End of the Line The future logistics challenges of production and multi-channel retailing
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1 End of the Line The future logistics challenges of production and multi-channel retailing Launch Global E-Tailing 2025 Workshop 2 Berlin, May 20, 2014 Prof. Dr.-Ing. Katja Windt, School of Engineering and Science, Jacobs University Bremen Todd Starbuck, Executive Vice President Business Development Europe, DHL Supply Chain
2 Agenda Big Data and Data Reliability in Manufacturing Prof. Dr.-Ing. Katja Windt Key Challenges in Multi-Channel Retailing : : Conclusions and Q&A Todd Starbuck DHL Page 2
3 Scene Setting Big Data and Data Reliability in Manufacturing 1. Data Reliability Big picture in how traditional manufacturing serviced traditional buyers and how does modern E-Tailing work? 2. Big Data Big picture on how data sources are servicing manufacturing to be more nimble 2.1 General overview 2.2 Specific examples from manufacturing 3. What are the new requirements that arise from E-tailing and the availability of big data? 4. Signaling Manufacturing How today s sharpest manufacturers are bringing technology to their customers requirements DHL Page 3
4 Traditional and e-supply Chains Distribution Centers (DCs) and Retail Outlets Fulfilment Centers (FCs) and E-Tailers Many-to-many OnlineRetail.Com Direct or in-store deliveries Information Flow Physical Flow DHL Page 4
5 Big Data The Facilitator Big Data definition Big Data is the fast analysis of large-scale data sets from various sources with the aim to create economical value. (BITKOM 2012) Big Data analysis in manufacturing is fostered by the accumulated amount of data collected at more and more hubs throughout the entire supply chain. In parallel, data processing and storage capabilities have dramatically increased in efficiency. Integrating new data sources on the customer side (mobiles, tablets, etc.) and on the business side (e.g. real-time GPS tracking) facilitates forecasting, planning and hence creates certainty along the entire process. Big Data sources - supplier Big Data sources consumer Infrastructure Network Shop Floor Feedback Data Production Schedule Social Profiles Market Forecasts Invoices Maintenance Information Transport Information Customer Order Profiles Geographic Patterns Delivery Notices Shift Schedule Quality Check Results DHL Page 5
6 Big Data The Facilitator Big Data Process Diagram Interpretation & evaluation Data mining System understanding iterative cycles Data preparation Transformation Patterns Selection/extraction Prepared data Transformed data Ontology-Enhanced Data Mining in Production Logistics (DEMOn) Data set Target data DHL Page 6
7 Big Data The Facilitator Big Data Possible application Consider the creation of a master production schedule Manufacturing Data Shop Floor Feedback Data Distribution Logistics Data Transport Information Customer Data Social Profiles Planner s intuition Quality Check Results Market Forecasts Current Production Schedule Delivery Notices Customer Order Profiles Maintenance Information Infrastructure Network Geographic Patterns Shift Schedule Multiple interconnected/correlating data sources have a potential impact on the production schedule DHL Page 7
8 Big Data The Facilitator Big Data Possible application Consider the discovery of different classes of automobiles along many different dimensions (3-D example) Automobiles - cluster KW Weight i.e.sports cars Max. speed Cluster Analysis as one Big Data method is suitable for analyzing large, heterogeneous data sets to identify homogenous subsets of objects DHL Page 8
9 New Requirements for Manufacturers MARKET PRESSURE Market High customer expectations Disloyal customers Product High variety Small lot size propagation Short term modifications Technologies Internet of Things Cloud computing Positioning systems Intelligent products E-Commerce Requirements Determine Production Logistics Conditions Processes New, supply chain integrated order systems High order-returns ratio Logistics Performance Infeasible delivery times Higher due date reliability Higher delivery flexibility Higher information readiness LOGISTICS TARGETS Logistics Costs Lower local inventory Volatile utilization Reconfigurable technologies Efficient planning and control methods DHL Page 9
10 How do manufacturers react to the new requirements? Manufacturers have to be able to produce in a more flexible manner Rapid manufacturing through shared resources. Distributing and hence decentralizing the production capabilities for highly specialized goods using technologies like 3-D printing. To match a distributed sourcing strategy of E-Tailers, manufacturers can share resources to reduce their transport costs, or facilitate the effective use of raw materials between different manufacturers. This way, high variability and manufacturing loads can be serviced between different manufacturers according to demand, hence improve the efficiency of every individual manufacturer in this network. Tracking and tracing: Enabling the live tracking of the production site, complete monitoring of all parts in the production site through networked sensors. These data allow ubiquitous process control and optimization to reduce waste and maximize yield or throughput (Bogdan, 2013). DHL Page 10
