E-Fulfillment Towards a success story for The Netherlands? Johan Beukema Partner Supply Chain Buck Consultants International Duiven, november 2012 Buck Consultants International Postbus 1456 6501 BL Nijmegen Tel nr : 024 379 02 22 Mobiel : 06 51100938 Fax : 024 379 01 20 E-mail : johan.beukema@bciglobal.com Background Buck Consultants International conducted a study on e- fulfillment and the competitive position of The Netherlands The study was requested and financed by Heembouw, with support of NDL, SADC/AAA Literature research + Interviews Key themes: NL Position in E-Fulfillment E-Fulfillment Regions in NL E-warehouses Buck Consultants International, 2012 1 Buck Consultants International 1
Agenda 1 E-Facts and Figures 2 From E-commerce to E-fulfillment 3 The Position of The Netherlands as location for E-Fulfillment Operations Buck Consultants International, 2012 2 1 E-Facts & Figures In Summary: Why are we talking about this? (internetretailer.com, 2012) Growth Market AND Logistics Complexity (IMRG, 2012) = Opportunity for Logistics Community (Accenture, 2012) Buck Consultants International, 2012 3 Buck Consultants International 2
Europe is an interesting e-market Largest e-market in the world European online sales from 117 bln in 2008 to 203 bln in 2011 Growth in 2012: 16.1% (18.7% in 2011) Online sales (bln USD), 2010-2013 Sources: JP Morgan, 2011, Centre for Retail Research, 2012 Buck Consultants International, 2012 4 Benelux # 5th market in Europe UK, Germany and France: 70% of European online sales Benelux 5 th position Online sales and expected growth Country Online sales ( bln) Increase Online Sales 2011-12 GDP ($ bln) Inhabitants (mln) UK 59.4 14% 2,418 63.0 Germany 45.1 13% 3,577 81.3 France 38.7 22% 2,776 65.6 Italy 12.3 18% 2,199 61.2 Benelux 12.3 14% 1,412 27.6 Spain 9.4 16% 1,494 47.0 Sweden 5.7 18% 538 9.1 Switzerland 5.5 16% 636 7.7 Denmark 5.2 14% 333 5.5 Norway 4.9 17% 484 4.7 Poland 4.5 24% 513 38.4 Sources: Kelkoo, Centre for Retail Research, 2012, CIA World Factbook, Eurostat, 2012 Buck Consultants International, 2012 5 Buck Consultants International 3
Relevant E-Commerce characteristics Local for Local Only 6% of European businesses selling online across borders, 25% within own country Concentrated Industry 130 webshops do 75% of Dutch online sales US companies usually pick a large market market for entry to Europe Online Portfolios expanding Buck Consultants International, 2012 6 Online Portfolios are Broadening Telecom/ electronics/ IT and fashion are the largest product offerings online Strong growth in white goods, toys, etc. (resp. 25% en 38%) Percentage sold online Reizen Tickets Erotiek Computer software DVD/Blu ray Verzekeringen Musiek Foto/Film Home entertainment software (Mobiele)telefoon Computer hardware Consumentenelectronica Boeken/magazines/kranten Audio/video Speelgoed Kleding/schoenen Witgoed/keukengoed fietsen / fietsaccesoires Interieur Auto's Sportartikelen Doe het zelf / hobbie Persoonlijke verzorging Tuinartikelen Dierenvoeding Optisch / lenzen Bloemen, planten Levensmiddelen Internet Winkel 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Source: Thuiswinkel Multichannel Monitor 2011 Buck Consultants International, 2012 7 Buck Consultants International 4
2 From E-Commerce to E-Fulfilment E-commerce: critical success factors Offering the best customer experience Scalability; size, portfolio, geography Online technology; full value chain Supply chain as integrated t part of the Business Model! Buck Consultants International, 2012 8 E-fulfilment: In the Heart of E-commerce E-fulfillment is the entire supply chain management process behind the online web shop to ensure consumer orders are processed, products are delivered on time and that returned orders are managed efficiently and effectively E-fulfilment Front office Logistics Back office On-line shop - Assortment - Website design - E-marketing - Product development Warehouse - Inbound -Storage - Order picking - Loading Transport - Shipment - Delivery Returns - Return transport - Return handling - Delivery of other product Back office - Customer service - Stock management - Warranty - Fin/adm. services Source: Buck Consultants International, 2012 Buck Consultants International, 2012 9 Buck Consultants International 5
Process E-fulfilment Buck Consultants International, 2012 10 Consumer complaints online shopping Logistics Logistics Logistics Logistics 4 out of top 5 major complaints are directly linked to logistics! Succes factor E-commerce excellent logistics service!! Buck Consultants International, 2012 11 Buck Consultants International 6
