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THE PERSONAL

SUPPLY CHAIN

CONTENTS

1.0 EXECUTIVE SUMMARY

2.0 THE CONNECTED CONSUMER

6
6
6

2.1 The continuing Omnichannel story


2.2 Our research
2.3 The growing numbers of omnichannel shoppers

3.0 THE RETAIL SUPPLY CHAIN B2B COLLABORATION

10

3.1 How collaboration generates value in the retail supply chain

10

3.2 Case study: B2B collaboration in the supply chain


Brightstar supply chain services for the Telstra Store Network

12

4.0 THE PERSONAL SUPPLY CHAIN TELSTRA RESEARCH FINDINGS

15

4.1 Consumer collaboration in the Australian retail supply chain

15

4.2 Problem deliveries

20

5.0 BUSINESS IMPLICATIONS

24

5.1 Omnichannel changes everything

24

5.2 Tools for consumer collaboration in The Personal Supply Chain

24

5.2.1 Mobility

24

5.2.2 Stock management systems

26

5.2.3 Social media

26

5.2.4 Delivery options: Where physical meets digital

27

6.0 EMERGING TRENDS

30

6.1 Drones not just toys

30

6.2 Augmented reality

30

6.3 Dynamic delivery addressing Geepers

31

6.4 Address beacons to light up delivery locations

31

6.5 Car boot drop-offs

32

6.6 Two-sided marketplaces Uber and beyond

32

7.0 CONCLUSION

35

8.0 ABOUT THE AUTHORS

36
3

1.0 EXECUTIVE SUMMARY

Today, there is wide acceptance


that we live in an Omnichannel world.
The modern consumer doesnt just
shop at bricks and mortar stores, but
also shops and researches online
sometimes even while standing in a
real store. Omnichannels effect on the
retail and logistics sectors has been
profound, and is driving a revolution
in the way that businesses and
consumers now connect and exchange
value. At its heart is the connected,
engaged Omnichannel shopper
a person who is no longer prepared
to stand by, but wants to actively
participate in the supply chain. This
has resulted in a new phenomenon
we call the Personal Supply Chain.
In this latest Telstra research report,
which explores the opportunities and
challenges of the new Personal Supply
Chain, weve looked into:
 The current status of the
Omnichannel shopper in Australia
 What services shoppers really
want from the supply chain
Which of these services are
currently being delivered by
businesses
Which services shoppers are
prepared to pay a premium for
Which services shoppers are
prepared to collaborate on,
in return for a discount
What shoppers see as the biggest
problems with the current retail
supply chain.
As expected, Omnichannel behaviour
is increasing rapidly, with the incidence
of online shopping and reviewing
rising to 87 per cent in 2014, up from
66 per cent in 2012 (from the annual
Sensis Business Index). And its not
just young people driving this change
its on the rise in all ages and gender
demographics. Another fascinating
fact revealed by our research is the
steep increase in numbers of people
shopping on their mobile devices,
although the personal computer is still
king for most online purchases.

Collaboration adds value to the


supply chain
Traditionally, businesses were
considered to deliver value and
consumers to receive it. Now its
recognised that value is created
through the collaborative actions
of the network which increasingly
includes the end-consumer. (Take, for
example, a customer who researches
a product, orders and pays online, but
in exchange for a discount is prepared
to pop down to their local store to
collect the product in person thereby
saving the supplier the cost of delivery
and meeting the needs of both.)
Information, transparency and trust
are the vital ingredients of such a
value-driven, integrated supply chain.
But without upstream and downstream
visibility of customer requirements and
supplier capabilities, it is difficult if
not impossible to achieve the level of
responsiveness demanded by todays
market. Relationships with suppliers
and customers need to be proactively
managed if the real potential for supply
chain integration is to be achieved.
And the Omnichannel shopper has very
clear views on what they want from
todays retail supply chain, with a vast
majority nominating examples such as:
The ability to return goods to
a physical location
Knowledge of stock levels
Receiving a text message saying
goods are to be delivered in x minutes
The ability to go online and
customise a product to their
personal requirements
Guaranteed same day delivery,
or delivery services that include
set-up (a genuine boon to anyone
struggling with todays technology).
Businesses today are providing
some, but by no means all of
these services. There is a very real
opportunity out there for retailers,
delivery organisations and associated
companies who can provide what
customers really want.

Omnichannel changes everything


Omnichannel gives shoppers more
choice. If they cant visit a store for any
reason, they have a multitude of stores
in their pocket. Supply chain design has
not caught up with this development.
Overwhelmingly, retailers have
focused on cost, and the result is a
narrow service offering that doesnt
suit the needs of the anywhere, anytime
Omnichannel shopper, or take account
of what these shoppers can offer
in return. Our research shows that
consumers are prepared to pay more,
or to collaborate and co-create value
with retail supply chains that give
them choice.
So what is needed for this to happen?
The key ingredients include:

Mobility make sure you are
communicating on a platform that
is accessible to your customers. In
the world of the Personal Supply
Chain, apps must be accessible on
any platform to reach the greatest
number of customers.

Stock Management Systems
in the Omnichannel world,
customers have higher expectations
for visibility of stock availability. The
majority of online shoppers can see
available stock levels as a matter
of course, which is not the case in
most traditional retail stores. Tools
are available for this today: the use
of Radio-frequency identification
(RFID) not only allows retailers to
provide accurate information about
the location of stock to customers,
but can also be used in the supply
chain to track the progress of goods
in transit.

Social media is an essential
tool for building trusting
relationships with consumers,
allowing retailers, manufacturers
and transport companies to share
information with, and respond
swiftly to, their customers. Social
media is also a great place to
share a conversation about how
a product, service or delivery
experience could be improved.


Delivery options our research
shows that consumers are
demanding both a choice of
service offerings and also a choice
of price. Time-definite services can
demand a premium, while someone
prepared to wait all day for a
delivery now expects a discount.
We explore a number of innovative
solutions that address some of
challenges that retailers and
transport companies face and that
encourage collaboration between
the core elements of the supply
network: parcel lockers, shared
drop locations, home lockers and
Click and Collect options.
On the horizon
Beyond what is possible today, this
paper also takes a look at some of
the most interesting and possibly
transformational opportunities on
the horizon. All of these solutions are
based on technological innovations
with one goal deeper collaboration
with the consumer and further
personalisation of their experience.
One solution that has received much
press coverage is the drone an
unmanned aircraft that swoops
above traffic snarls to deliver goods
to customers whose current location
can be identified via their mobile
device (where locations services
are enabled by the customer).
This development tailors neatly
with concepts such as dynamic
delivery addressing the idea that
a customer can have any number
of addresses associated with their
identity and can direct deliveries
to whichever is most convenient at
any time the office, home or even
a favourite fishing spot. An address
beacon to light up a delivery location
is another fascinating concept, yet
to be commercially realised.
Closer to widespread deployment
is the car boot drop-off option
a smart solution that allows car
owners to use their car boot as a
secure, lockable locker, opened via
the use of a disposable digital key.

This could help companies and


consumers avoid the enormous
cost (and inconvenience) of failed
or insecure deliveries.
Augmented Reality (AR) which
overlays digital information such as
sound, video, graphics or GPS data
on a live camera view of the world
offers enormous promise to those in
the supply chain looking to enhance
the picking process in the warehouse,
provide guidance to driver en route or
improve the actual delivery process.

Aside from the admittedly exciting


technologies that will potentially
enable the transformation of the
Personal Supply Chain, we also look at
collaborative frameworks like those
behind companies such as Airbnb
and Uber that have the potential to
transform parcel delivery services too.
Its an exciting time to be involved in
the Personal Supply Chain, and our
research into what customers really
do, think and want provides some
fascinating, thought provoking and
potentially profitable insights.

2.0 THE CONNECTED CONSUMER

2.1 The continuing Omnichannel story


Three years ago, at a conference
in Sydney, the word Omnichannel
was first used to describe a new
connected consumer who shopped
anywhere, anytime and looked for
relationships with retail brands
rather than discrete channels,
whether they be virtual or physical.
Omnichannel had been spoken of
overseas for some time, but that
conference in Sydney was the
first time the concept had been
addressed publicly in Australia.
Today, Omnichannel has been talked
about so much that some people
never want to hear the word again.
But Omnichannel is still relevant
for a couple of reasons. First, the
Omnichannel debate has made it
inconceivable that any retailer
would see the world as anything
other than bricks and mortar and
online whereas just a short time ago
we regarded the retail world as either
bricks and mortar or online. This
black and white approach was taken
by some retailers who chose to run
an online business in competition
with their bricks and mortar chains
and more dramatically by the
high profile retailers who closed
their online stores when that
channel was deemed to be
insufficiently profitable.
The second reason why Omnichannel
remains relevant today is that its
effects are still playing out. In this
paper, we are going to introduce
a concept that is part of the
Omnichannel story. Were calling
it the Personal Supply Chain and,
like Omnichannel, its based on the
emergence of the connected shopper.
Its conceivable that in three years
time, the Personal Supply Chain will
become so much a part of business
as usual that, like Omnichannel,
some people wont want to hear
it talked about ever again.
So what is the Personal Supply
Chain? In essence, it is supply
chain management that includes
the consumer as an active creator

of value. Up to now, supply chain


management has been about
business to business (B2B)
collaboration and consumers have
simply received the value created.
Now that consumers are connected
via their devices in the same way that
businesses are connected, they too
can become active collaborators in
the supply chain and creators rather
than simply consumers of value.
In our research we were keen to find out:
The current status of the
connected shopper in Australia
What services shoppers want
from the supply chain
Which of these services are
currently being delivered
by businesses
For which services would
shoppers be prepared to
pay a premium
On which services would shoppers
be prepared to collaborate in
return for a discount
What shoppers see as the biggest
problems with how the retail
supply chain is currently executed.
2.2 Our research
Our consumer research consisted
of a telephone survey of 800
randomly selected respondents
across Australia. Quotas were
applied to provide for adequate
representation in each age group
and gender. Quotas were also
applied on location to ensure
coverage across metropolitan and
regional areas in each State and
Territory. The interview fieldwork was
conducted between February and
April 2014. The data was weighted by
age and gender within each location
so that the results are reflective of
the Australian population.
The findings for small businesses
(1 to 19 employees) and mediumsized businesses (20 to 199
employees) come from additional
questions included in the March 2014

Sensis Business Index. The findings


are based on interviews with 775
SME proprietors across Australia
in the manufacturing, wholesale
trade, retail trade and transport
and storage sectors. Quotas are
applied on business size, business
type and location to ensure that the
sample is reflective of the actual
business population across Australia.
Interviews were conducted in the
period February to April 2014. The
findings for large business (200+
employees) are based on a separate
survey conducted among 150 large
businesses across Australia in the
manufacturing, wholesale trade,
retail trade and transport and storage
sectors. Interviews for this survey
were conducted in April 2014.
2.3 The growing numbers of
Omnichannel shoppers

This is the third year we have


looked into the heart and mind
of the Omnichannel shopper.
The Omnichannel shopper shops
anywhere, anytime and looks to
form relationships with brands
rather than channels. They use
online sources, particularly their
smartphone, at every point on the
path to purchase. And each year,
the number of people shopping in
this way increases.
As you can see in Chart 1:
56 per cent of consumers report
using a phone to find information
out about a retailer versus 38 per
cent last year
51 per cent have compared prices
online while shopping in a store
versus 36 per cent last year
42 per cent have made a purchase
on a mobile phone versus 23 per
cent last year
39 per cent have made a purchase on
a tablet versus 25 per cent last year
19 per cent have scanned a
barcode in a store to find out more
information versus 11 per cent
last year.

