Welcome! The Future Value Chain Project, Trends, Opportunities And the Industry Response. Sabine Ritter, The Consumer Goods Forum

Transcription

1 "We can't solve problems by using the same kind of thinking we used when we created them." Commonly attributed to Albert Einstein Welcome! The Future Value Chain Project, Trends, Opportunities And the Industry Response. Sabine Ritter, The Consumer Goods Forum Jim Flannery, P&G

2 Objectives:! Give the retail/consumer goods industry a comprehensive, more connected view of trends! Identify trends ( external forces ) over which the industry has little control! But that will have significant impact on the way it operates! Identify trends over which the industry has more control! And the ability to influence their course or impact! Identify key areas where companies must collaborate in order to manage the value chain in 2016

3 Forces "We can't solve and problems Trends by using the same Driving kind the Future Value of thinking we used when we created them." Chain Commonly attributed to Albert Einstein

4 "We can't solve problems by using the same kind of thinking we used when we created them." Commonly attributed to Albert Einstein Succeeding in a Volatile Market 2018: The Future Value Chain

5 2018 Future Value Chain Global and Asian focus Why Asia?! 45 million square km. (! 2 x NA, 5 x Europe) Home to some of the earliest retail models Asia central to Western and global commerce Rapidly developing and massive consumer market Major source of ingredients and manufacturing Major Population Centres in Southeast Asia Asia has over 40 markets with populations of more that 10 million people

6 Eight Trends and the Industry Opportunities

7 Findings!Things Move Fast!!Markets are more similar than they are different!even though the challenges are similar across the world, the markets are in different phases of adopting solutions

8 Trend #1: Declining economy! Increased market volatility! Leveling off of economies in emerging markets ABC News Consumer Comfort Index

9 Trend #2: Changing Society Urbanisation New Aging Population Middle Class Low Income

10 Trend #3: Rising Cost (and Scarcity) of Raw Material! Continuing rise in cost of energy and raw material! Population spikes put pressure on water and food supplies! Increasingly volatile climate, affecting production and the supply chain! Effects of political instability

11 Trend #4: Increasing awareness and action on sustainability! Global! Asia!Sustainable lifestyles, regardless of economic status and ahead of regulation!consumers demand responsible and ethical behavior but will not pay extra!growing corporate awareness and responsibility! Responsibility for the entire product lifecycle! Financially beneficial sustainability programs!environmental degradation and extreme weather events increase concern!pollution will be a key driver of consumer concern!the move towards sustainability will resemble Western patterns.! Government will increasingly step in

12 Trend #5: Growing consumer access to technology! Asian consumers increasingly at ease with new technology! Asian adoption of technologies matches Western economies! Even faster penetration of new technologies in urban areas! Use of technology extends beyond high-income groups! Many Asian markets can leapfrog developed nations! Access to product information anytime, anywhere! Personalized and consolidated consumer communication will be key

13 Trend #6: Changing business models! Shift from traditional to modern (or organized ) trade! Boosted by - increasing consumer purchasing power - availability of technology - information sharing across the supply chain! As organized retail grows, there are less intermediaries! Rather than polarization, models will merge and new models develop

14 Trend #7: Growing Availability of Supply Chain Information! Japan: pushing the envelope!the use of RFID technology will accelerate when investment costs drop!a consumer-driven supply chain, based upon consumer information! India: Focus on the basics!enhanced performance as a result of information sharing

15 Trend #8: Increasing concern about product safety! Increasing pressure to disclose product history, safety and wellness information! Need to share costs and risks involved

16

17 Conclusions: Despite the tough economic, social and environmental climate that we operate in, there are many opportunities for our industry to continue to grow and to better serve our consumers needs. The industry must Redefine the 2016 Value Chain Trading Partners must more readily and freely Share Information In their Bi-Lateral relationships The industry must Develop New Ways of Working Together

18 New Ways of Working Together

19 The Case for Change! We have been talking about Collaborative Commerce and Collaboration for years.! Efficient Consumer Response was founded on the Strategies of: Efficient Assortment Efficient Replenishment Efficient Promotion Efficient New Item Introduction Yet today s Supply Chain is STILL filled with waste.

