Building capabilities and digital skills

CARLOS CORDON

IMD PROFESSOR1

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Traditional businesses are mastering digital agility!!

NEW CAPABILITIES NEEDED

HOW TO OBTAIN THEM, INTERNALLY?

NEW SUPPLY CHAIN PARADIGM

NEW PARADIGM: SUPPLY CHAIN TO INCREASE SALES, NOT JUST REDUCING COSTS• SUPPLY CHAIN MANDATE WAS:

• DELIVER ON TIME• WITH THE AGREED QUALITY• AT MINIMUM COSTS

• WE HAVE A LOT OF TOOLS IN SUPPLY CHAIN TO MANAGE COSTS:

• SPENT ANALYSIS• COST OPTIMIZATION TOOLS

• NEW MANDATE: INCREASE SALES AND PROFITS … !!!

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AN EXAMPLE: ADIDAS IN RUSSIA

INFORTMATION TECHNOLOGY AND SUPPLY

CHAIN MANAGEMENT

TOGETHER

UNTIL 2013 GROWTH 30-

100%. ONE OF THREE ATTACK MARKETS (USA

AND CHINA)

MARKET LEADER WITH MORE THAN

1200 STORES AND 1500 PEOPLE

Implementing the Internet of Supply Chain

RE-START ROLLOUT• 200+ locations• 30+ stores a week

Radio-frequency identification and Ship-from-store

• 1.5 year period• Same change

agent as C&C

In store digital display• Frozen until the

end of 2015

Endless Aisle

RFID and SFS

Click-and-Collect

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Click and Collect

• First trial November 2014: expected 10 orders per week, they’ve got 1000. The two collect stores couldn’t manage. Project on hold.

• Sales in Moscow grew double digit overnight!!!6

Endless Aisle: All stock available

• Previous efforts didn’t work, too complex

• Allows the customer to have all stock available

• Improves customer engagement

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RFID AND SHIP FROM STORE• RFID: Optimize inventory management and allow ship

from store• Ship from Store: All inventory in all of Russia available

to all customers (online and store)• Potential on increasing sales• Reduction of stock• Labor reduction in logistics

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CLICK AND COLLECT:380 STORES,

70% OF E-COMMERCE, 20%+ PROFITS

RFID:540 STORES

SHIP FROM STORE:100 STORES,

EXPECTED SALES INCREASE 10-20%

MAY 2016: SUCCESS!!!

70% 20%50%

New Capabilities Needed

Look for new questions

• New data, old questions• New data, new

questions

Test new ideas

• Create a portfolio• Fail often to

succeed sooner

Prototype with customers and learn:

Fast learning

Portfolio of new ideas

New questions

• Cycles of 2 weeks• Make sure to learn

systematically

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How to obtain the capabilities: to make your big data journey you do not need to be a teenager …

Jan Dekker has been CEO Pharmacies Netherlands since 2009

But some of the methods are very new and mainly developed for start-ups:- Why: the golden circle- Business model canvas- Profit formula- Lean start-up

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You find digital capabilities in… Existing employees and Hackathons!!!

… you must use new methodologies and burn the old ones …

Explore the

world

Why: Golden Circle

Business Model Canvas

Profit Formula

Lean Start-up

UNLEARN LEARN

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THANK YOU

THANK YOU

Click and Collect• 380 stores by February 2016• 70% of e-commerce sales• Initially only 50% were picked up by consumers• 185 stores with next-morning replenishment from the

distribution center (sales up to 9 p.m. were replenished to the stores by 8 a.m. the next morning).

• Expected a 20%+ increase in net profits by converting existing orders.

• Six strong store managers with five-plus years of retail experience to act as change agents.

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RFID implementation• RFID was launched in October 2015 in five pilot • 5,000-piece inventory of an entire store counted with

99% accuracy in 45 minutes and the average on-floor availability 96%

• 100 stores live by May 2016, • 500 stores by the end of 2016. • The team also added RFID capabilities to the

distribution center:• 100% accuracy of 97% of cartons• Shrinkage reduced by 40% (€2 million)• Leaner inventories and reduced the need for working capital.

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Ship from Store implementation• May 2016, over 100 stores, 350-plus by the end of 2016. • SFS fast and accurate: from order placement to pick and

pack 30 minutes• SFS 4% of retail sales and as much as 10% in some stores.

Stores were processing 25% of home-delivery orders in the pilot regions.

• In most cases, orders were delivered the next day, or within two days for faraway places, versus three to seven days previously.

• SFS reduced delivery costs in the pilot regions by about 50%

• Expected a 10% to 20% boost in sales due to the increased size availability

• Initially, store staff resisted preparing items for shipment because they were waiting to see if they could sell them in store but “burns stock down, which means we can sell it at the full price rather than mark it down at the end of the season.”

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Endless Aisle• New EA capability piloted in 30 stores by 2015• 120 by May 2016. • 600 by the end of 2016

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