ADVANCE
THETHE
CONNECTED
SHOPPER
ADVANCEOFOF
CONNECTED
SHOPPER
Q. Which
of these
activities
have
you
done
Q. Which
of these
activities
have
you
doneininthe
thepast
pasttwelve
twelvemonths?
month?
2014
56%

2014
51%

2013
38%

2014
42%

2013
36%

2014
39%
2013
25%

2013
23%

2013
11%

Used a mobile phone to


find out information on
a retailer

Compared prices online


while shopping in a store

Made a purchase on
a mobile phone

Made a purchase on
a tablet

2014
19%

Scanned a barcode using


a mobile device for
price information

CHART 1

Three years ago, we set out to see


if the Omnichannel shopper existed
in Australia. In our paper How you
can join the Omnichannel shopper
in transforming Australian Retail,
we found that they most certainly
did exist in our market. And more
importantly the incidence of
Omnichannel behaviour has been
increasing ever since. For example,
back in 2012, 66 per cent of the
population had shopped in bricks
and mortar stores and had made a
purchase on a computer. A similar
number had read online reviews.
In 2014, the incidence of online
shopping and reviewing had both
risen to 87 per cent.

Base accesses the internet

Personal Supply Chain | J une 2014

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OMNICHANNEL BEHAVIOUR IS INCREASING


11%
19%

Scanned a barcode using a mobile device for price


Base accesses the internet

2013

25%
34%

Searching for offer or coupon from a retailer I want

2014

22%
39%

Made a purchase on a tablet

25%
42%

Made a purchase on a mobile phone

31%
47%

Using an online offer or coupon sent to me

37%
48%

Placed a bid in an online auction

36%
51%

Compared prices online while shopping in a store


Used a mobile phone to find out
information on a product

38%
56%

Purchased music or video content

47%
55%
54%
62%

Purchased event tickets


Read online reviews
of products
!"#$%
&
(!

72%
87%

Purchased products or services online

76%
87%
79%
92%

Browsed products on websites or apps

CHART 2
7

Airline t
reserv

C
acces

2.0 THE CONNECTED CONSUMER (CONT.)

Total
Total online
On a computer
On a mobile phone
On a tablet

2014 - THE RISE OF MOBILE TRANSACTIONS


Its also interesting to note that
Omnichannel behaviour is increasing
across all Q.
ageWhich
groups. In
instance,
ofthis
these
have you purchased in the past twelve months?
we asked consumers whether they had
Gender and age 2014 compared to 2013
used a mobile phone to find information
Gender and age 2014 compared to 2013
about
a retailer.
78%
72%All age groups reported
65%
61%
62%
big increases. Particularly significant
Q. Have you used a mobile phone to find out information on a retailer?
Q. Have you used a mobile phone to find oout information on a retailer?
are the rises in 50+ age group.

OMNICHANNEL
BEHAVIOUR
IS RISING
AGE
OMNICHANNEL
BEHAVIOUR
ISACROSS
RISINGALL
ACROSS
AND GENDER DEMOGRAPHICS

ALL AGE AND GENDER DEMOGRAPHICS

2013
61%

Total

2013
37%

Male

Female

2014
20 13 48% 65%
8%
10% 2014
6% 44%
6%
40%

10%

14-19

42%
40%
20-29

30-39

CHART 3

Personal Supply Chain | June 2014

40-49

Page 2

10%

Telstra Unrestricted

2014
22%

49%
2013
48% 8%

50-64

Airline tickets/hotel
reservations/travel

Clothing/
accessories/shoes

58%

53%
47%
40%

62%

Total
Total online
On a computer
On a mobile phone
On a tablet

9%

30% 4%
28%
8%

4%

9%
35%
23%
22%

4% 2%

Computer software

2%

11%

Groceries or alcohol

5%

Music

Books

4% 2%

Appliances and
electronic equipment
(other than computers)

Airline tickets/hotel
reservations/travel

Clothing/accessories/shoes

Books

5%

Groceries or alcohol

4%

Airline tickets/hotel
reservations/travel

Clothing/
accessories/shoes

16% 16%

4%

Music

35%7%

20%

17%

38%

10%

Videos/DVDs/games

9%
25%24%

9%

21%

15% 48%

Appliances and electronic


equipment (other than
computers)

12%

8%

16%
12%

4%

16%
15%

4% 1%

35% 6%

4%

3%

13%
12%

3% 3%

Cosmetics

19%
41%
39%

29%

53%

20%

Computer hardware

23 %

Cosmetics

56%

24%

37 %

31%

Videos/DVDs/games

58%

Total

56%

51%

73%

10%

5%

Total
On a computer
Total online
On a mobile phone
On a computer
On a tablet
On a mobile phone
38%On a tablet
35%
35%

Computer software

62%

Computer hardware

53%

6%

9%

4%

Q. Which of these have you purchased in the past twelve months?

62%

10%

Page 12

10%Telstra Unrestricted

73%

49%
48%

65+

Personal Supply Chain | June 2014

6%

Q.ofWhich
these
have you purchased
in the past twelve months?
Q. Which
these of
have
you purchased
in65%
the
63%past twelve months?

42%
40%

41%
39%

higher, and this has had an impact


on purchases on phones to some
extent. Tablets provide a better
shopping experience.

We repeated the question this


year (Chart 5) and the dramatic rise in
purchasing via mobile device is clear to
see. Sales in most categories are now
higher on tablets, some significantly

2013 CATEGORY BEHAVIOUR

62%

62%
6% 7%

2013
17%

2013 - Category behaviour

65%

19%
15%

Books

6%

73%

2013
54%
16%

Cosmetics

2013
2014
53% 18% 54%
15%

36%

30%
29%

Computer hardware

2013
38%

9%

47%

44%2014
72%
42%

Computer software

59%

7%
2013
3%
38%

In Chart 4, the pink bars measure


participation in the category by any
means. The next three orange to
magenta bars measure purchasing
via computer, mobile phone and tablet
respectively. The numbers dont add
up because itsTotal
an Omnichannel world
Total online who buys via
i.e. the same customer
On a computer
a computer could
also be
buying in a
On a mobile
phone
On amobile.
tablet
store or via their
What this chart
showed was that while purchasing via
mobile device was more important in
some categories than others, overall,
it was less significant than purchasing
via computer.

2014
76%

33% 2014

2014
56%

Videos/DVDs/games

26%
24%

Q. Which of these have

52%

2014
78%
44%
39%

47%
42%

39%

Books

Airline tickets/hotel
reservations/travel

Clothing/
accessories/shoes

58%

56%

Music

54%

Appliances and
electronic equipment
(other than computers)

58%

Groceries or alcohol

57%

55%
In our51%
2013 paper How
Mobility is
48%
changing the rhythm of Australian
Retail, we specifically looked at the
influence of mobile devices on the
20%
Omnichannel shopping18%
experience, 18%
12%
9%
10%
measuring shopping behaviour by
device across the various categories.

Personal Supply Chain | June 2014

Page 1

Telstra Unrestri cted

CHART 4
Personal Supply Chain | June 2014

!"#$%&
(!

Page 2

Telstra Unrestricted

49%
48%

42%
40%

Q. Which
these of
have
you purchased
in the past twelve
Q.ofWhich
these
have you purchased
in themonths?
past twelve months?

58%

56%

48%

47%
42%

39%

18%
9%

7%

9%

Appliances and
electronic equipment
(other than computers)

Groceries or alcohol

Books

Airline tickets/hotel
reservations/travel

Clothing/
accessories/shoes

3%

18%
15%

6%

CHART 5

Total
Total online
On a computer
On a mobile phone
On a tablet

Books
19%
15%

16%
10%

6% 8%

Personal Supply Chain | June 2014

10%

6%

6% 7%

Cosmetics

18%
10%

36%

30%
29%

Music

20%
12%

47%

44%
42%

44%
39%

33%

26%
24%

5%

52%

Computer hardware

54%

Computer software

58%
55%

61%

Videos/DVDs/games

57%
51%

62%

4%

Total
Total online
On a computer
On a mobile phone
On a tablet

72%
65%

9%

Airline tickets/hotel
reservations/travel

2014
- THE
OF MOBILE
TRANSACTIONS
2014 THE
RISERISE
OF MOBILE
TRANSACTION

78%

10%

6%

Clothing/
accessories/shoes

10%

41%
39%

Page 2

Telstra Unrestricted

Which of these
purchased in
the past twelve
months?
TheQ.evolution
of have
the you
connected
shopper:
2012-2014
The Australian shopper today shops how they want, and for an increasing number of Australians, digital
technologies have been driving this trend. Overall there has been an increase in the proportion of Australians
62% from 71 per
shopping65%online, rising
62% cent in 2012 to 77 per cent in 2014. And while digital technologies have been
driving the growth of the anywhere, anytime shopper,
tablet devices have become the device of choice for many
58%
56%
Australian shoppers. Tablets, offering a larger screen and better visual
experience than the smartphone, have
53%
seen them 49%
now
usurp
the
mobile
phone
for
many
categories
of
purchase.
In part, the growth of tablet purchasing
48%
48%
42%
41%
aligns
with the strong growth
of
tablet
ownership,
which
has
met
or
exceeded
expectations
every year since their
40%
38%
39%
35%
35% the tablet 35%
release. With tablet owners having higher income levels and more
likely 30%
to shop online, targeting
makes
25%24%
28%
23%
sense for businesses in the retail supply chain.

Total
Total online
On a computer

2%

4%

16%
15%
4% 2%

4% 1%

13%
12%

3% 3%

Cosmetics

8%

Computer hardware

5%

22%

9%

Videos/DVDs/games

Groceries or alcohol

4% 2%

Music

5%

11%

Computer software

16% 16%

9%
4%

Appliances and
electronic equipment
(other than computers)

10%

Books

6%

Airline tickets/hotel
reservations/travel

10%

Clothing/
accessories/shoes

73%

9
Personal Supply Chain | June 2014

Page 2

Telstra Unrestricted

3.0 T HE RETAIL SUPPLY CHAIN


B2B COLLABORATION
3.1 How collaboration generates value
in the Retail Supply Chain Martin
Christopher, Emeritus Professor of
Marketing and Logistics, Cranfield
University, UK
Supply chain management as an
idea is not much more than thirty
years old. Since this concept
of collaborative working across
organisational boundaries was
first developed, the uptake of this
revolutionary business model
has accelerated. One reason for
this is the growing number of
time-sensitive and value-seeking
consumers who seek to acquire
solutions rather than products. This
has been one of the main drivers
behind the strategy that some have
called servitisation the conversion

of a product into a service.


The implications of this strategy
for supply chain management are
profound, and there are three key
prerequisites for its successful
execution:

for a value-driven, integrated


supply chain. Without upstream
and downstream visibility of
customer requirements and
supplier capacities/inventories,
it is difficult if not impossible
to achieve the level of customer
responsiveness that todays
marketplace demands.

A recognition that value is created


across the supply/demand
network of which the business is
a part. Previously it was always
assumed that the firm as a standalone entity was the sole creator
of value now its recognised that
customer value is created and
delivered through the collective
actions of the network which
includes the end-consumer.

Relationship management across


the supply chain is critical for the
creation of a seamless, end-toend pipeline that extends from
upstream suppliers through to
the end-consumer. Relationships
with suppliers and customers
need to be proactively managed
on a win-win basis if the real
potential for supply chain
integration is to be achieved.

