Insighton ecommerce and_collaboration

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BUY

E-Commerce & Collaboration

InsightOn:by OneVoice

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If everyone is moving forward together, then success takes care of itself.

HENRY FORD

04

05InsightOn: Editorial – Bill Meahl

Dear Reader,

With the growth of e-commerce, the way people consume is changing rapid-ly, with strong impact on the way many companies do business and on their supply chains and logistics.

There’s no doubt that e-commerce empowers consumers through ease of use and broadening product choice. Plus, for logistics providers, it opens up a whole new area of potential, because, of course, products ordered online need to be delivered to doorsteps. Those doorsteps might be in the next town; but they might also be on the other side of the world. For every opportunity, there’s a challenge. How can good delivery performance be achieved cost-effectively in an era of higher fuel prices and higher volumes, for example?

Collaboration may be one part of the solution. Collaboration is frequently discussed in business, yet not always fully understood in its entire scope and potential.

Most commonly, companies think of collaboration as what happens at a con-solidation center, when manufacturers and retailers work to share warehouses, transport infrastructure and information. Some people call this ‘horizontal collaboration’, and it is indeed an option that many companies are pursuing as higher e-commerce volumes change the equation on the market.

Then there’s ‘vertical collaboration’ in which suppliers in a single industry, such as the semiconductor industry, consolidate goods and share transport, since they are often retracing each other’s steps and sharing the same customers from a logistics point of view.

True collaboration is hard to achieve, of course, as you’ll read in the second half of this report. Luckily, it’s also a topic that inspires a great deal of ‘thought leadership’, some of which is highlighted in the following pages.

I invite you to enjoy our take on e-commerce and collaboration and to find out more about what experts from around the world have to say about both.

Best regards, Bill MeahlChief Commercial Officer at DHL

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07InsightOn: Contents

ContentsEditorial – Bill Meahl Page 05

Contents Page 07

Editorial – Ken Allen Page 09

Facts & Figures Page 10

The Game Changer Page 13

Life – Plugged In Page 14

Consumption 3.0 Page 20

The Expert View – Johan Paludan Page 25

Reaching Customers – Globally and Locally Page 26

Perfection: What Customers Expect with Online Shopping Page 34

The Ripple Effect of Online Purchases Page 38

Global E-Facts Page 42

E-Commerce: The Growing Pains Page 44

The Expert View – Christoph Wenk-Fischer Page 50

E-Commerce and Collaboration Page 53

An Evolution of Collaboration Page 55

Collaboration – The Human Factor Page 58

Collaboration: A Foundation for Supply Chain Innovation Page 65

The Expert View – John Gattorna Page 70

Orchestration: The New Form of Collaboration Page 74

The Foundation of Future Business Page 76

DHL Case Studies Page 78

Background and Bibliography Page 90

InsightOn: Contents

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09InsightOn: Editorial – Ken Allen

E-commerce revenues worldwide are expected to reach 1 trillion US dollars this year. By 2015, the world will have 3.7 billion internet users. Already, the number of internet users in Asia is double that of Europe, even though pen-etration rates in Asia are still low.

The numbers are staggering. And, as e-commerce flourishes, they are only set to rise. For retailers with an online offer, then, the international opportunities are both hugely exciting and there for the taking. The phenomenon of online shopping (and it is a phenomenon, touching everyone wherever they are in the world) allows enterprise the chance to break into new markets – particu-larly lucrative developing ones. It also allows them to build a prosperous and truly global customer base.

There is, of course, a ‘however’ – and it’s this. Successful product shipment is going to become more critical than ever for retailers who want a slice of the e-commerce pie. You might have developed a truly groundbreaking product, but if you can’t transfer it easily from your website into the hands of your customers, your business will never succeed.

Studies have shown that effective logistics – particularly in the retail e-com-merce sector – are a competitive differentiator for merchants. If you can offer the items that people want or need and ship them more efficiently than your competitors, you offer something of real value. Your business is duly marked as a cut above the rest.

For those who recognize this, online is a real growth opportunity, a point made in the first half of this InsightOn: report which explores the trends, prospects and challenges of e-commerce. The second half of the report looks at collaboration as a means to tackle some of the more taxing problems and complexities of e-retail.

Collaboration is a word we know well at DHL. We believe in close collabor ation with businesses in order to drive sustainability initiatives, reduce costs and implement the best, most efficient integrated solutions for their individual needs.

Of course, we are well known for providing critical services that enable the vast flow of goods around the world, and for our ability to move high volumes from one corner of the world to another on time and within budget. But we also do far more to support our customers who run businesses online. For example, we provide software products that make it easy for merchants to ship and track their packages and manage their returns – a facet of e-commerce highlighted in this report.

Whatever viewpoint you are reading from, e-commerce isn’t a subject any of us can choose to ignore. Online retail, with all its multi-faceted challenges, is here to stay.

With that, I’ll leave you to explore our latest InsightOn:. Enjoy your read.

Best regards,

Ken AllenCEO, DHL Express

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More than 1000 16101 to 1000 711 to 100 9Under 10 18

– number of top 50 online retailers that featured more than 1,000

videos on their site in Q1 2011.

SS AALL EE68%

of American retailers polled expected 2011 online holiday sales to increase by at least 15% from 2010

26%projected annual growth of e-commerce in countries such as Spain, Brazil, China, Russia and Mexico through 2015

11InsightOn: Facts & Figures

‘mobile commerce’ grew between 2010 and 2011, as measured in the e-tailing group’s 14th Annual Mystery

Shopping Study

2015 – the year that global e-commerce, including travel and auto purchases as well as online retail sales, will reach an estimated

$ 1 400 000 000 000

of monthly retail budget that U.K. shoppers

spend online

48%48%

224 000 000 – number of ebay’s unique visitors per month

– average number of hours internet users in Europe spent online in March, 2011

26

2/3 – fraction of

smartphone users who shopped

by phone in September 2011

75%

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13InsightOn: The Game Changer

The Game Changer

E-commerce is a truly ground-breaking inter-national phenomenon — a consumer in Madrid, say, can order goods from a seller in Missouri. Yet, from a logistics perspective, this involves a long supply chain that crosses borders, curren-cies and customs regimes and requires a cost-effective and consistent solution. The consumer’s repeat business depends on it.

Returns is another conundrum. How does a faulty or unwanted product go back through the supply chain in a way that serves and satisfies the customer, but doesn’t squeeze the margins of the e-retailer or the logistics provider? It’s a question that the logistics industry is still grappling with.

There’s no doubt, however, that e-commerce is a game changer for the retail industry. It’s also growing exponentially. Online companies who want growth – and what ones don’t? – know they need to set up their businesses and sup-ply chains to take advantage of a new shopping reality. The ones who don’t won’t be around to tell the tale about how they tried to turn back the e-commerce tide. So, in the first part of this edition of InsightOn:, we look at the continually evolving e-commerce landscape and investigate its trends, opportunities and challenges from the viewpoints of the consumer, enterprise and the logistics operator.

If retailers are going to thrive in the age of e-com-merce, then collaboration could offer a way to implement greater competencies in logistics planning and execution. At its simplest level, collaboration is about the sharing of equipment, vehicles and carriers; but it’s also about sharing critical data on the movement of goods as they

travel to the end user. There are human factors to consider, too: Collaboration between internal team members and their managers, for example, and cross-collaboration between their opposite numbers in external (and sometimes competing) organizations. For this to be successful, a com-mon focus and open communication is needed; plus an understanding of the end goal by staff at many different levels within a business.

So how do companies collaborate successfully? What challenges and barriers must they over-come to do it effectively, what is its true cost and how can it be encouraged? In the second half of this report, leading international academ-ics and logistics experts (including author and consultant John Gattorna, and Richard Wilding, a professor of supply chain strategy at Cranfield School of Management) offer the latest thinking and strategies on collaboration.

Could it be a turning point for e-commerce?

E-commerce once described how companies operating in the B2B sector conducted business by sharing information electronically. Nowadays, it has a completely different meaning: e-commerce is ‘online shopping’ and all that comes with it, such as social shopping, multimedia entertainment, immediacy and, of course, ease.

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Futurists predict that our electronic connect-edness will continue to impact daily lives in profound ways, including the way we consume. It may seem far-fetched now, but some futur-ists can see the day when you might not have to shop for yourself because your fridge will do it for you. It will be intelligent and, knowing when it is getting empty, able to initiate an order from an online shop – thus taking you, the consumer, out of the equation.

Your bathroom mirror, meanwhile, could have a dual role as a message centre, reminding you about your schedule as you get ready for the day, and/or summarizing your home’s energy consumption and production. By tapping your mirror you post these results on a social net-working site, where you are challenging friends to earn the most points to exchange for games and prizes to be collected online.

If all this sounds outlandish, scroll back to the world today and notice that what was considered science fiction two decades ago is not only part of the new reality – it is driving expectations

The changes are well documented. Anthropologists have shown how text messaging – expected to top 9.4 trillion messages by 2016 (Informa Telecoms and Media, May 2012) – has transformed language; how instant messaging has shortened attention spans, and how consumers are collaborating and sharing in new-found communities that are no longer restricted by physical boundaries.

These communities often pursue a greater good, such as reducing their carbon footprint or help-ing others with practical information on things as diverse as home health remedies, fashion trends and where to spot a shopping bargain.

From a consumer perspective, computer technol-ogy has had the greatest impact of all by revolu-tionizing the way people shop. Now everything from groceries and home furnishings to cars and holidays can be bought over the internet. More than this, however, consumers can collaborate and share information, write reviews and impart tips in new-found online communities. Shoppers are no longer restricted by physical boundaries. Technology has empowered them.

Life – Plugged InThe digital world – with its always-on, 24-hour cycle of information, communication and media – permeates lifestyles, shaping the way people interact, consume and make sense of the world we live in.

15InsightOn: Life – Plugged In

Delivering Tomorrow: Customer Needs in 2020 and Beyond. A Global Delphi Study (see p. 113 for details)

PROBABILITY

Unlikely: 25 %

Definitely not: 13 %

Definitely: 12 %

Probably: 31 %

Possibly: 19 %

DELPHI THESIS 46

IN FUTURE …… the internet connects 100% of the world’spopulation, based on a new infrastructure (e.g. glass fiber, satellite, mobile devices).

for consumers. For instance, between meetings at work, the busy consumer can now place an online order for a dinner to be delivered to their home at a time of their choosing. All they need to make this happen is two minutes’ access to a PC, laptop, mobile or tablet – and a reliable delivery service, of course

“With reliable delivery and plenty of choice, consumers have discovered that click-and-ship is in many ways more gratify-ing than traditional shopping.”

Multiple means of communication – or hyper-connectivity – is the new normal. According to Robert Greenhill, the chief business officer of the World Economic Forum, hyperconnectivity is redefining relationships between individuals, between consumers and enterprises and between citizens and state. He has said, “We are begin-ning to see fundamental transformations in all areas of the economy and society.”

Most experts believe that e-commerce is not the driving force, but rather e-connectedness. Once connected, people then transfer their experience of instant information gratification and empowerment to the realm of e-commerce. In other words, e-connectedness means con-sumers want their products fast, easy and on their own terms.

It’s no wonder then that retail e-commerce is booming. For several years now, it has been steadily taking market share away from tradi-tional bricks-and-mortar retailers. In the US, for example, e-commerce reached 8 percent of over-all retail sales in 2011, compared with roughly 4 percent in 2004.

With reliable delivery and plenty of choice, consumers have discovered that click-and-ship is in many ways more gratifying than traditional shopping. People find that it fits into their lives much more easily than a trip to the store, where selection may be limited and comparing prices is done the old-fashioned way: Manually.

And that’s not to mention the benefits for life-logistics: No more vying for a parking spot at a shopping area, waiting in line to try on clothes, waiting in line again to pay and then fighting traffic or crowds on the subway on the way home.

Governments, too, are keenly aware of the advantages that come with e-commerce, and they’re keen to boost computer and internet usage to keep their economies and workforces competitive.

As part of its Digital Agenda for Europe, the European Commission has set a target of en-abling 75 percent of the population to be regular internet users by 2015, with the proportion of the population that has never used the inter-net decreasing to 15 percent. Within the same period, 50 percent of the population should be buying online and 20 percent of the population should buy cross-border online.

For businesses and consumers alike, this trend opens up whole new worlds of opportunity.

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solomo

We are perpetually in motion. Thanks to online technology, we can now all have a home and office on the move. With our mobile phones and tablets, we can field business queries, monitor our Facebook pages, send a Tweet, add to a blog and book a table for dinner while we’re, say, sitting on a train or re-laxing at a café table.

Internet trend watchers have come up with a new acronym that could describe this behavior as well as one of the main trends on the world wide web: SoLoMo, short for social-local-mobile.

The term conjures up a world dominated by social networks (So), in which local (Lo) commerce and communities thrive while people interact and transact from their mobile (Mo) devices.

“The Social, Local, Mobile (SoLoMo) revolution is here,” says Daniel Laury, the CEO of LSF Network, a US-headquartered global digital marketing company offering digital advertising and performance marketing. “With rapid rates of smartphone and tablet adoption, consumers are on the move, looking for information quickly and expecting relevant results on the go.”

Already in 2007, social networking surpassed email in terms of time spent online. By 2011, users in Israel, Argentina, Turkey and Chile all spent more than 10 hours a month on social networking sites. They were most likely sharing and commenting on photos of friends and family, swapping recipes or comparing their opinions on films, books and cur-rent events.

Many people use social networks to research pur-chases and learn about products. For example, Mumsnet in the UK, a place where mothers compare notes and collaborate, has built up such a following that is considered crucial for influencing product choices – and even elections. In India, India Con-sumer Forum is an online platform giving consumers the chance to share information about goods and services, post grievances and give helpful consumer-related tips and advice. Then there is US site Pinter-est, which invites visitors to share their favorite things on ‘pinboards’ and follow collections created by others, and has over 12 million users a month. Plus, many retail sites have developed a sellers and buyers community forum – discussion pages where potential consumers can read comments and re-views by posters who have already bought a partic-ular product. US retail giant Amazon, for example, launched its customer discussion board in 2007.

Christoph Schwarzl, a Kurt Salmon partner and the author of the book New Online Retailing, said, “Many shoppers now consult their peers online be-fore they make major purchases. For them, other consumers are considered more reliable and trust-worthy than advertisers.”

going local

Next comes business, with a definitive local twist, driven by social media users on mobile devices. While business may be global in many ways, com-panies like Groupon and LivingSocial help generate demand for products and services locally. And check-in services like shopkick drive foot traffic into retail outlets.

E-COMMERCE TRENDS



PROBABILITYDefinitely not:

2 %Definitely: 12 %

Probably: 40 %

Possibly: 27 %

Unlikely: 19 %

DELPHI THESIS 48

IN FUTURE …… all across the world, communication costs decrease extremely – information and telecom-munications are available to everyone at any time and almost for free.

Indeed, a survey by comScore in 2011 showed that local listings are among the most relevant and trust-ed search results for consumers. Some 61 percent of online searchers consider local search results to be more relevant, and 58 percent consider local search results to be most trustworthy than others, it said.

Relevancy typically means that users recognize the name or address of a business that has the products or services they want in a specific location. For business-es, it translates to a more targeted readership for ads.

“For a local company looking for local customers or a national company steering customers to local storefronts, local search provides targeted messages to the consumer searching for a product or service in a particular area,” Laury said. The “Mo” trend in SoLoMo is also moving forward at full speed.

Almost shockingly, more people on this planet could access a mobile phone network than electric-ity, if cost were no factor. According to the GSM As-sociation and the United Nations, commercial wire-less networks can reach 85 percent of the world’s population while the electrical grid can reach only 80 percent of the world population.

With wireless access widely available and mobile handsets far cheaper than desktop PCs, it’s clear that users of the mobile internet will far outnumber their fixed-line brethren. At the time of writing, PCs are still the preferred way of connecting to the internet; but a new study by NPD DisplaySearch predicts that tablets will overtake PCs by 2016. Indeed, experts say that most of the mass market consumer world will never have a PC, but only a

smart-phone or tablet. The device will be the cen-tral nervous system of their lives and the place where they conduct their affairs, relying on the opinions of people in their social networks and ser-vices provided locally.

In South Africa, for instance, internet use grew 25 percent in 2011, mostly due to access via mo-bile phones. And India may be raising a “mobile-only” generation, according to one study. It found that 49 percent of people who are using the mobile internet either never or infrequently use it from a desktop.

Essentially, the SoLoMo trend is another example of how electronic connectedness and new consumer technologies have eliminated information asym-metries from the consumer‘s shopping experience – and put power into the consumer’s hands.

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exponentially: 2011 saw 25 percent growth in Indian internet users over just 12 months.

The future of the internet in India looks set to be driven by mobile devices. Figures from wearesocial.net highlight that 59 percent of all Indians only access the internet via mobile technology. With an increase in 3G and 2G services, and an Indian Government roll-out of low-cost tablet devices across schools nationwide, internet use is going to get much higher, very soon.

With more and more citizens online, e-commerce in India is on the rise. In 2011, it was estimated that the value of online business in India had reached US$10 billion. Popular sites in India include 20North.com, offering electronics, books, music and movies; the fashion site 99labels.com; and Dealsandyou.com, which features deals and dis-counts on a variety of products.

The same story is being repeated in parts of Africa, where undersea cables have opened up high-speed online access and dramatically increased business opportunities. Mobile is big news here: By 2015, mobile phone subscribers are expected to reach 850 million — of which 250 million will have mobile broadband subscriptions. In Nigeria, according to statistics from the ITU (International Telecommuni-cations Unions), 35 million new internet users came online during 2007 and 2010. Mobile use is high in the country, with over 95 million mobile sub-scribers (Nigerian Communications Commission).

In South Africa, smartphone users also represent the future potential of internet growth. At the end of 2010, 6.8 million South Africans were using the internet; but by the end of 2011, that figure had in-creased to 8.5 million; and by the end of 2012 it is estimated to topple the 10-million mark.

the internet and the developing world

The internet may have its roots in Silicon Valley, but statistics show that its future will be decidedly in-ternational.

Already, the strongest growth in number of users – and the sheer largest number of users overall – is in developing countries. Europe and North America now have the highest proportion of internet users among their entire populations, but the overall number of users is dwarfed by countries in the de-veloping world.

China, for instance, added more internet users in three years than all the internet users combined that exist in the US, according to Mary Meeker, an analyst at venture capital firm Kleiner Perkins Cau-field & Byers and a recognized expert on internet trends and business.

China had a population penetration of internet us-ers of only 34 percent in 2010, but that rate was growing at 20 percent per year, according to the In-ternational Telecommunications Union and the United Nations. What’s more, the total number of internet users in China in 2010 – some 459 million – was already nearly double that of the US, where 244 million people were accessing the internet.

Popular sites in China include the marketplaces Tao bao and 360buy.com, which had more than 40 million registered users in early 2012 and pro-cessed 400,000 orders a month.

In 2011 in India, 121 million people were estimated to be internet users. If that sounds like a lot, then it’s nothing compared to the overall Indian population, which stands at 1.2 billion. In such a big country, then, 121 million is a low figure; and, if internet growth was standing still, it would be unremarkable. But internet growth in India isn’t standing still. According to re-search aggregated by wearesocial.net, it is growing


are used by far more non-Americans than Americans. For instance, more than half of Google’s traffic comes from outside the US. And the market valua-tion of Chinese and Russian internet companies has been rising quickly, according to Meeker. As of late 2011, Chinese companies like the search-engine giant Baidu and the online service provider Tencent were valued at more than US companies such as priceline.com and Yahoo!

These rising figures have real implications for com-panies’ logistics operations. If businesses are not already shipping to developing markets, then they had better prepare to seize the opportunity in the coming years. A rising, internet-savvy middle class in the developing world is busy writing the next chapter of the e-commerce story.

sale, sale, cyber sale

Black Friday, the day after the Thanksgiving celebra-tion in the US, consumers typically begin their Christ-mas shopping. It has become a discount shopping day when millions of US shoppers hope for massive savings. The term Black Friday illustrates the point at which stores start to make a profit, or go "into the black." The holiday shopping season is important for the economy because 19 percent of retail sales occur between Black Friday and Christmas. For some retailers, such as jewelers, the period may bring in nearly 40 percent of their annual revenue.

Often, stores stay open until midnight to attract as many shoppers as possible.

In recent years, however, Cyber Monday, the first Monday after Thanksgiving, has become almost as important to retailers. It’s the day online shopping is gauged to predict how strong the holiday shopping season will be for retailers overall. With full stores and rising gas prices, online shopping is gaining ground as people simply do the job from their desktops or hand-helds. During the 2011 post-Thanksgiving weekend, Cyber Monday sales alone hit US$1.2 billion, making it the heaviest US online spending day in history.

E-commerce in South Africa is growing accordingly, as noted in an Internet Economic Impact Study survey by independent technology research and strategy organi-zation, World Wide Worx, published in May 2012. “The study… indicates that e-commerce is growing at a rate of around 30 percent a year, and is showing no signs of slowing down,” said Managing Director of World Wide Worx, Arthur Goldstuck. “In fact, taking into account the fact that a number of major consumer brands and chains have not yet devised comprehensive online retail strategies, the scope for future growth is even greater.” The result, says Goldstuck, is that an internet economy worth R59 billion in 2011 and making up 2 percent of the SA economy could grow to as much as 2.5 percent of the economy by 2016.

Other points in case: the world’s largest internet properties may be American companies, but they

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PROBABILITY

Definitely not: 2 % :yletinfieD

13 %

Probably: 41 %

Possibly: 36 %

Unlikely: 8 %

DELPHI THESIS 56

IN FUTURE …… Web-connected inter-faces make private homes intelligent environments, where temperature, aroma, personalized broadcasts, and information are automatically adjusted to the preferences of the inhabitants, at all times.

draw large groups of people; typically, they work through social networks and rely on social media to spread the word about deals at shops.

“Digital natives don’t want to waste their time. They will only go shopping for one reason: To have fun.”

The Psychology of ShoppingOver the course of time, shopping has always been about more than just meeting the daily needs of life. The acquisition of certain goods re-mains a central way for people to distinguish themselves socially and economically from oth-ers. And marketplaces have historically offered an important space for social interaction, the ex-change of information and spectacle.

