​Traditional supply chains as we know today will be extinct by 2025 as various trends and disruptive forces drive change and new connected models emerge. There will be more change in the last 10 years than in the last 25 years, and at an increasing speed.

1. Connected Retail
Supply Chains
Racing towards 2025
Stuart Harker
Partner
September 2016

2. Traditional supply chains as we know today
will be extinct by 2025 as various trends
and disruptive forces drive change and new
connected distribution models emerge…

3. …the only consistency during this time will be
the accelerating level of change across
organisations.
There will be more change in the next 10 years
than in the last 25 years.

4. The ever changing retail landscape will see substantial
changes to global supply chains by 2025 due to…
Global
megatrends
Consumer
& market
trends
Government
&
infrastructure
trends
4

5. Global
megatrends
5

6. Mega trends will progressively influence retail supply chains…
6
Climate change &
resource scarcity
Demographic shifts
Shift in economic
power Technology
Accelerating
urbanisation
 Pop of 8.3b by 2025 ;
7.4b today
 Infrastructure stretch on
ports, airports
 Mega cities outside of
major cities
 Electric vehicles
 Scarce resources
 Increased regulation
& taxes
 Sustainability
 8.3b pop by 2025 will
need:
 50% energy
 40%water
 35%food
 21% by 2050 over 60
 Polarisation of haves and
have nots
 Talent shortages
 New skills
 Ageing
 Gen Y individuals with
digital shopping behaviour
 Asia powerhouse
 Shift in power to Asia
 Increase in wealth
 New markets &
competitors
 Changing operating models
enabled by technology
 New and more complex
 Data – expected growth
 Digital impacts
 Consumers using multiple
connected devices
 Omnichannel to
continue growth
…and these will drive substantial changes in supply chain

7. 7
Consumer
& market
trends

8. The supply chain fundamentals will not change…
8
…but the competitive market and operating environment will require supply chains to fundamentally
change due to consumer demands, increasing length, complexity, cost and growth
Right
products
Right
place
Right
time
Right
cost

9. Consolidation
Customer
Government
Regulatory
Technology
Collaboration & Trust
Internet of Things
Consumer
personalisation
Analytics
Value equation
Sustainability
& environment
Automation
Costs
Complexity
Offshore/onshore
Sourcing
Diversity
Productivity
Risk
Talent
Cyber
security
Globalisation
Safety
Operating
model
Digitisation
Social networks
Labour costs
Transparency
Connectivity
Mobile
Big Data
Global Competition
Disruptive technology
Omnichannel growth

10. Consumer and major market trends are and will continue to drive
material change in future supply chains…
10
Customer
Technology
Omnichannel
Globalisation &
consolidation
Talent
Disruption &
risk

11. 11
Customer: Everchanging, complex and promiscuous
Shops
globally
Difficult to
engage and
complex
Shops
anywhere,
anytime
Time poor More
informed
Connected
and
empowered
Always connected and always on…
Image source: Google Images

12. 12
Strong customer value propositions will continually change and
be redefined
Customer
profiles
Personalised
serviceValue
Price
transparency Range Convenience
Marketing &
promotions

13. Customers now expect personalisation and curation
13
Image source: Company websites

14. Connected customers who are always on…
Connected
customer
Customer
focused with
transactions
anywhere
Social
media
Consumer
networks
Market
place Trust &
privacy
Integrated
Supply
chain
In store
Engagement
Curation
Experience
Personalisation
Insights
Big data
Productivity
People
Operations
Merchandising
Enablement
Value
proposition
Technology
Seamless
In store
ecosystem &
experience
Empowerment
Analytics
14
Source: PwC Connected Retail

15. Online expenditure in Australia will continue to grow
15
Omnichannel
the seamless
integration between the online
and offline world
7.3% Percentage of retail sales
$18.1bn
Total retail spending
11.4%
Annual growth
And projected to be 9% plus… in 2018
Source: NAB Online Retail Sales Index

16. The impact of this growth of omnichannel on supply chain and
logistics has seen…
16
Greater complexity & cost to organisations due to:
 Free and time driven delivery
 Same day/one day delivery
 Multiple delivery preferences
 Returns options
 Click and collect services
 Global delivery points
 Parcel points
 Predictive purchasing
 SKU proliferation
 Order processing speed and accuracy
And this complexity will continue and require a need for:
 Inventory accuracy and visibility
 Personalisation and curation
Image source: DHL, Google Images