Shared information, transparency


and trust are the vital ingredients

STAGE 1: PILLARS OF VALUE

Wholesaler

Manufacturer

Consumer

Retailer

STAGE 2: SUPPLY CHAIN MANAGEMENT

STAGE 3: PERSONAL SUPPLY CHAIN

Manufacturer

Manufacturer

VALUE

VALUE

Wholesaler

Retailer
Wholesaler

Retailer

Consumer

VALUE

UTILITY

COST

Solutions
not product

Total Cost
of Ownership
Not Just Price

Collaboration
Transport

10

Consumer

CHART 6

Lets explore each of these three guiding


principles in a little more detail:
1. Value Creation
What is customer value? Economists
and even philosophers have debated
this question for years. At its most
basic, value is the perception of benefits
received by the customer compared
with what has to be sacrificed in order
to obtain them. This latter concept
of sacrifice might more precisely
be referred to as the total cost of
ownership. We use the term total
cost of ownership rather than price
because, in most transactions and
relationships, costs other than price
will be incurred for example, inventory
carrying costs, maintenance costs,
running costs, disposal costs, etc.
So value for customers can be created
by reducing their total costs of
ownership, as well as improving
the benefits delivered.
Its important to have a clear
understanding of the value that
customers seek (recognising also that
customers will differ in their value
preferences). Customers are looking for
solutions to problems and it is helpful to
think of a firms value proposition as the
way it sets out to solve those problems.
The value creation and delivery process
today is rarely the domain of a single
company; instead, value will be created
and delivered through a network of
partners that increasingly includes
the end consumer. These partners
contribute knowledge, customer insights,
technology, physical assets, and so on to
create and deliver superior value.
2. End-to-end Visibility
In conventional supply/demand
networks, there tends to be limited
visibility of what is happening outside
the four walls of the company.
Sometimes theres also poor visibility
within the business depending on
the functional silos around which the
business is organised. Upstream and
downstream visibility is essential if the
supply chain is to operate smoothly and
synchronously to respond rapidly to
end-user requirements. Where the flow
of information is limited or blocked, then

uncertainty will increase. And


when uncertainty increases, so
too does the need for holding costly
reserves of safety stocks to meet
unknown demand.
Companies that aspire to become
demand-driven will not be able to do so
unless theyre able to capture end-user
demand and then rapidly translate those
demand signals into a coordinated,
network-wide response. This is what
supply chain visibility is all about.
Visibility is achieved through sharing
information and sharing only happens
when there is a high level of trust.
Much of the information that needs to
flow freely across the supply/demand
network, if it is to become more agile
and responsive, is commercially
sensitive. As a result, there is often
a reluctance to share this information
widely. However, once the parties
involved recognise the business case
for working collaboratively, significant
benefits are available.
One of the best examples of the
benefits of sharing information
across a supply chain is the
pioneering collaborative programme
between WalMart and Procter and
Gamble (P&G). Using point-of-sale
information captured by WalMart
from their checkout counters across
the USA, P&G were able to establish a
continuous replenishment programme
that was truly demand-driven. Before
this, P&G had to forecast WalMarts
requirements and hold safety stock
to cover themselves against forecast
error. Now they could react to real
demand and, as a result, WalMart
benefited from better on-the-shelf
availability and the need to hold less
inventory. P&Gs benefits came in the
form of much better use of production
capacity, reduced safety stock and, of
course, better sales because of fewer
stock-outs in the stores.
3. Relationship Management
In a sense, both the previous
elements of integrated supply chain
management value creation and
shared information are dependent in

large part on the ability of a company


to forge strong relationships both
with customers and with suppliers.
Relationship management has to be
at the core of any programme to build
competitive advantage through supply
chain excellence.
Customer Relationship Management
(CRM) is a well-established process
in many companies at least in B2B
contexts. However, its full potential may
not be realised if customers are not
actively engaged in the value-creation
process. Some call this idea co-creation
and it implies that the customer, rather
than being at the end of the supply chain,
is actually at the beginning and the end
of the supply chain. A demand-driven
supply chain is in effect a circular supply
chain, with the customer specifying
the value that they seek and the supply
network working collaboratively to
deliver that value.
Of equal importance is the other
side of the coin: supplier relationship
management (SRM). For many
years, the conventional approach to
managing suppliers was arms-length.
In other words, it wasnt considered
appropriate to get too close to
suppliers. Indeed, in some cases the
strategy was often to play one off against
the other in what was primarily a pricebased war.
Today, enlightened businesses seek
to work with key suppliers in a different
way developing a relationship based
on partnership and mutual trust. A
company will typically have fewer
suppliers compared with previous times
and there will be a very close, almost
seamless connection with the core
group of strategic suppliers, with high
levels of both visibility and transparency.
The combined impact of a sharper
focus on value creation, visibility and
relationship management can be
significant. Such a focus will lead to
supply chains that are truly customercentric and responsive enabling service
provision and co-creation to become
powerful sources of differentiation in
a crowded marketplace.

11

3.0 THE RETAIL SUPPLY CHAIN B2B COLLABORATION


(CONT.)

3.2 Case Study: B2B collaboration in the supply chain Brightstar Supply Chain Services for the Telstra Store Network

INTRODUCTION
Telstras internal Supply Chain function works in partnership with the Supply Chain team within Brightstar to
drive business processes that support the retail network through the operational execution of the supply chain
for mobile, fixed line, data and BigPond products and accessories. Brightstar and Telstra adopt a collaborative
approach to deliver value in working capital efficiencies, obsolescence optimization and logistics services whilst
also improving service levels that allow Telstra to meet the needs of their customers.

VENDOR

2 Warehouses
1 Telstra owned and
the other Brightstar
owned
Both Brightstar
managed

Vendor
Managed
Inventory

Vendor
Suggested
Order

TELSTRA
STORE
NETWORK

TELSTRA
LICENCED
STORE

Telstra has a retail network of 96 owned stores, from key icon stores in leading high street positions, to main
shopping malls through to smaller towns and rural centres, this channel is described as the Telstra Store Network
(TSN). In addition to the company-owned stores, there exists a network of Telstra Licensed Stores (TLS) with in
excess of 295 stores covering a similar retail placement.

12

HIGHLY COMPETITIVE MOBILE MARKETPLACE


The differentiators in the competitive marketplace of mobile devices are availability and speed; Telstra must
have the correct volume of new and existing products in the market place, faster than the competitors supply
chain. This can enable capturing early adopters, retention of the existing customer base and ultimately market
share growth. With the proliferation of smartphones, shortening lifecycles and increasing device cost prices, the
speed of decision making to optimise working capital investment for the operator is paramount. Timing must
be optimised to ensure that critical new launches are brought to market quickly to capture growing customer
demand for the latest devices. Businesses must also be mindful of exiting products and reduce supply in an
effective manner to minimize obsolescence, clear retail space for the active portfolio and improve cash flow for
the business to invest in the next device.
The supply chain process support provided by Brightstar must have the agility to react to changes in the demand of
devices whilst recognising that some products have a very stable lifecycle and can be managed in a just in time or
lean approach.

COLLABORATION IN THE TELSTRA STORE NETWORK SUPPLY CHAIN


To ensure the best designed supply chain for the TSN, Brightstar use a number of Supply Chain Management
techniques in conjunction with the Telstra Supply Chain function. These activities include:
1. Demand Management
Inventory should be replaced by qualitative information in a supply chain to help minimise the risk of holding
excessive inventory. If a business could forecast 100 per cent accurately and the suppliers could deliver product
exactly when requested, the need for safety stock would be zero. In reality, forecasts are not accurate and suppliers
cannot always deliver on time; therefore, a collaborative approach must be used to understand the inherent
variances of the supply chain and the demand managed.
2. Demand Signals
Demand (revenue generation) begins with the customer, so its important to ensure that the voice of the
customer is heard and utilized as the guiding principle to respond to. Telstra can effectively shape the demand and
encourage customers towards available products by ensuring their websites and brochures are kept updated with
the products they wish to sell. Where vendors and retailers look to bring promotional activity to the marketplace,
there must be agility in the supply chain to respond to these signals and ensure that working capital is available.
Brightstar is organised to deliver quickly and effectively for Telstra to the marketplace. The Telstra Supply Chain
team works effectively with Brightstars supply chain capabilities to enable Telstra to take full advantage of
opportunities when they arise and as a result Telstra maintains the competitive advantages of speed to market
and shorter lead times thus capturing market share.
3. Probability
Whilst the Vendor Managed Inventory process used to maintain inventory in the retail channel is effectively a
Push system in that inventory is replenished, pushed to the stores to fulfil customer demand, there is a need to
build into the process a methodology for incorporating the business plans to allow for placing of inventory in the
channel prior to demand being created. In order to determine the level of stock that should be in the store to meet
the possible demand to support the objectives of Telstra, investigation into the types of probability distributions
has been implemented to achieve a higher service level with reduced inventory risk for Telstra.
4. Safety Stock and Re-order or Replenishment Points
Telstra is exposed to the potential impact to both NPS and revenue of not having the right stock at the right time
as both existing and new customers potentially go elsewhere to acquire the mobile devices they wish to purchase.
The reorder point specifies the stock level at which a replenishment order is placed, a reorder point is usually

13

3.0 THE RETAIL SUPPLY CHAIN B2B COLLABORATION


(CONT.)

set to provide an acceptably low risk of stock-out between the time when a replenishment order is placed and
subsequently received (which, in a system with automatic reordering, is the lead time). Therefore, setting the
reorder point is a trade-off between the cost of incurring one or more stock-outs and the cost of holding additional
stock (commonly called safety stock) to cover the possibility of unanticipated demand during the replenishment
lead time.
5. Velocity and time
If Telstra can take the customers on the same value adding journey in less time or on a higher value adding
journey in the same time as their competitors, then increased velocity will have been achieved creating a
competitive advantage in the supply chain.
To have a high velocity supply chain Brightstar, Telstra, Retailers and Vendors must adopt three Ts: Trust,
Transparency and Time. When this is achieved the organisations of today will become more agile and responsive.
These three variables are interrelated and dependent on one another to create a robust supply chain. Once a
business as a whole understands the time dimension within the supply chain then transparency of what (and
when) activities are occurring will be created. Transparency will then help to build trust within an organisation as
all the players of the supply chain share the opportunities and work together to drive a greater understanding of,
and improvement in, processes through the value chain.
6. Performance measures
Telstra and Brightstar base the measurements of the Retail supply chain on delivering to the business metrics
as listed below.
Customer Responsiveness Measures

Sales Maximisation through Availability: Maximise the amount of sales in units sold or revenue
generated

Fill Rate Maximisation: Maximise the number of customer orders filled on time. Can be extended
to include delivered on time so as to measure complete customer order satisfaction

Customer Response Time Minimisation: Manage the amount of time from order placement to order
receipt by customer.

Cost Measures

14

Cost Minimisation: Measures that define the cost of the entire supply chain and/or measures that help
to minimise cost of supply chain units or stages are employed. i.e. cost per unit of outbound shipments

Inventory Investment Optimisation: Minimise inventory costs, including product, obsolescence and
holding costs.

4.0 THE PERSONAL SUPPLY CHAIN


TELSTRA RESEARCH FINDINGS
4.1 Consumer Collaboration in the
Australian Retail Supply Chain
The Omnichannel shopper wants a lot
from the retail supply chain. When we
asked consumers what they would
find useful or very useful (Chart 8):

76 per cent said the ability


to customise a product to
requirements online

86 per cent said the ability to


return goods to a physical location

There were also strong scores for


delivery being tracked on a mobile
app (67%), click and collect (53%) and
delivery service, including set-up (51%).

71 per cent of customers said


guaranteed same day delivery.

83 per cent said the ability to see


stock levels online
76 per cent said receiving a text
message saying goods are to be
delivered in x minutes

ONSUMERS WANT MORE FROM THE SUPPLY CHAIN


CONSUMERS WANT MORE FROM THE SUPPLY CHAIN
Q. How useful consumers would find retailers offering...

Q. How useful consumers would find retailers offering...


Ability to return goods to a physical location

56%

Retailer stock availability information visible online

30%

52%

Getting a text message saying the goods are about to be


delivered in X minutes?