According to Paludan, the future of “live” shop-ping may hinge on its ability to continue to meet these key needs as it adapts to changes in the way we peruse and pursue goods.

For hundreds of years, people visited ancient ba-zaars, seaport commercial districts and general stores to select the things they needed. Then came downtown department stores and sub-urban shopping malls.

But all this was before e-commerce was a force to be reckoned with, with its 470 billion US dol-lars in sales that are expected to exceed 1 trillion US dollars worldwide by 2012.

Take the phenomenon of pop-up retail. In New York, Paris and Berlin, shops can appear quickly – and be gone a few days later.

The idea is to create a buzz online that trans-fers back to the physical world, enticing people to partake in short-term, limited offerings at frequently changing locations in city centers – i.e. pop-up locales.

Over the past few years, Toys ‘R Us has opened hundreds of holiday pop-up retail shops using otherwise vacant retail space, Vogue magazine has rolled out temporary stores for teens that don’t sell any items but offer makeovers and model castings, and US retailer Target offered New Yorkers two weeks to buy regular store items onboard a 220-foot long glass-topped boat that it motored into Chelsea harbor.

Johan Paludan, a futurist who has worked at the Copenhagen Institute for Future Studies since 1976, says the pop-up retail trend is part of a wider ongoing transformation of retail space to event space.

“Bricks-and-mortar shops are quickly finding out that they must offer something special to compete with the benefits of buying online. It won’t be long before people head to shopping areas not to buy things – but to seek entertain-ment,” Paludan said.

“Digital natives don’t want to waste their time. They will only go shopping for one reason: To have fun.”

Those retailers who are successful in pop-up selling often use the techniques employed by the flash mob performance art movement to quickly

Consumption 3.0Once, the mantra for successful retailing was “location, location, location.” Now, e-commerce is re-defining the concept of place, allowing companies to create a virtual identity that can be marketed just like a physical one and enabling people to travel between both worlds.

21InsightOn: Consumption 3.0

CBRE Group, Inc, it was reported that e-commerce had seen its share of core retail sales captured rise from 3 to 6 percent during the past six years; while the majority of bricks-and-mortar retailers’ shares declined during the same period. Jeffrey B Edelman, Director of the assurance, tax and consulting firm McGladrey & Pullen, LLP, believes that “2012 will be another year of lethargic growth, store closings and increased focus on everyday low prices by several major retailers, all of which will have a significant impact on the entire retail landscape.” He adds that multichannel is key to survival for many; and that online retailing also threatens existing store economics, measurement systems and incentives.

According to a UK-government backed report by Mary Portas, a retail marketing expert, TV person-ality and fashion designer known as The Queen of Shops, town center vacancy rates have doubled over the past two years, and 50 percent of consumer spending takes place off the high streets. Portas advocates turning the country’s town centers into cultural and social meccas. She says, “I fundamentally

Despite its tremendous size, the experience of e-commerce is not even fully evolved yet, says Paludan. Right now, popular shopping sites in-clude large marketplaces that aggregate the goods of thousands of sellers, such as Amazon.com and Alibaba.com, or giant retailers with a large web footprint such as Walmart.com.

In the future, we may shop in 3D virtual malls that are architectural masterpieces and, at some point, we may even be able to have sensory and tactile experiences while shopping online. “Merchants may be able to pipe the smell of bread into your own home, or you may be able to print out sample fabrics to explore their feel,” said Paludan.

With the fast uptake of e-commerce, and such fan-ciful developments on the horizon, some experts are already predicting the death of the shopping mall. They say that e-commerce could leave shop-ping malls in a bind, just as those very malls and hypermarkets have played a part in high vacancy rates in downtown shopping districts. In the US, in a May 2012 report from real estate services firm

BUY

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expect to find there. It’s a bridge between event shopping and old shopping – as consumers go back and forth between the worlds,” said Paludan. This is omni-channel retail – the ideal aim for many e-re-tailers and the ultimate evolution of ‘multi-channel’ and cross-channel retail. The idea of omni-channel retail is that consumers will be able to access the retailer from whatever platform is available to them in whatever part of the retail process they are, and enjoy a co-ordinated and cohesive experience.

“The idea of omni-channel retail is that consumers are able to access the retailer from whatever platform is available to them in whatever part of the retail process they are.”

To this end, one company has even reproduced the image of a grocery store on a poster – just like a Potemkin village – and is giving people the chance to buy items in what appears to be a typi-cal store. Hung in subways by a Korean division of the UK grocer Tesco, users approach the posters

believe that once we invest in and create social capital in the heart of our communities, the eco-nomic capital will follow.

Others don’t see e-commerce as such a threat. Paludan, for instance, believes it and real-world shopping can co-exist and be mutually beneficial. He says the most successful real-life shopping venues will actually be a blend of both – offering interaction between the virtual and real worlds and striking the right mix of entertainment and shopping.

Already, people and merchants connect the two worlds. Users do so when they redeem electronic coupons for real-world goods in stores or follow the recommendation given on their handset to walk into a particular store and interact with products. There’s also the trend of sharing your location with friends by checking into physical spaces – like a Starbucks – using a smartphone and services such as foursquare or Facebook’s location-sharing feature. Often companies will reward users with discounts for checking in.

Companies, too, are transcending cyberspace. The auction site eBay did so by setting up a pop-up shop in central London for wares avail-able only online. And the carmaker Renault has plugged the virtual into the physical world by erecting an information kiosk at a car show in Holland and enabling visitors to “like” particular models on their Facebook pages.

“I see companies combining real-world locations with digital messages of what the consumer can

23InsightOn: Consumption 3.0


PROBABILITY

Definitely: 5 %

Definitely not: 8 %

Unlikely: 45 %

Probably: 16 %

Possibly: 26 %

DELPHI THESIS 57

IN FUTURE …… purchasing decisions are based on peer-to-peeradvice (e.g. via the internet); classical advertising is dead.

and place orders for home delivery with their smartphones while they’re waiting for their train.

Though some companies like Tesco seem to be embracing these types of new marketing op-portunities and creative ways to position their brands, others still see altered buying behavior as a threat, says Paludan.

“In the end, shopping will become much moreindividual, as merchants collect intricate dataabout our preferences.”

At present, many retailers are working through their policy for dealing with shoppers who compare prices online for items they see while standing in a store. Some retailers may conclude that it’s best to forbid the use of virtual shopping assistant applications, while others have already accepted the writing on the wall and are actually facilitating customers as they make purchases via the web or phone – while visiting an actual store.

The way consumers shop may be shifting, but it’s a slow metamorphosis. Yet some things never change: Currently, whether consumers purchase in store or online, goods need to reach them as quickly and as effectively as possible – other-wise their custom will go elsewhere. Retailers are currently facing the twin-pronged reality of bricks and mortar and e-commerce and realiz-ing the key role that logistics has to play in both. They are understanding the importance of a smoothly operating supply chain. Poor delivery service in either area may have a long-term negative impact on their entire brand, after all.

Collaborative DesignIn the end, shopping will become much more individual, as merchants collect intricate data about our preferences, Paludan says. That data is already being used for target marketing cam-paigns i.e., a strategy whereby retailers focus on a group of potential customers in specific locations or demographic groups; or even shoppers with similar attitudes, tastes and lifestyles. Sellers are

working to make target marketing enhance the shopping experience. The profiles generated from collected data also help companies interact with consumers, offering them more chances to be a part of the design and production process. A UK furniture company, for instance, offers “democrat-ic” designs by asking its customers to vote online about which pieces it should manufacture, and wearers of Nike shoes can now design their own styles and colors, complete with their own initials.

Other campaigns are even more ambitious in their size and scope and don’t even involve the product itself. In 2011, Johnnie Walker, the blended Scotch whisky, launched its Keep Walking campaign to galvanize support for three innovative initiatives in the fields of the arts, technology and business in a number of markets, for example Brazil and Thailand. The Johnnie Walker consumers in each market were urged to debate, over Facebook, which initiative they thought had the most poten-tial to shape the future in their country.

This offered consumers “a collective sense of participation and achievement and (will) hope-fully spark new thinking about what can be achieved by working together,” said Gavin Pike, Global Brand Director for Johnnie Walker. “By using our communications to encourage like-minded consumers to connect, collaborate and champion causes that inspire them we will deliv-er a deeper engagement with our brand as well as showcasing some of the pioneering thinking that could lead us towards a better future.”

“Whether online or in a store, we’re seeing grow-ing interaction between the consumer and the producer,” said Paludan. “Call it collaborative consumption if you will.”

24

try this on For size – shape-Fitting technologies Walk into some stores these days and the sales clerk may call your attention to the screen on the back wall instead of the coat on the rack.

There you can position yourself to play a game of shopping in a Wii-like way. The program will react when you raise your arms and move your body to signal which items you like and dislike.

You may motion to remove an item you’re viewing that has been fitted to your personal avatar, or you may swipe wide and twist to have it returned to center-screen for your inspection.

What you’re doing is interacting with a computer-ized personal shopping assistant. Such technolo-gies are no longer the realm of futuristic films but

actually available to shoppers around the physical and digital worlds.

In the UK, shoppers at Selfridges and New Look can have their bodies mapped by BodyMetrics, and online shoppers can do the same with home-based camera technology. After the profile is made, it be-comes a tool for trying on garments across multiple stores on the web. Shoppers will try on clothes via a personal avatar that is an interpretation of their shape.

If body measuring technology became the basis for online shopping, it could do even more by helping retailers improve their manufacturing, warehous-ing and stocking processes because of the ability to predict demand more precisely for particularly-sized items.

Now that’s a good fit for retailers.

25InsightOn: The Expert View – Johan Paludan

Many people shop online in marketplaces (like eBay), but the experience doesn’t feel like that of visiting a mall. Why not?

Johan Paludan: Online shopping is fundamen-tally different from traditional shops. A traditional shop has a general display, where the shopper has to find what she wants. Online shopping will in-creasingly be based on the supplier knowing more and more about the individual shopper. Online shopping is therefore much more based on the in-dividual displaying what she or he is known to like. What online shopping misses is the social dimen-sion. Man being a social animal, I expect we will continue to go to traditional shops to experience other people.

That brings up privacy concerns.

Johan Paludan: The basic situation is that sup-pliers will know more and more about the individ-ual consumer. The talk is about “big data” and about how to exploit it. People know that the ad-vantage is that they will only get information they find interesting and spam becomes truly a sin. The other side of the coin is that this development will indeed negatively affect privacy. As somebody said, “Privacy is gone – get over it.” It does, however, only take a couple of scandals of somebody misusing the data before we have a new situation. It is basi-cally a matter of trust, and trust takes a long time to build and a short time to demolish.

Which products will disappear from the traditional retail trade as consumers shift to online buying?

Johan Paludan: The current situation gives the answer: Those products where it is not impor-tant to feel, taste and smell were among the first to be popular online, such as books and music. Ultimately, all products could disappear from the traditional retail trade once the digitalization of taste and smell has been accomplished. Right now, that process is still in the lab. Traditional retail will have to survive on the social needs of people and location-based marketing. When you walk in the city you – or rather your smartphone – will be bombarded with messages about what you could get just round the corner. Instant grat-ification is always tempting.

What is the role of logistics in this picture?

Johan Paludan: In traditional retail, the con-sumer takes care of the last leg of transport from shop to home. In online shopping the retailer has to take care of the last leg, hence this becomes an important element in the competition with others. People are often away and can't receive their goods. My vision is that every home will have an installa-tion like the trap door some people have for letting their cat go in and out. For goods, it would have to be a one-way mechanism with built-in cooling/freezing facilities.

Johan Peter Paludan serves as the Director Emeritus at the Copenhagen Institute for Futures Studies (CIFS). He is widely known as a crea-tive thinker on social trends, education, business and the popular imagination. A privately funded, non-profit think tank, CIFS provides in-terdisciplinary statistics-based and subjective research on a variety of topics.

Paludan earned a master’s degree in political science from Aarhus University and worked as a high school teacher before joining CIFS in 1976. His pub-lications include ‘The Nordic Welfare State’ as well as ‘The Strategy of Corporations: The most Likely Future and the Wilder Alternatives.’ He also contributed to the production of ‘The Dream Society – From Information to Imagination.’

The Expert View – Johan Paludan

26

Reaching Customers –Globally and Locally

For the merchant behind the website, the shop-per’s physical location is far from irrelevant. Logistically speaking, where the customer is can have a major impact on how quickly – or even if – they can be served. Shipping goods overseas means dealing with issues surrounding different currencies and customs regimes and longer transport times. Overheads – such a factoring in the costs of returns from abroad – may put a squeeze on profit margins. Suddenly, from the e-retailer’s perspective, delivering the goods from A to B is fraught with difficulty, especially if A is on one side of the world and B is on the other.

Yet a retailer’s ability to serve customers abroad may make or break a business, especially during tough economic times. In the UK, for example, merchants are clearly responding to growing competition from domestic websites and cutbacks in household spending due to the financial crisis: A recent survey showed that 64 percent of online retailers there plan to expand internationally in 2012. Good logistics will therefore play a central role in future competition among e-retailers.

“The real growth opportunity is international,” says Andrew McClelland, the Chief Operations

When surfing and shopping the Web, national frontiers are hard to spot. One click leads to another, and the product is suddenly in your shopping basket. For the consumer, it is of little concern that the website is based outside their country of residence.

27InsightOn: Reaching Customers – Globally and Locally


PROBABILITY

Definitely not: 1 %

Definitely: 10 %

Unlikely: 25 %

Possibly: 37 %

Probably: 27 %

DELPHI THESIS 52

IN FUTURE …… more than 3 billion people in the world run their businesses completely and more effectively than evervia the internet, making use of the World Wide Web’s marketing power; 50% of B2C transactions are carried out online.

& Policy Officer of the Interactive Media in Re-tail Group (IMRG), a UK e-retail trade group. “Overseas e-commerce markets offer a com-pletely fresh customer base and one that is in-creasing exponentially.” By the end of this year, there will be 2.5 billion internet users worldwide. By 2015, this number will rise to 3.7 billion.

For merchants, going global is easier said than done. And it’s just one of the many challenges to tackle as the e-commerce market matures and customer demands rise for the best service and the best prices.

“A retailer’s ability to serve customers abroad may make or break a business, especially during tough economic times.”

Beginning in the early 1990s as a curious new form of distance selling, e-commerce has be-come an overwhelming force to reckon with – for both small and medium enterprises (SMEs) and the world’s largest retailers. While early en-trants like Amazon.com and eBay continue to drive expectations with their giant marketplaces, experts say much unclaimed territory is still available to those online sellers that get multi-channel retailing right and learn to cross borders effectively.

Opportunities – A Click Away According to recent industry surveys, even the big-gest names in retail e-commerce are taking a slow, measured approach to expanding abroad, given the risks of failure, which would be costly and damag-ing to hard-won brand confidence. For example, in May 2012, US retailer Macy’s announced its inten-tion to dip a toe into the Chinese market by selling an assortment of its private brand merchandise di-rectly to consumers in China through a Macy’s sec-tion on omei.com, a newly established China-based online retailer of in-season luxury and fashion brands operated by VIPStore Co., Ltd.

“Our relationship with VIPStore will allow us to gain additional experience in the fast-growing

Chinese market, and to better understand how consumers across China interact with Macy’s and the products we sell,” said Terry J. Lundgren, chair-man, president and chief executive officer of Ma-cy’s, Inc. “We know that Macy’s is very well known and regarded in China through international tour-ism, globally broadcast events such as the Macy’s Thanksgiving Day Parade, and movies such as Mir-acle on 34th Street. But we still have a great deal to learn about the shopping patterns and merchandise preferences of consumers in China’s very diverse and rapidly emerging consumer marketplace.

“We continue to believe there is significant long-term opportunity internationally for both Macy’s and Bloomingdale’s. But we need to be certain that our future decisions in this regard are based on fact and experience.”

Macy’s are not alone in being cautious in entering new territories. Only a small proportion of the sites the IMRG has surveyed offer currency con-verters or customer support in a local language.

One hurdle they face is missing infrastructure for cross-border transactions. Search engines, which know no geographical borders, may drive traffic to a retailer’s site, but sales are lost without the requisite checkout, customs and delivery ser-vices for international clientele, as well as a host of other adaptations.

These include site-specific ways to handle lan-guage and cultural barriers as well as the chal-lenges of cross-border fulfillment and returns. For example, not all merchandise can be shipped across international lines without incurring taxes or duties, and returns from a different country are more complex and costly than domestic ones.

European Cross-Border E-CommerceCross-border e-retailing within the European Union would seem easy enough since internet use and online buying from domestic websites is on the rise across member countries, led by adoption in Norway, the UK and Sweden. The percentage of individuals who made purchases over the internet has, on average, more than doubled from 20 percent to 43 percent between 2004 and 2011, Eurostat says. In addition, the European Union’s 27 member countries have a common legal basis for trading and 17 countries share the common currency.

Yet significant barriers to cross-border e-com-merce still exist in Europe. In 2010, some

28


PROBABILITY

Definitely: 16 %

Definitely not: 2 %

Unlikely: 9 %

Probably: 44 %

Possibly: 29 %

DELPHI THESIS 54

IN FUTURE …… people are “always on”the internet, surroundedby easy-to-use appliancesand virtual “smart agents”automatically assisting the users in their daily activities, filtering information and serving as personal coaches.

74 percent of EU online retailers did not sell to other EU countries.

A report released in 2011 by the European Par-liament found a lack of consumer confidence in cross-border online commerce. Apparently, cus-tomers hesitate before making purchases outside their home countries because of differing rules on sales taxes (VAT), returns and the inability to compare prices in different languages. This fear of the e-commerce unknown seems to be easily overcome, however. A 2011 report, published by the European Consumer Centres Network, found that 61 percent of the consumers who have already shopped across borders are equally confident in cross-border and domestic online shopping, compared to only 33 percent of the general population.

Europe needs more multilingual price compari-son sites, says Pablo Arias Echeverría, the rap-porteur for a European Parliament Working Group on e-commerce. “There are still a signifi-cant number of consumers who are not yet aware of the offers and competitive prices that are available from cross-border retailers. Despite the 300 price comparison websites that exist, only a handful provide cross-border price re-views,” he has said.

Consumer uncertainty and language barriers have made themselves visible in the numbers as well: From 2008 to 2010, cross-border e-shop-ping in Europe only grew from 6 percent to 9 percent while domestic online purchases rose twofold.

Many companies simply underestimate the cul-tural divide present when expanding to interna-tional markets. Experts believe they do so be-cause of the lingering myth that technology eradicates borders in our lives.

“There are still a significant number of consumers who are not yet aware of the offers and competitive prices that are available from cross-border retailers.”

Yet, by neglecting to adapt to local conditions, some retailers could be cutting themselves off from growth: During recent years, e-commerce sales have been the main growth engine of the retail sector. According to the European Com-mission, e-commerce is the dominant distance sales channel and accounts for around 4 percent of the total retail sector.

Getting Cross-Border E-Selling RightAmazon.com has successfully expanded to inter-national markets. Yet the world’s largest online retailer, with 48.08 billion US dollars in net sales in 2011, acknowledged in its latest annual report



that international operations present risks such as a relative lack of operating experience in a particular country, legal and regulatory uncer-tainty and established local brand-name compa-nies as competitors.

Still, a “significant” portion of the company’s to-tal revenues come from outside the US, and it is clearly a leader off of its home turf. Some ana-lysts believe the Seattle-based company may be entering a new international expansion phase af-ter slowing the pace following its 2004 debut on the Chinese market. Amazon has retail websites in the US as well as in Canada, the UK, Germa-ny, France, Italy, Japan and China. It launched in Spain in 2011, and reports say the giant is now eyeing new markets.

Even as market leaders like Amazon.com or Ali-baba.com forge ahead outside their home markets, significant opportunity still exists. But what works in Michigan won’t necessarily work in Mumbai. So how must businesses and supply chains adapt when going abroad? Researching customers and markets is critical, naturally, because each market-place is different. Apart from getting a handle on culture, language and etiquette, retailers will need to understand what product – and packaging – will work best in the locations they are targeting.

Experts agree that “local” is the lingua franca. They say companies should start exactly there by making shopping carts, websites and customer service available in the local language and pro-

viding call centers. That’s because some consum-ers only feel comfortable making a purchase after finding out that the company is ‘real’ by actually speaking to someone.

US retailer Walmart operates a website in China that is highly tailored to the local market. Where-as its global site is designed for consumers who want to purchase online, its Chinese site is made to have an “official” look and feel appropriate for a retailer with the size and clout of Walmart.

According to an analysis of the site by a group of professors from universities in the US, Hong Kong and Taiwan, Walmart’s site rightly focuses on what’s important in the Chinese market – introducing the company, cooperation with the government, social responsibility, the latest news, supplier services and food security.

Scott Price, the Asia CEO of Walmart, said the company is “very keen” on the online market in China. Walmart operates about 370 bricks-and-mortar stores across China and has a minority position in Yihaodian, a company that has carved a niche in same-day or next-day deliver-ies in five cities. Walmart is applying to take a majority position in the company. “We’re com-mitted to the Chinese market,” Price said.

The Localization Industry For retailers large and small, the cross-border opportunity is too attractive to ignore, and an industry of boutique companies has cropped up

PROBABILITY

Definitely not: 4 %

Unlikely: 24 %

Possibly: 36 %

Probably: 31 %

Definitely: 5 %

DELPHI THESIS 53

IN FUTURE …… rapidly expanding mobile infrastructures and free access to information let emerging economies catch up with Western societies.

30

to help others properly design localized, multi-lingual websites. According to some estimates, the decade-old industry is already worth more than 10 billion US dollars.

These consultants are prepared with software and solutions that will help companies run flexible websites that can scale up and down almost by the minute – as demand dictates.

“The future will be to figure out how to encourage the online customer to come to the stores, and encourage the customer in the store to shop online.”

They also help retailers consider critical questions when reaching out to new markets: Is your prod-uct selection adapted to local tastes and are prices competitive? Does your advertising comply with applicable law and does the approach resonate with locals? And are your fulfillment process and logistics effective and cost-efficient?

Macy’s is addressing all these questions and more as it expands abroad with its Macys.com website. The company’s flagship store in Man-hattan is a popular destination among foreign shoppers, and Macy’s has tried to cultivate that customer segment for years.