E-fulfilment network configurations 1 Production Consumer 1 Direct delivery Often for unique custom made products 2 Production Distribution Centre Shop Consumer 2 Combination centres Stores and on-line customers serviced from same facility 3 Production Distribution Centre Distribution Centre Shop Consumer 3 Dedicated centers Stores and on-line customers serviced from separate locations 4 Production Distribution Centre Shop Consumer 4 Store distributed ib t d on-line customers are serviced from stores 5 Production Distribution Centre Distribution Centre Shop Consumer 5 Hybrid model Combination of the above strategies based on geography, SKU segment (type or velocity) Buck Consultants International, 2012 12 Network configuration 3: Dedicated center(s) Production facility Distribution Center Shop (Outside Europe) Production to DC/store Direct to customer Store service Characteristics Stores and on-line customers serviced from dedicated facilities for each channel Can be a single facility or multiple facilities, although typically limited for both retail and online business (Exceptions: Amazon has over 10 facilities in Europe; Zalando has multiple centers) Service areas (store and direct to consumer can overlap) European examples include H&M, Urban Outfitters, Tesco, Esprit Buck Consultants International / DHL 2012 13 Buck Consultants International 7
Network configuration 5: Hybrid model Production facility Distribution Center Shop (Outside Europe) Production to DC/store Direct to customer Store service Characteristics Online orders can be collected free from the selected store or are delivered at cost to the customer home via a courier for an additional delivery fee Centralized DC is used to distribute both store and online orders to each country. In each country the online orders which the customer has selected to be collected in the store are delivered with the regular replenishment orders to each store. The direct to consumer home delivery orders are delivered centrally to the local/domestic courier company for next day delivery Returnable items can be returned (free of charge) to a local store Example: Zara Buck Consultants International / DHL 2012 14 Evolution model Maturity (volume, Geography, Scope) Store distributed Integrated Dedicated Hybrid Network configuration Buck Consultants International / DHL 2012 15 Buck Consultants International 8
A channel vs. an integrated approach Channel focused approach (channels operate in silos Brand focused approach (integration as standard) Business strategy Elements Operating Structure Customer Order Data Staff training Factors underpinning a convenient and easy cross-channel customer experience Cross-channel fulfilment (e.g. Click& Collect) Cross-channel returns Unified brand experience Cross-channel fulfilment (e.g. Click& Collect) Cross-channel returns Unified brand experience Source: DHL Freshminds report Discontinuity between channels fails to deliver consistent brand experience Consistent customer experience enabled across channels Buck Consultants International / DHL 2012 16 Towards cross-border e DCs The number of RDCs/EDCs in Europe for e-fulfillment will increase Main drivers: increased cross-border sales, economies of scale, transport networks Characteristics 1) Lead time Value / kg Sales volume Internat ional Size of products Prevailing warehouse Prevailing warehouse Product group sales solution now 2) solution in future 2) 1 CDs, DVDs, Books 0 0 + + - SDDC RDC 2 Consumer electronics 0 + + 0 - SDDC EDC 3 Apparel & shoes (incl. sports) - 0 + + 0 RDC EDC 4 ICT hardware 0 + 0 0 0 SDDC EDC 5 Fashion accessories 0 + + + - RDC EDC 6 Toys 0 0 + 0 0 RDC RDC 7 White goods 0 + - - + SDDC RDC 8 Furniture + 0 - - + SDDC RDC 9 DIY 0 0 0-0 SDDC RDC 10 Med tech products (consumer) - + 0 + 0 EDC through air EDC 11 Pharmaceutical products - + + 0 - SDDC RDC 12 Office furniture + 0 - - + SDDC RDC 13 Fresh food - - + - 0 MDDC MDDC 1) + = high, 0 = average, - = low 2) EDC = European Distribution Center, SDDC = Single Domestic DC, MDDC = Multiple Domestic DC, RDC = Regional DC Buck Consultants International, 2012 17 Buck Consultants International 9