31%

51%

Being able to customise product to requirement online

7%

26%

22%

Payment only after goods have been delivered

9%

54%
33%

Guaranteed same day delivery

36%
37%

15%

Guaranteed weekend or evening delivery

32%

36%

14%

Delivery guaranteed in one hour window


Ability to click and collect

29%

10%

Quite useful

19%
15%
Not too useful

CHART 7

18%

18%
22%

25%

30%

35%
Not at all useful

37%

3%
2%
3%
4%
1%
2%
6%

15 %

12%

23%

3%

6%

25%

26%

22%

20%

Ability to change delivery location while goods are in transit?

16%

9%

18%

30%

12%

15%

14%

26%

21%

Ability to collect goods from a secure locker location


close to home or work?

Very useful

25%

27%

Delivery service including set-up

Manufacturing process visible online

30%

30%

12%

13%

31%

37%

14%

12%

Being able to vary delivery window and location

Delivery tracked on mobile application

12%

9%

40%

35%

7%

9%

0%

5%

4%
5%
6%
3%

Don't know

Personal Supply Chain | June 2014

Page 16

T elstra Unrestricted

15

4.0 THE PERSONAL SUPPLY CHAIN


TELSTRA RESEARCH FINDINGS (CONT.)

Businesses are providing some but by


no means all of these services (Chart
7). So while the majority of both Small
to Medium Enterprises (SMEs) and
large businesses offer the ability to
return stock to a physical location,
there are large gaps between some
of the other services desired by
consumers and those being delivered
by the retail supply chain:

83 per cent of consumers want the


ability to see stock levels online, but
only 10 per cent of SMEs and 44 per
cent of large businesses provide
this service

71 per cent of customers would


like the option of guaranteed same
day delivery, but only 29 per cent
of SMEs and 31 per cent of large
businesses offer this service

76 per cent of consumers would like


the ability to customise a product
to requirements online, but only 7
per cent of SMEs and 26 per cent of
large businesses offer this service

67 per cent of consumers would


like delivery tracked on a mobile
app, but only 12 per cent of SMEs
and 13 per cent of large businesses
are offering that service.

... ...BUT
BUTBUSINESS
BUSINESSES
ARE NOT
PROVIDING IT
ARE NOT PROVIDING
IT
Proportion of consumers that would find this useful
Proportion of SMEs that provide this service
Proportion of large businesses that provide this service
86%

83%
68%

68%

67%

36%

15%

Guaranteed weekend
or evening delivery

Being able to vary delivery


window and location

Guaranteed
same day delivery

Payment only after goods


have been delivered

35%
27%
12% 13%

7%

Being able to customise


product to requirement online

Retailer stock availability


information visible online

Ability to return goods to a


physical location

10%

51%

39%

31%
29%

29%

Delivery tracked
on mobile application

26%

55%

53%
48%

48%

44%

10%

25%

23%
11%

Manufacturing process
visible online

71%

60%

Delivery service
including set-up

73%

Delivery guaranteed in
one hour window

76%

73%

Base all consumers, all businesses

CHART 8
Personal Supply Chain | June 2014

Page 18

Telstra Unrestricted

16

Proportion of SMEs that provide this service


Proportion of large businesses that provide this service
86%

83%
71%

68%

68%

67%

48%
36%

27%
12% 13%

62 per cent of consumers would


Base all consumers, all businesses
be willing to pay a premium for
guaranteed same day delivery,
but only 9 per cent of SMEs and
4 per cent of large businesses are
offering them the opportunity to
do so

Delivery tracked
on mobile application

Guaranteed weekend
or evening delivery

Being able to vary delivery


window and location

Guaranteed
same day delivery

Payment only after goods


have been delivered

7%

Being able to customise


product to requirement online

Retailer stock availability


information visible online

Ability to return goods to a


physical location

35%

15%

10%

Whats more, a significant number


of consumers are willing to pay a
premium for most of these services,
but businesses are not charging for
them (Chart 9):

31%
29%

29%

26%

51%

39%
25%

23%

10%

11%

Delivery guaranteed in
one hour window

44%

55%

53%
48%

Manufacturing process
visible online

73%

60%

Delivery service
including set-up

76%

73%

businesses are offering them the


opportunity to do so

57 per cent of consumers would


be willing to pay a premium for the
ability to customise a product to
requirements online but only 2 per
cent of SMEs and 6 per cent of large
businesses are offering them the
opportunity to do so

40 per cent of consumers would be


willing to pay a premium for a delivery
service including set-up, but only 4
per cent of SMEs and 6 per cent of
large businesses are offering them
the opportunity to do so.

54 per cent of consumers would


be willing to pay a premium for a
guaranteed weekend or evening
delivery, but only 11 percent of
SMEs and 5 per cent of large

Personal Supply Chain | June 2014

Page 18

Telstra Unrestricted

CSUTOMERS WOULD PAY PREMIUM IF


THE SERVICES WERE OFFERED

CUSTOMERS WOULD PAY PREMIUM... IF THE SERVICES WERE OFFERED


Proportion of consumers that would be prepared to pay a premium for
Proportion of SMEs that charge for this service
62%

Proportion of large businesses that charge for this service


57%

54%
45%

40%

37%

36%

33%
23%
17%

0%

0%1%
Manufacturing process
visible online

2%

Retailer stock availability


information visible online

10%
2%1%
Delivery tracked on
mobile application

7%5%

Being able to vary delivery


window and location

5%
1%

12%
5%

Ability to return goods to


a physical location

6%

Payment only after goods


have been delivered

3%1%

Delivery service
including set-up

9%

Delivery guaranteed in
one hour window

6%

11%
5%

Guaranteed weekend
or evening delivery

2%

Being able to customise


product requirement online

Guaranteed same
day delivery

9%
4%

Base all consumers, all businesses

CHART 9

Personal Supply Chain | June 2014

Page 19

Telstra Unrestricted

17

4.0 THE PERSONAL SUPPLY CHAIN


TELSTRA RESEARCH FINDINGS (CONT.)

One of the biggest benefits of B2B


collaboration in the supply chain is
efficiency. For example, if a retailer
agrees to share valuable sales and
inventory information with its supplier,
then it would expect something equally
valuable in return a reduction in
inventory, a reduction in price or an
increase in sales as a result of better
stock management. If a retailer agrees
to pay for goods in advance, they would
expect a reduction in overall buy price
or some other trading term. If a retailer
and a manufacturer collaborate in

the design of a new product, then


the manufacturer should expect
guaranteed volumes and the retailer
exclusivity or a price reduction. In
each case, the principle is the same:
collaborative effort requires a reward.
Consumers recognise this principle and
are keen to collaborate in the supply
chain if they are offered an incentive
(Chart 10). In return for a saving:

87 per cent would be prepared to


pay in advance
71 per cent would be prepared to
pick up from a locker rather than
have the goods home delivered
70 per cent would provide design
suggestions to manufacturers
67 per cent would accept delayed
and variable delivery.

CONSUMERS ARE PREPARED TO


COLLABORATE
IF OFFERED
A SAVING
CONSUMERS
ARE PREPARED
TO COLLABORATE
IF OFFERED A SAVING
Q. What would you be prepared to do if offered a saving?

Q. Would you be prepared to do... if offered a saving...?

87%

Pay in advance

71%

Pick up goods from a depot/retail locker

70%

Provide design suggestions to manufacturers

68%

Give an authority leave without signature

67%

Accept delayed and variable delivery

54%

Provide location based information delivery companies

47%

Commit to purchasing a pre-determined quantity


Share information about your pattern of consumption

CHART 10

18

...BUT BUSINESS IS NOT REWARDING

39%

Personal Supply Chain | June 2014

Page 20

T elstra Unrestricted

COLLABORATE IF OFFERED A SAVING

Q. Would you be prepared to do... if offered a saving...?


Q. Would you be prepared to do... if offered a saving...?
87%

Pay in advance
Pay in advance

p goods from a depot/retail locker

87%

71%

Pick up goods from a depot/retail locker


sign suggestions to manufacturers

71%

70%

Provide design suggestions to manufacturers


n authority leave without signature

70%

68%

Give an authority leave without signature


cept delayed and variable delivery

68%

67%

Accept delayed
delivery
5 per
cent of
large businesses offer an
businesses
are not and variable
54%
ed informationUnfortunately,
delivery companies

67%

incentive to provide design suggestions


rewarding collaborative consumers
54%
Provide
location
based
information
to manufacturers.
And only 5 per
(Chart
11).
Only 12
per cent
of SMEsdelivery companies
47%
chasing a pre-determined
quantity
cent of SMEs and 4 per cent of large
and 13 per cent of large businesses
Commit
to purchasing
a pre-determined
quantity offer an incentive to accept 47%
businesses
offerofan
incentive
to pay in advance.
39%
about your pattern
consumption
delayed and variable delivery.
Meanwhile,
only 8 percent
of both
39%
Share information
about your
pattern of consumption
SMEs and large businesses offer
an incentive to pick up from a locker
rather than have the goods home
Personal Supply Chain | June 2014
Page 20
delivered. Only 2 per cent of SMEs and
T elstra Unrestricted
Personal Supply Chain | June 2014

Page 20

T elstra Unrestricted

SINESS IS NOT REWARDING


...BUT BUSINESS IS NOT REWARDING
RATIVE CONSUMERS
...BUT
BUSINESS IS NOT REWARDING
COLLABORATIVE CONSUMERS
COLLABORATIVE
CONSUMERS
Proportion of consumers that want a discount for collaborating
Proportion of SMEs that give a discountProportion
for this service
of consumers that want a discount for collaborating
Proportion of large businesses that giveProportion
a discountof
for
this service
SMEs
that give a discount for this service
Proportion of large businesses that give a discount for this service
67%
54%
70%

71%

67%
47%

39%
54%

47%

20%

5% 4%

Base all consumers, all businesses

39%
20%

1% 0%
3% 1%

Provide location based


Share
information
about your
information
delivery
companies
patterns of consumption

usinesses

2% 5%

8%

Accept delayed and


Commit
to delivery
purchasing a
variable
pre-determined quantity

8% 8%

3% 1%

Provide design suggestions


Provide
location based
to manufacturers
information delivery companies

5% 4%

Pick up goods from a


Accept delayed
depot/retail
locker and
variable delivery

2% 5%
12% 13%

Pay in advance
Provide design suggestions
to manufacturers

Pick up goods from a


depot/retail locker

8% 8%

8%

1% 0%

Share information about your


patterns of consumption

70%
87%

Commit to purchasing a
pre-determined quantity

71%

Personal Supply Chain | June 2014


Page 21
Telstra Unrestricted

CHART 11

Personal Supply Chain | June 2014


Page 21
Telstra Unrestricted

19

*2009/10 = 100
180
160
140
120
100
80
60
40
20

Regulated mail
Regulated mail (forecast)

20
17
-1
8

20
16
-1
7

20
15
-1
6

20
14
-1
5

20
13
-1
4

20
12
-1
3

20
11
-1
2

Before this, shoppers did the work of


the supply chain by travelling to stores
to pick up goods and transport them
home themselves. Consumers judged
a retail brand and its supply chain by
its performance up to the retail store.
The delivery leg was up to the shopper.
However, in the online and Omnichannel
world, the customers last experience
of the brand and its supply chain
is the delivery to home. Sadly, poor
delivery to the home is a cause of much
dissatisfaction among consumers across
all age groups (Chart 12)

CHANGES IN REGULATED LETTERS AND DOMESTIC


PARCEL VOLUMES, 2009 18*

20
10
-1
1

4.2 Problem Deliveries


One of the biggest changes in the retail
supply chain has been the advent of
online and Omnichannel shopping. With
Australian online sales set to grow from
$16 billion in 2012 to an estimated $26.9
billion in 2016(1), the volume of parcels
being delivered is also increasing(2). (Its
worth noting that research carried out
for Australia Post by BCG showed that
growth in Australia Posts own parcels
business is slowing (1.5 per cent in
2013-14, down from about 9 per cent
in FY2012-13) due to the entry of new
competitors into the market.)