20 Stores are over SKU d New SKUs Registered , , ,000 Average Items in a Typical Supermarket , , ,000

21 Inventories are too high There is too much of the stuff consumers don t want and not enough of what they do.

22 Out-of of-stocks persist

23 Trading partners continue to focus on business minutiae instead of shoppers

24 Jean-Paul AGON Chief Executive Officer L OREAL New Ways of Working Together Project Leaders Brenda C. BARNES Chairman & Chief Executive Officer SARA LEE CORPORATION Paul POLMAN Chief Executive Officer Designate UNILEVER Manufacturers JOHNSON & JOHNSON NESTLÉ PROCTER & GAMBLE KRAFT FOODS UNILEVER Retailers CARREFOUR KROGER CO. METRO GROUP WAL-MART TESCO Colleen GOGGINS Worldwide Chairman, Consumer Group JOHNSON & JOHNSON A.G. LAFLEY Chairman, President & Chief Executive Officer THE PROCTER & GAMBLE COMPANY Sir Terry LEAHY Chief Executive Officer TESCO PLC Eckhard CORDES Chairman of the Management Board & Chief Executive Officer METRO AG J.M. SMUCKER COCA-COLA Legal Counsel WEGMANS SAFEWAY Jeff NODDLE Chairman & Chief Executive Officer SUPERVALU Lars Oloffson Chief Executive Officer CARREFOUR GROUP Stefano PESSINA Executive Chairman ALLIANCE BOOTS

25 New Ways of Working Together Eliminate value chain disruptions, enable growth Industry Track (Collaborate) Best Practices/ Standards Documentation, Education, Communication Guiding Principles and Frameworks Share Results Focus on Consumer Strategy Alignment JAG Framework Connected Business Information Common Goals & Measures Information Sharing* EPC Data Sync Prepare People for New World Knowledge, Skills & Capabilities Incentives & Rewards organisation Design Share Our Supply Chain Sustainability Cross Industry Integration Integrated Supply Chain Consumer/ Shopper Satisfaction Strategic Issues Between Trading Partners Common Goals, Common Measures Specific Measures & Priorities Other Data Sharing Opportunities Trading Partner Track (Competitive Advantage) *Note: Utilizations of Industry Standards

26 New Ways of Working Together Eliminate value chain disruptions, enable growth Industry Track (Collaborate) Best Practices/ Standards Documentation, Education, Communication Guiding Principles and Frameworks Share Results Focus on Consumer Strategy Alignment JAG Framework Connected Business Information Common Goals & Measures Information Sharing* EPC Data Sync Prepare People for New World Knowledge, Skills & Capabilities Incentives & Rewards organisation Design Share Our Supply Chain Sustainability Cross Industry Integration Integrated Supply Chain Consumer/ Shopper Satisfaction Strategic Issues Between Trading Partners Common Goals, Common Measures Specific Measures & Priorities Other Data Sharing Opportunities Trading Partner Track (Competitive Advantage) *Note: Utilizations of Industry Standards

27 ! Encourage bi-lateral collaboration Based on clear, fact-based understanding of market context and trends Focus on Consumer! Embrace joint long-term planning Annual planning is often insufficient IP protection and trust! Implement longer term planning processes JAG process Five step process building a three-year rolling JAG plan Annual milestones to be set Program reviewed throughout the year Buyer-Seller accountable for functional liaison, planning coordination, agreement and execution follow-up Cross-functional teams drive analysis and planning to support Buyer-Seller Fact based Help trade partners build rationale for their growth strategy Demonstrate the objective selection of relevant growth levers Allow reliable quantification of the opportunities and expected ROI Step 1 Review the economic and shopper environment Step 5 Monitor & Conditions adapt for success Step 4 Execute the JAG plan Step 2 Review sales and agree on prioritized growth levers Step 3 Define and agree on 3-year JAG plan

28 New Ways of Working Together Eliminate value chain disruptions, enable growth Industry Track (Collaborate) Best Practices/ Standards Documentation, Education, Communication Guiding Principles and Frameworks Share Results Focus on Consumer Strategy Alignment JAG Framework Connected Business Information Common Goals & Measures Information Sharing* EPC Data Sync Prepare People for New World Knowledge, Skills & Capabilities Incentives & Rewards organisation Design Share Our Supply Chain Sustainability Cross Industry Integration Integrated Supply Chain Consumer/ Shopper Satisfaction Strategic Issues Between Trading Partners Common Goals, Common Measures Specific Measures & Priorities Other Data Sharing Opportunities Trading Partner Track (Competitive Advantage) *Note: Utilizations of Industry Standards

