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www.sustainableroadfreight.org
Trends Changing the Shape of FMCG Networks
Dr Andrew PalmerCentre for Sustainable Road Freight
BESTFACT Workshop, Milan 4th December 2014
The Supply Chain Chronology
1970’s Oil crisis
1980’s Stock reduction
1990’s Customer service
2000 ? ……
Logistics Trends – 2000 to 2020
Delivery
Reliability and
Congestion
Vertical and
Horizontal
Collaboration
Multi
Modal
Multi Channel
Retailing /
Home Delivery
Different
Types of
Warehouses
Global
Sourcing /
Focused
Manufacturing
Product Line
Proliferation
All Year
Seasonal
Produce
Rapid
Replenishment
Reverse
Logistics
Sustainability
City
Logistics
Consumer needs – and the supply chain response – produce fragmented and additional product flows
What Causes Supply Chain Networks to Change
Influences such as:• Economic
• Environmental
• Social
• Political
• Technological
• Legal
Sustainability
The EU Vision
EU Transport Policy Vision (EC 2011):
� Reduce Europe's dependence on imported oil
� Cut carbon emissions in transport by 60% by 2050
�Modal shift: 30% off road by 2030 – 50 % by 2050
�Multi-modal: European corridor network (low carbon/green)
Decarbonisation Scenario for Road Freight in 2050
Source: Piecyk, 2010
Total tonne-kms stable at 2007
level
40
60
80
100
120
140
160
Inde
x va
lue
1990
= 1
00
GDP Tonne-kms (all modes) Tonne-kms (HGVs)
Product Compaction
Larger High Capacity Vehicles
Double Deck Trailers
Longer Semi Trailers
… and potentially
Longer Heavier Vehicles
(Mega Truck)
Source: Piecyk, 2010
Total tonne-kms stable at 2007
level
Road share of freight tonne-
kms reduced from 68% to 50% 72.6 72.3 73.6 74.6 74.3 75.3 75.9 76.1 76.5 76.8 76.5 76.8
20.7 20.9 19.7 18.8 19.1 18.2 17.8 18.1 17.7 17.5 17.9 17.8
6.7 6.8 6.7 6.5 6.6 6.5 6.3 5.8 5.8 5.7 5.5 5.5
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
% of
tonn
e km
trav
elle
d
YearRoad Rail IWW Source: Eurostat, 2009
Percentage Modal Split in EU25
65% 67% 65% 64% 62% 64% 62% 64% 64% 63% 67% 68%
6%7%
7% 7% 7% 8% 7%8% 8% 9%
9% 8%
23% 21% 23% 24% 26% 24% 26% 24% 23% 24% 21% 20%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Percentage Modal Split in UK
Road (HGVs+LGVs) Rail Water Pipeline
Decarbonisation Scenario for Road Freight in 2050
World Economic ForumSupply Chain Study 2009
� 27% of good vehicles in the EU are running
empty
� Average loading of the rest is 57%
� Overall efficiency: 43%
� Flow imbalance could only explain half of this
loss
� For how long?
The total cost burden of road freight transport
inefficiency is €160 billion
Source: McKinnon, 2009
Total tonne-kms stable at 2007
level
Road share of freight tonne-
kms reduced from 64% to 50%
% of truck kilometres run
empty reduced from 27% to
17%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Irelan
dGre
ece
Nether
lands
Finlan
dAus
triaSpa
inPola
ndNor
wayFra
nce
Portu
gal
Hungar
y
United
King
dom
Czech
Repu
blicSwed
enGer
man
y Den
mar
k
Average of 27% empty runningSource: Eurostat, 2009
23
24
25
26
27
28
29
30
31
32
% Kms Empty Running in UK
Decarbonisation Scenario for Road Freight in 2050
Source: McKinnon, 2009
Total tonne-kms stable at 2007
level
Road share of freight tonne-
kms reduced from 64% to 50%
% of truck kilometres run
empty reduced from 27% to
17%
Average weight based load
factor up from 57% to 70%
EU average payload weight (tonnes)
Source: European Parliament DG- Internal Policies, 2010
Utilisation of trucks in the non-food retail supply chain (UK)
Decarbonisation Scenario for Road Freight in 2050
Total tonne-kms stable at 2007
level
Road share of freight tonne-
kms reduced from 64% to 50%
% of truck kilometres run
empty reduced from 27% to
17%
Average weight based load
factor up from 59% to 70%
40% improvement in energy
efficiency
DfT 2010
Decarbonisation Scenario for Road Freight in 2050
Source: McKinnon, 2009
Total tonne-kms stable at 2007
level
Road share of freight tonne-
kms reduced from 64% to 50%
% of truck kilometres run
empty reduced from 27% to
17%
Average weight based load
factor up from 59% to 70%
40% improvement in energy
efficiency
30% reduction in the carbon
content of the fuel energy