20
09
-1
0

4. 2

4.0 THE PERSONAL SUPPLY CHAIN


TELSTRA RESEARCH FINDINGS (CONT.)

Domestic parcels
Domestic parcels (forecast)

DIAGRAM 1

DELIVERY IS A PARTICULAR PROBLEM ACROSS ALL AGE GROUPS


Gender and Age

DELIVERY IS A PARTICULAR PROBLEM ACROSS ALL AGE GROUPS


Gender and Age

Q. Have you ever had something go wrong with an online delivery?

Q. Have you ever had something go wrong with an online delivery?


50%

Total

53%

Male
Female

46%

14-19

56%

20-29

49%

30-39

55%

40-49

54%

50-64

36%

65+

57%

CHART 12
Base purchases online

1 http://www.frost.com/c/1641896/doclib/document-display.do?backlink=ref&id=1823116
2 http://www.malcolmturnbull.com.au/media/Australia-Post

20
Personal Supply Chain | June 2014

Page 22

Telstra Unrestricted

Half of all Australians have had


something go wrong with an online
delivery. They report a range of
problems (Chart 13), including poor
service/rigid processes, goods
arriving broken or damaged, the
wrong product arriving, goods being
sent to the wrong address, but the
overwhelming problem reported is
delayed or failed delivery.
Retailers know that consumers
Q. WHAT WENT WRONG?
can be very unforgiving of poor
performance within a bricks and

mortar store. If the stock is not


there, the staff cannot explain
how something works, it takes too
long to pay or its hard to return
something, customers often decide
to take their business elsewhere.
After all, with up to 200,000 retail
outlets in Australia, there is plenty
of choice. When the supply chain
ends at their door instead of
the retail store, the consumers
attention is focused on delivery
performance and they are equally

Q. WHAT WENT WRONG?

unforgiving (Chart 14). If a delivery


issue is not resolved the majority
of consumers will not go back to
that retailer again. On the plus side,
if delivery issues are resolved, the
majority of consumers will return
to the retailer. The challenge for
retailers is that even though poor
delivery performance is likely to be
a supply chain network problem, it
is the retailer that will pay the brand
penalty not the manufacturer,
wholesaler or delivery company.

60%

Delayed/didn't arrive

WHAT WENT WRONG?

Poor service/rigid
processes

18%

60%

Delayed/didn't arrive
17%

Broken/damaged

Wrong product
arrives

16%

Poor service/rigid
Sent to wrong
processes
9%

18%

address

17%

Broken/damaged
Base purchases online and has had something go wrong with delivery

Wrong product
arrives

16%
Personal Supply Chain | June 2014

Page 23

Telstra Unrestricted

Sent to wrong
address

9%

CHART 13
IF THE ISSUE IS RESOLVED, THE MAJORITY WILL GO BACK.
IF IF
THE
ISSUE
IS IS
NOTRESOLVED,
RESOLVED,THE
THEMAJORITY
MAJORITY WILL
WONTGO
GO BACK.
BACK
THE
ISSUE

IF THE ISSUE IS NOT RESOLVED, THE MAJORITY WONT GO BACK

Base purchases online and has had something go wrong with delivery

Have you been


back to the
retailer again?

Was the issue resolved to your


satisfaction?
Yes

No

Yes

66%

37%

No

33%

63%

Personal Supply Chain | June 2014

Page 23

Telstra Unrestricted

CHART 14
THE ISSUE IS RESOLVED,
THE MAJORITY WILL GO BACK.
21
THE ISSUE IS NOT RESOLVED, THE MAJORITY WONT GO BACK
Base purchases online and has had something go wrong with delivery

Personal Supply Chain | June 2014

Page 25

Telstra Unrestricted

4.0 THE PERSONAL SUPPLY CHAIN


TELSTRA RESEARCH FINDINGS (CONT.)

INTEGRATED SOLUTIONS IN ACTION:


(WWW.TEMANDO.COM)
Temando is a market-leading technology company that is working with
some of the worlds largest brands to overcome the challenges of shipping
in eCommerce. Temando matches what consumers want, with what
shipping providers can actually do, in a single system that is easy for
merchants to manage.
Temandos smart shipping software provides a central location for
fulfilment across multiple eCommerce platforms, helping to streamline
the shipping process and increase online sales. CEO Carl Hartman, talks
about the evolution of the Omnichannel world:
Lets face it. Technology has really raised the bar on customer expectations.
I think it all began with Google, which turned our game of battleship hit or
miss search into something that could miraculously predict what we were searching for, even as we typed it. And
so, consumers entered the age of instant gratification whatever they wanted could be summoned at the click of
the button.
Just like Google taught us to expect instant answers to our questions, likewise we quickly learnt that using
UBER is a more effective way of hailing a cab, Expedia is a quicker way of searching flights and rather than
leaving your dining location to chance, a quick check on Yelp will determine whether the latest hipster hangout
is indeed hot or not.
At the centre of this revolution has been the smartphone, which has created connected consumers who have
ever-increasing usage patterns and ever-rising expectations. Connected consumers expect answers
instantaneously and demand to take action.
Take something simple like stock levels, for example. Consumer demand for information can be satisfied if supply
chains provide real-time inventory information. Real-time inventory is the foundation of most innovative supply
chain models, as it obviously becomes difficult to offer premium services like timeslot express, same day delivery,
if there are no guarantees that the local store or distribution centre has something in stock.
Inventory levels aside, the other interesting trend emerging is that consumers are willing to pay more for a service
when it offers a superior experience or value. Take UBERs Black service as an example. Its extremely popular and
yes, you get a far nicer car and better service than the average taxi, but ultimately you are paying more for the core
service of being driven from A to B. In parcel delivery, one only has to look over to more mature retail markets like
the UK and view the smorgasbord of delivery options that the average UK Omnichannel retailer offers their
customers Standard Free Shipping, Pick up from Store, Pick Up From Collection Points and even deliveries timed
down to 15 minute timeslots. Its probably no surprise that UK retailers boast amongst the worlds highest average
conversion rates and percentage of online retail sales versus offline retail sales. Temandos own data seems to
validate this, with premium express services chosen by customers at the checkout rising by more than 19 per cent
over the last year.
When you think about this from a demographic perspective, the trend makes sense. Large numbers of consumers
shop online because they are time poor. Therefore, the underlying need is all about fitting in with their schedule,
whether that means delivery after hours or the chance to buy online and then pick it up themselves. Others have
just been trained by other applications on the Internet where you can click a button and the Internet then brings
you whatever you need. Ultimately, I think the truth is somewhat more a Pavlovian response. Its about trust and the
fact people crave positive experiences. Click a button and have the latest shoes delivered in under three hours, like
the promise that was stated on the website? Assuming its kept, thats a positive experience thanks to the instant
gratification generated, and it builds trust, especially if it becomes a regular pattern.

22

But the antithesis is also true if these promises are not kept, and the experience becomes negative, this breaks
the cycle of trust between the consumer and the retailer, and the customer may never shop with the retailer again.
Yep. Its that dramatic Temando data shows that customers that have a negative delivery experience (where the
retailer made a promise that was not kept) resulted in 79 per cent of consumers not purchasing from the retailer
again within a 6-month period.
So whats the take away from this? Technology is certainly reducing the friction from the buying process, but its
also dramatically raising the expectations that consumers have for online delivery. Consumers have moved on from
this free-value driven expectation, and are now seeking delivery experiences that meet their specific needs. Now,
perhaps more than ever, there is an onus on retailers to curate these delivery experiences using technology
to ensure that delivery promises are kept, and customers get the delivery experiences they want.

The

experience

It has been clear for some time now that the future of retail is overwhelmingly mobile and nowhere is this truer
than in Australia. We know that Australian consumers are savvy early adopters and are really leading the world
when it comes to the pace of change. Connectedness is changing the way we shop and has dramatically shifted
consumer expectations when it comes to the retail experience. Their wants and demands are the driving force
behind innovations that improve online and offline shopping experiences and service standards.
A good example of this is the ever-evolving delivery experience, which has long been seen as one of the biggest
barriers to overcome in online commerce. To cater for the discerning Australian consumer, we are starting to
see more choice as new entrants to the market build out capabilities and existing carriers create new consumer
delivery solutions.
eBay recently completed research asking online shoppers about their delivery experience expectations and
shoppers confirmed our hypothesis around what they are looking for from retailers.
The cost of delivery continues to be a constraint to online shopping with shoppers being sensitive to perceived
excessive shipping costs. As a result, more retailers are offering free standard shipping and low-cost, express
shipping.
Speed of shipping is becoming more important with over a third of shoppers having already used fast delivery
options and half of all shoppers expecting to use it if it were on offer. A next day delivery service under $10 would
be most attractive to shoppers, with a premium on top of this price for same day afternoon deliveries.
Deadlines and time sensitive needs such as birthdays or replacement purchases are playing a key role in
determining what shoppers are willing to pay for delivery. Whilst a sub-$10 next day delivery may be challenging
for many retailers to fulfil Australia wide, it presents a real opportunity for local retailers who can meet consumers
expectations around next day or same day delivery.
Mobile commerce has taken hold and with it, local commerce. Being able to buy online and pick up in-store
appeals to shoppers, with over one third using or likely to use in-store pick up. The ability to confirm that an item
is in stock and purchase it before journeying to the store is an attractive proposition.
Mobile phones are merging online and offline commerce and the line between these two channels is blurring.
Location-based inventory information is now essential in order to minimise cost and the time between the
purchase and receipt of goods, and to ensure a seamless experience for buyers wherever they may be.
Hamish Moline B2C Marketplaces Senior Director

23

5.0 BUSINESS IMPLICATIONS

5.1 Omnichannel changes everything


Twenty years ago, there was really
only one way to shop and that was by
visiting a physical retail outlet. With
the emergence of online and more
recently, Omnichannel it is possible
for consumers to shop anywhere,
anytime. This gives shoppers infinitely
more choice. If they cant visit the
store for any reason, they have a
multitude of stores in their pocket.
And if their retailer of choice cant
supply the product, price, information
or service that they want, they have a
multitude of alternatives accessible
on their connected device. Supply
chain design has not caught up with
the Omnichannel shopper.
In the business to business sphere,
retail supply chain design has been very
responsive to the needs of particular
retailers. Inditex, the parent company of
Zara, for example, are famous for their
agile supply chain design, which enables
them to take a new design from concept
to store in as few as five days. It creates
value by getting fresh fashion in to stores
and minimising Inditexs issues with
markdowns. WalMart, on the other hand,
is famous for its cost-driven supply chain
design, which has contributed to very
their low expense base and, in turn, their
ability to offer very low prices to their
customers. It creates value by helping
to give WalMart prices that most of its
competitors have been unable to match
and has helped them grow into the
biggest retailer the world has ever seen.
In contrast, consumer-facing retail
supply chains appear to have
been designed in one dimension.
Overwhelmingly, the focus has been on
cost and the result is a narrow service
offering that doesnt suit the needs of
the new anywhere, anytime Omnichannel
shopper. Consumers dont want a one
dimensional supply chain and they are
prepared to pay more, or to collaborate
and co-create value with retail supply
chains that offer them choice.