29 ! Common Goals and Common Measures Based on a common language! GS1 Trading Partner Performance Management Standard Connected Business Information! Global Data Synchronization

30 Six Key Sales Measures Focus on Consumer Sales Supply Chain Connect our Business Information Sales Growth % Share Retail Item Gross Margin % Retail Gross Profit Margin % Sales Forecast Accuracy % Markdown % TPPM Order to Delivery Cycle Time On-time Delivery % Finished Goods Inventory Cover Out of Stock % Service Level / Fill Rate % Prepare People for New World Operations Data Accuracy Share Supply Chain On Time Payment % Invoice Accuracy % Order Item/Quantity Change % Unsaleables% Item Master Data Accuracy % Item Data Synchronisation % All definitions include formulas, conditions, parameters and examples.

31 New Ways of Working Together Eliminate value chain disruptions, enable growth Industry Track (Collaborate) Best Practices/ Standards Documentation, Education, Communication Guiding Principles and Frameworks Share Results Focus on Consumer Strategy Alignment JAG Framework Connected Business Information Common Goals & Measures Information Sharing* EPC Data Sync Prepare People for New World Knowledge, Skills & Capabilities Incentives & Rewards organisation Design Share Our Supply Chain Sustainability Cross Industry Integration Integrated Supply Chain Consumer/ Shopper Satisfaction Strategic Issues Between Trading Partners Common Goals, Common Measures Specific Measures & Priorities Other Data Sharing Opportunities Trading Partner Track (Competitive Advantage) *Note: Utilizations of Industry Standards

32 Vision Vision Skills Skills Measures / Rewards Measures / Rewards Measures / Rewards Resources Resources Resources Vision Skills Resources Vision Prepare People for New World Skills Five Elements of Change? Measures / Rewards Action Plan Action Plan Action Plan Action Plan Action Plan Change Change Confusion Anxiety Gradual Change Frustration Vision Skills Measures / Rewards Resources False Starts

33 ! Understand the Barriers and Enablers to long term, shopper focused business planning Prepare People for New World! Transform people performance incentives and rewards! Build knowledge, skill and capability sets! Design organisational structure around consumer needs and drivers

34 DISCOVERY- What s s holding us back? New Ways of Working Together: Prepare our People for the New World GCI/Childs Davidson Global Study

35 GCI NWWT Project Expert Panel workshops in multiple markets around the world: Ahold, Carrefour, Kroger, Metro, Safeway, Tesco, Wal*Mart, Wegmans Coke, J&J, Kraft, Nestle, P&G, Smuckers, Unilever

36 Lack of focus on the consumer Wrong assortment, layout and promotions.

37 Lack of focus on the consumer My buyer explained that he would rather have a slower growing category with a higher per unit gross margin percent because that s what he is evaluated on.

38 One dimensional, functionally siloed goals He kept telling me that I had access everything they had.

39 One dimensional, functionally siloed goals Many of the merchants in her company began pushing back on her efforts to fix the quality defects.

40 What would it look like? 40

41 New Capability Model Goals KPIs Measuring shopper satisfaction and building it into integrated KPIs and rewards. Structures and resources Rewards and incentives Attitudes, beliefs and behaviours Enabling the organisation to embrace joint value creation for shoppers. Skills and knowledge Processes and tools Creating the skills and process disciplines to target shopper satisfaction.

42 New Capability Model 1.1 Satisfied shoppers 1. Goals 2.1 Sales Growth 2.2 Margin 2.3 Market Share 2.4 Brand Equity 2. Key Performance Indicators 3.1 Rewards hardwired to KPIs 3.2 Longand shortterm balance 3.3 Integrated outcomes rewarded 3.4 Culture reinforces KPIs 3. Rewards and Incentives 4.1 Empowered crossfunctional teams 4.2 Can deliver at POP 4.3 Shopper Marketing function 4.4 Resourced to engage 4. Structures & Resources 5.1 Longterm, sustainable 5.2 Joint development oriented 5.3 Proactively seeking cost reductions 5.4 Flexible about shopper solutions 5.5 Actively building trust 5. Attitudes, Beliefs and Behaviours 6.1 Knows trading partner needs & practices 6.2 Can explain and sell programs 6.3 Skilled application of insights 6.4 Disciplined use of tools & methods 6.5 Creative about activation 6. Skills and Knowledge 7.1 Shopper and consumer logic 7.2 Category methods drive strategy 7.3 Agreed decision model 7.4 Terms of engagement, escalation 7.5 Systematic cost-to-serve analysis 7.6 End-to-end supply chain efficiency 7.7 Rapid efficient date sharing 7. Processes and Tools

