The data-driven supply chain - Preparing Australian retail for an emergence of data-driven collaboration - Telstra Labs
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The data-driven supply chain Preparing Australian retail for an emergence of data-driven collaboration.
Contents 1. Executive summary 04 2. Introduction 06 Australia Post: Data driving functional capability 08 3. Our research 10 3.1. Research questions and hypothesis 10 3.2. Sample and method 11 3.3. Results and discussion 12 3.3.1. Belief in business benefits 12 3.3.2. Technology deployment 16 3.3.3. Relationships with partners 17 3.3.4. Barriers to adoption 21 3.4. Our research: Conclusions 28 3.4.1. Collaborators need to align 28 3.4.2. Data is the new oil but only when it can be used 28 3.4.3. Data is a resource that needs securing 28 3.4.4. This vehicle needs extra drivers 29 3.4.5. Small businesses need allies 30 Otto: Using predictive analytics to place inventory in the network 31 Target USA: A systems led approach to data-driven retailing 32 Linfox migrates its fleet to IoT 34 4. New technologies connecting retail supply chains 36 4.1. Instrumenting the data-driven supply chain: The Internet of Things and IoT networks 37 4.2. Intelligent data-driven supply chain: Artificial Intelligence, Machine Learning and Deep learning 39 4.3. Retail supply chain collaboration: Blockchain and data exchanges 41 5. Conclusion 44 5.1. About the author 44 5.2. Acknowledgements 44 6. References 46 02 03
1. Executive summary Technological advances are transforming the world of supply chain management, making data easier to collect, interpret and share. As a result, we are about to see the emergence of supply chains where data from every web search, transaction and movement of stock, trucks, team members and customers will be captured and combined with other data to better predict and manage resources to satisfy customer demands. The age of the data-driven supply chain is here. All those in the retail industry will need to adapt quickly or risk losing out to those organisations that are able to Many are already adopting the key • Recognise data as a resource that leverage data to cut supply chain costs technologies required for the data- only has value in use and needs and compete more effectively. In this driven supply chain and are enjoying to be shared report, we explore the implications of generally positive relationships with data-driven supply chains for Australian • Assure the security of their data their supply chain partners. So what’s businesses. What are the benefits? How holding them back? • Align incentives between partners ready are supply chain actors to adopt so there is mutual benefit a data-driven approach? And what are Our research identifies a number from collaboration. some of the barriers to adoption? of barriers that need to be removed before data-driven supply chains reach The retail ecosystem as a whole Our research, conducted in Australia their full potential. Our respondents needs to bring in new data science with a sample of retailers, logistics reported a reluctance to share data, skills, and smaller businesses need companies and manufacturers, shows the need to properly secure it, skills to develop strategies to participate there is a very strong appetite for a gaps in their businesses, challenges in the data-driven supply chain or data-driven approach to supply chain with technology, organisational issues risk being relegated to low-value, management. We discovered that their and issues relating to the alignment of transactional relationships. interest lies not only in the power of goals and processes as major obstacles data to transform traditional supply We end with a look at what’s looming to deployment. But all these problems chain KPIs like inventory turnover, on the technology horizon and are solvable. In this report, we also delivery in full on time (DIFOT), defect how organisations can leverage feature case studies of businesses that reduction, responsiveness and network these developments to realise the are successfully embracing a data- optimisation, but also to more general extraordinary benefits promised driven approach, including German business benefits like sustainable by the data-driven supply chain. retailer, Otto, Target USA, Australia Post competitive advantage, improved and Linfox. management of risk and loss, improved margins, better informed business From these case studies and our decisions and agility. research, we conclude that there are a number of key issues to be addressed before data-driven supply chains can be widely adopted in Australia. In particular, organisations need to: 04 05
2. Introduction It has been said that data is the Of course, supply chains have existed Today, technological advances are Traditional retailers face competitive new oil because it has the power since the earliest days of the retail about to usher us into a new era disruption from online, digital-native The 5G Journey · Massive machine-to-machine to transform every industry. In our industry, but the concept of supply of supply chain management. The retailers like Amazon and Alibaba, who communications: 4G technologies “5G” is actually an umbrella term are today facilitating IoT sensor last report, Spacetime Marketing, chain management (SCM) only emerged ability to capture supply chain data are already masters of supply chain for the next major wave of cellular we looked at the power of data to in the 1980s and has been defined as: will rise exponentially with 5.5 billion data. Both collect every customer click networks at scale, but 5G will network technology. increase scale to support billions of transform retail marketing. In this smartphones and 20 billion IoT (Internet and use it to predict buying patterns, report, we look at the power of data “The management of upstream of Things) devices in the market by optimise the placement of inventory 5G will be a combination of devices without human intervention. to transform an equally important and downstream relationships 2020.5 This means it will be possible in the network and maximise both the transformational technologies 5G will enable the new technologies part of retail: the supply chain. to collect data not just on sales and speed and efficiency of delivery. Scott that will address specific use with suppliers and customers cases. Whilst 1G, 2G, 3G and 4G that improve efficiency, speed production schedules between retailer Galloway6 has predicted that in the and reliability through a number The supply chain is vital to the retail in order to deliver superior and manufacturer (as in the Walmart future Amazon will send consumers were primarily about voice and then industry as it represents both a large of features: customer value at less cost to and Proctor & Gamble case), but two boxes a week: one containing data, 5G will be about connecting cost and a source of competitive everything with minimal delay, · A Distributed Cloud Architecture advantage. Supply chain costs are all the supply chain as a