5.2 Tools for consumer collaboration


in the Personal Supply Chain
Just as the tools and impetus for
businesses to collaborate in the retail
supply chain came from technology,
so the key drivers and enablers of
collaboration with consumers in the
personal supply chain are driven by
technologies including mobility, stock
management systems and social media.
5.2.1 Mobility
At the centre of the personal
supply chain is the connected
device. Smartphones and tablets
allow consumers to be connected
to the Internet anytime. This
puts them on par with retailers,
manufacturers, wholesalers and
transport companies that have
been connected so they can
collaborate for the last 25 years.
Mobile connectivity is important
to consumers because in the past
their fixed Internet connection
could only keep them in touch with
a supply chain when they were
at home, logged on and at their
computer. This is quite a small
proportion of the day for most
working Australians. Now that most
Australians are always connected
via their mobile device, a broadbased business opportunity exists
for consumers to collaborate in the
supply chain. Research by Sensis(3)
estimates that penetration of
smartphones will reach 84
percent and tablets 54 per cent
of population by the end of 2014.
This is up from 44 per cent and 12
per cent of population respectively
in 2011.
So how does the supply chain move
from connection to collaboration?
The first step is to make sure
you are communicating on a
platform that is accessible to
your customers. When supply
chain businesses first started

3 Source: Sensis e-Business Report Sweeney Research 2013

24

to collaborate with each other


online this was not the case.
Communication was often through
proprietary platforms that retailers
required their suppliers to acquire
as a condition of doing business.
Some long-standing business
relationships were broken during
this period. Today, if supply chain
businesses develop their app for
only one of iOS, Android or Windows,
they are effectively doing the same
thing with their customers. If the
customer doesnt have the platform
for which your app has been
developed, then they are effectively
excluded from doing business with
you. This should be anathema to
retailers who need every customer
they can get.
In the world of the Personal Supply
Chain, apps must be accessible on
any platform and on any hardware
version. A few years ago this was
not feasible but, fortunately, the
issue of app distribution across
platforms is not as difficult as it
once was. Telstra partner, Kony is
one of the industrys leading mobile
and Omnichannel application
platform providers. Kony develops
a suite of customisable pre-built
apps, the Kony Platform, and a
comprehensive mobile application
management solution that gives
companies the confidence and
control to quickly build apps once
and deploy everywhere across
all mobile devices and operating
systems. (For a closer look at Kony
Mobile Retail in action, visit
www.kony.com/retail.)
Another option is the instant app.
Platform issues aside, consumers
may have resisted downloading
your app because it required
personal information that they are
not prepared to distribute widely.
Or maybe they simply do not like
the added time involved in having

an app load, signing in, etc. For


these consumers, the instant app,
developed by Telstras partner,
Mandoe Media, could be more
effective. The instant app is an app
or suite of apps that appear on the
phone in a browser the moment
the customer opts in to a Wi-Fi
network at a participating venue.
The venue could be a retail store, a
distribution or pick-up point or even
a manufacturers pop up. Instant
apps are quick and frictionless for
the customer to use. An additional
benefit for customers is that the
instant app is anonymous they
dont need to submit personal
information to use it. Instant apps
disappear when a customer leaves
the Wi-Fi zone but hopefully,
during the time the supply chain
has connected with the customer,
theyve given an indication of any
future communication preference.
Apps arent for everyone. Research
from Nielsen(4) shows that over
the last three years, while time
interacting with apps has gone
up, the number of apps regularly
accessed by consumers has
remained constant at around
a couple of dozen. As a retailer,
manufacturer or transport company,
you will be highly fortunate if your
app makes the top two dozen on
a customers list. It may be more
appropriate to connect with your
customer using methods like
SMS, email or even voice. Using
technology from Telstra partner,
Whispir, its possible to send
messages to selected groups of
customers directly when you have
their permission to do so. Whispirs
tailored message templates and
pre-defined distribution lists
allow retailers, manufacturers
and transport companies to send
targeted messages simultaneously
via SMS, email and voice.

The key to effective digital


consumer communication
is content. Top of consumers
requirements for content are
location relevance, message
relevance and tangible benefit.
The Mobile Path to Purchase 2014
report(5) shows that consumers are
becoming increasingly comfortable
about receiving commercial
messages on their smart devices
as long as these messages meet
this criteria.
The research earlier in this
paper gives a clue to the type
of content consumers might
find useful. Some of the supply
chain services most desired by
consumers are being informed
of stock levels (83%), being
able to modify a design online
(76%) and being able to vary
a delivery time and location
(68%). If this content involves
video, another distribution
challenge exists. Video has been
traditionally developed for single
channel (broadcast, Internet,
etc.) distribution. More recently,
technology has emerged that
allows content distribution across
multiple platforms. Ooyala,
recently acquired by Telstra,
allows businesses to deliver
digital TV and video content,
across any device to mass
audiences, and includes analytics
to provide recommendations,
personalised content and
advertising to the end user.
The overwhelming benefit of mobile
devices for the supply chain is that
they are location aware. Transport
businesses have invested heavily in
freight and transport management
systems. Real-time information
on freight status and vehicle
location builds the operation
control and efficiency. Now add
the customer into the delivery

and pick-up design process and


the mobile device can be used to
broker the agreed delivery location
and time window. The customer
acknowledges and accepts and
can continuously monitor progress
and where necessary alert the
delivery process to any changes
of the location and time. This is
particularly useful in improving
delivery effectiveness, which
our research shows to be one of
the biggest sources of customer
dissatisfaction. For a customer,
its also useful to be able to track
a delivery on a map. This type
of application has been very
successful in the pizza delivery
market. More successful deliveries
mean more happy customers, more
profit and less brand damage from
deliveries gone wrong (see also
section 4.2).
There is one platform decision
that will continue to affect the way
supply chains communicate with
customers and that is the type of
device the customer has in their
hand at the time. The smartphone
is completely portable and is always
with the consumer. However, the
screen is small and the keyboard,
whether virtual or actual, is even
smaller. Smartphones are good
for sending customers messages
and great for use as an instore,
shopping assistant. They can be
used to scan products to get more
information, to get directions to
stock or services, as well as to pay
for goods if that service is available.
They are potentially invaluable as
a digital delivery assistant.
The tablet is better for situations
where the customer is sitting down
and has more time to consider
information. According to the latest
Telstra Smartphone Index(6), tablet
usage peaks in the evening when
consumers are likely to be doing

4 Nielsen:So many apps. So little time. July 2014 http://www.nielsen.com/us/en/insights/news/2014 smartphones-so-manyapps--so-much-time.html


5 Nielsen, xAd, Telemetrics, Mobile Path to Purchase 2014 http://www.mobilepathtopurchase.com/
6 Telstra Smartphone Index 2013

25

5.0 BUSINESS IMPLICATIONS (CONT.)

other things like watching TV. For


the supply chain, this means the
assets optimised for tablets should
contain more detailed information
like maps, tracking and video. They
should take advantage of the bigger
screen size and the opportunity to
interact with the customer more
deeply. There would seem to be a
great opportunity to cross promote
between tablet-based assets and
relevant TV shows.
By connecting with customers
on mobile devices through an
accessible platform that offers
content thats relevant the
supply chain will be ready to start
collaborating with the consumer
to co-create value.
5.2.2 Stock Management Systems
In the Omnichannel world,
customers have raised their
expectations of stock availability.
According to our research, 87 per
cent of Australians have bought
something online this year up
from 66 per cent in 2012. The
overwhelming majority would have
had a shopping experience where
available stock levels are revealed
as a matter of course. This has not
been the case in most traditional
retail transactions. Various studies
have found that Retail Inventory
Record Accuracy (RIR) is below
70 per cent(7). (RIR is defined as
the difference between physical
inventory and the information
available on the system.) This level
of accuracy makes it impossible
to promise customers that
inventory is where you say it is. To
the Omnichannel customer who
expects an anytime, anywhere
shopping experience, this is not
acceptable. Our research reveals
that 83 per cent of customers would

find the provision of accurate stock


information either useful or very
useful in their shopping mission.
Radio-frequency identification
(RFID) technology has been around
for more than a decade, but is just
starting to find its place in the
retail supply chain. RFID helps
track assets and inventory in the
supply chain by the use of passive
or active chips attached to goods.
One of the main uses for RFID in
retail is to make RIR more accurate.
When a retailer uses RFID to control
its inventory, stock counts are
faster and more accurate. In turn,
studies show, this can both reduce
inventory and increase sales(8).
More importantly, the use of RFID
allows retailers to provide accurate
information about the location
of stock to their Omnichannel
customers. At this years National
Retail Federation (NRF ) Big show (9),
Dr Bill Hardgrave, Dean of the
Harbert College of Business at
Auburn University and the founder
of the RFID Research Centre,
claimed that twenty of the top thirty
retailers in America currently have
RFID projects installed or underway.
WalMart, Macys and American
Apparel are high-profile early
adopters of the technology.
RFID can also be used in the supply
chain to track the progress of
valuable assets. This can be useful
not only for monitoring delivery, but
also for gaining vital information
about the condition of sensitive
goods in transit. As an example,
Telstras Sendum Asset Tracker
Solution is a near real-time multisensor asset tracking solution that
enables you to monitor the intransit conditions of your packages
or assets. It provides information on

the location and condition of your


items (e.g. temperature, vibration,
humidity and light) to an online
portal where you can view this data.
Customisable triggers and alarms
can be preset or changed while
your packages or assets are intransit so that action may be
taken before they are damaged
or permanently lost.
For businesses that are just
beginning their stock management
journey, new cloud-based retail
systems give the small to medium
end of the market access to stock
control capabilities theyve never
had before. Systems like Vend have
sophisticated stock management
capabilities built in and already
tightly integrated with POS.
5.2.3 Social Media
In Section 3 of this paper, Martin
Christopher emphasises the
importance of trust between
partners in building productive
collaborative relationships in the
B2B supply chain: Relationship
management has to be at the
core of any programme to build
competitive advantage through
supply chain excellence.
In the business world, trust can
be built via face to face meetings,
but this is not always feasible
when a retailer may have tens
of thousands or even millions
of individual customers. Social
media becomes an essential tool
for building trusting relationships
with consumers. Firstly, it allows
retailers to be where their customers
are. According to Sensis (10), 65 per
cent of Australians used social
media in 2013, with 45 per cent
of Australians saying that they
accessed social media every day.

7  Raman, Ananth; DeHoratius, Nicole; Ton, Zeynep. 2001 The Achilles Heel of Supply Chain Management, Harvard Business Review.
Vol. 79 Issue 5, p25-28.
8  Hardgrave et al 2011 An Empirical Study of Potential Uses of RFID in the Apparel Retail Supply Chain, University of Arkansas
http://itri.uark.edu/104.asp?code=rfid
9  http://rbis.averydennison.com/content/dam/averydennison/rbis/global/en/documents/Newsroom/Press-Releases/NRF-2014RFID-Big-Idea-Release.pdf
10 Sensis, Yellow Social Media Report 2013

26

More importantly, it allows retailers,


manufacturers and transport
companies to be transparent and
be seen to responding instantly to
the concerns of their customers.
Social media is also a great place
to share a conversation about
how a product, service or delivery
experience could be improved.
5.2.4 Delivery options: where
physical meets digital
As our research shows, consumers
are demanding both a choice of
service offerings and also a choice
of price. The market is maturing in
offering free delivery, next day and
same day deliveries. Day-definite
and time-definite services can
demand a premium in the case of
time-definite and a reduced cost in
the case of day-definite.
The fundamental challenge for
last mile delivery organisations
is that their relationship with the
customer is weak. Traditionally,
the relationship has been driven
by the sender (or consignor). Take
the example of a pure play online
retailer in this case, theyve
selected a number of transport
providers that they have negotiated
service and costs. The customer
buys but the financial transaction
is with the online retailer. The online
retailer pays the transportation
provider directly. When the
customer decides to change
the delivery service to change
the day or time of delivery the
transport company has no financial
arrangement with the customer/
designated receiver of goods.
Their customer is the retailer so
the challenge for the transport
business is to recover any extra
costs. This problem is exacerbated
when the retailer is overseas.

