You are on page 1of 40

A

Innovation Excellence
in Logistics
Value Creation by Innovation
Deutsche Bibliothek has registered this publication in the German National Bibliogra-
phy; detailed bibliographic data can be found on the Internet at http://dnb.ddb.de.

ELA European Logistics Association / Arthur D. Little


Innovation Excellence in Logistics
Value Creation by Innovation
Results of the ELA / Arthur D. Little Study.

ELA European Logistics Association / Arthur D. Little


Brussels 2007

ISBN 978-3-924606-53-4

Copyright © 2007 ELA European Logistics Association / Arthur D. Little


– All rights reserved –
Brussels 2007
2 Innovation Excellence in Logistics – Value Creation by Innovation

Preface

“Innovation distinguishes between a leader and a follower”


Steve Jobs, CEO of Apple Inc.

Innovations have always been judged as the growth engines of society – in the field of
logistics, their importance is still underestimated and they are not exhaustively analyzed.
However, increasing customer needs and new business models in trade and industry offer
various chances to develop new markets by means of innovative logistics services. Tech-
nology improvements also enable logistics processes to be created more efficiently.
Which innovation objectives are pursued in each case, which are the triggers and drivers
for innovations in logistics, how is the innovation management organized within com-
panies, which innovation approach and process is pursued in each case, which innova-
tion fields receive attention and which essential success factors exist for Innovation Excel-
lence in logistics?
You will observe some very interesting findings for those questions in our study cover-
ing more than 100 logistics service providers and shippers in various industries across 15
European countries. The study was conducted by European Logistics Association (ELA)
together with the international management consultancy Arthur D. Little.
The ELA wishes to thank all the individuals from the different ELA member organi-
zations in European countries who supported the study in various ways and opened the
doors to participating companies. We also thank the team of Arthur D. Little consultants
and staff members for their excellent cooperation.

Prof. Dr. Dr. h.c. Hans-Christian Pfohl


Member of the board of European Logistics Association and Head of Research and
Development Committee
Chair of Management and Logistics at Darmstadt University of Technology

A
Innovation Excellence in Logistics – Value Creation by Innovation 3

Table of Contents

1 Abstract 4
2 Management Summary 5
3 Objectives, Definitions and Scope 9
3.1 Study Objectives 9
3.2 Definitions and Innovation Model 9
3.3 Study Scope and Methodology 10
4 Detailed Results of the Study 11
4.1 Identification of Top Innovators 11
4.2 Innovation Objectives and Relevance in Logistics 11
4.3 Organization and Scope of Innovation Activities in Logistics 13
4.4 Triggers and Drivers for Innovations in Logistics 15
4.5 Innovation Strategy and Process in Logistics 18
4.6 Fields of Innovation in Logistics 23
4.7 Key Success Factors for Innovations in Logistics 24
4.8 Innovation Excellence Improvement Potential in Logistics 25
5 Case Studies 27
5.1 Rodenstock 27
5.2 Valeo 28
5.3 Woolworth 29
5.4 APL Logistics 31
5.5 Interporto Rivalta 32
6 About the Contributors 34
7 Acknowledgement 35
8 Contacts 36