In 2011, the company began offering shipping outside the US. According to a news report, its website is being reconfigured to detect a shop-per’s location worldwide and display a welcome screen in the appropriate language. Shopping will then continue in English, but at checkout, the consumer is notified of the price and ship-ping costs in the local currency.

Overall, Macy’s online sales are booming. CEO Terry Lundgren said in a TV interview that he expects them to exceed 2 billion US dollars in 2012. “We’re one of the most advanced com-panies when it comes to the online business. And we’ve been investing there. A lot of the capital investments I’ve made for the company over the last three years have gone into technology. It’s really paying off.”

Shopping Channels A La Carte – In Store, By Phone, OnlineMacy’s international push online is part of its overall strategy to meet the demands of sophisti-cated shoppers who want access to Macy’s prod-ucts and services in a multi-faceted way.

“Today, the most important customer and the most important trend is what we call the ‘omni-channel consumer,’” Lundgren told a reporter. “This is the consumer who is shopping on his or her phone, shopping at their desktop and going into our stores. The future will be for us to figure out how to encourage the online customer to come to our stores, and encourage the customer in our store to shop online.”

As a result, the retailer is now testing or imple-menting capabilities such as digital receipts, free Wi-Fi in stores and tablet computers for sales clerks that will help improve customer service by giving easier access to online information. And Macy’s already has the technology at its cash reg-isters to allow sales clerks to search for an item online that may not be available in the store and complete an online purchase for the customer who is standing in the store.

The UK department store House of Fraser and others have taken the multi-channel idea one


step further. In a move that was unimaginable only a few years ago, it has opened stores in cen-tral shopping areas in Aberdeen and Liverpool that don’t sell any products at all.

Instead of walking in to find racks of products, shoppers enter what looks like a lounge where they can browse – but mostly online. Packages are delivered to the customer’s home or to the shop for pickup the next day. If the consumer happens to be un-initiated into the world of on-line buying, a friendly assistant is there to help the person navigate the clicks.

The move by the House of Fraser illustrates another way retailers are coming to grips with shoppers who want to browse and buy in all possible ways and at their own whim. At any given time, these channel-hopping consumers may want to research online, view in a store, purchase via the web or handle returns by mo-bile phone and mail.

For many consumers, deciding if, when, where and how to shop is a matter of “personal free-dom,” and those vendors who don’t enable them to move freely among the channels end up, well, cramping the shopper’s style.

Accordingly, retailers should carefully organize and plan cross-channel efforts for optimal exe-cution, says Sucharita Mulpuru, vice president and principal analyst for Forrester Research, in the Retail TouchPoints 2010 Outlook Guide.

“This isn’t about taking baby steps – it’s about committing to multi-channel and aligning your incentives and your organizational structure in such a way that you can set yourself up for suc-cess,” she was quoted as saying.

And if retailers get it right, the bounty could be rich for society at large. In Europe alone, the gains to consumer welfare could be 204 billion euros or 1.7 percent of GDP, if e-commerce grows to be 15 percent of the retail sector, the European Commission says.

The Economist magazine predicts winners and losers in what it describes as the “coming retail boom.” With shops representing a fifth of small businesses in Europe, it says many will have to change their strategies when they face up to competition from their larger counterparts.

The magazine wrote: “But the winners will out-number the losers. Some of Europe’s small shops will give up the battle… and reinvent themselves as stylish showcases for e-commerce. Oddly enough, the old continent’s best chance of pre-serving its cultural traditions lies with harness-ing new technology, not ignoring it.”

32

china’s big sellers: alibaba, tmall, taobao Tmall, which is part of the Alibaba Group, was launched in April 2008 and is the most visited online retail web-site in China, offering an extensive brand selection of consumer electronics, home furnishings, designer footwear and beauty products, to name a few.

Chinese consumers are certainly buying: Tmall reached its highest single-day transaction volume during a special promotion on November 11, 2011. That day, sales of goods reached a volume of RMB 3.36 billion (531.76 million US dollars), or an average of more than RMB 38,000 (6,022.18 US dollars) per second.

Tmall’s owner, the Alibaba Group, is a family of internet-based businesses that include online mar-ketplaces which facilitate international and Chinese

B2B trade, retail and payment platforms, a shopping search engine and distributed cloud computing ser-vices. Privately held, the group reaches internet users in more than 240 countries and regions and employs more than 25,000 people in some 70 cities in China, India, Japan, Korea, the UK and the US.

Alibaba also owns Alibaba.com, a global e-commerce platform for small businesses and the Taobao Market-place, a popular C2C online shopping destination.

Alibaba.com provides three marketplaces: • a global trade platform (www.alibaba.com) for

importers and exporters

• a Chinese platform (www.1688.com) for domestic trade in China

• and a transaction-based wholesale platform on the global site (www.aliexpress.com) geared for smaller buyers seeking fast shipment of small quantities of goods

Together, these marketplaces form a community of more than 79.7 million registered users. Further-more, the company offers Chinese traders a wide choice of business management software, internet infrastructure services and export-related services.

Taobao Marketplace was launched for consumers in China. With more than 800 million product listings and more than 370 million registered users in 2012, it is one of the world’s top 20 most visited websites.

clouds parting above the developing world

Just as the advent of internet technology allowed giant online marketplaces to flourish years ago, the low-cost and scalable software and services enabled by so-called “cloud computing” could give a spectacular boost to e-commerce – also in the developing world.

The cloud computing business model is designed to provide digital storage space on a shared network (i.e. in the cloud) along with the latest versions of soft-ware and supporting services. This means businesses using internet-accessible services from the cloud can avoid costly upfront investments in servers or software that needs to be installed on desktops.

The cloud revolution, say some commentators, is coming – and it could be a breakthrough for many when it does. In part, that’s because it offers com-panies scalability, flexibility, agility and the chance

to launch new services (such as social media) with minimum risk.

As such, its uptake is increasing. UK industry body the Cloud Industry Forum (CIF) recently conducted a survey across 250 UK-based organizations and found that 61 percent are currently using cloud-based services, with a 92 percent satisfaction level. The research also showed that the primary reason for the adoption of cloud is the flexible model of delivery (71 percent), scalability (66 percent) and the low cost of adoption (58 percent), although operational cost savings were not the major driver.

For instance, international aid organizations often stress how the “digital divide,” or the lack of access to broadband networks and the internet, harms the economic growth prospects of billions of people liv-ing in developing countries. Now some have pinned hopes on cloud computing as a way for countries to catch up, once the broadband networks are available.


all eyes on amazon The name Amazon.com is nearly synonymous with the concept of e-retailing, and most experts credit the company with opening the floodgates of online commerce. When it was launched in 1995 by Jeff Bezos, the company’s CEO, few would have imagined that the company would grow to its current size and scale in less than two decades.

Now the world’s largest online retailer, with 48.08 billion US dollars in net sales in 2011, Amazon.com is a strong force in setting expectations among consumers, with its huge selection, prices and customer service.

The story goes that Bezos boxed up the first book sold on Amazon.com in his garage in Seattle. His idea in the early years was to focus on cheap-to-ship books and other media that was already catalogued and therefore easy to be uploaded on a website.

Today, Amazon offers a product catalogue of mil-lions of items. Many are warehoused, fulfilled and delivered from Amazon’s logistics centers in north America, Europe and Asia, and many more come from the millions of merchants that also offer goods via the company’s marketplaces. Add to that Amazon’s so-called “Prime” services, which feature unlimited delivery for a low, fixed price each year,

and it’s clear to see why the company is a key trend-setter in the market.

Forrester analyst Sucharita Mulpuru credits Amazon.com’s marketplace model as a key driver of profit, since Amazon earns a commission off the sale of the wares without necessarily having to keep them in inventory or fulfill orders. According to Forrester, marketplace sales represented 35 percent of revenues and 30 percent of unit sales on Amazon’s website in the fourth quarter of 2010. Other online players are taking a cue from the likes of Amazon and eBay and moving to the marketplace model, including Flipkart.com in India, which offers a cash-on-delivery model that makes sales possible for those people in India who do not have bank accounts.

“Retailers that compete with Amazon have come to dis cover that offering marketplaces on their own sites is critical to driving margins and remaining competitive on the prices and the shipping fees of the items they do stock in inventory,” Mulpuru wrote in a research note in 2011.

“Companies such as Buy.com and Walmart have in-troduced marketplaces, and we anticipate others in verticals such as apparel, toys, and sporting goods will follow suit.” Mulpuru said, “This strategy will help them to retain some of the market share they may otherwise lose to Amazon.”

Mobile telecommunications networks have already done a lot to bring communications and digital services to people in remote areas, and the positive economic impact is well-documented. In Africa, some 65 percent of the population uses a mobile phone. This cellular infrastructure has allowed some developing countries to “leapfrog” over the age of fixed-line networks and go straight to the mobil e-commerce party.

In Kenya, for instance, users not only talk and text with their phones, they also conduct their banking on them. The M-PESA system, which uses cloud-based infrastructure, is well known for having brought payment capabilities to remote villages, thereby helping millions of small businesses thrive.

Still, much more must be done to improve lives in developing countries, and experts say the cloud could play an important part. Nir Kshetri, a profes-sor of business at the University of North Carolina in Greensboro, pointed out that cloud services are easier to install, maintain and update than traditional computers with desktop software and therefore provide a benefit of particular importance for rural users with little IT training.

Microsoft, Google and Amazon.com are among the large providers of cloud services worldwide that may indeed help chip away at the structural disadvantages that exist in health, education and commerce in the developing world.

Kshetri wrote: “In theory, it is possible for the de-veloping economies to catch up with the West, as the cloud allows them to have access to the same IT infrastructure, data centers and applications.”

34

Perfection: What Customers Expect with Online ShoppingBy Andrew Starkey

The demands placed on the supply chain by e-commerce will be driven by retailers’ requirements. But retailers’ requirements themselves are driven by consumers. Logistics providers and retailers must examine how consumers are changing their behavior to understand how supply chains should be adapted for e-commerce.

Recently on a Sunday afternoon, I went online to purchase a towel rail for my bathroom. I found a model I liked at a decent price on the website of a UK retailer whose name I won’t reveal. After doing some quick research, I was ready to purchase.

However, when I got to the checkout stage, I could not get the web site to accept my order for delivery to my home. I called the company’s customer service line, and a representative, sounding a bit surprised, told me that I could only buy the item in the store. My retort: “Well, why is it listed on your website?”

My easy and convenient home shopping experi-ence turned into frustration, and this retailer is no longer in such high standing in my eyes. Now I won’t be purchasing it from them at all; and I may not purchase anything else ever again.

I don’t think my reaction is particularly draco-nian. Like other consumers, I know that I can have a reliable and consistent online purchasing experience elsewhere. Why should I give this merchant more of my time?

This brings me to a point I’d like to make about how deliveries measure up in the world of e-commerce: Too often, logistics and the supply chain lag behind what the consumer actually expects. We at the IMRG, the Interactive Media in Retail Group, the UK’s trade association for e-retail, have four years of data to show that consumer satisfaction with physical logistics is lower than that with other steps in the home-shopping process.

The Digital World: Three Reasons Why Consumers Demand More Consumer behavior is being changed by the spread of ubiquitous digital communications and the alternatives it brings for multi-channel contact. We know that some 70 percent of consumers who make purchases online in the UK are influenced by other channels, including above-the-line media, below-the-line media, digital media and so forth. Secondly, consumers are used to an immediate ex-perience, and they’re looking for that in shopping as well. The result is that they are losing patience.

Third, consumers are more mobile. We find that consumers are very often in different locations for different deliveries. They don’t spend all day in an office. They don’t spend regular hours at home. They conduct their lives from different places. Consumers are simply less predictable.

Although they’re more unpredictable, we do know that these individuals shop and increasingly on-line. Sometimes they shop in a physical environ-ment, but they may do their research in an online environment. When this consumer walks into a store, he may use QR codes or scan a barcode with a mobile device to identify if a particular item can be had cheaper online.

These options give consumers more choices, but they also create complexity, particularly for the re-tailer, since the consumer wants to have a consist-ent experience – no matter what the channel.

High Expectations for Delivery Then comes delivery. We say delivery begins during the browsing phase. If you go onto an Amazon website and you’re browsing for a

Andrew Starkey is the found-er and lead consultant for Spiral4, a postal and e-logis-tics consulting company. He is retained by IMRG as its Head of e-Logistics, leading its re-search and member support program. Starkey has a unique background in the world of parcels, packets and postal logistics, with more than 30 years of experience gained in the commercial sec-tor and the regulatory envir-onment. He held senior posts at Royal Mail, and he has served as an Executive Director of Postcomm and the Commercial Director of Jersey Post International. Starkey is a member of the Chartered Institute of Logistics and Transport and the Institute of Direct Marketing and is a recognized expert on the UK postal and e-retail home-delivery markets.

35InsightOn: Perfection: What Customers Expect with Online Shopping

product, it will describe the product and the service you get with the product. If you’re shopping for a camera, it will tell you how many pixels the camera has, plus that camera’s absolute availability and the time window when it will be dispatched and when you can expect delivery. This happens at the point of browsing. What market leaders are doing is replicating the act of walking into a physical store and seeing the item for yourself, knowing you can walk out with it.

Many less-advanced e-retailers don’t give you this information until you’ve made your decision to purchase and you’re in the checkout process. Only then do they tell you when and how you can receive your camera, and if they don’t provide the right options you may well abandon the purchase – a time-consuming and costly exercise for both parties.

We’re getting to a point now where consumers expect to see this supply chain information at the start of their online shopping journey. They want to know the availability, dispatch date, delivery time windows and delivery time options. They want to see this at the time of browsing, and a vast majority of retailers don’t give you that information then. So, consumers immediately experience a disconnect between what they expect in the wider digital world and the reality of many e-retailers provide, which is often driven by supply chain restraints (or the lack of understanding of the importance and impact of the supply chain).

CheckoutAs the shopper enters the checkout, he/she ex-pects to know exactly what that product will cost.

Yet some e-retailers still apply delivery charges at checkout after the purchase decision has been made.

Other retailers provide a consistent shopping and delivery experience each time. But what happens if it fails? Let’s say you’re on your third purchase with a retailer and that delivery failed. If that happened, you had a 30 percent failure rate. Nobody in this world would deal with a company that has a 30 percent failure rate.

But at least 8 percent of UK deliveries fail to meet the shoppers expectation at the first attempt. We’ve got clear data that show that de-livery performance is a clear retail differentiator. In excess of 70 percent of UK consumers will positively testify that a good delivery experience encourages them to shop with that retailer again (and again, and again…).

In-TransitDuring the in-transit stage, consumers want to have instant information at their fingertips as well. However, some retailers disappear after the checkout is complete. Some 70 to 80 percent of retailers do send a confirmation email or SMS to notify the customer that an item has been dispatched. However, only 12 percent will send a message while the goods are in transit con-firming the delivery date is still on target. That’s 88 percent of retailers who forget to maintain the positive experience.

ReturnsThe final way that e-retailers can improve customer service and the delivery experience is in the area of returns. I call the current status

36

quo on returns a ‘black hole.’ We have data that shows that female shoppers are more likely to return goods than their male counterparts. Some 42 percent of female fashion purchases are returned as compared to 13 percent of fashion purchases made by men in the UK. Clearly, ladies are more discerning, so they buy several colors and several styles and they choose the one that suits them best. The rest they return.

The problem is that in most cases, the customer has already paid for the item that is being re-turned but has no control and lacks information about the package during the returns process, even though she may be bearing the cost of the return herself. In fact, that’s a key point.

Since the consumer may have to pay for the return, she sends it back the cheapest way – i.e. through a postal carrier that doesn’t provide a tracking number. At this point she is carrying all the risk during the three or four days it may take to return the item. During this time, she has 1) no goods 2) no money 3) and may have paid a premium to return the items. Many e-retailers are generally not good at letting me know that

the goods are back in their system and that I’ll be given my refund. During this time, I’m in the returns ‘black hole.’

When the retailer gets the goods back, the credit may be delayed for another three to four days while the return is being processed. All this time, the consumer is feeling uncertain. She may phone the customer service center, asking questions and causing the retailer to incur cost. I always say that an anxious consumer is a bad consumer.

This is a customer who the retailer spent mar-keting money to acquire; and the customer is unlikely to shop with the retailer again if it’s a bad experience. This is a very vulnerable time. Yet in the UK, most return services remain untracked. The data show that about 85 percent of online shoppers are generally satisfied with their outbound deliveries but only 60 percent are satisfied with services for returns. Again, it’s a disconnect because shoppers will see both delivery and returns as components of the over-all shopping process – an excellent ‘outbound’ experience will be negated by a ‘black hole’ returns experience.

37InsightOn: Perfection: What Customers Expect with Online Shopping

idis gold standard

Some UK retailers are seeking certification for the use of delivery best practices as a way to differenti-ate themselves from the competition.

IMRG has developed the IDIS Gold Standard, a delivery baseline against which retailers can meas-ure themselves and become certified. Certification indicates to consumers that the retailer is geared up for delivery best practice, such as allowing the customer to specify when the delivery is made.

Once the standard is met, the retailer is invited to display the IDIS Gold Best Practice logo on its website to show its customers that it provides an excellent delivery service.

Inside the Consumer’s MindI have presented four stages of the online shop-ping experience as they relate to deliveries and consumer expectations. It’s clear to see that a first-class online experience is characterized by communication with the customer that is conducted via the channel pre-selected by the shopper. The buyer is constantly kept abreast about the status of their deliveries, beginning at the browsing stage.

It’s also clear that consumers demand high levels of service and experience from e-retailers yet frequently experience a gap between their expectations and the available service enhance-ments in logistics. This gap represents an oppor-tunity for retailers, software providers, technol-ogy providers and logistics providers to respond via the supply chain.

I would argue that the response must be guided by a full understanding of how the consumer is feeling and why consumers’ expectations are as so high. Otherwise, we will never be able to properly adapt the supply chain and design low- or no-cost services that address consumer expectations.

DELIVERY NOTIFICATION

12% of retailers sent a text message alert regarding delivery, up from 4% last year

4%

12%

89% of retailers allowed the customer to track their order online, up from 77% last year

77%

89%

Larger retailers were more likely to send texts: 26% did so, up from 11% last year

11%

26%

19% of sites made the customer log-in/register before showing the delivery charge

19%

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PROBABILITY

Probably: 42%

Definitely: 15 %

Definitely not: 1 %

Unlikely: 12 %

Possibly: 30 %

DELPHI THESIS 49

IN FUTURE …… data and program storage are provided not locally but on huge internet servers, allowing for ever smaller and lighter devices.

The Ripple Effect of Online PurchasesDespite its image as “virtual,” the e-commerce industry depends on effective on-the-ground services, such as fulfillment and last-mile deliveries. The boom in e-commerce is bringing new and different challenges to supply chains.

Consumers may save time and energy by no longer heading to the shopping mall. Instead, they click away and the items are delivered to their doorsteps.

But let’s say a consumer receives at least five packages a week of foodstuffs, clothing and housewares, because they live in a remote area. The ability to purchase online may have simpli-fied their life, but it still means change and learning a new process: Not only must the card-board carrier cartons be taken to the recycling bin, the consumer may need to think ahead about where they will be when the packages ar-rive (i.e. how the delivery will be received) and, in case the product isn’t right or is faulty, how it will be returned.

Consumers bought 34 billion euros of goods online for home delivery in Germany alone in 2011, according to Christoph Wenk-Fischer, the head of the German e-commerce and Distance Selling Trade Association (BVH).

How this boom changes daily lives is only one part of the picture. Flip to the other side, and you’ll see millions of additional small packages flowing through the delivery networks of postal and express carriers impacts businesses and supply chains in numerous ways.

“A typical customer order triggers several B2B and B2C logistical operations,” says N. Viswa-nadham, a professor at the Indian Institute of Science and an expert in logistics.

Market leaders like Apple have refined their busi-ness to the point where a customer’s order online can initiate the manufacturing of the product. Others have focused on using advanced IT to au-tomate numerous processes, such as the creation of production or picking orders.

Still, the higher volumes mean far more people than in the past are needed to handle freight,

particularly in countries like China, where logistics capabilities must in some cases be built from scratch.

Step-by-Step: How E-Commerce Impacts Supply ChainsBefore an order is placed online, many custom-ers expect to see real-time information about the product’s availability, how long it will take for delivery and the cost of delivery. This type of information is very useful to the customer but not so easy for internet shops to provide, since they are dependent on a long list of supply chain partners to make that data available in a compatible format and a timely manner. Across the board, much effort is being given to make this information available widely.

Next, shoppers place their order. Besides a pay-ment receipt, they expect an electronic confir-mation about when the order will be shipped. Andrew Starkey, the head of e-logistics at the UK’s trade association for e-retail, IMRG, the Interactive Media in Retail Group, says, “Most merchants and logistics companies send confirmation emails with the IT systems they have ramped up in the past years. Often, the IT systems of the merchant are connected to that of the logistics provider or a managing intermedi-ary, or access is provided via the internet.”

After the order travels through the various information systems (i.e. that of the online shop, the producer, the distributor, etc.), and the product is located in the warehouse, someone (or, in highly automated warehouses, some-thing, i.e. a robot), must then move it off the shelf and place it into a staging area for packing.

Indeed, such fulfillment services have seen their share of growth in the past few years, and experts see them growing at 5 to 10 percent going forward, as producers target the direct-to-consumer market. It’s no coincidence that big online retail names have opened up fulfill-ment centers in emerging markets recently, such

39InsightOn: The Ripple Effect of Online Purchases

as China and India, in order to help with their logistics operations in these countries.

In some cases, small online sellers will fulfill or-ders from their basements; others ask third-party logistics providers to do the job. Companies with larger online volumes often have their own fulfill-ment facilities, or they have adapted their existing logistics operations for the larger volumes and particular demands of e-commerce.

Some even operate their own warehouses for their merchant customers. After outbound packages reach the warehouse dock door, these companies send them with a variety of commercial logistics providers (often express carriers) that deliver to the consumer’s home.

For many logistics providers, doorstep deliveries can be the most costly step in the process and represent one of the biggest areas of change taking place in the business, given the higher volumes of home deliveries and rising demand by consumers to determine for themselves when and where the package should be dropped off. The challenge for the e-retailer – and, by extension, the logistics provider – is how home deliveries can be made both efficiently and profitably.