whole.”2 also on the location and condition all the goods Amazon thinks you will of goods throughout the supply chain. need and the other to return what faster speeds and at larger scale means resources can be allocated the costs associated with warehousing, with billions of devices (via the from the cloud enabling a better These devices will also capture data you don’t require, all based on data transporting and handling goods Internet of Things). user experience At the core of SCM is the theory of on everything from consumer and captured through interactions in the from the point of manufacture to the collaborative advantage3 - the idea that team member movements (both in supply chain. · Massive MIMO Antennas that point of purchase. They have been It’s important to understand that more value is created by collaboration and outside stores), stock levels in can focus the radio signal towards calculated by the Reserve Bank1 to In this report, we look at how ready the journey from 4G to 5G will not than by competition, and that when two consumers’ fridges and appliances, multiple users simultaneously, represent 40% of retail selling prices. the Australian retail industry is to take be a step change. Rather, many or more organisations pool resources the availability of consumers to receive increasing speeds and As a result, any company in the supply advantage of the potential of such data- features that will eventually be and skills, all will benefit. a delivery, and much more. reducing interference chain that controls these costs can driven supply chains and how prepared collectively standardised as “5G” will potentially improve profitability. In One of the earliest examples of Data storage is already being they are to compete with data-driven be incorporated into forthcoming · New protocols and frame other cases, a supply chain can also supply chain collaboration in action transformed through the increasing online competitors. What do retailers releases of 4G LTE standards and structures, which will reduce provide a competitive advantage by was between Walmart and Proctor & capacity and flexibility, and decreasing see as the benefits of deploying a will progressively be deployed by latency for all services and improve delivering goods to the right place more Gamble in the mid 1980s.4 Walmart cost of cloud computing. Wide data-driven supply chain? And what carriers such as Telstra alongside reliability for mission-critical quickly than rivals, thereby serving agreed to share point of sale data with adoption of cloud computing – in are the challenges involved in deploying 5G deployments. IoT services customers better. Proctor & Gamble and, in turn, Proctor combination with other technologies a data-driven approach (including for There will be three major & Gamble agreed to ensure optimal like blockchain and data exchanges the human relationships that make any · Network Slicing, which enables Organisations that are able to leverage benefits to 5G: on-shelf inventory at Walmart. This – will mean information can be supply chain work)? a granular way to segment data to cut supply chain costs and · Ultra-low latency: For mobile the network, allowing finely resulted in increased sales, decreased shared by all parties, not just point- compete more effectively will gain broadband services, 5G will grained performance and cost inventory in the supply chain, lower to-point collaborators like retailers the edge in the market. Today, it approximately halve latency, optimisation to be applied to costs for Walmart and better market and manufacturers. increasingly comes down to data – how which will greatly improve the individual applications, industries intelligence for Proctor & Gamble. Since it’s captured, stored and analysed – all Data analysis will also be transformed responsiveness of internet and customers then, supply chain collaboration (SCC) of which has been a key factor in the as autonomous or semi-autonomous applications. For mission-critical has become a well-established practice success of organisations as diverse as platforms allow businesses to discover · Network Function Virtualisation in parts of the retail industry, with IoT applications, 5G will provide very Wal Mart, Inditex, Amazon and Alibaba. deeper insights, make predictions, or enables the use of commodity studies showing that it delivers benefits low latencies at very high reliability, generate recommendations in virtual network infrastructure, which can such as risk reduction, cost reduction, which will enable brand new real time. Most of all, high-speed data rapidly adapt to the changing needs access to complementary resources, industrial automation applications networks will enable collaboration to of the network. improved productivity, increased take place at a pace that allows timely · Increased speeds: 5G will provide competitive advantage and increased business decisions. significantly faster data speeds profitability over time. and greater capacity, eventually providing ten times the speeds and capacity of 4G. 06 07
Australia Post: Data driving functional capability Australia Post has been around for As both a retailer through its nationwide Australia Post’s biggest challenge now 209 years, but the last seven have network of Post Offices and a delivery is how best to use data to drive change seen some of the biggest changes in organisation, the company is now and improve collaboration. The recent its history, with the number of parcels looking very closely at its supply chain launch of the Shipster platform is a they deliver overtaking letters for the and how it can better leverage data prime example. first time. There is no doubt this has to improve the customer experience. With Shipster, Australia Post is been driven by Australia’s growing It’s all about understanding what essentially creating an ecosystem appetite for online shopping – up a the customer wants and aligning of merchants and retailers involved in whopping 19.2%7 last year alone. their service offering to that. online shopping. The aim is both to help For the company, this new And the organisation understands them grow their online businesses and e-commerce world is presenting that customers want choice, they remove one of the biggest barriers to both enormous opportunities – and want convenience, and they want that goal – shipping and shipping costs challenges – as they move from their everything now. – by combining data from merchants, traditional business model towards Like many big corporates, their legacy consumers and logistics providers to an omnichannel, on-demand future. systems and infrastructure have get items where and when people want required major transformation. Beyond them. Over a hundred retailers and that, however, they are now focusing merchants are already onboard and on a number of key questions. What another thousand are on the horizon. do customers want in-store? How do So what next for Australia Post? Will retail systems connect to real-time drones one day be delivering our mail? inventory? How