What transport companies like


about B2B transactions is that
typically and we generalise
the businesses are in commercial
areas that have higher delivery
and pick-up density and therefore
are cheaper to serve. Businesses
are also usually manned during
working hours so the likelihood of
a futile delivery is greatly reduced.
How businesses are turning B2C
transactions into B2B transactions
Many businesses and consumers
are trying different innovations to

make B2C (Business to Customer)


deliveries more like B2B deliveries.
Shared parcel lockers, intelligent
home lockers and parcel drop-off
points are all examples of these
innovations.
The table below compares the
attributes of a business delivery
to a home delivery note that
these are deliberate generalisations
as there are many exceptions (e.g.
businesses in residential areas and
private residences in industrial/
business zones).

Delivery to
business

Attribute

Delivery to
a home

Open and accessible during working hours


Open and accessible out of hours and weekends
Located in commercial areas
Good pick up and delivery density
Fewer futile deliveries (or repeated delivery attempts)

TABLE 1: BUSINESS TO HOME DELIVERY

27

5.0 BUSINESS IMPLICATIONS (CONT.)

Innovators in last mile delivery


have created solutions that address
some of challenges the transport
companies face and that encourage
collaboration between the core
elements of the supply network,
including the person taking receipt
of the parcel. These include:
Parcel lockers
One such innovation is the parcel
locker. Hundreds of thousands of
Australians love the convenience of
online shopping, but find it frustrating
to come home and discover that
their package couldnt be delivered
because they werent there to sign

28

for it. Organisations such as Australia


Post and TZ (www.adam.tz.net) are
in the process of rolling out parcel
lockers that are conveniently located,
and offer 24/7 secure access,
wherever possible.
Amongst the 140 Australia Post
lockers installed thus far, are a
number in major office blocks. These
allow office staff to receive parcels
during working hours, whilst also
relieving the company mailroom
from having to cope with private
deliveries. (Many businesses strongly
discourage or ban personal deliveries
to corporate locations).

Shared drop locations


Like the parcel lockers offered by
Australia Post, other businesses are
establishing secure, shared drop-off
locations (such as service stations,
pharmacies and newsagents)
that can be easily accessed by the
consumer. Players today include
Toll, ParcelPoint, ParcelConnect
and nParcel. In turn, the host site
benefits from increased foot traffic
and a great opportunity to upsell
other products and services.

Home lockers
The traditional home letterbox
is being taken to the next level
by businesses such as Pakman
(www.pakmanparcelbox.com.au)
in Australia and Pelipod
(www.pelipod.com) in Europe.
These intelligent, secure and
connected home lockers allow
secure 24/7 access for deliveries
typical features include secure pin
opening for the delivery company,
and SMS proof of delivery
notifications. (Lockers with cool
storage capability are needed for
home grocery deliveries.) A central
application allows for communication
between the retailer, the courier and
the consumer to control all data
transfers and access codes
Click and collect
Another choice for consumers is click
and collect a queue busting solution
for pick-up of preselected goods at
a physical store or a 24/7 click and
collect locker.
We note that consumers have clearly
stated their willingness to become
involved in the delivery process;
however, our survey results provide
a caution for business who may
feel they can charge extra for these
services. In fact, consumers expect
a discount as they know their
participation in the process reduces
the number of futile deliveries (and
therefore costs to the business).
As shown in the table on the right,
by providing new services such
as parcel lockers, businesses are
transforming B2C deliveries so
they offer the same sort of delivery
attributes as a B2B delivery.
As shown in Table 2, by providing
new services such as parcel lockers,
businesses are transforming B2C
deliveries so they offer the same sort
of delivery attributes as a B2B delivery.

Attribute

24 hour
access
locker

Home
lockers

Drop off location


(Service station/
newsagent)

Click
and
collect

Open and accessible during working hours


Open and accessible out of hours and weekends
Located in commercial areas
Like to increase pick up and delivery density
Like to reduce futile delivery (or repeated
delivery attempt)

TABLE 2: ATTRIBUTES OF THE NEW B2C DELIVERY SERVICES

29

6.0 EMERGING TRENDS

Where possible, the trends below


are assessed in terms of the Gartner
Hype Cycle. Gartner Hype Cycles
provide a graphic representation of the
maturity and adoption of technologies
and applications, and how they are
potentially relevant to solving real
business problems and exploiting
new opportunities(11).

Governments are in the process of


granting licenses to test drone delivery
and there are clear use cases where
this technology does make sense.
Drone deliveries will take the freight
load typically small parcels weighing
less than five kilograms from the
drone centre (or nest) to the location
required by the consumer.

6.1 Drones not just toys


Gartner Hype Cycle score for
autonomous vehicles Peak of
Inflated Expectations: 5-10 years
from reaching plateau.

Drone delivery offers very clear


advantages not the least of which is
the way it allows delivery companies
to avoid bad traffic or road conditions.
The US Federal Aviation Administration
(FAA) has approved the use of drones
for police and government agencies,
issuing about 1,400 permits over the
past several years. Its expected that
civilian air space will be opened up to
other kinds of drones in the US by 2015
and in Europe by 2016(14).

No piece on last mile delivery


can ignore the hype surrounding
unmanned aircraft for delivery in
other word, the use of drones. There
has been talk (and video) from
the worlds largest online retailer,
Amazon(12), about their proposed
Prime Air service and the potential
to deliver items within half an hour
of an order being placed. But the
e-commerce giant isnt the only
company researching how to harness
the potential of small, unmanned
aircraft: there have also been public
statements from DHL and UPS about
their own experiments with flying
parcel carriers.
In September 2014, Google announced
that it has been secretly developing
a drone delivery system, tested in the
Australian outback, codenamed Project
Wing. In a video released on YouTube,
the company said it had successfully
delivered a first-aid kit, candy bars, dog
treats and water to some lucky farmers
(and their dogs). They admit that the
technology to make a safe delivery
system possible is still new, but believe
that drones offer tremendous potential
to transport goods more quickly, safely
and efficiently(13).

Australia became the first country


to introduce legislation covering
unmanned aerial vehicles, including
rules governing civilian use of the
technology(15). Drones can be operated
commercially in Australia with
certification from the Civil Aviation
and Safety Authority (CASA).
Australian startup players such as
Flirtey(16) are working on ways to exploit
the opportunity their plan is for
university students to be able to order
books from Zookal via an Android
smartphone app and have one of six
Flirtey drones deliver them to the
customer. The service aims to reduce
postal costs and avoid the problem
of missed deliveries by tracking the
location of the recipients mobile
phone. As the drone sets off, students
will be able to track it in real-time on
a Google map. The company is in the
process of applying for regulatory
approval now to begin operations.

Flirtey hopes to then expand the


service to other products and locations,
including food and drinks to people and
blood to and from blood banks
and hospitals.
6.2 Augmented reality
Gartner Hype Cycle score for
Augmented Reality Trough of
Disillusionment: 5-10 years from
reaching plateau.

Augmented reality (AR) is essentially


an enhanced version of reality, created
by the use of technology to overlay
digital information (such as sound,
video, graphics or GPS data) on a live
camera view of the world. Perhaps
the best-known AR initiative is Google
Glass(17) where the user wears a
peripheral very similar to eyeglasses,
which communicates with their
connected device. The peripheral
includes a camera and a display that
can, for example, be used to display
information relevant to what the user
is currently viewing.
In recent times, businesses such DHL
and mobility solutions specialist,
Blackbay, have been reviewing
opportunities for AR in the supply
chain to enhance the picking process
in the warehouse, provide guidance to
driver en route and improve the actual
delivery process.
Blackbay is working with New
Zealand researchers at the University
of Canterburys Human Interface
Technology Laboratory (HIT Lab) to
develop AR technology to enhance first
time delivery rates for couriers. Just a
small increase in the percentage of first
time delivery success across a courier
business can offer major cost savings.
The technology was initially developed
to help rescue teams in earthquakes,

11 http://www.gartner.com/technology/research/methodologies/hype-cycle.jsp
12 http://www.bbc.com/news/technology-25180906#story_continues_2
13 http://mashable.com/2014/08/28/google-project-wing-drone-delivery-australia/
14 ibid
15 http://www.casa.gov.au
16 http://www.smh.com.au/technology/sci-tech/push-for-liftoff-on-drone-deliveries-in-australia-20131014-2vixx.html
17 See http://www.google.com/glass/start/

30

as a way of seeing what damaged or


destroyed buildings looked like before
the disaster struck. Now it is being
integrated into Blackbays systems to
help couriers quickly find exactly where
to leave a package. The proliferation of
smartphones with cameras, GPS and
compass sensors has meant that mobile
devices can deliver several layers of
information at the same time.
AR is also highlighted in DHLs Logistics
Trend Radar(18):By adding virtual layers
of contextual information at the right
time and in the right place, augmented
reality will provide new perspectives in
logistics planning, process execution,
and visual analytics.
Examples highlighted in the report
include the integration of AR to provide
contextual and predictive navigation and
courier support by mapping shipment
data to real-time scans of physical
entities (buildings, streets, etc.) AR could
also be used for facial recognition to
support proof of identity deliveries.
DHL also note the potential of AR
to enhance logistics operations,
manufacturing, and production,
covering the execution of warehouse
operations such as picking and assembly
(pick-by-vision), facilities service and
maintenance, staff training, and risk,
quality, and incident management.
6.3 Dynamic delivery addressing
Geepers
Having one address for delivery is a
start, but consumers increasingly hope
that theyll be able to receive parcels
wherever is most convenient for them
the office, the home, a friends house.
To meet this untapped need, an
Australian startup called Geepers (www.
geepers.com) is looking at revolutionising
the way addresses work. Delivery

addresses traditionally associated one


fixed physical location (street name
and number, suburb, city, etc.) with the
customer. But the challenge we face
now is that customers want the delivery
address to be dynamic to change
according to their needs.
According to the companys website(19),
using the Geepers system, a receiver
can create a single logical location,
but have multiple physical locations
associated with their !Geepers address,
allowing flexible location addressing.
Problem addresses are no longer a
problem as Geepers ignores traditional
address systems and instead relies on
an exact geo-physical location created
by the customer or location owner. Each
location is then given a unique alphanumeric name, based on the name of the
company or person.
For example, all Geepers addresses
are prefixed by the ! symbol. A search of
!DavidWhite will show all of David Whites
possible addresses while !DavidWhite.
home will show Davids home location.
A simple click on the nominated delivery
address will then navigate the courier
to that exact location.
Geepers is hoping to change the way that
the logistics industry manages locations.
The ability to accurately navigate to
correct pick up and or drop points is a
significant cost-down opportunity for
transport and parcel businesses. As
another example, no longer would drivers
need to second guess where to deliver
a package the !Geepers address will
navigate them directly to the correct
pick up point. !Geepers.warehouse will
navigate them to the precise location
of the warehouse door while !Geepers.
reception will direct them to the
receptionist using a geophysical location
that is accurate with three to five metres.