The fact is that a merchant’s customer-focused reputation hangs on fulfillment. Fulfillment is super-critical to the success of any e-commerce enterprise. Unfortunately, fulfillment also gets potentially more complex and costly as e-retailers tap into different markets – including emerging markets with all their promise but also with their variable infrastructure – while offering increasing numbers of products to their customers.

It is essential, then, for the home delivery part of the process to be working efficiently, with the e-retailer utilizing the right logistics networks and solutions that, literally, deliver. Apart from being ultra-reliable, these solutions need to be cost-ef-fective both for the merchant and for the logistics provider (who will be aware of repeat deliveries eating into their profit margins) but also for the customer. Otherwise their business will be lost.

The way forward has to be through collaboration. With e-retailers and logistics providers working together to provide each other with better information, the challenges of the constantly evolving e-commerce market can be better understood and the supply chain solutions become that more ingenious.

40

Delivery Re-RunsIf the customer is not at home when the package arrives, the logistics provider either tries again at another time, takes the package to the near-est post office or, if the proper infrastructure is in place and the customer requests it, drops the package off at a 24-hour un-manned service point, such as DHL’s Packstation.

A decade ago, un-manned pick-up and drop off stations were few and far between. Clearly driven by e-commerce, their spread is a smart way to deal with the fact that people aren’t always home to receive a package. Some experts expect grocers to begin to place such stations in their stores as a way to drive sales on their own websites. Con-sumers can go to the corner store, buy fresh milk and collect their packages from the store’s locker.

If a second delivery attempt must be made, the delivery company’s margins – already low – are put under further pressure. And then there’s the matter of parking delivery vans in dense city centers as well as increased truck traffic in already congested areas.

Some companies have come up with innovative solutions to make doorstep delivery more cost- and time-efficient and to decrease the related emissions. One way is to send customers a text message or email informing them of the time window for delivery and giving those customers the option to accept the time window or select another. Such a service is possible with existing IT, but only a few companies are using it effectively at the moment, according to the IMRG’s Starkey.

Typically, a carrier will make two attempts to deliver a package and offer some form of online tracking of that package for both the merchant and the consumer, services made possible with advanced IT systems. But what happens when the delivery just can’t be made? Or the product isn’t right and has to be returned?

Working – In ReverseWhat’s obvious is that the package must make its way back to the original sender. What’s not so obvious is the sophistication and skill required by carriers to make this an efficient process, even if the package is returned through a different chan-nel than it was bought.

Merchants rely on the returns management ser-vices offered by third-party logistics companies and others, and the ability of a business partner to handle returns reflects back directly on the merchant. It impacts their image and is associated with customer service.

“Often called ‘reverse logistics,’ the process ofreturning an item raises the cost of the transaction,but it’s a fundamental and unavoidable part of the business.”

In many cases, the way a company handles re-turns can make or break the business. Customer satisfaction is strongly linked to the returns pro-cess, and inventory management depends on an efficient and effective returns process. From a cus-tomer perspective, an e-retailer’s returns process cannot be underestimated. Get it right and you can increase customer satisfaction. Get it wrong and you reduce the chance of their repeat busi-ness. Returns figure highly on online shoppers’ wish-lists. According to a survey by comScore, 63 percent of online shoppers look at a retailer’s return policy before making a purchase.

Often called “reverse logistics,” the process of return-ing an item raises the cost of the transaction, but it’s a fundamental and unavoidable part of the business. The right of consumers to return items bought from a distance trader is enshrined in European law, for instance. E-retailers will have to deal with customer product returns because this is a critical part of their customer service program. Customers may be advised to mail goods back – or some merchants will

41InsightOn: The Ripple Effect of Online Purchases


PROBABILITY

Unlikely: 15 %

Definitely not: 4 %

Definitely: 9 %

Probably: 41 %

Possibly: 31 %

DELPHI THESIS 51

IN FUTURE …… most business transac-tions are totally automateddue to the connection of business databases. Clients and service providers cooperate closely on the basis of aligned integrated IT systems.

organize pick-up from the customer. Poor instruc-tions on how to return the goods – included with the original items – may ultimately impact on a retailer’s receiving staff. Returns policies among major e-retailers are broadly similar, in order to remain competitive and encourage the customer.

According to a 2008 study by Forrester, 81 percent of consumers surveyed felt they would be more loyal if an online company offers a good returns policy. Some e-retailers are now going one step further and offering free returns policies: A good marketing strategy. Yet by making it easy to return goods, more goods will be returned: Thus the company creates a thorny problem for itself. It may also be shaping new consumer behavior, because why just order the one product you do want when you can order a further four alongside it that you may want? If it turns out you don’t want the extra ones, they are easily returned after all.

“With every additional trip to the post office to return an item bought online, supply chains are once again asked to adapt.”

A reverse logistics operation will therefore need to be as efficient and cost-effective as possible and executed in a way that satisfies both the cus-tomer and, importantly, the company itself. This is because returns can have a significant impact on business profits. In a paper entitled Reverse Logistics with E-Commerce Strategy, produced by IFIM Business School in Bangalore, reverse logistics is succinctly described as a process “done by a firm to minimize loss in the process of capturing value without affecting the quality available for enhanced customer satisfaction.”

In sectors such as high-end apparel, consumer returns reach levels as high as 20 percent. Apparently, it’s women shoppers who initiate most of the returns, says the IMRG’s Starkey. “Women in the UK are more selective shoppers and far more likely to return a product bought online than men,” he said. Some estimates put the cost of online returns for UK consumers and retailers at

100 GBP per year for shipping, postage and pack-aging. In Germany, 80 percent of clothes ordered online are returned, according to the BVH.

Across Europe, consumers have 14 days to refuse an item purchased online. Often, they choose to return their purchases, which were delivered by express carriers, in the cheapest (and therefore the slowest) way, using services such as those offered by postal carriers.

“For merchants, that’s a very long 14 days since they are trying to recover some of the lost time and expense associated with the item,” said the BVH’s Wenk-Fischer, adding, “Sophisticated companies handle returns as part of their inven-tory management.”

With every additional trip to the post office to return an item bought online, supply chains are once again asked to adapt. Due to the higher volumes, many postal organizations find them-selves stretched to the limit, experts say.

Who Pays for Returns?When considering the higher volumes and the costs associated with reverse logistics, one must remember that product returns are not new to the world of distance trading. They were a fact of life for companies and customers of catalogue and television shopping for decades before online shopping existed.

What’s different now is the transparency of delivery prices. The rise of IT automation in the global supply chains has allowed companies to calculate more easily the cost of each step of the shipping process at the item level (as opposed to the pallet or container level) and share that information electronically.

“With transparent pricing, it’s now far easier to debate over who will pay the fee. Of course, cus-tomers don’t want to pay anything extra for ship-ping and handling,” said the BVH’s Wenk-Fischer.

What may not be calculated into the costs is the business complexity unleashed by reverse logistics and multi-channel shopping. “Before, retailers had to worry about getting their products to the store. Now, they must place the same stock into multiple channels, manage availability for peak periods, such as Cyber Monday, and handle increased returns. All this requires precision logistics and plan-ning,” said Viswanadham.

42

Global E-Facts

united states – The success of US-based retailer apple’s ipad is driving widespread retail site overhauls, with 73.9% of chain retailers, 62.3% of web-only merchants and 69.2% of manufac-turers selling online reporting that they will have tablets in mind as they redesign their sites.

brazil – Although online sales in Brazil will reach US$22 billion in 2016, up 178% from 2010 figures, import taxes remain steep. A Laptop, for instance, sells for US$1,400 in Brazil, compared with US$800 in Mexico and US$500 in the United States.

aFrica – credit card pen-etration remains low in Africa, with only 50 million bank accounts spread across a population of one billion. Mobile payment systems like ‘M-PESA’ have instead helped drive an increase in online transactions, fueled by the continent’s growing middle class.

43InsightOn: Global E-Facts

india – A 2010 report by the Internet and Mobile Association of India has revealed that India’s e-commerce market is growing at an average annual rate of 70% and has grown over 500% since 2007. India’s online sales were projected to reach US$10 billion by year-end 2011.

world internet usage and population statistics march 31, 2011

world regions population(2011 Est.)

internet usersDec. 31, 2000

internet usersLatest Data

penetration(% Population)

growth2000-2011

users % of tablets

africa 1,037,524,058 4,514,400 118,609,620 11.4% 2,527.4% 5.7%

asia 3,879,740,877 114,304,000 922,329,554 23.8% 706.9% 44.0%

europe 816,426,346 105,096,093 476,213,935 58.3% 353.1% 22.7%

middle east 216,258,843 3,284,800 68,553,666 31.7% 1,987.0% 3.3%

north america 347,394,870 108,096,800 272,066,000 78.3% 151.7% 13.0%

latin america/carib. 597,283,165 18,068,919 215,939,400 36.2% 1,037.4% 10.3%

oceania/australia 35,426,995 7,620,480 21,293,830 60.1% 179.4% 1.0%

world total 6,930,055,154 360,985,492 2,095,006,005 30.2% 480.4% 100.0%

Source: http://www.internetworldstats.com/stats.htm

china – Chinese online consum-ers benefit from relatively cheap broadband and shipping costs. Internet access charges total US$10 a month (compared to US$30 in India, for instance) and shipping a one-kilogram parcel would set a consumer back just US$1, far lower than the US average of US$6.

europe – In September 2011, Russia overtook Germany as the market with the highest number of unique visitors online. The United Kingdom showed the highest engagement, with users spending an average of nearly 36 hours online in September.

44

bricks-and-mortar stores: Fighting for survival

Walk down a high street in Britain these days and you’re likely to find more than a few large clothing retailers and sporting goods stores. Over the next five years, you’ve got a four in ten chance of stroll-ing by storefronts that have been nailed shut and left to graffiti artists.

According to a report by the consulting company Deloitte, retailers in the UK will be selling large portions of their property holdings as they struggle to keep up with the changes in the market, driven in part by a shift to online buying.

Already, another study says, some 48,000 retail sites across the country are vacant, something that’s got communities worried, not only because they’re an

eye-sore but also due to the blight that inevitably sets in when urban spaces are abandoned.

UK Prime Minister David Cameron is so worried about it that he commissioned a report on how to revitalize downtown shopping zones. The report has come up with 28 recommendations on how to fight the decline.

Cameron asked retail expert and TV personality Mary Portas to lead the research. A sought-after speaker known for her creative approach and sense of fashion, Portas frequently lectures around the world on retailing and brand positioning.

Published late last year, the report says high streets, or downtown shopping zones, must once again become community centers where people seek cultural and social enrichment.

“Our high streets can be lively, dynamic, exciting and social places that give a sense of belonging and trust to a community,” she wrote in the “The Portas Review: An Independent Review into the Future of Our High Streets.”

E-Commerce: The Growing Pains

45

While people embrace e-commerce, they may also wonder what it means for their livelihoods, their neighborhoods and their privacy. In this chapter of InsightOn:, we explore the side effects of e-commerce and how the boom is forcing change in companies – and for communities. We also look at what happens when customers are unsure about the final costs for receiving their online purchases.

InsightOn: E-Commerce: The Growing Pains

Key recommendations from the report include putting visionary operational teams in place to run high streets like businesses, removing unnecessary regulations so that anyone can trade on the high street unless there is a valid reason why not and exploring further disincentives to prevent landlords from leaving units vacant.

Though focused on the UK, these recommen-dations would surely help in other countries that are experi encing urban decline, which is often symbolized by boarded up bricks-and-mortar stores. Economist trace decline in the US, for example, to the rise of the automobile and the availability of abundant cheap energy that enabled suburban living. Over decades, those trends left countless town squares in America looking like the ghost towns depicted in iconic Westerns.

Prince Hinson, an independent pharmacist in the US, operates a store with a single location in Gainesville, Florida. In his 32 years as a pharma-cist, he has seen the business move from one that was a neighborhood staple based on a trusting relationship between patient and pharmacist to a mass-market industry dominated by chain stores with drive-thru prescription pickups.

Yet Hinson has found a model that is surviving, even as consumers are driven online for better prices or are even forced to fill prescriptions that way by their insurers. Hinson’s Westlab Pharmacy has focused on the pharmacist as a chemist – i.e. his store continues to mix compounds by hand for individuals and companies. And human in-

teraction, including sound advice about medica-tions, is a big part of his success. Hinson seeks to individualize prescription medications for the patients he sees.

For the UK’s Portas, Hinson’s business may be just what she imagines as an antidote to closed shops.

Mary Portas

46

shopping online and the big unknowns

Now that consumers have access to a global mar-ketplace for goods, they are getting their feet wet in making purchases outside their home countries.

Research shows, however, that what these consum-ers actually want is the feeling that they’re buying from a shop around the corner. They want the buying experience to be simple, and the items they purchase should be delivered quickly and without the hassles, costs and delays typically associated with customs.

With its international express network, ability to have goods landed in the shortest times, and ties to customs-clearance boutiques like Borderlinx, Deutsche Post DHL is already making one part of that scenario possible. And steady progress is being made on the other side: The company is working together with partners, including IOR Global, to streamline many of the complexities that are as-sociated with the international shipment of goods for consumers.

“We handle matters such as obtaining licences and permits, or the payment of duties and taxes, so the buyer does not have to be involved,” said Ken Muldoon, the CEO of IOR Global, which helps inter national traders meet the requirements of being an Exporter of Record (EOR) and Importer of Record (IOR).

IOR Global operates in all major trading nations across Asia Pacific, the Americas and Europe/Middle East/Africa, consolidating shipments in its own name to keep freight costs down and reduce emissions.

According to Muldoon, online shopping has provided the visibility for the buyer, but much work remains for sellers to maximize the potential. “There are a couple of sellers who do it really well. A buyer goes onto their website and prices are in the local currency and they guarantee a delivery time of a few days. The buyer doesn’t know, or need to know, that goods are actually shipped from China or Singapore or Brazil or Germany. They’re transported across the world, cleared through cus-toms with all necessary paperwork, and then deliv-ered to their door. All the buyer sees is a local price and a few days later the goods,” said Muldoon.

What these companies offer, in one way or an-other, is what’s known in the logistics industry as a Guaranteed Landed Price (GLP). The idea is that the consumer is offered a single price for an inter national purchase that is an advance calculation in the buyer’s local currency incorporating the following: The price of the item, its shipment, customs fees, and charges for duties, taxes and quarantine, if necessary.

With the GLP concept, which is slowly making its way into the market, consumers will be able to make “like-for-like” comparisons of prices that remain valid for a given period of time.

It may all sound simple enough, but from a process point of view, making the GLP a reality is daunting, not to mention data-intensive.

“Given the complexity and the difference in customs regimes around the world, getting to a Guaranteed Landed Price is not so easy,” says Muldoon. “Service providers must review a seller’s product catalogue for goods that may cause problems for international clearance, determine if licenses are necessary – and if so which ones – understand the packaging and dimen-sions of the products, determine the likely freight charg-es for single or bulk shipments, and the list goes on.”

A few service providers are specialized in doing just this, allowing retailers to sell to any number of countries without the expense of establishing a company there.

Providing a Guaranteed Landed Price and customs clearance are services that Muldoon expects more and more sellers to take advantage of.

Muldoon said, “It is really about giving access to the vast world market, with the simplicity of a local purchase.”

47

counterfeiting and e-commerce: the genuine article

It’s a fact of life: There will always be unscrupulous people who try to take advantage of a good situa-tion by doing bad things. The world of e-commerce is no exception, with the sale of online counterfeit items reaching epidemic proportions.

There has long been a trade in counterfeit goods, of course, but the growth of the internet has rap-idly increased and eased its spread. A 2011 report by MarkMonitor – a provider of online brand pro-tection technology – revealed that websites selling counterfeit goods, including prescription drugs and luxury items, generated more than 92 million visits per year.

This is criminal activity with serious implications. The International Chamber of Commerce (ICC) has found that by 2015, the total impact of the trade in counterfeit and pirated goods – including those traded on the internet and the added costs to society through lost taxes and jobs – will exceed US$1 trillion. Even more disturbing is that profits made from illegal online operations often fund other kinds of organized crime.

The anonymity the internet provides has undoubt-edly aided the counterfeit trade. Yet buying from an unauthorized website that purports to be dealing in top brands – be they Vuitton accessories or Oak-ley sunglasses – is just as risky as buying them at a knock-down price from a nervous-looking man who is selling them from a suitcase in the high street. In both instances, you shouldn’t be surprised when your purchase turns out to be a substandard fake.

It’s not just a financial cost that’s at stake from counterfeit e-commerce, however. When you discover that the ‘Rolex’ watch you bought online isn’t the real deal – if it arrives at all, that is – you risk feeling cheated. If the medicines you buy online are fake, you risk your health and safety, because these can range from inactive, ineffective preparations to harmful toxic substances. Estimates suggest that up to 90 percent of illegal drugs are now sold online; and, worryingly, Robert Mallett, a senior vice-president at Pfizer, has warned that one out of five individuals may use a counterfeit pharmaceutical within five years.

The sheer scale of the e-commerce counterfeit problem can’t be underestimated – and it certainly isn’t being ignored, either by genuine retailers

or the authorities. China Daily reported that, over a six-month period in 2010–2011, Chinese authorities shut down 829 websites involved in counterfeit operations. In all, 426 suspects were detained in cases involving nearly 800 million yuan (US$124.3 million). In November 2011, the US federal authorities shut down 150 websites for selling counterfeit products; and in April 2012, the US District Court for the Southern District of Florida issued a preliminary in-junction shutting down over 175 websites engaged in the sale of counterfeit golf products. In the UK, fashion retailer Karen Millen says it has identified over 65 websites selling counterfeit Karen Millen goods, and is taking action against them.

The counterfeit e-commerce trade starts with a mouse click. It can stop just as easily if online shoppers only bought from established, authorized retailers; and, on eBay, ones that have been recommended to them.


48

a matter of trust: is e-commerce safe?

Major security breaches of brand-name websites constantly make top headlines in the news. Meanwhile, phishing attacks – emails directing consumers to scam websites to ‘update’ their financial or personal data – are on the increase.Spam email is a constant bugbear, clogging up per-sonal and company inboxes worldwide, asking for attachments to be opened and links to be followed (these should always be deleted, naturally). What’s more, there are frequent horror stories about mal-ware and the increasing abilities of cybercriminals to, for example, monitor online movements; and, of course, viruses can infect computer systems and wreak havoc across entire companies.

Cybercrime is a big problem and a worrying one. US-based IT security company Kaspersky Lab has revealed in a survey with B2B International that 41 percent of companies polled worldwide are not prepared to counter cyberthreats. Kaspersky Lab also published the results of a survey by Harris Interactive in which 60 percent of internet users from Russia, the US and Europe cited the loss of financial information as their greatest online concern. It may be, but the e-commerce explosion shows that these concerns aren’t dissuading shoppers from making online purchases. It could, however, be stopping e-commerce from realizing its full potential.

This point was underlined recently by Arrie Rauten-bach, Head of Retail Markets at South African retail bank Absa. In August, Absa announced a partnership with fashion retailer Mr Price that will extend the bank’s online payment services to the retailer’s customer base and provide a secure payment facility when shopping for Mr Price ap-parel online. “Online banking is one of the most successful stories to emerge from the advent of e-commerce,” said Rautenbach. “It provides un-precedented flexibility for consumers. However, for e-commerce to realize its full potential, consumers must have confidence in the security of online transactions.”

49

Unlike a face-to-face transaction in a store, e-commerce requires trust on the part of the consumer. The consumer has to know that the website they are buying from is genuine and that the financial details they are asked to plug into it will be secure. The bigger players are so well-known that their authenticity is never in ques-tion (although fraudulent sites may impersonate legitimate companies, using similar domain names); but even the largest e-commerce retailer can experience issues around the security of cus-tomer records. Some smaller, less well-known or new websites are patently an unknown quantity for the online shopper. Yet more and more con-sumers are entrusting their personal and financial data to online merchants.

So how do shoppers know their information is secure? Many trusted websites rely on third-party suppliers of secure payment methods at the cash register. They may also have their security regime audited by an independent party and carry that group’s seal of approval.

Tony Ventura, the Chief Information Security Officer Senior Director at DHL Express, says that an important part of DHL’s role as an enabler of e-commerce is protecting customer data shared along the supply chain.

“E-commerce is about collaboration, and col-laboration is about trust. It is our job to protect customer data from loss, prevent its access by unauthorized parties, keep it away from those with malicious intentions, make sure that customer data integrity is maintained and remove any means of interception.”

Still, stresses Ventura, consumers should stay proactive, watching for red flags that may signal a dubious website. These may include spelling and usage on websites or in emails; design irregulari-ties on websites; the inability to reach someone behind a website, either via email, online chat or phone; and static websites on which many links are broken, except those leading you to a place where you can enter your personal and financial details.For Ventura, consumer vigilance and responsible merchants both play a crucial role in keeping per-sonal data safe in cyberspace.

“Security techniques have improved dramatically over the past decade. But threats evolve, and so must the ways to fight them. At DHL, keeping on top of the security game is one of our highest priorities.”


50

The Expert View – Christoph Wenk-Fischer

The European initiative comes as other coun-tries are re-working their laws about the com-mercial use of personal electronic data. The White House released a “Consumer Privacy Bill of Rights” in February which calls for basic data self-determination, such as transparency regarding data policies and accountability for the companies that collect and use personal data.

India and China, too, are working on data pro-tection rules. Their moves are critical given the fact that more Indians and Chinese will soon be online than there are citizens in Europe and the US. According to the Economist, India’s bill would set up a data-protection authority, call for consent before personal data can be pro-cessed and create a formal right to privacy. In China, a 2003 draft law that seems to have lost steam would require, among other things, prior informed consent for organizations that want to transfer personal data.

DHL spoke with Christoph Wenk-Fischer, the head of Germany’s e-commerce and Distance Selling Trade Association (BVH), which repre-sents 330 companies. Members are combined catalogue and internet sellers, merchants that operate only online, tele-shopping companies, online pharmacies and eBay power sellers. The German e-commerce and distance selling in-dustry represents 34 billion euros in spending per year.

Mr. Wenk-Fischer, what keeps your members up at night regarding data privacy?