does the customer Nothing is being ruled out of the mix, want their parcel delivered: click and it seems. Whether it’s an autonomous collect, online or physical? How can the electric vehicle or a drone, the company customer get visibility of their order? aims to continue leveraging data, and And how can the delivery network evolving its business model to make be optimised to get a parcel to the sure they can keep giving customers customer as quickly and efficiently what they want, when and where they as possible? want it. Data is the thread that runs through Find out how another Australian all this, and the customer’s mobile company, Linfox, is taking a new number is one simple data set that is approach to data on page 34. proving very powerful, connecting into all the organisation’s internal data sets and systems. By having access to that data and knowing where an item is in the supply chain, the company allows their customers to say, ‘I want this item delivered here now, but in ten minutes time I want to change my preference,’ and the supply chain has the flexibility and fluidity to keep up. 08 09
3. Our research 3.1. Research questions Data-driven supply These are the technologies that are and hypothesis chain framework facilitating large-scale data capture Data-driven supply chain framework (IoT), automatic analysis (AA) and more In our research, we sought to explore We hypothesised that readiness effective collaboration between supply the phenomena of data-driven to adopt a data-driven supply chain partners (cloud, blockchain and 1. Belief that data-driven supply chains will increase sales, margin and supply chains and investigate three chain (DDSC) approach consists data exchanges). business efficiency through Deployment of key technology key questions: of three conditions. improvements in: Thirdly, we hypothesised that for a Belief in 1. What are the key readiness factors First, there must be a belief in the a. Data capture devices Technology a. Fullfilment (delivery in full, DDSC approach to be implemented, (IoT, video, etc.) Business on time [DIFOT]) for the successful execution of a business benefits that DDSC can b. Automated data analysis tools Deployment there must be strong relationships c. Platforms for collaboration Benefits b. Inventory (turnover, days supply, carrying cost) data-driven retail supply chain? deliver i.e. management must believe between the supply chain partners. (cloud, blockchain, etc.) c. Responsiveness (lead time, flexibility) that an investment in DDSC can deliver The resulting framework builds on a d. Quality (defects) 2. What are the current readiness levels e. Network optimisation increased sales, margins or business recent review of academic studies across retail, transport/logistics and efficiency through measurable into supply chain collaboration by 2. Top management commitment manufacturing businesses? improvements in supply chain KPIs Ralston et al8 that found the three main 3. What gaps in readiness exist like fulfilment rates, inventory initiators of SCC are internal (belief), between supply chain actors productivity, responsiveness, technological and relational. (retail, transport/logistics and quality or network optimisation. Relationship manufacturing) and between Strength Secondly, the key technology small and large organisations elements of a DDSC must be adopted. in these sectors? Inter and intra company a. Levels of trust b. Risk and reward sharing c. Common business language Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. 3.2. Sample and method Forrester Research conducted the An effort was made to ensure we quantitative part of the research on received responses from all parts We conducted both quantitative behalf of Telstra. The data was gathered of the supply chain (retail, transport/ and qualitative research to answer via an online survey during December logistics and manufacturing) and that our research questions and test 2017 and January 2018. 200 responses both smaller businesses and larger our hypotheses. were received from supply chain businesses were represented. professionals from around Australia. 10 11
“To what degree do you believe the following are benefits of your organisation implementing a data-driven supply chain?” (Showing percentage of respondents selecting “Strong benefit” or “Benefit”) Accelerated inventory turnover 56% 39% (reduced days’ supply, reduced carrying cost, improving management of risks an loss) Improved fullfilment 55% 39% (on time and in full) Reduction in number of defects (damage during transport, wrong shipments, etc.) leading to superior quality 58% 34% Increased responsiveness through reduced lead time/increased flexibility 58% 34% through real-time data sharing within supply chain partner network Improved network optimisation, better placement of physical facilities 52% 36% (stores, distribution centres) and stock held in them Respondent profile: Strong Benefit Benefit Company HQ location Company size (in Australia) Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. 1,000 or more employees 14% Australia N=22 N=53 US N=21 500 to 999 employees 36% When asked to rank these benefits, our “15-20% of complaints relate In general, retailers and transport/ respondents nominated improvements logistics companies were in lock-step, in DIFOT (70%) and better utilisation of to fresh products. Anecdotally but manufacturers ranked the benefits Europe 250 to 499 employees 35% assets (including inventory) across the lettuce has a lifespan of differently. For example, while higher N=37 Asia Pacific excluding Australia network (62%) as the most important. 2-3 days and a lack of visibility margins ranked as the number one N=67 leads to participants holding general business benefit for retailers Other (Canada, China, 100 to 249 employees 15% The interviews we conducted confirmed and transport/logistics companies, it Latin America, MEA) a belief that data-driven supply chains the stock at non-retail only ranked sixth with manufacturers. would create positive outcomes in locations for over 24 hours, Likewise, while better-informed terms of cost, visibility and agility, as well as improving work practices in the limiting shelf life.” business decisions ranked number one with manufacturers, it ranked Target industries Level of decision-making supply chain. “I suppose, over time, (data has) become only sixth with retailers and transport/ “….often when…something’s more important because once upon a logistics companies. And while increased business agility was seen as gone wrong or out of service time a logistics transport infrastructure an important benefit by 62% of retailers was locked and loaded for life, so it was or your cost profile’s not right all about inventory. Nowadays, pretty and transport/logistics companies, Manufacturing 35% 35% Decision maker for supply 32% 99% of the time, what much every part of the supply chain less than half of manufacturers shared Transportation, chain operations strategies underpins that is the right is flexible… In the