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Rick Blasgen, President & CEO Council of Supply Chain Management Professionals (CSCMP)
Sean Monahan, PartnerA.T. Kearney
May 1, 2017
Navigating the Road Ahead: insights from CSCMP’s State of Logistics Report
A.T. Kearney CSCMP 3
A Professional Association: Evolution and Relevancy
1963
1985
2004
National Council of
Physical Distribution
Management
Council of
Logistics
Management
Council of Supply Chain
Management Professionals
A.T. Kearney CSCMP 4
EDUCATION
RESEARCH
CONNECTIONS
NETWORKING
CAREER RESOURCES
CSCMP – What You can Experience!
A.T. Kearney CSCMP 5
Join us in Atlanta, Georgia for CSCMP’s 2017
Annual Conference, September 24-27
Register today!cscmpconference.org
SCM professionals
under one roof
3000+
hours educational
content
120+
hours dedicated
networking
25+
A.T. Kearney CSCMP 6
Supply Chain Concierge Service
Join the Community – visit CSCMP.org!
CSCMP’s Evolving Role
• Goal
Connect, Educate and Develop the
world’s Supply Chain Professionals!
A.T. Kearney CSCMP 7
Meet A.T. Kearney• 90 year history
• Diverse global management consulting firm
• Known for Operations expertise, but full service – Digital
Transformation; Strategy; Leadership, Change & Organization
Industry
Expertise
Aerospace & Defense
Automotive Chemicals Comms, Media, &Technology
ConsumerProducts& Retail
FinancialInstitutions
Metals &Mining
Oil &Gas
PrivateEquity
PublicSector
Transportation,Travel, & Infrastructure
UtilitiesHealth
A.T. Kearney CSCMP 8
Our objectives today…
■ Share key insights from last year’s report and preview of perspectives from the 2017 report
■ Challenges on the road ahead
•Infrastructure
•Ecommerce
•Digital disruption
Stay tuned for June release!
A.T. Kearney CSCMP 9
State of Logistics Report is a
collaborative effort …
I Focused economic analysis
II Interviews with logistics industry leaders
III Logistics industry context and point of view
I
V
Trends and deep dives:global trends, sector trends, regulation, technology
State of Logistics
A.T. Kearney CSCMP 10
US business logistics costs
US Business Logistics Costs totaled
$1.4 Trillion in 2015
$ billion
1,169
1,243 1,245
1,063
1,127
1,223 1,273
1,321
1,373
1,408
1,000
1,100
1,200
1,300
1,400
1,500
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
5.1% CAGR2.6%
Source: CSCMP’s 27th Annual State of Logistics Report, A.T. Kearney
State of Logistics
A.T. Kearney CSCMP 11
As a percentage of GDP, USBLC declined
6 basis points to 7.85%
8.44%
8.59%
8.46%
7.37%
7.53%
7.88%
7.88%
7.93% 7.91%
7.85%
7.0
7.5
8.0
8.5
9.0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US business logistics costs as a share of nominal GDP (%)
Note: bp is basis points.
-6 bp
Source: CSCMP’s 27th Annual State of Logistics Report, A.T. Kearney
State of Logistics
A.T. Kearney CSCMP 12
1,408
$0
$250
$500
$750
$1,000
$1,250
$1,500
Motor Carrier Parcel Rail Other Modes InventoryCarrying
Support/Admin Total
U.S. Business Logistics Costs – 2015$ billion
Source: CSCMP’s 27th Annual State of Logistics Report, A.T. Kearney
Truckload
LTL
Dedicated / Private
Intermodal
Carload
Storage
Other
Financing
Air
Pipeline
Water & Ports
Motor Carrier and Inventory are the major
drivers of U.S. Logistics Costs
State of Logistics
A.T. Kearney CSCMP 13
Asia 17% GDP
China 18% GDP
Europe 13% GDP
India 13% GDP
Japan 11% GDP
Mexico 14% GDP
Economy• Higher Output – GDP
• Better use of resources
• Multi-use Infrastructure
Businesses• Market Access
• Market Integration
• Cost Efficiency
Consumers• More Goods and Services
• Wider Availability
• Lower Prices/Income
U.S.