Christoph Wenk-Fischer: The main issue we’re facing in the next years is European data privacy laws. In Germany, we don’t have a problem at the moment because the benchmark for data protection is a very high one. We are leading internationally on data protection law, but the proposed European Union directive for data protection and privacy regulations goes much further than German rules.

One thing that would adversely impact every e-commerce merchant is that you could only use data with the consent of your customer under the current draft of the directive. So, it would be very difficult to acquire new custom-ers. That’s the first point. I think the European Commission came up with this idea in re-sponse to the data practices of American com-panies that are well known for their leniency compared to European ones.

In what concrete ways would the directive impact e-commerce merchants in Europe?

Christoph Wenk-Fischer: Under the draft law, you are asked to give your written consent to use your data if you want to buy something online. This will make it impossible to make sales. In a social network, it’s easy to collect data because everybody wants to join. But for daily business like e-commerce, it will be diffi-cult to get consent.

Right now, e-commerce is booming, but we’re worried that if the proposal were implemented in the way it is written now, it would cause a downturn in sales. We would be happy if the

Christoph Wenk-Fischer has served as the head of the German e-commerce and Distance Selling Trade Association (Bundesverbands des Deutschen Versand han-dels e.V. bvh) since 2010, lead-ing the association’s work to promote the long-term inter-ests of the mail order trade. The association maintains close contacts with the German Bundestag and with various associations in Germany. It cooperates with the European Mail Order and Distance Selling Trade Association (EMOTA), which works close-ly with the European Union. Before joining the bvh, where he also served as deputy head, Wenk-Fischer was the editor in chief of the legal magazine NJW, the Neue Juristische Wochenschrift. Wenk-Fischer also led the legal and real es-tate activities at Otto Group in Hamburg, where he worked from 1997 to 2007.

51InsightOn: The Expert View – Christoph Wenk-Fischer

German benchmark becomes the European one, but anything more would harm sales.

So how does it work now? How are German internet retailers doing business?

Christoph Wenk-Fischer: Under German data protection law, there’s an exemption for purposes of acquiring new customers. The exemption is that you can use a customer’s address if it’s published in the public domain. But in the future under the European directive, this would be impossible. You would need the written consent of every new customer. Another point would be that you couldn’t send a catalogue to someone if he’s not yet your customer. Now companies can buy addresses from list brokerages. That’s an important business.

Under the new directive, profiling would also be prohibited. For Germany, it means that one quite important payment method would be im-possible. Nearly two thirds of all customers buy and pay after receiving their goods because they prefer to avoid using a credit card or an electronic method to pay. No merchant would send goods to somebody he doesn’t know any-thing about. So, we need profiling, which is scoring. But profiling would be prohibited.

What other data-related issues do your members face?

Christoph Wenk-Fischer: Another point is IT security. Our merchants don’t worry about it, but politicians worry about IT security. I think e-commerce is daily business nowadays. Especially in Germany, everybody does it and everybody buys everything online. We have re-liable merchants, we have great shops. We have secure payment methods. IT security is not the point at all for our merchants.

But I think some politicians consider e-commerce too new and too unknown. They associate e-commerce with the risk of credit card data being stolen or the like. It’s always the same story. The real point is that we have to explain how easy it is and how safe it is as well. Indeed there are no big problems in IT security for our customers because of secure payment methods, reliable shops and trust marks. In Germany, we have three or four established trust marks. If you buy in a shop with such a trust mark, it’s reliable. Period.

In closing, what are you doing about the draft European privacy legislation?

Christoph Wenk-Fischer: The BVH is talk-ing to politicians and to the European Commission. And EMOTA (the European Multi-Channel and Online Trade Association) is also involved in direct dialogue with European authorities. EMOTA is the European-level e-commerce organization we are members of.

The draft law will be discussed in all European forums, such as the European Parliament and the European Council. We do have some ways to influence the discussion. We’re talking to politicians in the parliament as well as to the German government.

It is our hope that further discussion over the next two years will lead to some sensible changes in the proposal. I think we’re making progress.

The European Commission proposed a new set of rules in January 2012 to strengthen the data protection rights of people online and to streamline the way data is handled across Member Countries. The Commission says the new rules, which may go into effect in 2016, could save busi-nesses 2.3 billion euros a year.

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53InsightOn: E-Commerce and Collaboration

E-Commerce and CollaborationE-commerce has made a huge impact in a rela-tively short timescale. In the last decade it has redefined the term ‘shopping’ for consumers and changed the face of retail for merchants. Now every retailer recognizes that they must have an online offer if they are to attract customers and keep pace with the competition. In order to survive and thrive, they need e-commerce.

And, remarkably, this is only just the beginning of the e-commerce story because its potential – in terms of emerging markets, cloud comput-ing and mobile technologies, etc – hasn’t even begun to be explored. The future is bright and the financial possibilities considerable. In JP Morgan’s annual Nothing But Net: 2011 Internet Investment Guide on digital commerce, Gold-man Sachs predicts that global e-commerce sales will reach US$963 billion by 2013, growing at an annual rate of 19.4 percent.

However, as we have seen, there are numerous challenges that e-commerce presents for manu-facturers, e-retailers and logistics providers. For most of civilization, retail meant bartering with people in your own physical space and time. Enabled by e-networks, in 2012, it often means short-term agreements executed for and with people in distant places who you may never meet. A successful e-commerce transaction, therefore, is all about good order fulfillment. That means reliable and timely delivery.

Yet in order to function properly, protect profit margins and inventories and raise customer ser-vice levels, the e-retailer is going to have to drive down costs by enhancing supply chain efficien-cies. That means embracing a way of working closely with partners including logistics provid-ers, intermediaries and even other e-retailers. In other words, the supply chain of the future will have to become even more visible and even more collaborative.

‘Collaboration’ doesn’t simply mean sharing warehouse space – although that may be part of the solution in some instances, with com-peting retailers and competing manufacturers looking to consolidation centers for savings on everything from rent and utilities to transport costs. For example, rival consumer electron-ics companies are sharing facilities via DHL in Scandinavia, and Carrefour is sharing space with other retailers in France.

Logistics providers will also have to work togeth-er with their customers to improve forecasting and replenishment by integrating information systems and sharing business-specific informa-tion. Based on trust and linked information systems, companies will pool their data to create a whole new picture of financial and physical flows that wouldn’t otherwise be possible. They’ll aim to balance supply and demand to reduce the cost of shifting goods around the world – and to maximize sales for the manufacturer and seller.

The ability to do all this has been boosted by ever-cheaper computing power and storage space as well as the expansion of the cloud and cloud-based software services. Dell, Toyota and Walmart have each found new ways to collab-orate that were enabled by connectivity. Toyota, for example, links up with its suppliers elec-tronically, sharing key information that allows Toyota to better coordinate its manufacturing schedule.

Even here, however, as we now explore in the second half of this report, there are challenges to confront. Simply having the technology to facilitate collaboration won’t be enough on its own. The willingness among all players to make it happen has to be strong, too. E-commerce is still in its infancy but, to be successful in its future, companies will require a community of spirit – and a new way of thinking.

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55InsightOn: An Evolution of Collaboration


PROBABILITY

Unlikely: 4 %Definitely: 23 %

Possibly: 24 %

Probably: 47 %

Definitely not: 2 %

DELPHI THESIS 07

IN FUTURE …… competitors collaborate with each other in orderto develop innovative solutions for sustainability and to better shoulder rising energy costs.

An Evolution of Collaboration

Today, collaboration remains a survival tech-nique – and a competitive advantage – for indi-viduals and companies alike.

It may take place in cyberspace, and collabora-tion may be among partners scattered around the world, but it is essential for staying alive in today’s competitive business environment.

For most enterprises, certain forms of collab-oration are already an integral part of each business area. But effective collaboration in the area of logistics is becoming even more im-portant, says N. Viswanadham, a professor and the executive director of the Centre for Global Logistics and Manufacturing Strategies (GLAMS) at the Indian School of Business.

Driven by higher fuel prices, lower volumes due to the recession and an acknowledged need to reduce consumption of fossil fuels, some companies are looking to improve the utilization of their transport, for instance by consolidating multiple shipments.

For good reason, says Viswanadham: “In my view, all successful companies in future will be logistics companies. Companies must not only be able to design and market a product, they also must be able to source its components, build it, move it, store it, and deliver it to the market – on time and at a competitive price.”

Yet barriers to logistics collaboration remain. Some companies are worried about sharing the neces-sary business information to make collaboration possible. Others want to avoid becoming reliant on partners to hold up their end of the agreement, or they are concerned that partnerships would suffer when it is time to share the gains.

If this attitude persists, however, the industry risks the government stepping in, says Alan

Waller, the chairman of a cross-industry group that promotes collaboration in the supply chain, the European Logistics Users, Providers and Enablers Group (ELUPEG) Ltd.

“The threat is that if we don’t stop under-utiliz-ing transport assets, Brussels will force us to do it by introducing taxes that give an incentive to consolidate transport. This could happen in the next three to five years. To avoid such disrup-tive legislation, the players in supply chain must work together to develop solutions,” said Waller. Waller is also the Vice President for Supply Chain Innovation at the international consultancy, Solving Efeso.

Shared Data – The Basis for Modern-Day CollaborationOne way companies are already tackling the problem themselves is through increased ‘co-opetition.’ The term, a blend of the words ‘cooperation’ and ‘competition,’ describes competitors working together to a common end without infringing anti-trust law.

The basis of their work together in transport management, fulfillment and scheduling is trust and shared data, for instance about inven-tory levels and freight flows.

In Scandinavia, for instance, two consumer electronics firms are working together to cut their costs at a shared DHL Supply Chain facil-ity. The companies have similar delivery pat-terns for products sent to electronics retailers. At the facility, distribution is organized inde-pendently via DHL Freight and other logistics providers, and customers have the opportunity to consolidate deliveries to save on handling and transportation. This requires a collabora-tive approach in which all parties involved agree on the business rules and the commercial framework.

Collaboration is one of the earliest survival techniques known to humankind. Whether hunters and gatherers or market traders, people collaborated to meet their daily needs.

56


PROBABILITY

DELPHI THESIS 34

IN FUTURE …… logistics providers can only survive if they formglobal alliances and collaborate closely, e.g. todevelop new rail networks connecting Russia, Asia,and Europe.

Unlikely: 11 %

Definitely not: 3 %

:yletinfieD19 %

Possibly: 21 %

Probably: 46 %

Retail-Driven CollaborationIn other cases, and representing a new trend, suppliers are working together more closely with retailers at consolidation centers.

“Traditionally, the retailer has been quite domi-nant in the relationship, but we’re now seeing manufacturers becoming more influential and taking a more active role in the supply chain in order to get their products to the retail store floor in the most efficient way. They say, ‘If I share a warehouse, or share a vehicle, or share infor mation, then that’s fine. The real battle is on the store floor,’” said Richard Quesne, Customer Management Director, DHL Supply Chain.

At DHL’s Collaborative Consolidation Center that serves Carrefour in Lomme, France, Carrefour is working together with suppliers to ensure product availability and cut costs by decreasing its stocks and truck movements.

Here’s how it works: Some 100 producers of items such as shampoo, baby food and laundry detergent deliver from their factories to the center in Lomme, remaining owners of the stock. DHL, which has signed contracts with the manufacturers and oper-ates as a neutral third party, handles all the logistics – from the reception of the goods through to order preparation and co-packing on pallets and in cages.

Carrefour places its order with manufacturers, taking ownership of the goods only when they leave the DHL consolidation center. By syn-chronizing orders, Carrefour ensures that ca-pacity on the trucks that deliver to its facilities is used as much as possible.

“Since Carrefour can place small orders but still fill trucks, and it doesn’t take ownership of the stock until the stock arrives, the com pany saves money. Manufacturers save by not doing the cross-docking themselves,” said Quesne.

Overall, the consolidation center can reduce transport costs by up to 40 percent per pallet, cut stock holding costs by 20 percent and re-duce carbon emissions by 25 percent, according to DHL’s calculations.

Despite the benefits that collaboration can bring, much remains to be done to improve col-laboration in the logistics sector.

Some experts see great potential in cloud computing. Where Electronic Data Inter change (EDI) was the main gateway for sharing data from the 1970s to the 1990s, now applications on the internet and cloud-based software pro-vided as a service (SaaS) are leveling the playing field, making it much easier and cost-effective

57InsightOn: An Evolution of Collaboration

for business partners of all sizes to exchange data and manage their supply chains better.

“Despite the benefits that collaboration can bring, much remains to be done to improve collaboration in the logistics sector.”

One grand vision revolves around a global repository of real-time freight-flow and other logistics data that would be generated and maintained by hundreds or even thousands of companies involved in transport. It’s a concept not so different from the way the online en-cyclopedia Wikipedia works, but it’s all about data, technically sophisticated and maintained by professional users.

By inputting their own data and combining that with data from other companies, users could gain a real-time overview of flows outside their com-

pany’s own networks. This information could help with route planning in congested areas and would make it possible to initiate partnerships to consolidate goods along shared routes.

The database would be a sort of “control tower” of global, cross-company supply chain informa-tion. Companies would benefit each time an-other joins, adding their data to the pool; and each time a user corrected or updated data, everyone would benefit. In addition, users could analyze traffic flow scenarios on a global basis for far more accurate planning and predicting than similar analyses based on only internal data.

Various organizations are at work building up such a capability and establishing a business as a neutral orchestrator of multiple supply chains. They provide, among other things, the cloud-based solutions and algorithms to enable a so-phisticated use of the data. But the practice is not yet widespread.

Waller’s ELUPEG is working on a similar con-cept called Vision 2020. “If it did catch on, a massive cloud of data about global freight flows could spur all kinds of new cooperation and collaboration – and it could be an ideal basis for helping companies cut costs and reduce emis-sions,” said Waller.

58

Collaboration – The Human Factorby Stuart Whiting

Overview – Where Are We At?Collaboration has been pursued by business as the holy grail for solving performance problems in businesses for more than a decade. The focus has been primarily on improving systems, pro-cesses, operations, IT, controls, financials and other business activities. Improvement in this part of the organization have been addressed through incremental, innovative and revolu-tionary means yet the results in performance improvement are variable and at times do not seem to justify the effort. There seems to be yet another area to address in the elusive ideal of successful collaboration, one that has been mostly ignored to date. In the supply chain area the focus of businesses has been on systems and processes, however more work needs to be done to address ‘human factors’.

In 2006, Verizon Business and Microsoft Corp. sponsored an international study of over 2000 organizations that revealed that “collaboration is a key driver of business performance around the world.” The research, conducted by Frost & Sullivan, developed an index for ‘collaborative-ness’ based on:

• An organization’s orientation and infrastruc-ture to collaborate, including collaborative technologies such as audio conferencing, web conferencing and instant messaging

• The nature and extent of collaboration that allows people to work together as well as an organization’s culture and processes that encourage teamwork

Drilling down into this study reveals that the focus is on technologies that allow communica-tion, rather than identifying the more elusive

soft-side of collaboration: The organization and the people.

This year, on January 24th 2012, Jacob Morgan, a Social Business Advisor wrote in his blog that “Collaboration is a Business Requirement”. There’s hope here that collaboration is now be-ing addressed in a more ‘people’ oriented man-ner. However when reading through the post the focus is still on ‘collaborative tools’. So the challenge remains that the focus on collabora-tion – the people side – remains difficult to un-pack and facilitate. Its much easier to look at tools and technology, than the murky waters of people, culture and collaboration.

“So the challenge re-mains that the focus on collabora tion – the people side – remains difficult to un pack and facilitate.”

So, What Is ‘Collaboration’?The term collaboration is derived from the Latin collaborare, ‘to work with’, appearing in print as early as 1871. Despite the clarity and simplicity of this definition, collaboration is a complex concept. For collaboration to be suc-cessful it requires involvement from an organ-ization at a multitude of levels. This includes the individual who collaborates, their manager who facilitates and assesses the collaboration,

59InsightOn: Collaboration – The Human Factor

Stuart M. Whiting is the Global Head of Multinational Customers, Government & Defense at DHL Express. Based in Bonn, Germany, Whiting also oversees DHL Express’ logistics business in a variety of regions. He has a keen interest in customer alignment and buying behav-iors and works to apply in-dustry-leading strategies on behalf of customers. Previously based in Taipei, Taiwan, Whiting was General Manager of DHL Express. Before that, he worked in commercial supply chains and other functions in Japan and throughout Asia. Whiting joined DHL Express in 1999 as a Commercial Manager from TNT Express. A Fellow of the Chartered Institute of Logistics and Transport, Whiting holds a Master of Science degree in Logistics and Supply Chain Management from Cranfield University.

critical to the collaborative experience. This is because it involves generating, converting, and diffusing ideas. In addition, it involves the abil-ity to make decisions – not necessarily about the collaboration per se but about when to col-laborate and when not to collaborate. Thus col-laboration is not really able to be project man-aged in a truly linear or sequential manner. The aim is more to keep the collaboration moving forward and aiming at definite goals over time.

The creative side of collaboration includes as-pects such as:

• Believing all involved can contribute creative-ly to the project;

• Support, value and recognize creativity;

• Set the situation up so that there’s a challenge – but not too much of a stretch;

• Provide a situation for those involved to focus on their work rather than on constant dead-lines;

• If people are excited about their work they tend to be more creative;

• “Creativity takes a hit when people in a work group compete instead of collaborate. The most creative teams are those that have the confidence to share and debate ideas” (Breen 2007), which means that trust and openness need to be valued in the culture(s) for success-ful collaboration; and

• Stable work environments need to be in place as constant downsizing or increasing work-loads tend to reduce creativity.

But What About the Status Quo?Morten Hansen in his 2009 book Collaboration: How Leaders Avoid the Traps, Create Unity and Reap Big Results wrote that “Good collabo-ration is worse than no collaboration at all”. This counterintuitive idea is the result of research on successful and unsuccessful collaborative projects across a range of industries and busi-nesses. Poor collaboration often involves high levels of friction and a poor focus on results. The drain on resources (products, money and time) through poor collaboration results in a problems for an organization. The other side of the coin, a poor focus on results, is often elusive to some organizations as well as the focus of

as well as the organizational context. Each of these factors can enhance or limit collabora-tion. Then to complicate matters even further, if collaboration is across organizations, the complexity increases as these factors are in play at each level of the other organization as well. This added level of complexity increases the challenge; however, anecdotally it has been re-ported that the relationships within an organi-zation are often more difficult to negotiate than external ones.

If collaboration is to be successful there needs to be an appropriate ‘fit’ or an alignment of a range of factors. These include disparate things such as: The culture; mutual understanding of the project and the contributors; knowledge (more than just information); organizational values; willingness of the leadership for collab-oration to happen; as well as the goal(s) and as-sumptions of the individuals involved. This is a big call for something that seems to be so simple.

“Good collaboration is worse than no collabo ration at all.”

In addition, there are a range of barriers to col-laboration such as team and/or organizational conflict; poor focus on results; hostile territory (i.e., relating to the context rather than the in-dividuals); under-estimating the costs of col-laborating (including time); and lack of identi-fication – and/or acknowledgement – of other barriers to collaboration that may be unique to the situation or the organization. Each one of these barriers, if present in an organization, will be challenges that need to be overcome for successful collaboration to happen. These nega-tives aspects, that are believed to be linked to poor or no collaboration, need to be either elimi-nated – or at least be reduced to a level at which they are less important than the positive aspects of collaboration – for success to be possible.

Another area of collaboration that is often overlooked is the activity of collaboration – at least in the initial stages. Creativity and inno-vation are non-linear processes that are diffi-cult to control, are not easily regulated, and are

60

the project drifts from the end goal to the means of achieving the goal – collaboration. Hansen reports that the goal of collaboration is not collaboration, but it is actually a means to an end: Improved business performance. The problem is that in many projects this objective is lost in the activity of collaborating and the end goal of an improvement or resolution of a problem becomes lost.

The approach Hansen proposes for successful collaboration is disciplined collaboration. This can be achieved by carefully selecting what col-laboration projects to pursue and then ensuring that the focus is on the desired outcome(s) throughout the project. Once the project is select-ed the next step is not to commence the project. There needs to be some background work com-pleted to identify and understand the current barriers to collaboration in the individuals, their manager(s), the team(s), and the organization(s) involved. This aspect is a huge challenge due to the number involved and may take some time to determine. Part of this may be identifiable through reviewing collaborations that were un-successful in the past. Removing or at least reduc-ing these barriers to collaboration through man-agement solutions and careful observation of the project is an ongoing quality of the collaboration itself. This may mean empowering individuals and team members to resolve issues, rather than leaving everything to managers.

This disciplined collaboration is defined as “the leadership practice of properly assessing when to collaborate (when not to) and instilling in people both the willingness and ability to collaborate when required” (Hansen 2009). This then requires delegation of power and the ability of individuals to participate in the pro-cess of collaboration, as well as to pursue the project itself.

Challenges to Overcome for Successful CollaborationThere are a number of challenges in the cultural and people area that need to be overcome – or at least reduced – for a project relying on collab-oration to be successful. These can grouped into five areas of focus, although not all of these problems will be found in the one organization: There is some overlap and interaction.

The first area of concern is trying to establish collaboration in hostile territory. This does not mean that there is negativity towards the

project per se. The issue is deeper than that. Answering the following questions may reveal a situation that is ‘hostile territory’ for collab-oration. How does the organization reward people? Does the organization encourage productivity through internal competition? Do business units or team compete? Is cooperation rewarded and encouraged? Do employees in the organization interact and share information easily? Or is the system more one of internal competition? If the response to these questions reveals that the emphasis and culture in the organization is internal competition rather than cooperation, it will be more difficult to establish a project that requires collaboration. Even before the project starts it is working against the cultural status quo and is more than likely going to fail.

“A different problem, found in an organization with a more cooperative environment is over- collaboration.”