eighties, data was this view. logistics and Influences decisions related warehousing information not being in the more about making sure you ordered This disparity in ranking of business to supply chain operations 68% strategies the right stock. Nowadays every part benefits is probably a reflection of the Retail right place.” of the supply chain is driven by some different planning horizons of retailers, 30% data decision.” transport/logistics companies and “Understocking and overstocking manufacturers. Manufacturers like is costing us a small fortune.” “So the promise of data that is richer, more connected is that we potentially to plan production as far in advance “We’ve got (thousands of) products could respond in a more agile fit for as possible, to maximise efficiency, Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia that are shipped on the average of the purpose way that would scale both while retailers and transport/logistics Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. average rather than the optimal of what up and down to match demand (while) companies are more concerned with we actually could ship. So we see an maintaining service levels.” maximising demand opportunities as enormous amount of ability to strip a they present themselves. The issue of The qualitative phase of the research 3.3. Results and discussion supply chain deliverables and general huge amount of cost out of our supply There was also recognition across alignment has always been important consisted of a number of semi- business performance. chain (using data).” the supply chain that DDSCs would in supply chain collaboration, and it will structured interviews with retail supply 3.3.1. Belief in business benefits improve general business performance be important in deploying a data-driven Traditional deliverables like inventory “Stock management should take up chain professionals from Australia. Our survey respondents showed – delivering sustainable competitive supply chain because both require a turnover, delivery in full on time (DIFOT), 10% of my time but it’s taking up 95% The interviews were conducted an overwhelming belief that a data- advantage, improved management of coalition of the willing. defect reduction, responsiveness and of it. It’s like playing catch-up football.” between November 2017 and driven approach will deliver tangible risk and loss, improved margins, better network optimisation were all seen February 2018. business benefits in both traditional informed business decisions and agility. as benefits of a data-driven approach. However, the ranking of these benefits was not consistent. 12 13
“Which of the following could be/are benefits of your organisation “Which of the following could be/are benefits of your organisation implementing data-driven decisions?” implementing data-driven decisions?” (Showing aggregate percentages of ranks) (Showing aggregate percentages of ranks) All Manufacturing Transport/logistics Retail All Midsize (100 to 499) Enterprise (500+) and warehousing Creating a sustainable 65% 71% 61% Creating a sustainable competitive advantage 65% 59% 78% 78% competitive advantage Improved management Improved management 65% 77% 70% 70% 65% 64% 25% of risk and loss of risk and loss Improved margins 64% 42% 82% 82% Improved margins 64% 65% 24% Make better-informed business 60% 81% 30% 30% decisions using insights from big data Make better-informed business 60% 60% 36% decisions using insights from big data Reduced costs 46% 49% 50% 50% Growth in revenue Reduced costs 46% 46% 60% 40% 38% 30% 30% More efficient scaling 37% 51% 28% 28% through automation Growth in revenue 40% 39% 40% Increased business agility 36% 30% 62% 62% More efficient scaling 37% 34% 16% Improved data quality through automation 27% 33% 22% 22% and consistency Increased business agility 36% 36% 21% Increased business efficiency 26% 19% 18% 18% Strengthened channels/ Improved data quality 18% 9% 18% 18% 27% 28% 66% partner network and consistency Access to valuable data 16% 12% 12% 12% that was not used before Increased business efficiency 26% 27% 46% Strengthened channels/ Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia 18% 14% 64% Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. partner network Access to valuable data 16% 15% 41% that was not used before Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. As well as recognition of the benefits, more advanced in their analysis of data large and smaller businesses. there is both aspiration and action and 57% say that they already gather Smaller businesses are generally among supply chain businesses more data and apply the learnings more less aspirational and have taken less to actually implement a data- quickly than their competitors. action towards becoming data-driven This could be a reflection of both the supply chain negotiations. SMEs know general agreement that data-driven driven approach in their operation. than large businesses, even though resources required to deploy a data- that data-driven supply chains will supply chains will deliver substantial Retailers, transport/logistics and For instance, 65% of our survey our research shows they have a bigger driven approach and the relative lack deliver tangible business benefits, but benefits, smaller businesses need to manufacturers are broadly aligned respondents aspire to become more belief in some of the core business of power enjoyed by small businesses don’t expect and are not preparing to find the resources to compete. here. However, there is – perhaps data-driven, 57% aspire to become benefits of becoming more data-driven. compared with large enterprises in be part of the ecosystem. If there is unsurprisingly – a divergence between 14 15
“Thinking about your company’s operations, how much do you “What is your firm’s timeline for implementing t he agree/disagree with the following statements?” following Internet of Things applications?” (Showing percentage of respondents selecting “Strongly agree” or “Agree”) (Not all responses shown) All Midsize (100 to 499) Enterprise (500+) We want to become more Inventory management or warehouse data-driven in our decision making 24% 41% 24% 26% 23% 56% management – tracking inventory levels 32% 24% 28% and managing warehouse operations We want to become more advanced Facility, smart building, and energy in our ability to perform analytics 17% 40% 12% 28% 22% 52% management – monitoring and remote management of 29% 36% 24% building security, communication and HVAC systems We gather more data, learn, and optimise in a changing market 29% 28% 29% 22% 28% 34% Fleet management – monitoring and managing faster than our competitors the condition and location, and usage of vehicle fleets 28% 21% 30% We measure process and decision (e.g. airplanes, taxis, buses and trucks) outcomes so as to quickly refine our 18% 37% 14% 34% 22% 39% analytics based on what we learn Supply chain management – managing supply chain relationships including payment processing 19% 34% 31% We want to get more value from big