76%
reduction in
CO2
emissions
Incr
easi
ng T
ailp
ipe
CO
2S
avin
gs
Increasing Cost
eco-driving training
low rolling resistance
tyres
stop/start hybrid
aerodynamic trailers
full hybrid
fuel cells
biogasaero fairings
biofuel(FAME)
mechanical turbocompound
electric turbocompound
compressed natural gas
electric vehicles
hydrogen
automatic tyre
pressure adjustment
Source: Ricardo report for Dept for Transport
Decarbonisation Scenario for Road Freight in 2050
Opportunities for Sustainable Cost Effective Logistics
• Optimising supply chain networks
• Collaboration
• Telematics
• Vehicle types
Load capacity utilisation and empty running
Local sourcing
Road share of freight – modal split
• Driving style
• Aerodynamics and tyres
• Avoiding congestion (routing & scheduling, out of hours delivery)
Kms per litre of fuel –engine/energy
efficiency
• Fuel type (electric, biodiesel, biomethane, hybrid)
CO2 emissions per litre of fuel – carbon
content of fuel
Few
er
Km
sFriendlier
Km
s
Supplier
Producer
Retailer
Shop
Retailer
Producer
Supplier
Shop
Product 1 Product 2
� Traditionally: vertical collaboration (SCM)
Vertical and Horizontal Collaboration
Keywords:• VMI• CPFR• ECR• Inventory control• Just in time• Push or pull • Transparency• Customization • Ordering policies• Bullwhip effect• Chain dominance• Product design• Integration• Power
Keywords:• Synergy• Bundling• Gain sharing• Competitors• Legal aspects• Give and take• Modal shift• Risk sharing
• Alternatively: horizontal collaboration
Future Supply Chain 2016
• Global Commerce Initiative & Capgemini
• Joint work of 24 major FMCG companies
• New sustainable supply chain architecture: collaborative warehousing and distribution
27 companies took part in the project
Company
Booker Group Plc
Kraft Foods
Nestle UK Ltd
Pepsico Food & Beverages Europe
Sainsbury’s
Arla Foods
ASDA Stores Ltd
Bacardi Brown-Foreman Brands
Brakes
Coca-Cola Enterprises Ltd
Colgate Palmolive (UK) Ltd
Diageo Great Britain Limited
Gerber Juice Company Ltd
H J Heinz
Kellogg Marketing & Sales Co
Kimberley Clark
L’Oreal UK and Ireland
Marks & Spencer plc
Mars
Molson Coors Brewing Company
MusgravePalmer & Harvey McLane Ltd
Procter & Gamble
Tesco
Unilever UK
United Biscuits
Waitrose
No of
Flows
No of
Movements
/Year
No. of Pallets or
Pall Equiv
Moved/Year
Annual km
(millions)
No of
trips/year or
Trip Equiv's
No. of Vehicles
or Full Veh
Equiv's
Annual Tpt
CO2 Emissions
(tonnes)
47,104 9,772,164 126,681,239 1,184.982 4,770,674 6,765 1,120,200
Ave days
worked
per week
Vehicle
shifts/day
Ave Tonnes/
Pallet
Annual
Tonne km
(billions)
Ave Height
of Pallet (m)
Average
length of
haul (km)
6.3 2.2 0.7 10.63 1.6 124.2
Represents
� £200 billion of UK turnover
� 8% of all UK road freight movements
� 6.3% of road freight kilometres travelled
� 2.5% of movements classified as backhaul
Ave
km/pallet
Ave
pallets/veh/
week
Ave tns
CO2/veh/year
Ave
km/veh/year
Ave km/veh
shift
9.354 360 166 175,166 248
Base case statistics for one year
Project STARFISH
Initiatives Considered
Validation
1. Individual company
a. Base case
b. CofG depots within existing boundaries
c. Optimum boundaries for existing depots
d. CofG depots within optimum boundaries
Collaborative
2. Backhaul opportunities
3. Consolidation of small deliveries
4. Use of regional consolidation centres
5. Freight village concept
6. Use of urban consolidation centres
7. Identify inter regional multi modal opportunities
Company Specific
8. Using larger vehicles
9. Out of hours
Collaboration Matrix
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Co
mp
an
y
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Company
Key:
Yes
Maybe
No
Profile of Flows (9 companies)
0
200
400
600
800
1000
1200
1400
1600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52
No
of
cust
om
ers
re
ceiv
ing
de
liv
eri
es
Delivery size in pallets/pallet equivalents
Delivery Size Profile 2010 v 2013 (9 companies)
2013 delivery size 2010 delivery size
Total CostTotal
Kilometres Total HoursTonnes of
CO2
% saving over Full Load Movements 8.0% 12.3% 5.3% 12.2%% saving over All Movements 4.7% 6.6% 3.0% 6.9%
Criteria
�Keep within the company if possible