Another aspect of hostile territory that is less obviously a barrier to collaboration is where power lies in an organization. If power and de-cision-making is tightly held with the manage-ment team and senior executives then there is little space in the organization for others to make decisions. Do employees have freedom to develop something new without asking permission? Or is everything centralized? Do employees out-side the top management team have a way of making their opinion heard? Is there freedom to initiate in the organization? Or is this frowned upon and viewed as subversive? There are two issues with centralized power in an organization or at least when there is a lack – or a low level – of empowerment of employees. The first is that the culture then tends to work against a project that is perceived to be undermining the power base of the organization. The second issue is that the employees are less experienced in initi-ating ideas and applying them and thinking outside the box. In this scenario it may be more difficult for the team to get used to the freedom



PROBABILITY

Definitely not: 5 %

Definitely: 3 %

Unlikely: 28 %

Probably: 22 %

Possibly: 42 %

DELPHI THESIS 59

IN FUTURE …… virtual companies assemble highly educatedprofessionals on a freelance basis in flexible teams and on demand. Thus, traditional company structures, based on rigid work spaces and fixed working hours, are obsolete.

of being creative, which is required in collab-oration as discussed earlier.

A different problem, found in an organization with a more cooperative environment, is over-collaboration. In this type of organization it is easier for the employees to focus on the activity of collaboration rather than the output of the project. This situation is almost the opposite of hostile territory. Instead, in this type of culture the project may lack focus on the end game and the bottom line. After all, the purpose of col-laborating is a result, not just the collaboration.

“In collaborative projects, which require some level of creativity and have no guarantee of success, there is an element of needing time for the project to come to fruition.”

A corollary issue to over-collaborating is over-shooting the potential value of the outcome. Some projects are not successful, yet organiza-tions will continue to support them a long time after they should be closed down. In collabora-tive projects, which require some level of crea-tivity and have no guarantee of success, there is an element of needing time for the project to come to fruition. At times it may be difficult to decide whether to cut losses or to wait. Sometimes, linked to each of the challenges listed above, underestimating the costs of collaboration will lead to an inability to determine when a proposed collaborative project should not be pursued. Additionally, if these costs are underestimated it is difficult to identify when a collaborative project should be disbanded as it costs more than the potential benefits estimated from completion.

These costs of collaborating include both finan-cial and non-financial factors. Understanding the absolute necessity of trust is critical to the suc-cess of a collaborative project. Even if all other

factors are in place, a lack of trust alone may block success. Despite the fact that the individu-als involved in the project may be enthusiastic and committed to collaborating, a lack of sup-port from the relevant touch points in the organ-ization may thwart successful collaboration. Therefore, support for collaboration from the or-ganization itself, including management, and the business units associated with the project is very important. A lack of support will erode most col-laborative projects – even if they do commence. A soft skill also required within both the collabo-rating team and organization leadership is the ability to resolve conflict. This has a similar out-come to support with collaborative projects, that is, if the ability to resolve conflict is present it can greatly facilitate collaboration, but if it is lacking, it may not obviously slow down the project and something else may be blamed for a lack of success. Time too, is required for developing a successful collaboration and building trust. Estimating how much time is required to invest in a project, as well as how much time is ‘enough’ for a project is difficult. Lastly, knowing the required outcome and what the desired benefits are is very important to keeping collaboration on track.

The final challenge is identifying the barriers correctly, which takes an imitate knowledge of the organization, intuitive knowledge of people and their interaction, and the ability to recog-nize both the soft and technical requirements of a collaborative project. A lack of understand-ing of this may result in a collaborative project costing too much – or being disbanded when it could have a large payback.

So What Does Collaboration Really Cost?In investigating collaboration, Hansen (2009) determined what he believes to be the real cost of collaboration. The collaboration premium (i.e., the full cost of collaborating) is calculated not just by identifying the direct costs of a col-laborative project, but it also includes account-ing for the opportunity cost in order to identify the true value of the collaboration, positive or negative. This is:

Collaboration Premium = Return on Project - Opportunity Cost - Collaboration Cost

This formula attempts to capture some of the softer culture side of collaboration. The limited business success to date of collaborative projects

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has demonstrated that the commonly used ap-proach of focusing on tools in the supply chain is acceptable, yet limited. It is the equivalent to assessing a company’s value using only financial metrics and ignoring the relational, social and human assets. Under standing of this limitation was recognized in the field of accounting and resulted in the assessment of a firm’s value using the triple bottom line.

Intangibles in business are recognized as differ-entiators between levels of success. A report on high-performing workplaces from the Australian School of Business in October 2011 noted that the intangibles that make a difference in per-formance are innovation, leadership, fairness, employee experiences and customer experiences. In collaboration the cultural factors, soft skills and intangibles are strong contributors to col-laboration success – or failure.

So What Are the Human Factors for Collaboration?The human factors in collaboration do not only lie with the individual. In reality they include a wide circle of contributors: individuals such as the designated collaborators; their managers; groups of individuals such as the collaborative teams; and the context of the organization(s). Next there is the interaction between all these, along with the IT set-up, the formal and infor-mal systems in the organization, and processes that contribute to and modify the human fac-tors of collaboration.

In Working with Emotional Intelligence (2009) Daniel Goleman stresses the importance of soft skills for success in business. A number of indi-vidual behaviors have been identified for success-ful collaboration. These are often described as ‘high-level’ or soft skills. Most critical are (self) motivation for the project, ability to do the re-quired work, ability to collaborate and a willing-ness to participate. Combining these individual skills with the manager’s contribution of em-powerment of the individuals in the collaborative project, support (discussed earlier), the ability to negotiate conflict, provision of appropriate re-wards, and being able to shape the project around a specified common goal is a powerful mix.

There are some individual and team barriers to collaboration that can work against the project. These include an unwillingness to seek input and learn from others, and an unwillingness to help. These can limit the transfer of informa-

tion and knowledge and leave the collaborative project unsupported. Although this may be an individual’s trait it may also be a reflection of a more internally competitive culture. The two other individual and team barriers are due more to inability than unwillingness. These are the inability to seek and find expertise required for the project and the inability to work togeth-er and transfer knowledge. These may also be due in part to a more competitive culture, but it could also be an experience and maturity issue. A good manager could spot some of these fac-tors and help overcome these hurdles for a suc-cessful collaboration.

“Part of the task of a manager who wants to facilitate the improve-ment of the organization context for collaboration is working to create a positive environment.”

There are a number of requisites of a manager for encouraging successful collaboration. This is critical for the establishment and continuity of collaboration, as it sets a positive context for the project. These include factors expanded previously in this discussion. Empowerment of the team in terms of allowing freedom to make decisions and the ability to function to com-plete the tasks required. Support for the project and removing organization conflicts – and helping with conflict management – is some-thing that a manager can facilitate. The devel-opment of a common goal for the team and the organization is critical as this can lead to align-ment and reinforce the positive aspects of the venture. Tying this all into rewards that relate to the success of the project and identifying the outcomes so that they are measureable is all part of working with the collaboration.

In summary the activities on the part of the manager are to provide equal opportunities for the collaboration to occur, help spot the


barriers to collaboration (before and during the project) and most importantly for the more experienced manager, to help tailor collaborative solutions. Hansen (2009) reports that these can be achieved by using the follow-ing three levers:

• Unification through creating compelling, common goals, articulating the value of the project and consistently talking collaboration. In this the manager frames the project in the context of the culture of the organization;

• Select people who cultivate collaboration, which is basically the right people in the right place, and support them with training and empower-ment to say yes or no to collaboration; and

• Promote the use of decentralized networks which may in some cases break through the hold of centralized power and decision- making to enable more contribution from those collaborating.

Organizational Context for Encouraging Collaboration Part of the task of a manager who wants to facilitate the improvement of the organization context for collaboration is working to create a positive environment. This extends the indi-vidual actions of a manager encouraging collab oration to changes in the organization. This includes building and strengthening knowledge management and connections (not just information management). The aim is to move from the attitude of ‘not invented here’, which is found in an insular culture, and bring it around to reducing status gaps, increasing self-reliance and decreasing fear of decision-making.

Measuring and monitoring collaboration pro-jects using relevant key performance indicators (KPIs) that may have to be developed in relation to the specific outcomes required from the collaboration. Helping to provide the correct environment and the required time for the project is something that an organization needs to do to ensure that the culture matches the environment that is necessary for successful collaboration.

Ghoshal and Bartlett (1994) identify four sets of attributes that interact to define an organization’s context. The first two, stretch and discipline, contribute to performance management, through stimulating people to deliver high-quality results with accountability for their actions. The next two, support and trust, provide the social support through security and space they need to perform. The combination of performance management and social support are believed to be mutually reinforcing, and need to be in balance for the best organizational context. This research matches Hasen’s (2009, page 49) more recent observations: “Collaboration rarely occurs naturally because leaders, often unintentionally, erect barriers that block people from collaborative… And the culprit is modern management”.

“Collaboration rarely occurs naturally because leaders, often unintentio-nally, erect barriers that block people from collab-orative… And the culprit is modern management.”

The sub-optimal contexts include over-emphasis on performance management while neglecting the social systems resulting in burnout and frus-tration of employees. The other situation is when performance is mediocre and the support system is over-developed.

One other factor that impacts collaboration is the tools used to facilitate the activities. The function is the same but the activity will vary. Gen Y are described by Graham (2011) as “embracing the convergence of creativity, connectivity and col-laboration…” and replacing Richard Florida’s creative class.

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65InsightOn: Collaboration: A Foundation for Supply Chain Innovation

Collaboration: A Foundation for Supply Chain Innovationby Professor Richard Wilding Cranfield School of Management

IntroductionAt a recent presentation by a leading retailer to a global beverage supplier a simple yet challenging request was made. “We need you to cut your logistics costs by 5.25 percent. Without this we cannot do business with you!” The response, as you can imag-ine, was not particularly positive; cries of “we don’t have that level of margin” and “we will be giving you stuff for free!” were heard at the meeting. After four years of downward price pressures there are no longer the reserves to take such a cut. But after an initial emotional response, it was recognized that new ways of working would have to be used to meet this challenge and this could only be done by work-ing with the customer and perhaps even competitors. It was recognized that by innovation and collab-oration perhaps this cut could be achieved.

“Collaboration is about working together to bring resources into a required relationship to achieve effective operations in harmony with the strate-gies and objectives of the parties involved thus re-sulting in mutual benefits.”

There are many drivers resulting in the need for companies to innovate their supply chains. The sustainability agenda, for example, is forcing in-novation. Head of corporate sustainability at

Asda Walmart, Julian Walker Palin, is quoted in recent supply chain press as saying, “Our custom-ers have told us they want retailers like us to provide affordable, sustainable products as the norm, not make it a complex choice with a pre-mium attached. By helping our suppliers to be-come more sustainable and efficient at the same time through the Sustain & Save Exchange we are helping to ensure everyone can afford to make sustainable choices.”

Asda Walmart will require the alignment of val-ues across the supply chain. Their customers, it seems, have bought into sustainability, but do other supply chain members embrace this value also? In order for sustainability and efficiency to be created across the supply chain network, part-nerships and collaborative relationships will be key. It now seems that many ‘burning platforms’ are forcing organizations to innovate, and for innovation to be effective, collaboration is often required. Competition is no longer between individual companies but the supply chains they are part of.

In this article we explore the concept of collabo-ration and why we are going to be increasingly dependent on such approaches in the future.

How Do We Define Collaboration?When looking at collaborative and partnership relationships we often find the terms are used in-terchangeably. Collaboration is about working to-gether to bring resources into a required relation-ship to achieve effective operations in harmony with the strategies and objectives of the parties involved, thus resulting in mutual benefits.

The Global Supply Chain Forum defined a part-nership as a tailored business relationship based on mutual trust, openness, shared risk and shared rewards that results in performance greater than would be achieved by two firms

Richard Wilding, a chaired professor of supply chain stra-tegy at Cranfield School of Management, is a specialist in supply chain risk strategies. In 2005 he was named the first ever full professor for the discipline, in recognition of his contribution to the sub-ject. Wilding has applied chaos and complexity science to logistics and supply chain management. The result was new management guidelines for supply chain re-engin-eering to mitigate risk. In addition to his academic work, Wilding is a consultant to European and internatio-nal companies in various industries on logistics and supply chain projects. Wilding was the winner of the ‘Individual Contribution Award’ at the ‘European Supply Chain Excellence Awards 2010’. He continues his work on creating collab-orative business environ-ments, reducing supply chain vulnerability and risk and maximizing customer value.

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working together in the absence of partnership. Both these definitions emphasis the multiplica-tion effect of collaboration: By bringing together two parties a win-win relationship is created. We move from one plus one making two, to one plus one making eleven! The language of multiplica-tion.

The definition for supply chain management used by Cranfield School of Management is “the management of upstream and downstream rela-tionships with suppliers, distributors and cus-tomers to achieve greater customer value-added at less total cost.”

“So, as companies strive to manage their supply chains, collaboration becomes increas ingly important.”

The key emphasis is the management of re-lationships within the supply chain. The recog-nition that competition is no longer between individual businesses but between the supply chains they are part of forces organizations to col laborate and partner with the best to gain competitive advantage. Analysis of how supply chain failures, such as late delivery, trade restrictions and quality issues, impact on shareholder value show an average reduction of nearly 25 percent in the share prices of an affected company. However, such supply chain failures are often not the complete responsi-bility of the companies whose share price has been hit, but are contributed to by failures in suppliers and possibly customers that then cause a significant failure in one organization. This creates our first ‘burning platform’: The pressure of shareholder value and supply chain resilience. So, as companies strive to manage their supply chains, collaboration becomes increasingly important. Recent events, such as the Japanese earthquake and tsunami, the floods in Thailand and volcanic eruptions, have demonstrated how fragile modern supply chains can be, but those organizations that have built and sustained high-quality relation-

ships with supply chain partners have proved to be significantly more resilient to such dis-ruptions.

Horizontal and Vertical Collaboration – the Concept of Co-opetitionA major challenge and opportunity being recog-nized is collaboration between competitors. The concept of horizontal collaboration, which has been defined as “the pooling of logistics activi-ties and consolidation of supply chains between two manufacturers for mutual benefit”, requires new forms of collaborative relationships. The manufacturers could be competing or non-com-peting, but often organizations are being forced to review how they can work with competitors. Collaboration between competitors, the concept of ‘Co-opetition’ (from COOPEration compeTI-TION) where competitors come together in or-der to compete.

Examples of this approach have been common-place in many industries. For example, brewers Heineken and Guinness build breweries together in developing markets to produce both competi-tors’ products. Carmakers Ford and Volkswagen Group co-developed and manufactured the origi-nal Ford Galaxy, Seat Alhambra and Volkswagen Sharan people carriers. The advantage to those involved in ‘co-opetition’ is that a category or market can be developed at lower risk to each organization. Now co-opetition can be utilized by logistics providers to lower CO2 and reduce costs for a group of companies in a sector. The challenge for an organization is having the skills and abilities to manage such relationships effec-tively.

Creating Effective Collaborative RelationshipsTo create a win-win relationships there are two key dimensions that need to develop. The first is C3 behavior, a combination of Co-operation, Co-ordination and Collaboration and the second is trust.

C3 behavior is seen as being essential to main-tain a successful business partnership especially when it is linked with commitment to the achievement of shared, realistic goals. There is generally an evolution that needs to take place. Co-operation is initially required, often in the form of short-duration low-risk interaction. This then builds to co-ordinating activity requiring longer commitment and greater working to-gether and finally collaboration is achieved,


where both parties may jointly plan and define operations and strategy. This is very similar to any personal relationship. Initially you may go on a short, low-risk ‘date’, for example a trip to the cinema. This then may progress to both par-ties spending more time together, co-ordinating their activities and finally a marriage may occur, where both parties collaborate!

Trust is a keystone of business-to-business rela-tionships. Trust enables co-operative behavior, promotes improved relationships, reduces harmful conflict and allows effective response in a crisis.

“Technical ability and in-telligence (IQ) alone do not guarantee success, and may be only one qualify-ing factor rather than the winning factor in the race to be collaborative. The emotional intelligence (EQ) of the organization is critical in enabling a collaborative culture.”

Trust requires risk (a perceived probability of loss), uncertainty (over the intentions of the other party), interdependence (where the inter-ests of one party cannot be achieved without reliance on the other) and choice (options are available) as essential conditions. There is little doubt that repeated cycles of exchange, risk- taking and successful fulfilment of expectations strengthen the willingness of parties to rely upon each other and, as a result, expand the relation-ship, in effect producing a virtuous circle that can be developed and promoted. The alternative, lack of trust, may precipitate a downward spiral of conflict leading to diminished operations or failure.

The New Skills for Collaboration – Moving from IQ to EQIt has become apparent that managers need new skill sets to develop C3 behavior and trust and thus develop collaborative relationships. All organizations need to have an emphasis on so called ‘soft skills’. Technical ability and intelli-gence (IQ) alone do not guarantee success, and may be only one qualifying factor rather than the winning factor in the race to be collaborative. The emotional intelligence (EQ) of the organiza-tion is critical in enabling a collaborative culture.

When building a collaborative relationship, social skills, empathy and motivation are of high value. Daniel Goleman in his book Working with Emotional Intelligence discusses this factor in detail and Cranfield School of Managements research highlights the requirements for these high-level skills.

A survey by the Society of Human Resource Management further emphasizes the need for emotional intelligence in gaining competitive advantage. The survey analyzed a series of top companies, selected for profitability, cycle times, volumes and other key performance measures. They found that the outstanding companies had the following competencies in managing their ‘human assets’: organizational belief and com-mitment to basic strategy; open communication and trust building with all internal and external stakeholders; an interest in building relationships inside and outside the organization where they offered competitive advantage; collaboration, support and the sharing of resources; an environ-ment where innovation, risk taking and learning together is promoted and a passion for compe-tition and continual improvement.

Effective Collaboration Within Your OrganizationInternal collaboration, within an individual or-ganization, is also becoming critically important. Analysis of both internal and external relation-ships by Cranfield School of Management, using a technique for assessing the strength of collaborative relationships, has shown that it is not uncommon for internal relationships within an organization to be far worse than the external relationships they have with customers or suppliers. The inter-nal relationships may be treated with contempt, with functions trying to gain advantage over each other, like a failing marriage where both parties are continually bickering but in the presence of strangers they appear like the perfect couple!

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Those organizations which collaborated well in-ternally had greater performance in terms of meeting customer needs and accommodating special customer requests, and new product intro-duction was significantly better. This resulted in an increased customer perception of the organiza-tions which led to increased sales and margin.

The Building Blocks of CollaborationFor collaborative relationships to be successful a number of key foundations need to be in place. Both organizations need a common focus (com-mitment to a basic strategy). This may, in the re-tail supply chain, be focusing on the customer and, because data sharing then becomes critical, IT systems need to be in place to enable this. An agreed joint process is required; this is often a problem as it is not uncommon for organizations to have little understanding of their own internal processes so agreeing on a joint one can be diffi-cult. Integration of internal applications is im-portant to ensure good communication and data flow. Flexibility and responsiveness are also criti-cal for both organizations to exhibit, creating agility within the relationship.

The Building Blocks of MeasurementOne of the biggest requirements is agreed joint per-formance measures; both parties should be meas-uring the success of the relationship in a common way using the same measures. Hard measures will need to be used but also soft measures for measur-ing the success of the relationship in terms of levels of trust and personal relationships.

One particular question we do need to ask is if col-laboration is so important to the success of a business in our modern global economy, why do so few or-ganizations measure the ‘soft’ relationship issues and continue to focus on hard performance meas-ures which only reveal the symptoms of failure and not the causes? Organizations need to ask questions like: How many business relationships do we have? Why are they important? Which ones are doing well and why? Which ones are NOT doing well and why? How do we identify hard targets for continuous relationship improvement? Techniques like the ‘Supply Chain Collaboration Index’ available from SCCI Ltd enable organizations to gain answers to such questions and work together on relationship improvement. This approach has been used by Masterfoods, EDF Energy, AMEC, and the UK Ministry of Defence amongst others to measure and improve the effectiveness of key collaborative relationships. The measurement and management of collaboration is receiving increased notice.

B2B customers may require suppliers to demon-strate that they have effective processes and measures in place to manage relationships. In the UK for example, a new collaborative stand-ard, BS11000 has been launched by the British Standards Institute. This requires organizations to go through an eight-stage process that includes assessment and measurement.

Reduce, Re-route, Re-Time, Re-modeThe ‘burning platform’ of the London 2012 Olympics has also forced organizations to innovate and collaborate. The impact of the Olympics on supply chains in London was significant. The Olympics was Britain’s largest peacetime logistical exercise, equivalent to running 26 simultaneous sporting world championships at the same time. All businesses with operations in and around London needed to plan to ensure business contin-ued as usual. When considering the movement of goods, deliveries and collections the motto: “Reduce, Re-route, Re-Time and Re-Mode” was developed.

“Flexibility and responsive ness are also crit-ical for both organizations to exhibit, creating agility within the relationship.”

Reduce – Where possible consolidate and join multiple orders into a single delivery to reduce journeys. Collaborate and coordinate with neighboring business to share deliveries. By doing this it is anticipated that a reduction in individual organizations costs and the amount of CO2 produced may result in cost savings.

Re-Route – By identifying the traffic hot spots using the feely available planning tool provided by Transport for London, companies can identify if it is appropriate to re-route deliveries, perhaps using different depots to supply from or perhaps different suppliers. This will save time and CO2.

Re-Time – Arrange out of hours deliveries when roads are quieter, plan to receive deliveries out-side the busiest times.


A recent analysis of over 60 collaborative

relationships by Professor Richard Wilding found a number of foundations

for success.

Those relation ships that were typified by

failure exhibited the fol-lowing types of behaviors

and practices.

Innovative commer-cial practices, tough but achievable incen-tives, and meaningful

gainshare.

End-to-end, clearly visible perfor-

mance objectives agreed by all supply

chain players including the end-customers.

Frequent, interactive, open

communications across all levels of the customer/

supplier interface especially on performance reviews and continuous improvement of

products/services and business processes.

Open, no-blame culture

aimed at customer and relationship satisfaction

which depend upon personal, trusting

relationships.

Joint planning and business systems sup-ported by free flow of

information.

Lack of stable cus-tomer funding arran-

gements, which prevent supplier investment

planning.

Lack of investment in good staff, which

causes unnaturally high turnover and prevents

personal relationship de-velopment and efficient

business processes.

Insufficient investment, which

generates long-term costs and prevents

performance incentivisation.

Adversarial, bureaucratic com-

mercial practices and attitudes, which increase

costs, cause delays and reduce trust.