data 15% 40% 13% 27% 16% 52% Industrial asset management – monitoring and We are good at ensuring managing the location, condition, and usage of 8% 38% 35% analytic insights actually 18% 36% 14% 22% 22% 49% industrial equipment and machinery create effective actions Operational efficiency has been Upgrading chain of responsibility 7% 25% 43% the greatest benefit from our data 18% 32% 16% 34% 20% 29% to comply with Australian legislation and analytics investments Customer order and shipment/delivery tracking – monitoring, managing and reporting status 6% 38% 37% Strongly agree Agree of order enabling customer visibility into the status of orders and deliveries Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Smart, connected products – incorporating Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. connectivity and intelligence into products, in industrial, 2% 35% 38% commercial and consumer markets Planning to implement Implemented/expanding Interested but no plans within 12-24 months 3.3.2. Technology deployment 1. Technologies to collect data The good news from our study is that at scale (IoT). these technologies are being adopted The second part of our hypothesis was across the supply chain and there are that some key technologies need to be 2. Technologies to analyse it automatically plans to increase adoption over the next In our interviews, we found a number There is also enthusiasm for a test-and- 3.3.3. Relationship with partners deployed for an organisation to be ready or semi-automatically (AI). 12-24 months. Very few of our survey of IoT applications are being deployed learn approach to adopting technology. for a data-driven supply chain. These The third part of our hypothesis was 3. Platforms on which to collaborate respondents were not interested in in the transport/logistics sector. technologies come in three categories: “We’ve been trialling autonomous that relationships need to be strong with the data. deploying these technologies. “We’re doing lots of trials at the forklifts. The business case doesn’t for an organisation to be ready for particularly stack up at this point, but data-driven supply chain. In this moment with vision picking, to we know it’s coming … so we’re learning case, 63% of our survey respondents capture a lot more information now what the implications (are) from reported having good or exceptional via cameras – things like serial a safety point of view, what happens if relationships with their suppliers and “What are your firm’s plans for the following technology concepts?” numbers and bar codes. the batteries die, how do you overrule customers. This would seem to be a it, all those types of things – that’s solid platform on which to build supply (Not all responses shown) One of our big sectors is the way that we sort of approach chain collaboration technology. service logistics. So you might this technology.” have the technician out fixing Internet of Things 56% 26% 16% 3% something and (with vision picking) be able to log in to the Public and hybrid cloud big data services (e.g. AWS, Azure) and data warehouse 35% 35% 24% 7% DC, say this is the part that I automation (e.g. Snowflake) need, to be able to see what Large-scale predictive modelling, they’re looking at and confirm data mining, or other advanced analytics 33% 35% 24% 9% it before shipping it out there.” Planning to implement Implemented/expanding Interested but no plans Not interested within 12-24 months Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. When we asked what type of that it is mainly IoT technology for deployments were in place or under the collection of data for supply consideration, the responses show chain management. 16 17
“Which of the following factors do you see as key operational improvement of collaborating between your company and your supply chain partners?” (Showing top three ranks) Alignment on common goals and shared (transparent) metrics 22% 16% 28% Ability to share granular transaction data frequently 22% 21% 14% Ability to synchronise master data 15% 22% 19% Use of common business language or semantic terms 15% 13% 15% Transparency across the network of inventory balances by location, labour, warehouse, and transportation capacity, transparency of purchase 8% 19% 13% and PO call offs to an agreed planning horizon Transport order status and (final) customer satisfaction 18% 9% 11% Rank 1 Rank 2 Rank 3 Base: 165 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. In our interviews, collaborative “I think (collaboration) means having a When we asked what data was “How would you rate the strength of relationships between your company relationships were consistently long-term goal and both being focused currently being shared with suppliers characterised as being founded on what you’re trying to achieve and and customers, a different picture and your supply chain partners related to collaborative technology?” on mutual benefit. there being benefit in that for both emerged. Data is indeed being shared, of you versus each being year by year, but this mainly relates to having a “When I meet with those hit a number and it’s all focused on delivery accepted or an invoice paid. (collaborative) suppliers, I do what we need to achieve… Just that Strategically important data that could Exceptional 27% ability to accept there’s two sides of the make the supply chain work more get a sense, it was a genuine story and we’re both here being willing efficiently – like sales information from desire, for our businesses to share and learn from each other. retail point of sale systems or item Good 36% to be successful and more And being open for us to try new things master data – are among the least likely successful. And what that that might mean sometimes we actually to be shared. This implies an inherent fail even if that might mean that we lack of trust between supply chain Moderate strength 20% looks like to me is they don’t hit a result.” partners when it comes to sharing understand what our strategy strategically valuable information. is – they’re trying to present to Weak 14% us products that align to what that forward strategy and Poor 4% customer aspiration is. So that, to me, says they’re truly trying to make our Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. business successful.” Where collaboration is being practised, respondents ranked the benefits “soft” actually “seeing the data that will help a number of specific business benefits to “hard” i.e. they see the most benefit drive the supply chain more efficiently”. occur. It was interesting that our survey in “aligning objectives” followed by 18 19