17. The increased level of complexity, cost and pace of change will
require organisations to…
17
Containing or reducing costs
will be a priority
Technology systems and integration
will be the key enablers and drive
innovation
Agility, flexibility, efficiency will be
key to success
Inventory visibility, traceability
and accuracy will be essential for
customers and brand reputation
Data management and Analytics will need to be
core competency and high priority if customer
insights and understanding are to be obtained in
a timely manner
Collaboration and integration with
suppliers will be critical; collaborative
warehousing will become core to
efficiency and lower costs
Increase investment in
supply chain
Sustainability and ethics will
be fundamental to future supply chains
Source: Retail Week -Supply Chain Trends and innovations in retail 2014-2015

18. Globalisation & Consolidation
18
 Globalisation will continue
to drive transformation
and this will drive
industry consolidation
 Large transactions will
continue – global and local.
Scale and capital are the
drivers to invest and grow

19. 19
• Technology infrastructure and integration
• Systems integration
• Internet of Things (IoT)
• RFID
• Big data and analytics
• Cognitive insights
• Mobile and digital
• Payments
• Wearables
• Cloud
Technology

20. • Technology is the core enabler of the Customer driven supply chain
• Investment in CAPEX will be greater than before
• System integration is critical to success for visibility across supply chain –
supply & demand; single view of customer and products
• Data warehousing and analytical tools are vital; RFID impact
• Integration and collaboration/partnership with all stakeholders;
mitigating risk
• Mobile, cloud, etc.
• Old metrics and ROI are no longer relevant
• Disaster recovery becomes critical
• Uber impact
• Cognitive ecosystems drive enhanced customer experience
• Connected distribution ecosystems
• Cyber security increasingly important as supply chains become larger and
connected across the world
20
Technology

21. The global cyber challenge extends beyond the
enterprise and now includes:
 All people, process, technology and extended ecosystems:
• The extended supply chain has and will have numerous partners
• Various data flows
• Connectivity and collaboration with known and unknown partners
• Supply chains in the future will increasingly be interconnected,
integrated and interdependent
• Cyber risks cannot be viewed in isolation
• Supply chains will have material risk
• High ethical standards
21
Technology: Cyber
Enterprise
Consumer
Suppliers
JV/
Partners
Service
Providers
Industry/
Competitors
Customer
Technology
Environmental
Economic
Image source: PwC Cyber

22.  Rapidly expanding in apparel across the world
 Now commencing in Australia
 Tracking inventory and assets across the Supply Chain
 Data quality and accuracy
 Analytics
 Visibility across supply chain
 Industry collaboration required in some industries such as CPG
& retail to make it successful
 Technology impact
22
Technology: RFID
Image source: Company websites

23.  More data in last 3 years than in last 30 years
 Personalisation and curation
 Impact on data warehouse and tools
 Data visualisation critical for success
 Data flows – complex, numerous and quantity of data, i.e. IoT
 Potential impact on:
• Productivity & operational efficiency
• Visibility
• Customer experience
• Supply chain risk management
• Business model innovation
• Talent
23
Technology: Big data & analytics
• Product traceability
• RFID
• Quality and warranties
• Insights across supply chain

24. Where is the value potential of the Internet of Things?
24
Technology: IoT
Source: McKinsey Global Institute – The Internet of Tings: Mapping the value beyond the hype
Retail environments
Automated checkout
$410bn-1.2tr
Factories
Operations & equipment
optimisation
$1.2tr-3.7tr
Offices
Security & energy
$70bn-150bn
Home
Chore automation
& security
$200bn-350bn
Vehicles
Autonomous vehicles &
condition based maintenance
$210bn-740bn
Cities
Public health &
transportation
$930bn-1.7tr
Worksites
Operations optimisation /
health & safety
$160bn-930bn
Outside
Logistics & navigation
$560bn-850bn
Human
Health & fitness
$170bn-1.6tr
9 settings
Gave us a cross-sector view of a
total potential impact of
$3.96trillion-11.1trillion
per year in 2025
2x more value
From B2B
applications
than consumer
Interoperability
required to
capture 40% of
total value
Developing: 40%
Developed: 60%
<1% of data
currently used;
more can be
used for
optimisation &
prediction
Types of opportunities:
Transform business
processes
Predictive maintenance, better
asset utilisation, higher
productivity
Enable new
business models