A
4 Innovation Excellence in Logistics – Value Creation by Innovation

1
Abstract

In the jointly conducted European study ties either in a separate department or


“Innovation Excellence in Logistics” the concentrated in a customer-oriented
European Logistics Association (ELA) and line function.
Arthur D. Little, methodologically sup-
• The innovation approaches of shippers
ported by Prof. Pfohl (TU Darmstadt),
(internally driven) and logistics service
analyzed more than 100 logistics service
providers (market-driven) are funda-
providers as well as their counterparts –
mentally different but mutually com-
the shippers – in various industries across
plementary.
Europe.
• Top innovators have implemented a
A substantial improvement potential by
structured innovation process in order
the application of Innovation Excellence
to develop their new products / service
in logistics was identified and the follow-
offerings, and measure progress and
ing questions were answered: Which inno-
success on a results-oriented scale.
vation objectives are pursued in each case,
which are the triggers and drivers for inno- • The structured generation of mar-
vations in logistics, how is the innovation ket and technology intelligence is the
management organized within companies, major success factor for an effective
which innovation approach and process innovation management for both ship-
is pursued in each case, which innovation pers and logistics service providers.
fields receive attention and which essen-
tial success factors exist for Innovation • In addition a market implementa-
Excellence in logistics? Based on these tion / rollout concept and ongoing
insights, general and specific recommen- involvement of customers are espe-
dations were established. cially important for logistics service
providers, while stringent project man-
By way of a summary, the following study agement is critical for shippers.
results can be emphasized:
• Companies with a high Innovation
• Price and reliability are no longer the Index, meaning companies with an
only buying criteria. They will develop effective and efficient innovation man-
into prerequisites for contracting logis- agement system (top innovators), gener-
tics services which lack differentiation ally have lower logistics costs or higher
potential. EBIT margins.
• Objectives of innovation activities in • Innovation pays off. An optimized
logistics will become more customer- innovation management can boost
oriented and less cost-oriented in the company success – as measured by
future. In this context the importance EBIT margin – by an average of 3 to
of innovation ability as a deal-clincher 8%-points.
will increase significantly.
This document summarizes the study
• Organizationally the shift from cost- results.
oriented towards customer-oriented
innovation activities has to manifest
itself in a bundling of these activi-

A
Innovation Excellence in Logistics – Value Creation by Innovation 5

2
Management Summary

Innovation Excellence mance-related indicators such as turnover,


Pays Off delivery reliability and delivery time, all
participants expect a significant improve-
An optimized innovation management ment potential.
system can boost company success. Com-
panies with a high Innovation Index (top
innovators), meaning companies with an From Cost-oriented to
effective and efficient innovation manage- Customer-oriented Innovation
ment system, generally have lower logis- Today the most important objectives for
tics costs or higher EBIT margins. innovation are the modularization of
Shippers can increase EBIT margins by logistics services plus reduction of logis-
4.4%-points if innovation management tics costs. However, this importance will
is optimized. Top innovators amongst the decline significantly in the future as cost-
logistics service providers can even in- oriented innovations are replaced by cus-
crease their EBIT margins by an aver- tomer-oriented innovations. The gener-
age of 8.5%-points. Average innovators ation of new services to cover existing
amongst logistics service providers con- requirements and to stimulate new ones is
sider the potential to be much lower, likely to become the most important inno-
although still significant, with a 2.7%- vation objective (figure 1).
point increase in EBIT margins. Price and reliability are no longer the only
The potential for reducing logistics costs buying criteria, but will develop into pre-
is between 7% and 14% for all shippers requisites for contracting standard logistics
and logistics service providers. For perfor- services. In this context, the importance of

Extract Trend

Reduce process 4.3


costs -7%
4.0

Modularization/ 4.2
standardization -12%
3.7

New services to 3.9


cover customer +5%
requirements 4.1

3.7
Cover basic market
±0%
requirements 3.7

Importance ranking from 1 (very low) to 5 (very high)

2007 2012

Figure 1: Innovation objectives

A
6 Innovation Excellence in Logistics – Value Creation by Innovation

innovation ability as a deal-clincher will innovators amongst logistics service pro-


increase significantly. As a result the focus viders are more customer-oriented than
will shift from cost-oriented towards cus- average innovators; they are better at pick-
tomer-oriented innovation activities. ing up and implementing ideas at their
shippers.
Personalized and
Institutionalized The Innovation Approaches
Responsibility Counts are Different but
The responsibility for innovation manage-
Complementary
ment is more often allocated within top The innovation approaches of shippers
management to logistics service providers and service providers are fundamentally
than to shippers. Otherwise the responsi- different but mutually complementary.
bility is more institutionalized at shippers The approach of shippers is primarily
compared to service providers. internally driven, based on strategic plan-
ning. Logistics service providers follow an
Top innovators primarily anchor their inno-
approach that is almost exclusively mar-
vation activities in a dedicated line func-
ket-driven, meaning it is triggered by the
tion or concentrate them in a customer-
customers in question (their shippers) and
oriented line function.
a concrete customer requirement or prob-
Insufficient human and capital resources lem.
are the main reason for failure to perform
Top innovators amongst shippers involve
innovation activities.
logistics service providers in their innova-
tion process at an early stage; top innova-
Customers and Companies tors amongst logistics service providers are
Trigger and Drive Innovations involved earlier.
Innovation projects in logistics can be All top innovators are increasingly measur-
characterized by their degree of novelty ing the success of their innovation proj-
and their degree of standardization; only ects, opening up higher transparency and
the smallest proportions are truly new controlling options. They are increasingly
developments. measuring the value added of their logis-
tics, whereas average innovators focus on
Triggers for innovations at logistics ser-
costs.
vice providers are mostly customer-spe-
cific projects, in contrast to mostly cus-
tomer-independent projects with shippers. Adaptable and Flexible
While the majority of shippers sees them- Logistics Systems and
selves as the source of innovation ideas, Networks are in Trend
from the logistics service providers’ point
Adaptable and flexible logistics systems
of view all value chain participants are
and networks have the highest absolute
involved.
potential for innovation within logistics
Top innovators amongst shippers involve from the participants’ point of view. In
their suppliers when looking for innova- particular, cooperation across the value
tion ideas, while average innovators are ori- chain is regarded as crucial for the realiza-
ented towards their end-customers. Top tion of improvement potentials.