“To what degree do you share data with your partners across the supply chain?” (Not all responses shown) Find out how Otto is using predictive customer analytics in the supply chain. Sharing data about See the case study on page 31. shipment; for example, ASNs 57% 29% 15% Sharing purchase order, purchase order acknowledgement, or goods receiving data 54% 39% 8% 3.3.4. Barriers to adoption We have seen that actors in the retail Sharing data about quality deliveries 49% 39% 13% supply chain understand the benefits of a data-driven approach, have begun deploying the necessary technology Sharing inventory data with supply chain partners 43% 43% 14% and claim good relationships with their supply chain partners. According to our Sharing customer data with supply chain partners 40% 47% 13% hypothesis, this would suggest there is a degree of readiness to adopt the data-driven supply chain, so what are Sharing location master data like GLN 35% 52% 14% the barriers to deployment? Sharing a perfect order “How do we bridge that gap 30% 46% 25% perfect delivery score card between us seeming so Sharing point-of-sale scan data futuristic to people that they 30% 37% 34% with supply chain partners don’t even know where to start? You know, how do Sharing data about yard slots for deliveries 10% 56% 35% we bridge that gap, that Sharing master data, for example, weight practical reality of taking 5% 56% 40% and cube for GTIN at unit, case or pallet level the next step to execution (that) seems real?” Shared with partners Share with selected Not shared collaboratively partners, but not widely Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Note: Percentage may not total 100 because of rounding Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. The reluctance to share strategic Some retailers guard information Some in the third party logistics (3PL) information was a theme of our jealously and infer in it a sense world challenged the retailer view interviews. Some saw it as a deeply of competitive advantage. that data has intrinsic value. They embedded cultural phenomenon were especially opposed to the idea “We actually had a request from a big that will be hard to break. that supply chain partners should be (manufacturer) the other day where charged a fee for access to it. They “Our entire commercial and they want us to give them all our store instead argued that, like many other data and store sales so they can legal system in Australia, New predict (demand). We don’t actually resources, supply chain data really only Zealand and probably other has value in use. give that information, we hold that parts of the Commonwealth pretty tight because, for us, it’s a “My view is that the value are adversarial. Resolving competitive advantage.” in the currency of data has an issue, it’s not inquisitorial, Ironically, some retailers are still something to answer for. I think it’s not data-driven … it’s all prepared to blame the manufacturer or wholesaler when out of stocks occur that we’re now realising that adversarial. So the buying and during promotional periods. what the data can tell you is selling relationship, whenever the real value, and by sharing “One of the biggest problems was we there’s two parties where would never get a proper forecast from it you’re going to maximise one is providing a service the (retailer) and then there’d be the the value. And I think that to another, you always get age-old ‘well, you should have had ownership of data is the the stock, we’ve had lost sales, etc.’” to this adversarial position, biggest inhibitor too, not only which is hard to break.” collaboration of course, but a truly data-driven supply chain.” 20 21
“What are the biggest challenges your firm faces in implementing a data-driven supply chain strategy” (Showing percentage of respondents selecting “ Very significant challenge,” “Significant challenge,” or “Challenge”) Data security/data privacy 30% 36% 24% Lack of capability to enable us to transform data insights into business action 16% 46% 22% Complexity of vendor application installations 31% 25% 26% Lack of budget 22% 38% 21% Poor data quality 26% 32% 21% Inadequate or missing relevant internal skills 10% 20% 26% Lack of business C-level executive support 15% 19% 20% Very significant challenge Significant challenge Challenging Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. “Looking at the technical implementation of data capture and analysis tolls and technology, how challenging is each element for its implementation in your organisation?” (Showing percentage of respondents electing“ Very significant challenge,” “Significant challenge,” or “Challenge”) Data security There are also concerns about the size Complexity of of the ecosystem that could potentially technology deployments The number one barrier seen by our be sharing data. Many SMEs, in survey respondents to adopting a DDSC Our survey respondents also saw particular, may not have the security approach was security of data. This practical problems in deploying Managing data capture 34% 27% 21% measures in place to ensure a retail and movement is not surprising given that we have a data-driven approach that related ERP system is safe if made available seen how importantly our respondents to the complexity of the technology. for collaboration. regarded data. When we asked specifically Analytics competency 26% 30% 26% In our interviews, we also found “We’re very protective of about deploying data capture and making sure that there’s no analysis tools, respondents cited businesses conscious of a duty of care Analytics technology maturity 28% 28% 24% major challenges as including around data on behalf of their customers. way they can bring our systems the management of data capture “The technology’s moving faster than down or that they can create and movement, the maturity of AI Complexity of integrating data, analytics, and IoT software 19% 38% 22% the social implications or the security viruses within our system by technology, integrating applications, implications. We’re probably one of those governance of management and sorts of organisations that need to make giving them the access.” sharing of data, as well as the Integrating enterprise and IoT data 21% 33% 21% sure everything is protected. And we’re previously mentioned skills gaps. quite conservative in our approach – if Skills gaps Data ownership and governance 16% 33% 22% In our interviews, we heard that even we don’t think that we can do it properly The next most important barrier to when a retailer has the intention to then we tend not to do it.” adoption of DDSCs is a skills gap within collaborate, sometimes they simply do Data and insight sharing 15% 16% 21% supply chain organisations. Supply not have the technological tools to do so. chain organisations feel they simply do not have the skills available to execute “I don’t think we’ve got the Basic network and infrastructure data protocol issues 10% 15% 10% on a data-driven approach. As we will tools to give our suppliers the see later in the report, this is an issue real transactional information already being addressed by some overseas retailers. and right forecast to Very significant challenge Significant challenge Challenging collaborate properly.” Base: 200 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. When we asked specifically about cloud of issues relating to operating across network design latency and the skills deployment as a collaboration platform, multiple platforms, including managing gap previously noted. our survey respondents cited a number compliance, security, support for apps, 22 23