43 Typical results: Poland Retailer Manufacturer 43

44 Is sweeping change possible? 52

45 New Ways of Working Together Eliminate value chain disruptions, enable growth Industry Track (Collaborate) Best Practices/ Standards Documentation, Education, Communication Guiding Principles and Frameworks Share Results Focus on Consumer Strategy Alignment JAG Framework Connected Business Information Common Goals & Measures Information Sharing* EPC Data Sync Prepare People for New World Knowledge, Skills & Capabilities Incentives & Rewards organisation Design Share Our Supply Chain Sustainability Cross Industry Integration Integrated Supply Chain Consumer/ Shopper Satisfaction Strategic Issues Between Trading Partners Common Goals, Common Measures Specific Measures & Priorities Other Data Sharing Opportunities Trading Partner Track (Competitive Advantage) *Note: Utilizations of Industry Standards

46 !Industry and trading partners must do things differently!adopt more sustainable business practices Share Our Supply Chain!Collaborative Transport Management, Empty Miles

47 The Future Supply Chain

48 Key trends driving the report Increased awareness of CO2 Increased urbanisation Regulatory restrictions Economics of supply chain Innovation

49 Solutions all focusing on the physical supply chain INNOVATION 1. In store logistics In store visibility Shelf ready products Shopper interaction 2. Collaborative physical logistics Shared transport (pooling etc) Shared warehouse (including x-dock) Review & Share infrastructure 3. Reverse logistics Products Recycling Packaging Recycling Returnable assets 4. Fluctuations Management for Promotions Joint Planning, Execution & Monitoring 5. Identification / Labeling 6. Efficient assets (vehicles / building) Alternative energies Efficient / Aerodynamic vehicles Switching modes Green building 7. Joint Scorecard & Business plan 8. Regulatory & Environment

50 As Is Situation: The Future Supply Chain 2016

51 To-Be Situation: The Future Supply Chain 2016

52 Conclusions True collaboration will be imperative Innovation rapidly applied Supply chain managers will need new capabilities. New ways of working

53 ! Focus on the Consumer will not work if there are not common goals and common measures, if there are not enabling rewards and incentive systems that reinforce the right behaviour.! Connect our Business will not work if it is not linked to long term, shopper focused business plan; if the ability to share and use data for vertical trading partner, integrated or enterprise level goals are not reinforced; or if the supply chain is still viewed as yours versus mine and not shared.! Prepare Focus our People will Connected be insufficient if Prepare there is People not a clear, for shopper Share Our focused Supply business on Consumer plan focusing the Business organisation, or if New there World are not the common Chaingoals, common measures and Information information visibility to act on.! Share our Supply Chain will not be possible without understanding how every Strategy decision made impacts Common the shopper, Goals & today Knowledge, and for the Skills long & term; Sustainability if the information Alignment we are looking, Measures the supply chain Capabilities visibility can not be Cross compared Industry up and JAG down Framework the supply chain; Information if we still try Incentives to optimize & each component Integration of the supply chain, but sub-optimize Sharing* the whole via Rewards siloed goals. EPC Data Sync organisation Design Integrated Supply Chain An Integrated Approach to Better Business Results

54 *Note: Utilizations of Industry Standards Get Started You identify the WHAT Trading Partners- Pick a problem to solve or an opportunity to progress. ECR-A - Pick a problem to solve or an opportunity to progress. Use the New Ways of Working Together Framework as the HOW New Ways of Working Together Eliminate supply chain disruptions, enable growth Industry Track (Collaborate) Best Practices/ Standards Documentation, Education, Communication Guiding Principles and Frameworks Share Results Focus on Consumer Strategy Alignment JAG Framework Connected Business Information Common Goals & Measures Information Sharing* EPC Data Sync Prepare People for New World Knowledge, Skills & Capabilities Incentives & Rewards Organization Design Share Our Supply Chain Sustainability Cross Industry Integration Integrated Supply Chain Consumer/ Shopper Satisfaction Strategic Issues Common Goals, Specific Measures Between Trading Common Measures & Priorities Partners Trading Partner Track (Competitive Advantage) Other Data Sharing Opportunities 54