $0.25 $0.75 $0.35 $0.60 Total $2.75 Traditional Online Order Fulfillment Retailer Pick $4.50 Transportation $9..00 Home Cost per Case CPG 1.00 Retailer $13.50 Total $14.50 CPG Direct to Consumer Fulfillment CPG Pick Transportation Home Cost per Case CPG $13.50 Retailer NA $4.50 $9.00 Total $13.50 Source: A.T. Kearney Experience A.T. Kearney CSCMP 18

19 Digital Disruption On the cusp of a new era: Industry disruptors Logistics industry disruptors Technology adoption Autonomous vehicles, IoT Artificial intelligence Uberization 3D printing Big data Alternative fuels Consumer requirements Want it now Personalization Millennial preferences Omnichannel shopping Aging consumer needs Logistics industry Macroeconomic trends Globalization Volatile commodity prices Climate disruption Urbanization Operational constraints Free trade agreements Environmental legislation Safety requirements Resource availability Key Disruptors Technology adoption: pace and breakthrough nature of technological innovation Operational constraints: regulations and resource scarcity will influence the ability to perform transportation and logistics activities Note: IoT is the Internet of Things. Sources: CSCMP; A.T. Kearney A.T. Kearney CSCMP 19

20 Long-term View Four Possible Scenarios Digital Disruption Unconstrained Operations Middle of the Road Technology capabilities improve incrementally. Customers have a few more choices, but no distinctive competitor emerges. Regulators are business-friendly and rational Incremental Technology Adoption Crusin Down the Highway Widespread and far-reaching tech adoption leads to a new paradigm: capital and technological expertise reframe the industry Technology Breakthrough Dead End Street Regulators are inflexible and hinder the entrepreneurial spirit and technological advancement. Cost of regulatory compliance shakes out supply markets. Great expectations remain unmet. Stop Signs & Red Lights Fierce operational constraints in a regulated, low-growth environment. Due to regulations, only the strongest and most easily adoptable technologies flourish Source: CSCMP, A.T. Kearney Constrained Operations A.T. Kearney CSCMP 20

21 today >2030 Digital Disruption Autonomous driving will be the next breakthrough in trucking efficiency Disruptive force: Autonomous driving Autonomous Delivery Urban Self-driving on highways and urban (autonomous hub-to-hub and last mile) Lidar Sensors Wheel speed Actuators Steering angle Throttle Transmission Autonomous Delivery Hwy. Highway pilot Self-driving on highways (autonomous hub-to-hub incl. platooning) Partial self-driving on highways (no permanent driver supervision required) Radar Stereo camera Brake Steering Connected assist Automation of connected functions (e.g. lane change assist) Partial assist Automation of single functions (e.g. emergency braking) Warning only No automation but warning functions (e.g. collision warning) Connectivity, context, maps HMI, control units, E/E architecture Source: A.T. Kearney A.T. Kearney CSCMP 21

22 Digital Disruption OEMs increasingly see trucks as mobile, connected data centers Source: Daimler Trucks A.T. Kearney CSCMP 22

23 Rick Blasgen, CSCMP Phone: Sean Monahan, A.T. Kearney Cell: A.T. Kearney CSCMP 23