“Looking at the technical implementation of cloud collaboration technology, how challenging is each element for its implementation in your organisation?” (Showing percentage of respondents electing“ Very significant challenge,” “Significant challenge,” or “Challenge”) “It’s a complex web of legacy stuff that you’re trying to unravel while Managing compliance levels across you’re trying to bolt on the new. 35% 40% 20% environments in the supply chain And, for me, I feel that’s the hardest thing to work through.” Privacy (e.g. unauthorised access/data breaches/theft) 28% 30% 23% One of things our respondents admired about Amazon was the Application support issues (e.g. apps 13% 41% 21% way innovation is baked in to their not supported or badly supported in particular) organisational process. Network design – architecting hybrid cloud networks, 18% 31% 25% “What they do is implement virtual private networking across different environments straightaway and they then Monitoring is a challenge 16% 32% 25% assess the customer experience. And if the Security (e.g. app/data protection) 28% 31% 14% customer experience is of value and resonates and it is Managing network performance/latency the right customer experience, 10% 26% 31% between clouds and to/from cloud platforms then they will quickly find Lack of skilled employees to the efficient (way to deploy it) 18% 21% 20% manage collaborative cloud platforms in the supply chain.” Very significant challenge Significant challenge Challenging Relational barriers to collaboration Base: 118 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. When we asked about barriers to collaborating more with partners, a non-technological factor was ranked highest i.e. alignment on common goals. This was closely followed by the lack Some CEOs are simply philosophically “If there was a technology platform “It’s hard to compete (for) the of a common business language or data opposed to holding data outside the that you could exchange information building, which makes any kind of on, that you could collaborate on in CEO’s attention when you’ve standards to facilitate data exchange. data-based collaboration difficult. an easy way, then that would enable got Sales and Marketing It’s interesting that for this question, you to, I think, manage a bigger pool promising the world and security was ranked lowest among the “I’ve heard people come into of partners. But I don’t see that increasing sales by 10% is responses. This suggests there are the business and say, ‘You’ve anywhere at the moment.” going to deliver (more benefit) major strategic alignment and data harmonisation issues to be addressed spent so much on servers and Organisational barriers than a 50% improvement before the issue of security can even there’s other ways of doing Our interviews also uncovered a number in the supply chain.” be considered. things now,’ but (the CEO is) of familiar organisational barriers in the very protective of our way of innovation. Attracting funds for In the retail world, supply chain infrastructure and that supply chain investments, especially managers are not used to building when competing with other projects investment cases for transformative probably can be a bit of that are seen to have a direct impact investments yet they need to assume a barrier when you’re on revenue, was seen to be a problem. that role in the future. sharing information.” “I suppose a lot of our time and “Supply chain managers are often in attention is growing our store an influencer role and it’s quite new for Others are looking forward beyond pure network. So therefore, the priority us to be seen as bringing value to the cloud to data exchanges, which promise is market growth.” business other than the lens of lowest the ability to share harmonised data cost to move. The concept of data sets between partners. connectivity creating enterprise value coming from a supply chain professional would be foreign for most I suspect!” There is also the problem of maintaining legacy systems and investments while simultaneously trying to transform. 24 25
“Which of the following factors are barriers to collaboration between your company and your supply chain partners?” (Showing percentage of respondents electing “ Very significant challenge,” “Significant challenge,” or “Challenging, but manageable”) Lack of alignment to common business goals, including risk and reward sharing, for all parties in the value chain 29% 23% 26% Lack of a common business language or set of standards for data exchange 29% 20% 17% Inability to share event or transaction data at a sufficiently granular level, sufficiently frequently 23% 23% 23% Lack of transparency of inventory, transportation, storage, or labour capacity 26% 20% 17% Lack of connectivity or other technology issues 11% 29% 14% Inability to synchronise master data (for example GTIN and attributes) 17% 23% 11% Concerns about data integrity, security and privacy 14% 9% 23% Very significant challenge Significant challenge Challenging, but manageable Base: 35 decision makers/influencers responsible for supply chain operations strategies within Australia Source: Forrester Research conducted the fieldwork for the quantitative part of the research on behalf of Telstra. In our interviews, the idea of having In the upstream world of transport/ “I think gain share works fewer but deeper relationships was logistics and manufacturing, there seen as a way to facilitate collaboration. is also the issue of incentives to if you have an honest cultural collaborate. If supply contracts environment that says “I very much favour a model are based on fixed fees for delivery ‘I respect the fact that both where you’ve got a really core of KPIs, then there is often no of us have to make money group that you’re building deep commercial reward for a partner who may see opportunities to improve a and that’s just the reality.’ relationships with and then process. Some of our respondents If you walk into every meeting you’re topping up with anything said that sharing the rewards from and the first part of the that they can’t service you on. improvements in the supply chain conversation is, ‘You guys are is a way to change this. Because I think it’s difficult for making a fortune,’ you sit there them to get deep understanding “Sometimes you sit there and you go, and think, ‘I don’t need to hear ‘I’d love to do all this work, but you of your business and vice versa know what, I get no value if I do find this again. I have a right to if you don’t have a smaller improvements.’ I think it will change make money and my job is pool that you can grow over when you start the commercial to help you make money.’” time with.” arrangement and say, ‘You know what, if we could improve the supply chain we’d both get a dollar each out of it.’” 26 27