7.9% GDP
U.S. benefits from a highly efficient logistics system
State of Logistics
A.T. Kearney CSCMP 14
U.S. supply chain leverages an infrastructure of tremendous proportion
8.4 million lane miles
46,6320 Interstate highway miles
599,766 road bridges
360 commercial sea and river ports
9,627 miles of inland waterways
140,000 miles of rail
Source: U.S. Department of Commerce
Infrastructure
A.T. Kearney CSCMP 15
However, despite importance to U.S. Economy, that infrastructure is at risk
Surface
Transportation Rail
Waterways
& Ports
Roads Bridges Waterways Ports
Grade D C+ B D C+
Needs
( 2025)$2,042 $1,541 $37
Funding $941 $124 $22
Gap $1,101 $29 $15
Total $1,145 Funding GapSource: American Society of Civil Engineers 2017 Infrastructure Report Card, A.T. Kearney
2017 Infrastructure Report Card – Key Logistics Categories ($ billions)
Infrastructure
A.T. Kearney CSCMP 16
Growing Rapidly Impacting Major Categories
Online Penetration, % of Total Category (US 2016)
No Signs of Slowing Down
• Online growing 3X faster than traditional B&M channel
• From 2012 to 2016, ecommerce grew from 5.4% to 8.1% of retail sales
Widespread Adoption
• All cohorts buying online (boomers, millennial) and penetration is growing for all categories
• Current penetration is low for Food & Bev, however is forecasted to have a sales growth rate of 16% CAGR
Online is growing rapidly at 15% CAGR and the Food & Bev category is underpenetrated
Books, MediaApparel and Accessories
58%
19%
7%
16%
2- 3%
Food and Beverage
Consumer Electronics
Health & Personal
Care
Source: Statista., Euromonitor 2017, United States Census Bureau, A.T. Kearney analysis
$696
$610$532
$462$395
$343
2017F
+15%
2019F20162015 2018F 2020F
Online Sales (US $B)E-Commerce
Under-penetrated
Ecommerce
A.T. Kearney CSCMP 17
Accelerated growth in Food & Bev as consumers focus on convenience and price
US Online Channel Forecast
Year over year online channel usage
Convenience
Key Drivers
• Merging channels – shop anytime, anywhere
• Hassle-free – no commuting,
crowds, auto-replenishment
• Click-and-collect service becomes
commonly offered
Assortment
• Provides an opportunity to expand product offering e.g., “endless-aisle”
• Promotional and specialty item access
Price
• Instant comparison of price and promotion across retailers
• Free shipping as a source of attraction
Source: AlphaWise, Morgan Stanley Research
22%Home furnishings
18%
23%
Sporting goods 15%
15%Home improvement items
Auto parts
Baby food & products 13%
16%
Pet food & supplies25%
18%
6%
Food & Bev (packaged) 28%14%
Grocery (fresh)
22%
19%
8%26%
Next 12 months
Last 12 months
Ecommerce
A.T. Kearney CSCMP 18
Challenge for grocery is unfavourable ship-margin economics for Food & Bev low price-point items
Illustrative
Retailers
Retailer DC Retail Store Handling
CPG Producer HomeTransportationCPG DC
Home
Transportation
CPG Pick
Retailer Pick Transportation
HomeTransportation
1 2 3 4 5 6 7Traditional Fulfillment
“Traditional” Online Order Fulfillment
CPG Direct to Consumer Fulfillment
Illustrative Fulfillment Cost
$0.75
$4.50 $9.00
$9..00$4.50
$0.25 $0.75 $0.35
Cost per Case
CPG $1.00
Retailer $1.75
Total $2.75$0.60
Cost per Case
CPG 1.00
Retailer $13.50
Total $14.50
Cost per Case
CPG $13.50
Retailer NA
Total $13.50
Source: A.T. Kearney Experience
Ship-Margin Economics – Example DTC Fulfilment Unit Economics
Ecommerce
A.T. Kearney CSCMP 19
Logistics industry disruptors
Logistics
industry
Technology adoption
• Autonomous vehicles, IoT• Artificial intelligence• “Uberization”• 3D printing• Big data• Alternative fuels
Macroeconomic trends
• Globalization• Volatile commodity prices• Climate disruption• Urbanization
Consumer requirements
• “Want it now”• Personalization• Millennial preferences• Omnichannel shopping• Aging consumer needs
Operational constraints
• Free trade agreements• Environmental legislation• Safety requirements• Resource availability
On the cusp of a new era: Industry disruptors
Key Disruptors
• Technology adoption: pace and breakthrough nature of technological innovation
• Operational constraints:regulations and resource scarcity will influence the ability to perform transportation and logistics activities
Note: IoT is the Internet of Things.
Sources: CSCMP; A.T. Kearney
Digital Disruption
A.T. Kearney CSCMP 20Source: CSCMP, A.T. Kearney
Long-term View – Four Possible Scenarios
Stop Signs & Red Lights
Fierce operational constraints in a regulated, low-growth environment. Due
to regulations, only the strongest and most easily adoptable technologies
flourish
Middle of the Road
Technology capabilities improve incrementally. Customers have a few more
choices, but no distinctive competitor emerges. Regulators are business-friendly
and rational
Unconstrained Operations
Crusin’ Down the Highway
Widespread and far-reaching tech adoption leads to a new paradigm: capital and technological expertise reframe the
industry
Technology Breakthrough
Dead End Street
Regulators are inflexible and hinder the entrepreneurial spirit and technological
advancement. Cost of regulatory compliance shakes out supply markets.
Great expectations remain unmet.
Incremental Technology Adoption
Constrained Operations
Digital Disruption
A.T. Kearney CSCMP 21
HMI, control units,E/E architecture
Sensors Actuators
Connectivity, context, maps
Source: A.T. Kearney
Autonomous driving will be the next breakthrough in trucking efficiencyDisruptive force: Autonomous driving
Warning only
Partial assist
Connected assist
Highway pilot
AutonomousDelivery Hwy.
No automation but warning functions (e.g. collision warning)
Automation of single functions(e.g. emergency braking)
Automation of connected functions (e.g. lane change assist)
Partial self-driving on highways(no permanent driver supervision required)
Self-driving on highways(autonomous hub-to-hub incl. platooning)
AutonomousDelivery Urban
Self-driving on highways and urban (autonomous hub-to-hub and last mile)
tod
ay
20
20
20
25
>2
03
0
Lidar
Radar
Wheel speed
Stereo camera
Steering angle Throttle Transmission
BrakeSteering
Digital Disruption
A.T. Kearney CSCMP 22
OEMs increasingly see trucks as mobile, connected data centers
Source: Daimler Trucks
Digital Disruption
A.T. Kearney CSCMP 23
Sean Monahan, A.T. KearneyCell: +1 212.365.4941
Email: [email protected]
Twitter: @SeanTMonahan
Rick Blasgen, CSCMPPhone: +1 630.645.3458
Email: [email protected]
Twitter: @RBlasgen