Lack of culture- matching results in

‘them and us’ attitudes, which result in a downward

spiral of poor behavior, reduced benefits and

low performance.

SU

CCES

S FACTORS

FAILURE FACTORS

SUCCESS AND FAILURE FACTORS

Re-Mode – Revising the mode of transport is encouraged. Organizations are being asked to look at using different transport and delivery modes – cycling or walking couriers might be used for small deliveries. Use ‘driver’s mates’ to minimize drop off parking by enabling them to jump out and deliver. Use secure drop boxes for smaller items. This potentially can save further time, costs and CO2.

These actions may provide a surprising legacy from the games, because it is forcing all in lo-gistics and transport to innovate. The ‘burning platform’ generated by this event may have last-ing impact by reducing costs and increasing sustainability of transport operations for years

to come. Foundational to this is developing new ways of working together

ConclusionWhen striving to create win-win relationships it could be argued that the first question all organi-zations need to ask before creating a collaborative relationship is: “How will the company or inter-nal function you want to collaborate with benefit from collaborating with YOU?” At the end of the day if there is nothing in it for the other party there is no motivation for collaboration and therefore the ‘multiplication effect’ will not oc-cur. ‘Burning platforms’ are often useful to bring the benefits into sharp focus for both parties.

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The Expert View – John Gattorna

Dr. John Gattorna is consi-dered a thought leader on the global supply chain with his unique, multi-disciplinary approach to the design and management of enterprise supply chains. Gattorna, who heads his own advisory busi-ness for companies around the world, serves as an ad-junct professor at the Graduate School of Management at Macquarie University in his hometown of Sydney, Australia. Gattorna established and led Accenture’s supply chain practice in the Asia Pacific region for several years from 1995. Before that, he ran a consultancy business speciali-zing in marketing, logistics and channel strategies. A fre-quent keynote speaker at con-ferences around the world, Gattorna’s latest book is called ‘Dynamic Supply Chains: Delivering Value Through People,’ published by FT Prentice Hall, Harlow, 2010.

Companies that operate this way have reached the much sought-after ‘collaborative zone,’ a state that inevitably takes time and patience to attain.

While a select few parties genuinely collaborate in some supply chains, in many others this is not the case, and it’s not necessarily desirable, says John Gattorna, a supply chain expert and the author of Dynamic Supply Chains: Delivering Value Through People.

That’s because collaboration is one of those concepts that can be over-used and over-worked in the supply chain vernacular, and col-laborating only makes sense if companies do it with those customers and partners who exhibit true collaborative behavior. Otherwise, they risk wasting their time and money.

In the early years of ‘lean’ manufacturing, as it was first introduced and practised by Japanese manufacturers, companies took for granted that suppliers would collaborate in the system-atic joint effort to cut costs, rather than just move them up and down the supply chain. However, as globalization took hold and supply chains became longer and more complex, the idea got lost in translation.

According to Gattorna, it is unlikely that more than 25 percent of customers at best will exhib-it truly collaborative buying values. Typically, they are those working with partners in ‘con-tinuous replenishment’ mode. These customers genuinely seek close relationships with their key suppliers, tend to single-source, remain brand loyal, share information freely, exercise price tolerance and, above all, they are forgiv-ing in case of a supply failure.

Gattorna argues, therefore, that companies must identify the supply chain needs of their customers and partners to see who has truly collaborative values. These parties must then be treated as a separate segment to the rest in their customer base so that the company can deliver

different value propositions via varying supply chain configurations, based on what the cus-tomer needs. In addition, executives must match the values of internal personnel with that of the collaborative customers they serve.

These may seem like small points, Gattorna says, but we are now operating in a world where nuances make the difference between success and failure operationally and financially, and companies ignore this reality at their own peril.

InsightOn: spoke to John Gattorna about the obstacles and challenges of reaching the ‘collaborative zone.’

Dr. Gattorna, what are the risks of too much or ill-conceived collaboration?

Dr. John Gattorna: Collaboration is a condi-tion that is definitely not for everyone. I prefer to think in terms of ‘requisite’ collaboration, where you collaborate as much as or as little as a particular customer wants or deserves. In this way, companies avoid a lot of costly over-servic-ing. In some industries, such as logistics service providers, research I have undertaken clearly showed an inverse correlation between the per-formance of LSPs and the number and com-plexity of contracts they were locked into.

These days, some previously collaborative com-panies are even moving away from collabora-tion because of the way they are measured on KPIs. It’s only a very enlightened CEO who says, “I’m going to segment my market. I’m go-ing to find out which of my partners and suppli-ers genuinely appreciate collaboration, and I will set up a collaborative supply chain with them. But for all the others, I’m going to have to come up with another solution.”

But some companies do get it right with collabo-ration.

Dr. John Gattorna: If someone gives you a golf lesson, and you’re an absolute beginner, you

71InsightOn: The Expert View – John Gattorna

may walk out, pick up your golf club and hit the most fabulous shot down the middle of the fair-way. But you don’t know how you did it. For the rest of your life, you try to replicate that shot.That’s what companies are doing at the mo-ment. They sometimes get collaboration right and don’t understand that they’re in a sweet spot. Next week, they’ll do something different, disrupting their own people and customers.

I’m arguing that you can’t make the success of collaboration repeatable until you’ve deter-mined the behavioral biases of your customers and partners. If you can reduce customers and suppliers to segments based on their buying be-havior, you can get cost out of your business, permanently. And you achieve greater custom-er satisfaction, so you end up with a double-whammy effect: Higher revenues at lower cost-to-serve.

What are the behavioral segments?

Dr. John Gattorna: We’ve identified 16 buy-ing behaviors, but when it comes to supply chains, most people fit into four categories. These suppliers, partners or customers exhibit 1) collaborative behavior 2) transactional be-havior 3) agile/dynamic behavior or 4) innova-tive solutions behavior.

Once you have identified the truly collaborative customers in your marketplace and where they fit into these segments, you can focus on non-binding Memoranda of Understandings that provide guidance for engaging each other, but in the end are based on trust.

The value of behavioral segmentation was highlighted recently when Australia’s 2nd and 3rd largest beef exporters (Teys and Cargill) merged. Aware that many mergers and acquisi-tions do not deliver for shareholders or customers, they used segmentation and Dynamic Alignment to pro-actively manage the process and the re-sult. By identifying the four major segments in their combined customer portfolio and devel-

oping strategies around these key segments they were able to create a unified and positive market positioning for the new business. They were also able to drive internal cooperation and to break down change barriers by focusing management effort on this external objective.

The research found that the new company’s ‘collaborative’ segment was larger than either company had predicted, and thus new strate-gies were designed to ensure they retained and built share of wallet with this group. The other three segments, who did not exhibit a collabo-rative bias, however also represented a large part of their business. Their specific priorities, ranging from very stable supply to very fast re-sponse times and to innovative offerings, were also reflected in the new portfolio of strategies. After close to 12 months there is clear feedback from both shareholders and customers that the merger has been successful.

Unilever’s former CEO Anthony Burgmans got it right when he said, in effect, that you should only collaborate with those customers and sup-pliers who genuinely want to collaborate. For the rest, you do whatever you have to do, but don’t waste your time trying to convert them to collaborative behaviors. This goes to the heart of my observation that too many suppliers are over-servicing some customers and under-ser-vicing others, and don’t have a clue which is which!

If you start guessing, then you get into a mess. Collaboration works in the right places: It’s like a big jigsaw puzzle.

What holds companies back from hitting that ‘sweet spot’ of collaboration on a continuous basis?

Dr. John Gattorna: Generally, people don’t have the full picture of the jigsaw on the cover of the box. One big problem for companies is that they organize themselves by functions and divisions – the opposite to the way that their customers buy. The company manages itself

Based on the cultural value of trust – an idea treasured above all others – collaboration in the supply chain means partners share information freely, seek long-term stability in the relationship and painstakingly forge ahead on strategic matters.

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vertically, but its customers buy horizontally, picking and choosing from the products and services offered.

Yet, if we can’t get people to work together in-ternally to get the finished product to the cus-tomer in the way they want to buy it, that means lost revenues. What I’m talking about is aligning cultures internally. But when it comes time to do this, many executives are either out of their depth or simply in denial.

Why? Because either they don’t understand or don’t want to delve into the abyss where the so-called ‘forces of darkness’ lurk in their own or-ganizations. With all the preoccupation with competitors, executives have been distracted from looking more deeply at the internal cul-tural in their own enterprises that can be im-proved to bring bigger returns for the time, ef-fort and money invested.

We will not be able to go to the next level of supply chain performance until this mountain is climbed and conquered.

In the book I’m writing now, Dynamic Supply Chains 3rd edition (due 2014), I examine fur-ther why true collaboration is difficult to achieve – i.e. the language barrier.

Language barrier?

Dr. John Gattorna: I’m not talking about working in an international setting, I’m refer-ring to the vernacular inside a company. I’m trying to crack the code of that vernacular to understand the subliminal meanings and de-termine the common metrics that allow for comparison within the company.

It leads back to my point about vertical integra-tion. We’ve got functions, such as the market-ing function, the production function and supply chain functions. All those different functions come from different roots and have different languages are jargon. If you’ve

studied or worked in procurement, you’ll talk about ‘tenders.’ If you’ve got a marketing degree, you’ll talk about product portfolios and life cycle concepts. Production and General management have their equivalent languages, too.

Yet at the corporate level, we’ve got to speak the same language and share common KPIs, other-wise, we fail to understand the demands that the customer is putting on us.

Any other suggestions for fostering collaboration?

Dr. John Gattorna: One technique that I have developed over the years is called ‘Strategic Partnering.’ This process involves de-veloping enduring corporate relationships based on understanding and shared knowledge. The process takes its name from developing and maintaining a strategic ‘fit’ between the goals, capabilities and market opportunities of both buyer and seller organizations involved in a particular situation. The two parties commit to a unique but not necessarily exclusive rela-tionship – that is the key, and it works!

And what about collaboration at a higher level – i.e. via consortia or industry bodies?

Dr. John Gattorna: The concept, per se, has merit: By working via consortia, joint ventures and with industry-level solutions, companies have instant access to more skills. But the cultures of these consortia have to be aligned from the outset. If not, problems arise on a macro scale, and internal synergies are hard to achieve.

Where is collaboration at the industry level working well and why?

Dr. John Gattorna: As many before me have noted, competition is no longer between indi-vidual companies but instead between their supply chains. I would take this idea one step further and predict that within 10 to 20 years,

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we’ll see networks competing against networks. We’ve gone from individual companies vs. in-dividual companies, to supply chain vs. supply chain, and next up will be network vs. network. I expect more industries to organize like the airlines do, where you’ve got competitors col-laborating in groups like Star Alliance vs. rivals in a different alliances like OneWorld. These companies share spare parts, capacity and fa-cilities. That’s where we’re moving. Collaboration will be fleshed out even more and become three-dimensional.

That’s a sort of co-opetition. Where do you see co-opetition headed?

Dr. John Gattorna: I think we’ll see a lot more co-opetition, but the problem is that a lot of people don’t understand the difference be-tween co-opetition and collusion. Co-opetition is working with competitors within a well-de-fined area, such as sharing certain logistics func-tions to create better economies of scale. A lot of the anti-trust people get very nervous when they see manufacturers in the same industry or re-tailers working together. I draw the line at price. Price collusion shouldn’t be allowed. But the fact that you’re working together behind the shop for the benefit of your company and a competitor shouldn’t be regarded as collusion.

As companies come under more pressure, they will reach for the creativity pill – ideas that they wouldn’t have entertained in the past. It’s happening in the oil industry a lot, where com-panies enter into ‘swaps arrangements’ instead of having to transport petrol across geogra-phies at significant cost.

How are companies putting your other ideas about supply chain alignment into action?

Dr. John Gattorna: We’re working with companies like Unilever and Dell to help them consider what to do on a day-by-day basis to achieve finer alignment of their supply chains with customers.

Unilever has examined its demand fluctuation to see that despite swings, some customers still take about 60 percent of a particular product on a regular basis. So, we started filling the trucks with that product, supplying them with 60 percent. And then, when Unilever runs promotions, they have available trucks for the additional volumes and top-ups. It’s all about capacity management. And the more volatile the demand, the worse it is for your supply chain. Supply chains hate disrup-tion and volatility; they love predictability.

You’ve got to understand how much of your supply chain is your baseload and build from there. Maybe only 20 companies around the world are currently able to do this.

In closing, I’d like to ask where you see the most creativity when it comes to supply chains?

Dr. John Gattorna: True innovation in the supply will come out of Indo-Asia rather than Europe or the US, because it’s so growth-ori-ented. There are opportunities every which way you look. Some countries like India require so much catch-up. They’re not going to just follow what the West did; they’re going to leapfrog the West with innovation and new business mod-els. They will try things that others were too frightened to try. There’s a whole motivation in Asia that is totally different than the conserva-tive approaches of the West. The incremental thinking of the Western world will be replaced by far more creative mindsets. And I wouldn’t be surprised if some of the ideas are based on collaboration.

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Orchestration: The New Form of Collaboration

You’ve talked about supply chain orchestration. What is it?

N. Viswanadham: Let’s start with what is a supply chain? It’s several organizations coming together to deliver the product to the customer. There are suppliers, manufacturers, distributors and retailers, to name a few. And what is collab-oration? It’s the way each player works together to make production possible.

Take the processes behind producing and deliv-ering a plastic doll. You’ve got the cloth dyer in Bangladesh who is preparing fabric for the doll’s clothes, seamstresses in Taiwan sewing her outfit, and the doll’s hair may come from Japan. What would happen without collabora-tion? Someone has to be there and say, “Hey, have you done this? Is it of quality?” and then take us to the next level and across the next bor-der. This is production and logistics at various places. It’s something more than collaboration. It’s orchestration.

I would argue that orchestration is the new form of collaboration. When a single company takes responsibility for the whole thing, it’s sup-ply chain orchestration.

Then what is the difference between a provider of third-party logistics and a supply chain orchestrator?

N. Viswanadham: The 3PL delivers goods end to end as per contract. It is only responsible for on-time delivery and takes care of all the tasks from loading the goods at the supplier end, until they are delivered to the customer. The orchestrator does much more. It is respon-sible for telling the suppliers how much to pro-duce and when and for whom and of what qual-ity. Also, if risks develop on the way, the

mitigation strategies are the responsibility of the orchestrator. Why is supply chain orchestration so important?

N. Viswanadham: If you take any business, there are three main things. Number 1 is called governance, in other words, you have multiple alternate suppliers and you have relationships with them that need to be managed. Suppose I tell a logistics provider that they have to deliver so many items to my factory at 9:00 a.m. every day. I have to choose my partners and tell them what I want. And the logistic player has to tune their resources, for instance. That’s governance.

The second thing is coordination. I have to tell each player what to do when. I have to find the driver and the truck and so on. Coordination is the detail work involved in collaboration.

Then you have to execute. And when you do this across borders, like what’s necessary to pro-duce the doll, then the process gets complicated. In a single country you have a single currency and a single culture. That makes things easy. But now you’ve got to execute across borders. And you may need to execute in areas that lack infrastructure, such as in rural India. There, where 400 million people lack access to basic infrastructure, the delivery person may drive a motorbike and only have a mobile phone to run his business. If a company like Flipkart, the Indian operator of a large online marketplace, wants to deliver to a customer in rural India, it may need to hire the motorbike driver. To do that, an orchestrator is crucial.

Currently, the above tasks are performed in an ad hoc manner and money and time are spent on expediting.

N. Viswanadham, the INAE Distinguished Professor at the Indian Institute of Science, spoke to InsightOn: about supply chain orchestration.

N. Viswanadham is currently the INAE Distinguished Pro-fessor at the Indian Institute of Science. Formerly, he was a professor and executive director for the Center of Excellence, Global Logistics and Manu-facturing Strategies at the Indian School Of Business in Hyderabad. He also served as deputy executive director of The Logistics Institute-Asia Pacific. Professor Viswanadham has contributed significantly to the area of automation, in particular to manufacturing and supply and service-chain automation. He is the author of three textbooks, six edited volumes, and more than a hundred journal articles and conference papers about auto-mation. His current research interests include Global Supply and Service Chain Networks. Viswanadham has developed an ecosystem framework for the analysis and design of supply and service supply-chain networks.

75InsightOn: Orchestration: The New Form of Collaboration

What makes supply chain orchestration possible?

N. Viswanadham: Over time, the difference between an ordinary supply chain and an e-supply chain have disappeared. In other words, every supply chain is an electronic supply chain. The transition has happened because of the de-velopment of the internet and the ease of ex-changing information. The result is what is of-ten called supply chain visibility.

With that visibility, it’s possible to coordinate

among multiple partners of the supply chain and use that coordination as a source of value and competitive advantage. As competition shifts from head-to-head competition between firms to competition between supply chains, competitive success will depend increasingly on the ability to coordinate and integrate the pro-duction activities at geographically dispersed and organizationally distinct locations. The new supply chain structures that are emerging will play a fundamentally important role in the fu-ture of businesses.

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The Foundation of Future Business

Rapid developments in e-commerce have re-sulted in the need for significant changes with-in logistics and supply chain environments. Logistics and supply chain was, for many or-ganizations, seen as something of an after thought; an ‘operational’ issue to be sorted out after the marketing and sales strategy had been defined. Now, e-commerce has driven organi-zations to recognize the importance of devel-oping their logistics and supply chain strate-gies in parallel with their sales and marketing strategies. This paradigm requires new forms of collaborative working.

For effective e-commerce, effective collabora-tion within the individual company is re-quired, and between all functions, too – but particularly the sales and marketing functions. This, in simplistic terms, is the part of the or-ganization responsible for the ‘demand crea-tion’ element of the business strategy; while the logistics, supply chain and operations func-tions are responsible for the ‘demand fulfil-ment’ element.

These functions need to continually collabo-rate to ensure value is delivered to the custom-er at an appropriate cost. Sales and marketing needs to understand what drives value in the final market place for the customer segments the company is serving. This ‘value’ has to be communicated effectively so that the logistics, supply chain and operations functions can de-sign techniques to deliver successfully to the organization. Conversely, logistics, supply chain and operations can innovate new ap-proaches that sales and marketing can utilize to create more value for the customer.

The complexity of managing e-commerce means that few organizations have the internal capability to manage each element of the value delivery sys-tem. It can be seen in this report that organiza-tions require capability in, for example, electronic social networking, delivery, returns, cross border payments, managing cross border tax, privacy law, the technology of shape and, location tech-nologies, to enable them to compete. These cap-abilities are available but can only be leveraged by effective collaboration with a wide variety of sup-pliers. Organizations will continue to ‘outsource’ elements, but perhaps the term ‘out-source’ is now incorrect, because, effectively, businesses need to bring a capability into their organization. By ‘in- sourcing’ this capability, a true win-win relation-ship can be developed where a new and innovative value delivery system subsequently creates reve-nue and advantage for both parties.

Fundamentally, e-commerce is resulting in businesses having to implement new processes, infrastructure, information systems and organ-izations. This results in major change manage-ment initiatives that need to be effectively im-plemented. For success in e-commerce, it needs to be recognized that “competition is no longer between individual companies but the supply chains they are part of”. Partnering with the best to create highly efficient supply chains that can deliver value at an appropriate cost will be-come a foundation of future business. The tradi-tional structures of business are falling apart to accommodate unprecedented change.

As Marilyn Monroe so aptly stated: “Sometimes good things fall apart so better things can fall together.”

by Professor Richard WildingCranfield School of Management

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DHL Case Studies

1. borderlinx – bringing the world of shopping right to your doorstep

In today’s e-commerce realm, exciting collabora-tions are happening between various interested parties to make online transactions and doorstep deliveries easier – and therefore more attractive – to consumers.

Borderlinx, as we shall see, is one such innovative collaboration, in this case between a logistics pro-vider, a credit provider and a customs-clearance and e-commerce service provider. By working to-gether, they have taken cross-border e-commerce to another dimension, with benefits and opportu-nities for all concerned. E-commerce shoppers cer-tainly need to be inspired by innovative new joined-up thinking, because cross-border transac-tions can be exasperating at times. For example, if you are shopping on a UK or US website – but live outside those countries – it can be frustrating to get to the checkout and discover that your address isn’t accepted for shipment, or that customs clear-ance costs more than the item you want to buy. It’s also incongruent with the way many people live today, jet-setting from one continent to an-other and crossing borders with ease.

It’s almost as if cross-border shopping hasn’t kept up with the times: The actual shopping experience feels international because products appear to be just one click away. But the reality is that national borders can still create an exasperating barrier. And despite growing networks of global economic activity, cross-border online shopping can still be full of surprises, such as unplanned trips to the customs office or unexpected tax bills.

For the international logistics provider, cross-bor-der challenges are many. Apart from the need to understand different languages and currencies, there are individual countries’ differing customs regimes, import tariffs and other regulations, lengthening transport distances and on-time ser-vice. These, however, are dealt with on a day-today basis.

Not so for many merchants, however, who are un-familiar with the global logistics landscape and hesitant to learn the ropes of international ship-ping. They are also worried that sending products abroad may reduce their margins, especially if re-turns are involved or receivables are difficult or costly to collect, due to the foreign currency and unfamiliar system.

The myriad rules and regulations for shipping are also off-putting, such as those concerning hazard-ous goods and others that come across as merely quirky, usually because they’re designed to pro-tect domestic markets. In Japan, for example, ven-dors need a special license to import eyeglasses and contact lenses, and radar detectors are re-stricted in the UAE. Such expert logistics knowl-edge is a priceless asset.

For shoppers, the hitch usually comes with web-sites that won’t accept credit cards with a foreign address or the high cost of international shipping fees. These consumers may be attracted by better prices or a better selection on certain international websites, but they’re hesitant to buy a product when they don’t know how much it will actually cost in the end.

Good, reliable, easy-flowing logistics, then, is the crucial make-or-break element in effective e-com-merce. That’s why DHL, MasterCard and Borderlinx, the Brussels-based customs-clearance and e-commerce service provider, are working to-gether to take the surprise out of shopping online from vendors in faraway countries.

The partners are ramping up two services that bring international shopping to consumers' doorsteps, simplifying the whole shopping process for consum-ers and vendors. In essence, shoppers outsource the effort involved in managing an international ship-ment to the partners, who provide an end-to-end, e-commerce transaction management service.