3.4. Our research: Conclusions 3.4.1. Collaborators need to align 3.4.2. Data is the new oil but only 3.4.3. Data is a resource that Collaboration requires a coalition of when it can be used needs securing the willing. Our research shows that Oil, generally thought to be the product Resources can be tangible (operand) there appears to be no problem with of decaying organic material held in or intangible (operant). Vargo and willingness to collaborate in the retail sedimentary rocks, has been with us Lusch introduced the idea that value supply chain. The major barrier appears for millions of years. However, oil only is created when ‘operant’ resources to be one of execution i.e. alignment became useful when we gained the are applied to ‘operand’ resources between the parties on business ability to refine it in the nineteenth to create value. They used the objectives. This is not surprising in the century. It was then that oil did indeed microprocessor as an example of sense that supply chain organisations transform every industry especially an operand resource (silica) turned have inherently different business by facilitating the development of the into something valuable through the drivers e.g. a manufacturer generally motor car and the aeroplane. application of an operant resource benefits from scale and would like as (knowledge). Data is an intangible or much time as possible to respond to Likewise, data has been with us since operant resource, but when deployed changes in demand, whereas a retailer retail began. If we could take a time in the supply chain it can be used to generally benefits from its ability to machine back to the great markets replace inventory, fixed assets, labour respond to demand in the short term of ancient history, we would see even physical locations through better and therefore prefers short lead times transactions being made, customers sensing of and responding to demand. and flexible order quantities. being served, supplies being ordered Data is therefore potentially as and delivered, and invoices being paid valuable as any of the tangible assets As we saw in our interviews, alignment – all generating data. What’s changed on a balance sheet and needs to be on objectives can also be an issue in recent years is our ability to capture protected accordingly. internally with different departments and store data, analyse it and share it within the same company often having with others – in other words, to make Overseas there have been a number different and contradictory drivers it useful. of high profile attacks on retailers, underlying their work. mainly targeting consumers’ personal Our ability to turn data in to a usable information. The retail supply chain is Even though business drivers and resource mirrors the breakthrough in arguably even more vulnerable because objectives may be different, the oil refining in the nineteenth century. of its interaction with large numbers of competencies of an organisation and Unfortunately, our research shows that SMEs who are less likely to have their a supply chain are complementary. data may not yet be as usable as we data protected. Manufacturers, transport/logistics would like to think. Our respondents companies and retailers are in the said: data is easy to collect but hard to The Australian government business of combining to get goods and manage, there are problems making it conservatively estimated the cost of information from point of production to compatible across different apps, the ransomware to the Australian economy point of consumption and sometimes tools to analyse it are in some cases to be approximately A$1 billion per back again. When competencies are immature, and the problems multiply year. It’s therefore not surprising that complementary, the conditions exist when we attempt to share it across supply chain actors cite security as for organisations to create something multiple platforms in the cloud. It their number one barrier to adopting bigger than the sum of their individual seems we are not quite at the point of a data-driven supply chain. To remove parts. This is the promise of the theory being able to use data to fuel our supply this barrier, supply chain businesses of collaborative advantage9, which chain in the same way we can use should consult a trusted partner in differs from the Porter’s theory of refined oil to fuel our cars. cyber security to ensure shared data competitive advantage10 in attributing is protected and the benefits of data- value creation to a network rather than Data needs to be accessible and useable. driven collaboration are not lost. an individual entity. Overseas we are seeing retail enterprise systems being rewritten from the 3.4.4. This vehicle needs Likewise, the transition to data-driven long recognised the benefit of PhD Aligning business objectives can ground up with exposed APIs to facilitate extra drivers supply chains requires the traditional data scientists in their businesses. be achieved through old-fashioned easy and quick access internally and skills of supply chain professionals, Traditional retail companies now also talking or through facilitated design externally. We are also seeing the The Apollo space programme took men but it also needs mathematicians. It need to fill this skills gap. Forming thinking sessions, but for it to be emergence of data exchanges that to the moon for the first time. Many of is mathematicians or data scientists closer ties with universities who have operationalised incentives need to be facilitate the sharing of data between the men selected to be astronauts had who will interrogate the data and pipelines of PhD students and have aligned. The coalition will not remain multiple supply chain players, as well as been fighter pilots or test pilots so were build the algorithms that turn supply post-doctoral students as potential willing if one party takes the lion’s share the use of blockchain technology that highly skilled in flying. Unfortunately, chain data into useful business project resources may be a logical of the spoils. For data-driven supply helps verify hands-offs between supply getting to the moon needed more information. Our research showed that first step. chains to be adopted, it’s important the chain actors. These developments hold than just flying skills and today it these skills are in short supply in the benefits of collaboration are shared the promise of overcoming current is acknowledged that without the Find out more about how retail supply chain. Data science is equitably11 and not just realised by one concerns with technology, making data contribution of mathematicians (many PhD-accredited data scientists predominantly the domain of PhDs, an party (usually the retailer). useful and assisting in the adoption of female), the journey to the moon could are transforming Target USA. academic credential not traditionally data-driven supply chains. not have been made. associated with the retail ecosystem. See the case study on page 32. Online retailers like Amazon have 28 29
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