6.4 Address beacons to light up


delivery locations
Another approach to determining
vicinity is the use of beacons. Beacons
are small, powered, stand-alone
devices that advertise their own
presence. When within range of a
beacon, applications on a compatible
connected device detect this presence
and refer to a back-end platform to
determine what action to take when
that particular beacon is near (e.g.
pushing relevant content or launching
an application).
The most advanced implementations
use Bluetooth beacons (such as
Apples iBeacon platform and
Qualcomms Gimbal platform). These
use a wireless communication protocol
called Bluetooth Low Energy (or
Bluetooth LE)(20) and are supported by
manycommon mobile devices. There
are less mature alternative vicinity
technologies, for example that use
ultrasonic beacons detected by the
smartphones microphone or invisible
signals embedded in store lighting that
are detected by the devices camera.
In an article by Richard Wishart in
the September 2014 issue of Postal
Technology International(21), he asks
whether address Bluetooth-enabled
beacons could revolutionise the last
mile delivery process.
In the scenario he envisages, an
address beacon would be fitted to
the delivery point say, a parcel locker
on a customers side verandah. Google
Street View could be used to guide the
delivery driver to the home address
and more accurate instructions could
be provided as the courier nears the
exact delivery point. As the courier
approaches the house, his smartphone
or tablet device would pick up the

18 http://www.dhl.com/content/dam/downloads/g0/about_us/logistics_insights/DHL_Logistics-TrendRadar_2014.pdf
19 www.geepers.com
20 Bluetooth LE used by Bluetooth beacons is available on Apple devices including the iPhone 4S onwards, 3rd generation or later
iPads and all iPad Minis. Most recent Android devices include Bluetooth LE (including, for example, Samsung Galaxy S3 onwards
and Galaxy Note 2 onwards, HTC One, Google/LG Nexus 5 onwards and post 2013 Nexus 7). Appless iBeacon platform requires iOS
7.0 or later or Android 4.2 or later. Qualcomms Gimbal platform requires iOS 7 .o or later or Android 2.2 or later
21 http://viewer.zmags.com/publication/a080f76e#/a080f76e/18

31

6.0 EMERGING TRENDS (CONT.)

signal being transmitted from the


address beacon and receive contextual
information from the Cloud about
exactly how and where to make the
delivery e.g. follow the path to the left
of the front door to the side verandah.
Wishart also posits that at the point of
delivery, a digital delivery token could
be automatically passed from the
recipient to the courier, to acknowledge
receipt. This could include date, time
and any manner of other contextual
information. This would negate the
need for the customer to actually be
present and sign for delivery.
6.5 Car boot drop-offs
Volvo and a Brussels-based business,
Cardrops(22), are developing a solution
that allows a parcel to be delivered to
the boot of a customers car whether
the customer is there or not. Given that
the enormous cost (and inconvenience)
associated with missed deliveries, and
the fact that most people already have
a large, secure four wheeled locker
(otherwise known as a car),
this innovation is highly promising.
The system was demonstrated at the
Mobile World Congress in Barcelona
in early 2014. In essence, the Roam
Delivery service will use new Volvo
digital keys that allow the owner to
select their car as a delivery location
when ordering items online. The
delivery company locates the car via
GPS and opens the trunk to deliver
a parcel via a temporary digital key
from their own tablet. Once a parcel
is delivered, the temporary digital key
is erased.
The customer can also track on their
own device when the car is opened and
when it is locked again, and are notified
via SMS of a successful delivery.
The idea is that the driver wont need

to be there to accept the delivery at


their car. The system is based on the
functionality offered in the Volvo On
Call telematics app. Other modern cars
can also use the Cardrops system with
the installation of a small unit near the
driver seat that allows the cardrops
beacon to link with the car in order to
lock/unlock the trunk or doors.
As well as reducing the number of
failed deliveries and the potential
for theft should goods be left in
an insecure location, the system
promises to be a boon for busy
customers. In a trial of 100 people,
86 per cent agreed that the car boot
delivery option saved them time.
6.6 Two-sided marketplaces
Uber and beyond
There are now a number of emerging
solutions based on collaborative
consumption models and two-sided
marketplaces. For the latter, the
principle is simple: where there is
both demand and latent capacity, a
two-sided marketplace connects the
demand to the supply, and visa versa.
Possibly the best known examples
are Airbnb, which connects hosts and
visitors, and Uber, which connects
people wanting a lift and drivers
through a simple app. From their
founding in 2009, Uber now operate in
over 70 cities today.
To operate, two-sided marketplaces
depend on both the Internet and even
more importantly mobile devices and
smart apps.

growth in online shopping and the


fact that more than one out of two
online transactions are consumerto-consumer.
So while there is still a need for the
big players such as DHL and TNT,
increasingly there is a need for
smaller, more local and specialised
courier services.
Today, this gap is increasingly being
filled by ICT-based companies like
UberRush(23), powered by Googles
Uber taxi-app, and Shutl, which was
acquired by eBay. They orchestrate the
delivery of a package with the ease of
booking a taxi, allowing the sender to
track delivery progress in the app,
and easily share the items location
with the recipient. These taxis, or cargo
bikes, can come right away, and deliver
directly, or pick up a parcel and deliver
at a designated time. According to
the companies, local, experienced
couriers do the job, and the rates
are very competitive.
And delivery could become even more
collaborative. DHLs Logistics Trend
Radar 2014(24)notes that: Currently,
almost 60% of the available transport
capacity (rail, road, private cars) is not
being used. By involving customers
in the pickup and delivery process,
not just transportation costs can be
significantly reduced. Consolidation
of transport volumes per route also
makes a significant contribution to
CO2 reduction.

A two-sided markeplace also has the


potential to transform parcel delivery
services connecting customers
requiring a delivery with an available
courier, be they in a van, a bike or
even on foot. This is of particular
interest, given that the ongoing

21 http://viewer.zmags.com/publication/a080f76e#/a080f76e/18
22 http://www.cardrops.com
23 http://blog.uber.com/RUSH
24 http://www.dhl.com/content/dam/downloads/g0/about_us/logistics_insights/DHL_Logistics-TrendRadar_2014.pdf

32

AUSTRALIAN CASE STUDY

Shoes of Prey co-creates value with the consumer


Shoes of Prey is an innovative Australian shoe retailer whose business model is based on co-creation of value
with the consumer. Shoes of Prey allows its customers to design their own shoes and have them delivered to their
homes in less than four weeks. Jodie Fox, co-founder of Shoes of Prey, explains how the business got started:

I was solving a problem of my own - Id always liked shoes, but I never loved them because I couldnt find exactly
what I was looking for. Either it wasnt quite the right colour, there was an embellishment I didnt like, not quite
the right heel height... anyway, when I was travelling, in the same way that you find someone who will make a
custom suit for you, I found someone with whom I could commission shoe designs. My shoe collection became
really exciting, and my girlfriends asked me where I was getting my footwear. When I explained, they asked me
to create shoes for them too. Concurrently, my two business partners Mike (Fox) and Michael (Knapp) were at
Google and becoming really excited about the opportunities in online retail. They just needed an idea. We all
came together and Shoes of Prey was born.
At the heart of Shoes of Prey is a shoe design tool that allows customers to design a shoe online from a series
of base styles, but with the ability to change toe, heel, material, fabric or decoration to suit and then look at the
results in a 3D visualisation. Customers can either store their designs or move straight to a purchase. Jodie says
what customers like most about the business is the total flexibility it offers: ..they can have both comfort and style.
Whatever it is that they would like to wear, we are able to make.
Like many retailers, Shoes of Prey have noticed the growth in the mobile-connected shopper. Weve seen tablet and
mobile users soar... Just under half of our visits in the last year were on mobile or tablet.

33

AUSTRALIAN CASE STUDY (CONT.)

Word of mouth has always been the best form of retail advertising. Today, social media is the new word of mouth
and Shoes of Prey has led the way in harnessing its power. Facebook and Instagram are the main platforms used by
Shoes of Prey, but they also produce blogs and align with international video bloggers like juicystar07. Jodie says of
social media:
Its critical. I really believe that retailers need to be wherever their customers are. Social media is one of those
places, and it allows the customers to engage in asking questions and giving suggestions that may otherwise be
barriers to purchase. We use social media to share news, answer questions, field opinions, chat about shoes with
shoe lovers and ultimately create a community where all shoe lovers are welcome. Its never a particularly hard sell
in these environment;, however, we know anecdotally that these touch points are critical in the lead up to deciding
to design shoes with us.
Customers also like to visit physical retail stores so its no surprise that Shoes of Prey decided to open a physical
store within David Jones in Sydney to complement its online presence. For Jodie, its all about serving the customer
in the way they wish to be served:
Its been fantastic. We havent seen cannibalisation of our online figures, but an entirely new audience who were
either a) not comfortable buying without seeing the product first, or b) didnt know about us and come across us
in the David Jones womens shoe department. It has also helped us to discover new ways of doing things on our
website, as we observe the natural way that the sales process takes place in a store.
Shoes of Prey customers in Sydney can now enjoy a true Omnichannel shopping experience.
Business has been good, with growth last year exceeding 200 per cent. Shoes of Prey has also garnered a string
of awards, including Online Retailer of the Year, Store Design of the Year at the World Retail Awards and a Telstra
Business Woman of the Year award for Jodie. So whats next for Shoes of Prey? Could the idea of co-creation be
extended further into the value proposition? Jodie says: Anything is possible. In fact, with 3D printing many other
parts of the value chain become accessible for co-creation. Ultimately, we should always be seeking to solve a
problem for the consumer, so if that means opening up other parts of the value chain, it is worth considering.

34

7.0 CONCLUSION

The idea of the Omnichannel


shopper is now well established in
Australia. Omnichannel shopping
offers consumers choice and flexibility
and those same attributes are now
being demanded of the supply chain.
More importantly, the connected
consumer cannot only collaborate in
the supply chain, but also be an active
co-creator of value in it. This represents
an evolution from traditional supply
chain management to the Personal
Supply Chain.
Consumers are prepared to collaborate
in all aspects of the supply chain,
including financing (by paying in
advance), helping with manufacturing
(by supplying designs), and picking up
goods at convenient locations or by
sharing location information to help
a delivery to be made.
Our research shows that consumers
will reward companies who provide
them the supply chain services they
want with higher prices or by doing
some of the work of the supply chain
for them, if offered an incentive. Most
businesses in Australia do not offer
such choices today, but the technology
is already there to support those who
choose to do so.
Retailers who chose not to take this
opportunity should recognise that
there is a consequence. Just as
Omnichannel reflects the fact that
consumers see brands and retailers
not channels, the Personal Supply
Chain reflects the fact that consumers
also associate the retailer with their
supply chain. This means that if
something goes wrong in the supply
chain resulting in, for example,
a failed delivery it is the retailer
that will be blamed not the delivery
company or any other supply chain
partner that may have been the
cause of the problem.

35

8.0 ABOUT THE AUTHORS

Gareth Jude
Gareth was born in the UK then educated in UK, USA and Australia. He got his
first job in a retail store (while still at school) in the same year that Ziggy Stardust
topped the charts. He has spent the last 20 years in a variety of senior sales,
marketing and general management roles including 2 years as CEO of a an
Australian sporting goods retailer and 7 years in the DSE division of Woolworths
responsible for group wide merchandise management, marketing and store
planning. Gareth has also spent a number of years consulting to retailers and
teaching retail at Sydney, Macquarie and Shanghai Jiao Tong Universities. He has
won citations for teaching excellence at Sydney University.
In 2011 Gareth was appointed Retail Industry Executive in Telstras Industry
Development team.
Gareth holds a Masters degree in management from University of Technology, Sydney.

Charlie Macdonald
Charlie Macdonald joined Telstra in January 2012 as the General
Manager for Manufacturing Transport and Logistics with the objective
of providing business solutions to the connected eco systems of
the Supply Chain. Charlie acknowledges a key to improving supply
chain efficiency is the availability of timely, accurate and complete
information from order to fulfilment to payment.
Prior to joining Telstra, Charlie held a number of senior business and IT
roles spanning more than 25 years in the transport sector.
Charlie is the chair of the ICT working group for the Australian Logistics
Council (ALC), the ALC is the premier industry body in Australia
representing Transport, Logistics and Supply Chain businesses.

36

The authors would like to acknowledge and thank


the following contributors who in the spirit of this
collaborative paper have given their insights and
expertise to make this paper come alive!
Christena Singh, Martin Christopher, Emeritus
Professor of Marketing and Logistics, Cranfield
University, UK, Jonny Reay from Brightstar, Elie Suggi
from eBay, Carl Hartmann & Hamish Grant from
Temando and Jodie Fox from Shoes of Prey.

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IMAGE TO COME

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