11 Agenda Big Data and Data Reliability in Manufacturing Prof. Dr.-Ing. Katja. Windt Key Challenges in Multi-Channel Retailing : : Conclusions and Q&A Todd Starbuck DHL Page 11
12 The Multi-Channel Reality From Any Device To Any Destination Website Phone Mobile At home Parcel lockers Office The consumer s e-tailing universe widens DHL Page 12
13 Challenge: Balancing consumer expectations with retailers needs Shoppers expectations Retailers challenges Very competitive market: grow profitably across-channels and geographies Increase service levels while decreasing cost Deal with high seasonality Get it right every time, all the time (lost sale = lost customer) Deal with returns rates that can exceed 50% Easy order & check-out process Deliveries and returns at low or no cost Order from anywhere, anytime Receive orders fast, anywhere, anytime Stay flexible -> re-route my shipments if I want to Easy returns process DHL Page 13
14 Supporting Growth - Debenhams Debenhams is a leading international, multi-channel brand with 240 stores across 28 countries. Debenhams is available online in 70 countries. Fast moving retail demands a cutting edge DHL supported Debenhams in implementing a new e-commerce Distribution Center and UK national network in 2011 Successfully integrated e- commerce alongside retail operations Enabled rapid volume uplift Provided breadth of product Award winning Fast Facts 50,000 ecommerce orders daily Via mobile and online 150,000 product lines Scalable during peak 400% volume increase 500% staff increase Highly commended for E-tail at European Supply Chain Excellence Awards 2013 DHL Page 14
15 Fulfillment Planning The multi-channel reality Massive volume fluctuations Product availability Green Big Data s hidden message Pool inventory Frequent new product launches Complex shipping profiles I want DHL Page 15
16 High Consumer Expectations We need to help our customers to operate in a consumer-centric way Ordered from anywhere Website Mobile Global Store Catalogue Phone Flash sales Delivered to anywhere At home Office With easy, free returns Parcel lockers At "secret spot around the house Drop-off points Pick-up in store DHL Page 16
17 Empik Everywhere Commerce Empik is a Polish chain specializing in books, international press and media products including film, music and software. Empik trades online and in store with 190 outlets across Poland and a customer base of 30 million. A changing landscape requires innovation Shifting global trends and increased consumer demands for convenience created an opportunity for Empik to focus on e-commerce growth while maintaining a strong high street presence. During 2010, DHL implemented an e-commerce solution that would: Fast Facts 6 year relationship Growth from 2,000 to 56,000 orders daily 100,000 SKU s Operational Performance Allow fast and significant volume uplift Manage a comprehensive product portfolio Use one IT platform for full supply chain visibility Enable Empik to focus fully on their customer offering with a trusted partner managing the supply chain 99.8% fulfilment rate 99.4% order accuracy 0.05 % error rate DHL Page 17
18 Return to sender Above all else, the return performance leaves the final impression on service Average return cost Average returns per industry It has been estimated that supply chain costs associated with reverse logistics average between 7 10% of cost of goods Online apparel Filmed entertainment Computer games Consumer electronics White goods 30% 70% 10% 30% 7% 15% 5% 12% 5% Increased complexity Returns cost An order of 5,000 in the single channel world would mean 1 purchase order, where now in the omnichannel world, this could be 500 online orders and 1 retail order resulting in 501 purchase orders 1 order to ship 5,000 units 501 orders to ship 5,000 units The cost of processes a return can cost up to Profit impact 2 3 times that of an outbound delivery A return can eat up 35% of the profit of a transaction Source: Deloitte study Reverse Logistics A New Core Competency by D Rogers, R. Lemkle, J. Bena DHL Page 18
19 End of the Line The Future Everywhere Commerce has become established The old boundaries between online and offline marketing and advertising channels have disappeared Retailing employs intelligent concepts which combine the best of the online and offline worlds: Touch-and-feel experiences in showrooms Interactive diversity and the independence of the virtual world Big Data analysis Low-cost providers and discounters focus on pure online concepts Consumers are accessible everywhere and at all times by way of mobile devices Retailers provide prompt delivery to any specified address as a standard service DHL Page 19
20 Questions?
21 End of the Line The future logistics challenges of production and multi-channel retailing Launch Global E-Tailing 2025 Workshop 2 Berlin, May 20, 2014 Prof. Dr.-Ing. Katja Windt, School of Engineering and Science, Jacobs University Bremen Todd Starbuck, Executive Vice President Business Development Europe, DHL Supply Chain
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