25. Internet of Things (IoT): sensing and sense making
25
Technology: IoT
Image source: Cisco Consulting
Successful implementation of IoT will require a clear vision, strong collaboration
and trust by all stakeholders within the supply chain, standardisation of
systems/components, and also the ability to invent as required.
• Inventory management via RFID
• Fleet & asset management
• Risk mitigation
• Health & safety
• Infrastructure sensors
• Real time routing
• Connected workforce
• Pay as you go
• Autonomous vehicles
• Predictive asset lifecycle management

26. 26
Technology: Automation & robotics
Image source DHL Self-driving vehicles in logistics

27. 27
Technology: Beacons, Wearables, Mobile
Image source:Forbes, DHL, zdnet

28. 28
 Operating model changes
 Supply chain talent will require:
• Demand, skills, image, training
 Changing needs in next 10 years will require
different:
• Leadership
• Executives and team skills
• Skills – technical, analytical, commercial and
collaborative
 Acquire, retain and develop
Talent

29. 29
Government &
infrastructure
trends

30.  Level of capacity at ports will continue as many organisations
have shifted sourcing offshore and congestion and delays
will continue
 A government review is underway; privatisation will
assist development
 Increase congestion zones and additional tolls/charges likely
 Increased investment required in rail but unlikely due to capital
required (approx. $3-13bn)
 Antiquated rail, road and sea infrastructure is costing the
Australian economy an estimated $9bn per year
 Government economic situation unlikely to change re
budget deficit
 Substantial impact in productivity and cost of doing business
30
Infrastructure

31.  Regulatory framework must be harmonised
 Agreements on standards to assist in shaping the digital future
re IoT, etc.
 Regulatory environment will only increase and compliance
critical re. chain of responsibilities
 Tax and duties optimised to be competitive in a global
market place
31
Regulatory & tax

32. Future global supply chains will need to be constantly monitored to
ensure compliance and government charges are optimised…
Free trade
agreements
Export controls or
sanctions
Export rebates
Bio security
obligations
Product standards
Free trade zones
Customs duty
Trade facilitation
schemes
Border
interventions, eg
Quarantine
Environment levies
and discriminatory
taxes
Customs Reporting
Bonded warehouses
& Indirect tax
deferral
Tax exposure
Regulatory
exposure
Concept Offshore
Factory
Offshore
Warehouse
Haulage HaulageExport
Wharf
Import
Wharf
Overseas
freight
Local warehousing
& distribution
Retailer Customer
32
Excise duty &
returns
Packing
standards
Trading terms
with vendors
Labelling
Requirements
GST/VAT
imports
Supply chain
security
Ethical sourcing
assurance
Tax incentives
R&D incentives Fuel tax
Chain of
responsibility
regulations
Government
incentives
Truth in labelling
GST/VAT
optimisation
E-commerce and
Low value
threshold

33. What can you do?

34. In summary, supply chains in 2025 will be have the following
characteristics…
34
Customer Driven Supply Chain
Regulatory
& Tax
Digital
Transformation
People &
Leadership
Technology Strategic
Alignment
Risk Privacy &
Cyber
…and will need to be agile, transparent and connected if retailers are to be efficient,
competitive and relevant to their customers

35. …which will drive the “connected and transparent” supply chain of
2025 and will be built around…
35
Global sourcingGPS
Control tower
analytics
Social
network
Safety
RFID
Portals
Returns
Automation
Data based
routing
3D printing
RoboticsProcurement
Environment
management
Predictive
Analytics
Big data
Optimisation
tools
Technology
infrastructure
Risk management
& analytics
Dynamic
reporting
Data analytics IoT
Wireless
Cloud
computing
MobileConnectivity
Collaborative
partners & suppliers
Digital media
duplication
@
Vendor managed
inventory
Logistics
Management
Predictive
ETA’s
Retailer

36. Thank you
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