World Trade - March 2009 - (Page 37) taking into account the usage of current transport and storage technology) could potentially reduce transport costs per pallet to the order of more than 30%, cut handling costs per pallet to the order of 20%, reduce lead time by 40% and lower CO2 emissions per pallet to the order of 25%, while also improving on-shelf availability. This does not include additional energy cost savings stemming from more efficient assets such as green buildings and fuel-efficient/aerodynamic and jumbo trucks. External forces driving change When we look ahead, we see a number of external trends that will shape the retail industry in the coming 10 years, which are largely outside its control. But retailers and consumer products companies must consider the impact of these external forces on their business and determine how best to respond to the changes that will be brought about as a result of their impact. • Economic trends: new markets and a new economic balance. Brazil, Russia, India, China, Africa and Korea will be major markets to consider in the coming years. Each of these markets will evolve much more quickly, compared with the parallel changes that occurred in North America and Western Europe. There will also be changes in the balance between local and global sourcing. • Ecological trends: sustainability and the scarcity of natural resources. Sustainability will be a prime consideration for future scenarios. The industry will need to convince consumers that it is operating in an ecologically responsible manner. The 2007 Bali Treaty and other political initiatives are challenging the industry to come up with breakthrough solutions by 2020. Preserving energy and raw materials and other resources like water will become a crucial aspect in future supply chains, as costs will likely remain volatile and supplies will continue to dwindle. • Demographic trends: graying and urbanization. The future will be dramatically changed by shifting demographics, such as the graying of Western countries and the increase in urban population. For example, it is projected that 51.3% of the world’s population will be urban by 2010.1 • New technology trends: explosion of information. Moore’s Law will continue to scale the effects of new technologies in ways never before seen. For example, RFID technologies will play a big role in the future. In addition, the adoption and use of new technologies by consumers and shoppers (in home, in stores, on-the-go) will grow rapidly. • Regulatory trends: new rules, new compliancy. In addition to consumer pressure and companies’ own growing emphasis on corporate social responsibility, governments will enact more regulations, particularly targeting areas such as sustainability. This will be done by government and regulatory bodies at different levels: local, national and international. In addition, some current labor regulations must be repealed (for example, for more flexible working times) to allow infrastructures to be used to their full capacity with less stress on the environment. The ‘City Hub’ Supply Chain of the Future The future supply chain architecture anticipates new collaborative models for city distribution that need to be applied in urban infrastructures. For transport into urban areas, congestion and CO2 emissions are the main challenges that need to be addressed. Sharing infrastructure for delivery into urban areas is therefore designed to limit the amount of (polluting) trucks going into the city. Merging the different streams that go into the city onto one infrastructure will be a big step forward. The key element will be so-called “city hubs” with a collaborative cross-dock operation. The final solution will be applied differently per shipment category: • Full truckloads for store replenishment • Less-than-full truckloads for smaller-store replenishment • Parcels, including home delivery needs For the first category, changes in the efficiency and emissions of the trucks could be sufficient, but the other two categories can be consolidated outside the city in city hubs and be brought into the city with alternative modes of transportation (like streetcars or electric vehicles). In addition, to address the expected growth in home delivery and therefore parcels coming into urban areas, alternative models for home delivery and neighborhood distribution should merge with the urban replenishment model. This implies consolidation of different delivery streams (different products based on different orders from different online ordering facilities, all for the same shopper) via city hubs. New neighborhood distribution models will have pick-up points or drop-off boxes to enable efficient delivery of the parcel stream in a consolidated way. Consumers will be given the choice to either have their online-ordered goods delivered at home, or to collect them at specific pick-up points or drop-off boxes. In both cases consumers will cause considerably lower CO2 emissions, compared with using their cars to go shopping. Achieving this vision of the future value chain will require a different approach to measurement that must be designed for new parameters. Most supply chains today are measured by Key Performance Indicators (KPIs) such as availability to the consumer (percent in-stock) and cost reduction, as well as financial KPIs like return on investment (ROI), return on brand equity and inventory. Although current KPIs can be used to measure supply chain efficiency, they do not adequately address supply chain sustainability. For this purpose, additional KPIs such as energy consumption, CO2 emissions, traffic congestion and infrastructure simplification have also been incorporated into the development of the future supply chain model. This set of KPIs will address the current and future sustainability issues as well as on-shelf availability and business cost. Let’s look more closely at these new KPIs. Companies and organizations must strive to use more renewable energy sources and use less energy overall in WWW.WORLDTRADEMAG.COM 37 http://WWW.WORLDTRADEMAG.COM
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