E-Fulfillment: in-house or outsourced? Key Drivers Outsourcing Limited it investment t Focus on core activities Limited logistics knowledge and experience Economies of scale / synergies Flexibility Integrated services portfolio specific LSPs In-house In-house expertise core activity Costs, e.g. synergy with existing retail flows Image / logistics as business card Large retailers Large manufacturers Smaller manufacturers in-house mix in-house / outsourced outsourced Buck Consultants International, 2012 18 What should a 3PL offer your customer? Source: Thuiswinkel.org, 2012 Buck Consultants International, 2012 19 Buck Consultants International 10
Characteristics e -DC Flexibility in Floor Space Process around the product Fire compartments High Floor Pressure (buildings until 4 stories) Day Light Product related installations More SKUs (smaller stock per unit) Labor-intensive, mechanization, WMS Level of mechanization depending on product Buck Consultants International, 2012 20 3 The Position of The Netherlands as a location for E-Fulfilment Operations Drivers Location Factors Conclusion: Reliability Distance To Market Location Factors e-dcs not very different from normal DCs Delivery Speed Logistics Infrastructure Flexibility Logistics Services IT/Systems Tax & Customs Efficiency Overall Cost Levels Buck Consultants International, 2012 21 Buck Consultants International 11
Distance to Market Eurodelta region: 12% of the European Union s GDP With shortening lead times, it is crucial to be in a central location in relation to your markets (within a 1-3 day Conclusions: reach) The Netherlands is well positioned for Regional and ++ European NL well positioned DCs versus major European consumer concentrations Typical service coverage just from as a Central surrounding facility in the Benelux Logistics area Hotspot (line haul + domestic in feed and express) regions in Belgium and Germany Dedicated Express -/- NL not located in atop4 top-4 EU market 1 day 2 days 3 days 4 days > 5 days Source: BCI, 2012 Buck Consultants International, 2012 22 Logistics Infrastructure and Services Infrastructure Port of Rotterdam: no1 in Europe for containers Conclusions: Amsterdam Schiphol h Airport: no 3 in Europe for airfreight i Well-positioned in European road networks NL Source: can NDL, profit 2012 from its strong general logistics base Services NL s 3PL community could (or should) be the key driver behind future SpecialisedE fulfilment success as suppliers E-Fulfillment Parcel hub! networks Regular 3PL s - The DC itself will not differentiate - Key is in local fulfillment; link to local distribution network - Also essential: full order to cash process and returns process Buck Consultants International, 2012 23 Buck Consultants International 12
Availability and location of e Real Estate Examples e-dc s in The Netherlands Conclusions: e DCs located in existing Logistics Hotspots Source: BCI, 2012 Buck Consultants International, 2012 24 Taxes/Customs Just as other recent studies show, also in the attraction of E-fulfillment Centers NL can profit from its positive scores on Customs and Taxes Aspects: Customs Efficiency VAT Deferral Bonded warehousing availability Buck Consultants International, 2012 25 Buck Consultants International 13
Towards a success story for NL? Location Factor NL Direct Competitors Proximity to Market ++ ++ to +++ Logistics Infrastructure t ++ ++ Logistics Services ( e -focus) ++ +(+) Tax and Customs ++ +(+) Overall Logistics Costs + + Average ++ +(+) How to win the battle for international E-Fulfillment Centers? The key is in the hands of the Dutch Logistics Community: Sustain the overall attractiveness of NL Conclusions: Develop integrated e-solutions that cover the full value NL chain is well positioned But competition is close to the same level and especially Germany can profit from its large home market Buck Consultants International, 2012 26 To Conclude: Key Challenges e NL Decrease the disadvantage of not being a top 4 consumer market Excellent cross-border transport tnetworks (and rates!) Develop top level end to end e-fulfillment solutions with execution and coordination in NL Facilitate a Flexibility cross-channel, differentiated distribution models, flexible buildings, etc. Market Smart! Buck Consultants International, 2012 27 Buck Consultants International 14
Contacts Onderzoek uitgevoerd door: Buck Consultants International Postbus 1456 6501 BL Nijmegen Nederland 024-379 02 22 Johan.beukema@bciglobal.com In opdracht van: Heembouw De Lasso-Zuid 22 2371 EW Roelofarendsveen Nederland 071-332 00 50 Met behulp van: Nederland Distributieland en Amsterdam Airport Area Buck Consultants International, 2012 28 Buck Consultants International 15