For e-retailers, this is of enormous benefit as they try to expand their global reach, but find logistics

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problems thwarting them at every turn. The ability to offer reliable cross-border delivery will give them access to new markets, increase their customer base exponentially and offer them long-term growth accordingly.

The borderlinx.com offering gives shoppers outside the US and the UK the chance to register on the site and receive their own US and UK addresses. These are input during the checkout process as the shop-pers’ domestic “ship-to” address. Customers pay with their credit cards with prices displayed in US dollars and the local currency of the final delivery address. Borderlinx’s online calculator can be used to add up the cost of getting the item from the merchant to the final international shipping ad-dress, including the cost of the product, the ship-ping and customs fees and a Borderlinx service charge that covers the cost of freight forwarding.

Once a person has finished shopping, goods are consolidated at a warehouse operated by DHL on behalf of Borderlinx – thereby reducing overall shipping fees. This happens at three facilities – one in the UK and two in the US. Items are collected

and stored for free for up to 30 days. Once fees have been paid, DHL forwards the package to the address of choice in the 61 countries and territo-ries served in the DHL-Borderlinx partnership.

For vendors, the transaction remains essentially a domestic one, since goods are shipped inland. Yet the market potential is far greater since merchants have the chance to reach shoppers in 61 countries who may want to take advantage of better prices and selection on US and UK websites. At the same time, the Borderlinx offering gives the merchant an advantage over the competition, since only a small number of US and UK-based websites ship internationally at this point.

Borderlinx is one of few companies worldwide that is enabling cross-border shopping and has the potential to transform the online retail land-scape, said Matthew Mitchell of DHL Express, who works closely with Borderlinx. Others have specialized in what is called “hosted checkouts.” The process allows shoppers on certain US sites to make purchases from outside that country, but shoppers are typically led off a merchant’s site

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during the checkout process, even if the mer-chant’s branding is still visible. With the Borderlinx solution, users simply input their own US or UK address without ever leaving the merchant’s site on which they are purchasing. For many shoppers, this is an important matter of trust: They may feel comfortable buying off a merchant’s own website but become uncertain about buying via an un-known payment system.

When the shopper is ready, packages are consoli-dated and shipped. Before purchase, customers can estimate their shipping fees and duties online with the Borderlinx total-cost calculator. Once packages arrive at a shopper’s Borderlinx-sponsored address, Borderlinx provides the customer with final ship-ping costs based on the actual weight and dimen-sions of the packages. It also makes it easy for shoppers to pay their international duties.

The second way Borderlinx has opened up the world of shopping is by launching the first-ever website that allows shoppers to buy products internation-ally from a single source. Called oneworldavenue.com, it makes it possible to pay shipping, duties and taxes up front, taking the risk out of interna-tional purchases.

According to Mitchell, oneworldavenue.com rep-resents a big opportunity for Borderlinx because the business model simplifies logistics and reduces the cost of shipping compared to the borderlinx.com model. The specifications for goods are known in advance for purchases made on one-worldavenue.com, whereas borderlinx.com orders may come in all sizes and shapes. Borderlinx.com never knows the dimensions, the weight and the value of the items that are headed to the ware-house, and the company must invest time and


money to look up the information to prepare items for forwarding. With oneworldavenue.com orders, the company is sent an alert about the critical shipping information and does not have to manually look up product information.

For merchants who sell via oneworldavenue.com, Borderlinx provides a unique opportunity to out-source the entire international shopping experi-ence for customers as well as the risks that come with it. For shoppers, it’s the best of both worlds, consolidating the Borderlinx experience and the shopping mall experience into one, said Mitchell.

“It’s the first end-to-end international e-com-merce offering,” said Mitchell. “We envision both Borderlinx partnerships enabling the promise of international e-commerce to truly unfold for mer-chants and shoppers.”

Borderlinx proves that good collaboration be-tween logistics providers and e-retailers is key to success for all. By working together, DHL, MasterCard and Borderlinx plan to successive ly open up new international markets and sell the joint service to their respective customers. Essentially, the three partners aim to make cross-border shopping as easy as possible. In the process, borders will be broken down for online merchants, the partners will benefit from higher value and a higher number of transactions and, what’s more, shoppers will have options they didn’t have before. They will be able to get the best deals on the products they really want – no matter where on the plan et those products are to be found.

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2. enforcing intellectual property rights – the dhl view

Risk management is the science of balancing out potential rewards with potential costs.

In the supply chain, it’s also a tool for finding the proper equilibrium between legitimate trade and controls meant to curb the buying and selling of counterfeit goods.

Online shopping gives the makers of counterfeit goods new reach into new markets – boosting what is already a multi-billion dollar industry for knock-off products, such as luxury handbags, medication or men’s wristwatches. The trade harms both the original producer and the consum-er. In some cases, counterfeit products can even be deadly – if they fail at the wrong moment or contain toxic substances.

As a leading global logistics company, DHL has formulated a policy about the problem of intellec-tual property right (IPR) infringement. Among oth-er points, the policy states that:

• Deutsche Post DHL will not knowingly carry goods that infringe IPR.

• Deutsche Post DHL supports efforts to take ac-tion against the violation of IPR and is engaged in full cooperation with authorities within appli-cable legal frameworks.

• Where it is suspected that IPR – infringing goods are being carried by the network, Deutsche Post DHL will cooperate fully with regulatory authorities.

One way to strike the right balance between legiti-mate trade and necessary controls, says Adrian Whelan, the senior vice president and head of Global Customs and Security for DHL Express, is to target controls where they are to be most effec-tive, for instance by using sophisticated risk man-agement techniques that rely on algorithms and models that combine information from intelligence sources to focus in on high-risk areas.

“Customs officials should apply enforcement sys-tems based on international best practices that use risk analysis and risk management to identify goods which pose potential IPR risks,” said Whelan.

And, of course, it’s critical to combat counterfeit-ing from the supply side – i.e. in the country of ori-gin of the counterfeited goods – as well as from the demand side, Whelan added.


3. 500,000 registered users for meinpaket.de

A good selection. Secure transactions. And reliable delivery. For many consumers, these criteria are top of the list when choosing an online marketplace.

DHL offers just this with its MeinPaket.de online shopping portal, launched in 2010 as part of DHL’s strategy to support e-commerce vendors with all possible services. Today, MeinPaket.de presents four million products offered by 2,500 vendors to more than 500,000 registered customers.

Merchants, including DHL’s business customers, are using the marketplace as an additional sales chan-nel for everything from cosmetics and copy paper to high-end mountain bikes that retail for 3,500 euros. Goods are categorized into areas: Technology and entertainment, living and enjoying, leisure and hob-by, house and garden, and special offers. Some ven-dors offer daily sales promotions with spectacular discounts that can help them lower their invento-ries: For instance, Kontra sold 1,000 brand-name telephones and Heuer moved 500 game consoles within a single hour.

Unlike other marketplaces, MeinPaket.de is adver-tised through traditional channels as well, repre-senting yet another benefit for vendors. DHL sends out a printed customer magazine by mail to reach those market segments that may not be typical on-line buyers, such as the over-50 group. The mag-azine includes articles on a wide variety of subjects,

introduces the products on the portal and eases the way for customers to go online and make pur-chases via MeinPaket.de.

Customers have a range of benefits as well. They can buy from 2,500 vendors through a single, se-cure DHL login, saving them the effort of register-ing with the vendors individually. They also have full control over their shipment and have access to the services they’re accustomed to from DHL via the MeinPaket.de platform. For instance, they can track their shipments with a mouse click or man-age their returns via a single, integrated account.

In addition, the customer can use DHL Checkout, an innovative payment system that is activated at the time of registration on MeinPaket.de. The cus-tomer’s address and payment data are saved dur-ing registration. When a customer makes purchas-es, he or she selects a delivery address and a preferred payment method. The order can be com-pleted within two clicks. Online merchants can in-tegrate the DHL Checkout system into their own web shops independent of their participation on MeinPaket.de

MeinPaket.de, available for the German market only, is provided to merchants at a fair price, roughly 4 to 8 percent of the sales price of an arti-cle, as well as a 20 euro fee for registering an on-line shop on the portal. DHL does not see the mar-ketplace as a competitor to that of Amazon or eBay, two important customers with whom DHL will continue to work closely.

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4. helping geeks get their Favorite toys during the holiday rush

ThinkGeek, an American online retailer that caters to people who are passionate about technology, had been experiencing tremendous growth, in-cluding fourth-quarter sales that were several times higher than usual non-peak volumes.

Being computer geeks as they are, ThinkGeek’s customers have high expectations that their orders for computer accessories, humorous T-shirts and caffeinated drinks will arrive on time without a hitch.

The company had one distribution center that was operated by a small third-party logistics company (3PL), but it needed a more flexible solution to po-sition the company for growth. ThinkGeek part-nered with Exel, a sister company to DHL Supply Chain operating in North America, to help it fulfill the huge amount of orders it expected to receive during the fourth-quarter peak and to establish the right solution for future growth. To pick, pack and ship these orders effectively, the two partners began working months in advance to redesign the warehousing and delivery systems supporting ThinkGeek.

Exel set up operations at a shared-use distribution center in Ohio that features vertical mechanization,

a technology that allows ThinkGeek to meet peak volumes in the fourth quarter and remain efficient during the rest of the year, when volumes are lower.

The company now occupies 130,000 square feet, which is 30 percent less than the previous site, and it uses a three-level pick tower. The tower re-duces congestion by storing product up instead of out and ensures efficiency during peak holiday times. A conveyor system can be adapted when needed to keep packages moving.

Exel provides the picking, packing and shipping services at the distribution center and manages personnel. Any order that comes in by 2:00 p.m. Eastern Standard Time during non-peak season is shipped out the same day. During peak season, items are sent within 24 hours.

Since the partnership began, Exel has successfully fulfilled a significant percentage of volume during the six-week peak period. The flexible supply chain solution has also reduced returns by 5 per-cent, raised inventory accuracy to 99 percent from 92 percent, and established a year-on-year pro-ductivity improvement of 18 percent.

The facility and team are now well positioned to meet peak-season demands with a high degree of flexibility and efficiency throughout the year.


5. packstation: convenient 24/7 parcel services by dhl

Seeking to provide a better access for customers to their parcels, Deutsche Post DHL developed the Packstation system. Since its inception in 2002, it has offered a wide selection of services, from delivering shipments to picking up parcels around the clock and franking.

For parcel services, customers have the choice to have their shipments delivered to the Packstation, so the parcel is no longer brought to the custom-er’s home address but can be picked up individu-ally. The process is easy: Customers register on the internet and receive a Packstation access card. Whenever ordering a parcel they can decide to have it shipped to their home or to a Packstation for collection. If a parcel is meant to be shipped to the home address but the recipient is not there, the DHL courier knows, via the scanning device, whether the customer is a Packstation member and if so can deliver the shipment to the nearest one.

Once a parcel has been deposited at the Packstation the customer gets a text message and/or email. The parcel then can be picked up easily using the customer’s card all over Germany. Dedicated service is provided by a modern touch screen, a card reader device for the customer’s card and a card reader for the credit card to frank the parcel. The advantage: Franking at Packstation is one

euro cheaper than processing the shipment through a DHL shop.

The idea of launching Packstation evolved out of a changing customer behavior. Having more single households in Germany and people travelling bigger distances to work each day, it was difficult for the couriers to deliver parcels during working hours. Another point is the development of online shopping. Since shopping habits have changed due to the significant increase of e-commerce providers, shoppers are able to purchase items round-the-clock on the internet. Having a flexible and time-independent delivery of the parcels fits better with the customers expectations: They want to receive their parcels as fast as possible and circumvent the inconvenience of being at work when the parcel arrives. Having access to a Packstation, customers can easily pick up their parcel after work or make a shipment outside re-strictive working hours. Stamps are available at the Packstation and the parcel can be left in one of the boxes where it will be picked up by DP DHL.

Currently 2 million customers all over Germany can access around 2,500 Packstations. Starting in 2002 with 56 boxes, there are now over 200,000 boxes available in more than 1,600 cities and counties. The service has been rolled out in a number of countries to date, such as Austria, Lithuania, Russia, Denmark, Luxemburg, Turkey and Dubai.

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6. return solutions

It can happen to the best of shoppers: The dress you ordered online arrives – cut one size too big. Or the mobile phone you purchased via the inter-net needs repair.

In both cases, it’s time for a return. In the world of bricks-and-mortar shopping, that would mean a trip back to the store, standing in line at the regis-ter and conducting the transaction.

For online buyers, returns can be as quick as a few clicks, and, of course, they’re done from the com-fort of your own home. Members of the shopping club Brands4Friends.com, for instance, simply se-lect the item that needs to be returned, and a few clicks later, they can print out a bar-coded and pre-addressed label for the outside of their pack-age. Members slap that on the parcel and hand over the package to a DHL driver, at a service center or via a 24/7 Packstation.

The idea is to make the returns process as easy as possible for the 3.5 million members of the German fashion club that was acquired by eBay in 2011. It is Germany’s largest online shopping club focused on brand-name specials for members who are on average 32 years old.

The online returns solution, which is integrated di-rectly into the website of Brands4Friends so that users never have to leave that site, is one of many

elements of DHL’s strategy to make online buying as simple and easy as possible – for end custom-ers and for thousands of online vendors as well.For instance, when a customer initiates a return with the online returns solution, the merchant is provided with critical data about the returns pro-cess. The vendor can forward that information to its own customers, thereby offering superior cus-tomer service and building loyalty. DHL also pro-vides its business customers with information that gives them complete transparency and control of expected returns.

reverse logisticsFor many businesses, returns handling and recalls can be a critical factor for success. Some even seek to differentiate themselves from the competition with superior after-sales service. The US-based shoe vendor Zappos, for instance, says its loyal customer base and high reorder rates are partly due to its liberal returns policy.

But what happens when returns are more than an occasional package? The answer is not so easy. By some estimates, only 1 to 5 percent of goods are returned, but their handling can use up a dispro-portionate amount of a manager’s time and a company’s resources.

Usually called reverse logistics, the process of get-ting products back from the end customer to the correct spot for the required action – which may be located at the manufacturer, the retailer or a service


center – is indeed complex. It’s a part of doing busi-ness in almost all industries, but reverse logistics are a particular challenge in the technology sector.

Just think about what needs to happen to that mo-bile phone you want replaced or the hard drive that began to overheat and needs repair.

The package must be handled by the logistics pro-vider as well as warehousing and customer service staff, and people in marketing and product develop-ment may also be alerted about the return, as they seek to improve product information or design. Each time the package is handled, the complexity of the transaction and the costs increase.

As a result, companies seek experienced partners to help them manage returns and reverse logistics, and they often want those who can offer additional ca-pacity during peak return times, such as right after Christmas.

Creative partners will help their customers analyze their returns processes and integrate steps to reduce costs, such as screening or testing products upfront or providing repair services directly at a warehouse to avoid further transport.

service parts and repairs – acer Acer, a maker of computers, smartphones and pe-ripherals, asked DHL to make suggestions on how it could improve service parts and repair operations in India at the company’s 21 parts warehouses and a

central repair facility. DHL Supply Chain India worked with Acer to consolidate the warehouses to three regional hubs in Mumbai, New Delhi and Kolkata and to perform screening and repair oper-ations at each of those hubs.

DHL is managing the whole reverse logistics pro-cess – from warehousing, to repair, to transport services – for 10,000 parts repairs per month. It is also providing a dashboard and metrics so that Acer has full visibility, traceability and control. Since the solution is working so well, DHL and Acer are considering taking it global.

recallsNow imagine that Acer or another company had to suddenly recall a product due to a consumer safety issue. This happened in 2009 to a maker of children’s strollers. The strollers were recalled af-ter 12 children lost parts of their fingers when us-ing the strollers. Such situations require well-test-ed plans and fast action to fulfill the legal and regulatory requirements of recalls and to minimize bad publicity for the brand.

DHL, which has managed large, global recalls, in-cluding the recall of 40 million lithium batteries for a major mobile phone manufacturer, is further developing and standardizing its offering, the DHL Recall Solution. It is also expanding services through the DHL Recall Alliance, a consultancy that helps customers make contingency plans for a potential recall.

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7. easy return – a standardized return solution

In order to better meet the needs of cross-border e-retailers and their customers in the area of returns, DHL Global Mail has created a service called DHL EASY RETURN. This is a convenient and simplified return solution for European distance sellers out-side Germany. For German e-retailers however, a similar service is available under the name of DHL Retoure International, offered by DHL Paket.

Europe is now a major marketplace for mail order customers and online shoppers who are more like-ly to buy a product if they have the option to re-turn it easily, with no incurred costs.

Yet buying from a website abroad may be off-put-ting for some would-be consumers, simply be-

cause cross-border returns can be so complex. Each European country has its own returns rules and border regulations, which can cause insecuri-ty for both e-retailers and consumers. Only the biggest e-retailers have the money and resources to set up domestic returns solutions in each indi-vidual country they wish to do business in.

With DHL EASY RETURN, however, big and small e-retailers can offer customers outside their home countries a standardized return solution with the backing of a well-known international logistics brand. This takes all the complexity out of cross-border returns to make the process as straightforward as sending a domestic parcel, thereby increasing con-sumer confidence and encouraging repeat purchases.

Returning a cross-border parcel by conventional means can be inconvenient and costly. One com-mon method is having the consumers pay for the export parcels back to the distance seller first, who then have to refund the cost of postage (which is troublesome for both parties). Another method is to use couriers who pick up the parcels at a pre-arranged time at the consumer’s door-step (but this may be inconvenient for the busy consumer). Finally, a third method is to have the consumers take their parcels to the courier’s depot themselves (which is time-consuming and involves travel, usually due to low depot density). The harder it is for the consumers to return their goods to the e-retailer, the less likely it is that they will return to buy from them again.

With DHL EASY RETURN, DHL Global Mail pro-vides e-retailers with return labels, customized to

almost every postal outlet throughout the EU (presently available for returns from around 20 countries including Germany). The e-retailers can simply download a return label as necessary and send it via email to their customers for printing; or to reduce the workload they can provide a web link via their webpage so that consumers can print the return label out by themselves on the DHL homepage; or they can integrate a web service for label generation in their webpage or system and provide the label this way. The return labels are usually pre-paid for most European countries with only few countries having differing regulations.

The consumers then simply fix the return labels to their parcels and take them to one of currently


more than 80,000 drop-off points across Europe. The postal services take all parcels to DHL’s European hub, where the parcels are consolidated and returned the most cost-efficient way to the originating distance seller.

DHL EASY RETURN caters for the needs of consum-ers and e-retailers alike. It offers both ease of use

and flexibility for the consumers and it provides them with a smooth returns experience. For the e-retailers, it is both easy to set up and an effective way to manage their return volumes with minimal effort. The DHL Global Mail web portal provides visibility so that e-retailers using DHL EASY RETURN can trace their returns at any time, improving in-ventory management and reducing costs.

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Background

InsightOn: InsightOn: is a series of special reports com-prising external and proprietary insights into selected global topics from the world of logistics and commerce. Each report takes an in-depth look and examines potential change and solutions on the horizon for each special topic.

InsightOn: also serves as a practical resource for businesses, governments and educational institutions.

The print version of this report can be ordered, and the PDF version downloaded at www.dhl.com

Delphi StudyPublished by Deutsche Post DHL in 2009, Deliv-ering Tomorrow: Customer Needs in 2020 and Beyond. A Global Delphi Study

The Delphi Study identified ten top trends for the future – green technologies and the significant role of the logistics industry among them. Also examined within the Delphi Study is the probability of 81 separate hypotheses being realized, as determined by numerous international experts.

www.dp-dhl.com/en/logistics_around_us/delphi_study.html

OneVoiceOneVoice is the global DHL customer mag-azine. It is published six times a year and intends to keep readers informed of the latest developments, trends and innovations across DHL and in business around the world. Each issue is comprised of features on logistics and business topics, news, in-depth coverage of key global markets and industry sectors, plus opinions from leading executives.

www.dhl-onevoice.com

DELIVERINGTOMORROW

Customer Needs in 2020 and BeyondA Global Delphi Study

INDUSTRY FOCUS:

ENGINEERING & MANUFACTURINGCOUNTRY FOCUS:

AFRICA THE EXECUTIVE VIEW:

DIAGEO

The Magazine for DHL Customers ISSUE 3 | 2011

91InsightOn: Background & Bibliography

Bibliography

Picture Credits:

Page 5: Thorsten ScherzPage 6: Getty ImagesPage 9: David KlaumerPage 11: Getty ImagesPage 14: ThinkstockPage 16: CorbisPage 17 top: Getty Images Page 17 bottom: Getty Images Page 19 left: Corbis Page 19 right: Getty ImagesPage 20: Getty ImagesPage 23: CorbisPage 24: Getty ImagesPage 26: Getty ImagesPage 28: Getty ImagesPage 29: Getty ImagesPage 32: CorbisPage 33: Getty ImagesPage 35: CorbisPage 36: CorbisPage 37: CorbisPage 39: WehmeyerPage 44 left: Corbis Page 44 right: Corbis Page 45: Rick Pushinsky / eyevine / Picture PressPage 46: ThinkstockPage 47 top: Getty Images Page 47 bottom: Getty Images Page 48 top: Getty ImagesPage 48 bottom: Getty Images Page 49 top left: CorbisPage 49 top right: CorbisPage 49 bottom: Getty ImagesPage 54: ThinkstockPage 75: ThinkstockPage 82: CorbisPage 86: Corbis Photographs used in illustrations: Corbis, Getty Images, Thinkstock

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Paper: Recymago (115 g/m2 inside pages, 200 g/m2 cover). This paper is made from 100 % recovered paper.

We are committed to protecting the environment and the world’s resources.

Editor-in-Chief/Project DirectorMichelle Bach

WritersRhea Wessel

Tony Greenway

Picture EditorMarialuisa Plassmann

IllustratorJanina Kossmann

Print CoordinationWilliams Lea

Manfred Rehberg

Managing EditorHannah Rausche

PublisherDeutsche Post DHLChristof Ehrhart | Silje Skogstad

PrinterDruckhaus Fromm GmbH & Co KG

Editorial Contact [email protected]

Project TeamDiane RinasJohannes OppolzerValerie Smith

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