� Characteristics of product (height, weight, crushability/stackable)
� Compatible vehicle type
� Loads of 20 pallets or more
� At least 10 movements per month
� Not currently classified as a backhaul (though 3PL, if used, may already do this)
� Cost justified based on a maximum diversion of up to 100km in total extra distance, or 50% of outward journey distance
� At least 15km journey
� Shift time available
Backhauling
• York Bardon 96,500 kms
• Halifax Bardon 27,000 kms
• Melksham Midlands 157,250 kms
Total 280,750 kms
Empty running reduction
&
Source: IGD & Richard Hasting, Nestle / Rob Wright, UB
Your competitor may be your best logistics partner
Collaborative Backhauling
Summary of Consolidation Results
Shared VMI process
- Daily EDI inventory and shipments from RDC
- Proposed deliveries of pooled orders by 3rd party provider
- Validation and transfer from pooling partners to transport coordinator
- Physical preparation of orders in shared warehouse
- Physical delivery in one single full truck to RDC
1
2 3
4
5
1
2
3
4
5
Synchronisation
Collaborative Consolidation
• 3 FTL shared deliveries / week to 30 RDC
• 15 to 30 % inventory reduction in RDC
• 35% full trucks ratio increase
• Carbon footprint reduced by 400 tons
The Benefits
Source: ELUPEG/Peter Surtees, Kimberly-Clark
Project Sphinx
28
A complex project involves a number of organisations, systems and processes and requires strong collaboration
Retailers
Multiple Transporters
Logistics ProviderCMI Service Provider
PartnersTransport Coordination
Source: ELUPEG/Peter Surtees, Kimberly-Clark
The Operation
Factories Warehouse RetailersCollaborative Warehouse Point of Sale
Flow of VMI information
8
9
10
11
12
13
14
15
16
Jan
11
Mrz
11
Mai
11
Jul 11 Sep
11
Nov
11
Jan
12
Mrz
12
Reduction of
20%
BEFORE AFTERFrom 1 to 3 deliveries / week Daily deliveries
Full Truck
19 Pal
15 pal9 pal
18 Pal
Source: ELUPEG/Peter Surtees, Kimberly-Clark
Vendor Managed Inventory
� Shorter replenishment cycles
� Enhanced customer service
� Improve on-shelf availability – sell more
� Reduce retailer-held inventory
� Maintain or improve truck capacity utilisation
� Reduced distribution costs
� Reduced carbon footprint
Source: Peter Surtees/ELUPEG
The Benefits
Summary of Multimodal Results
Terminals near depots Region Supply/Delivery areaNo of wagons
per day
No of trains per
day
3MG (Merseyside Multimodal Gateway) - Widnes North West From North East 15 0.68
To North East 36 1.64
3MG (Merseyside Multimodal Gateway) - Widnes North West From Greater London 23 1.05
To Greater London 7 0.32
DIRFT/EMDC East Midlands From Scotland 22 1.00
To Scotland 34 1.54
DIRFT/EMDC East Midlands From Wales 13 0.58
To Wales 24 1.09
DIRFT/EMDC East Midlands From North East 24 1.09
To North East 24 1.09
Trafford Park North West From Wales 14 0.64
To Wales 25 1.14
Trafford Park North West From Scotland 2 0.09
To Scotland 19 0.86
� Fourteen rail terminals considered
� Relationship between road distance and rail distance
� Three road distance bands (up to 2mls, 15mls, 30mls)
� Minimum 100mls of rail distance to be economically viable
� 26 pallets per wagon, 22 wagons per train
� Approximately 15% cost saving for traffic over 150mls, 30% over 300mls
Collaboration - What are the Barriers?
1. Competition law2. Fear of losing competitive advantage3. Technical incompatibility4. Organisation culture5. Peoples capability and skills
8%28%13%39%12%
BARRIERS VALUES
Own organisation culture/internal politics 4.1
Lack of trust 4.0
Hard to find partners 3.6
Managerial inertia 3.4
Costly in terms of time and effort 3.3
Technical incompatibility 3.3
Poor knowledge of internal flows 3.2
Fear of losing competitive advantage 3.2
Increased complexity of operation 3.2
Lack of cross network visibility 3.1
Peoples capability and skills 3.0
Fear of the unknown 2.7
Free-riding 2.6
Service expectations 2.4
Competition law 2.3
Gain sharing 2.3
Dependency on external support 1.8
Difficult to distinguish own company in group 1.6
Company Specific Results
www.sustainableroadfreight.org
Trends Changing the Shape of FMCG Networks
Thank YouQuestions?
BESTFACT Workshop, Milan 4th December 2014