A
Innovation Excellence in Logistics – Value Creation by Innovation 7

Virtual reality (such as for digital plant management) and strategic planning
planning) and automated control (e.g. by in order to optimize resource alloca-
agent systems, RFID etc.) are seen as the tion.
most important growth areas for innova-
• Bundle innovation-related activities
tions. The key barriers for virtual real-
in department or line function, with
ity, however, include insufficient degree of
clear responsibilities, align innovation
detail and reusability of models.
projects with strategic objectives and
report to board level.
Market / Technology
• Modularize and standardize service
Intelligence is Key
offerings in order to generate cost effi-
Key success factors for top innovators ciencies.
amongst shippers are a structured genera-
tion of market / technological know-how, • Implement structured and continuous
and stringent project management. market intelligence activities in order
to identify new customer needs and
Key success factors for top innovators technology trends (market / technol-
amongst logistics service providers are ogy intelligence).
again a structured generation of market
/ technological know-how, and the early • Involve external partners as early as
and ongoing involvement of their custom- the concept development phase.
ers. All others first need to focus on a clear • Implement a balanced system of indi-
strategy for their logistics activities and cators consisting of both cost- and cus-
the development of strategy and project tomer-oriented measures.
management competencies.
Shippers can address their specific defi-
With respect to the degree of implemen- cits by:
tation of key success factors, top innova-
tors are far ahead of average innovators. • Implementing a stringent project man-
This means that average innovators face an agement for all innovation activities in
implementation problem. their logistics domain.
• Developing and communicating a
How can Innovation clear strategy for their logistics area
Excellence be Achieved in which is aligned with overall company
objectives.
Logistics?
For innovation management to yield max- • Ensuring early and continuously
imal results for a company’s success, strat- involvement of all affected company
egy, processes, organization and resources departments, customers and qualified
have to be balanced and aligned. Based on service providers.
the results of this study general and spe- Logistics service providers can address
cific recommendations can be derived. their specific deficits by:
General recommendations which hold • Developing and implementing a con-
true for both shippers and logistics service cept for market launch and rollout of
providers are: new products / services.
• Implement a structured selection pro-
cess for innovation initiatives (idea

A
8 Innovation Excellence in Logistics – Value Creation by Innovation

• Developing and institutionalizing a


continuous learning loop and a sup-
porting knowledge management.
• Establishing tools and methods to sup-
port innovation activities within logis-
tics.
Further improvement areas are dependent
on the specific company environment and
the degree of maturity of the innova-
tion management in place. The improve-
ment potential that the study participants
expect, even and especially when they
are already well advanced in this respect,
makes striving for Innovation Excellence
in logistics worthwhile.

A
Innovation Excellence in Logistics – Value Creation by Innovation 9

3
Objectives, Definitions and Scope

3.1 Study Objectives 3.2 Definitions and Innovation


This study aims to identify top innova- Model
tors and the value added they generate by
applying Innovation Excellence in logis- Innovations
tics.
Innovations are defined from the custom-
The study determines the key differentia- er’s point of view. An innovation exists if
tors of top innovators with respect to the customer gains value added from the
“new” product / service, which is the case
• the strategic importance and organiza-
when a new function (or a new combina-
tional foundation of their innovation
tion of existing functions) is provided and
management,
/ or existing functions are provided at sig-
• their innovation approach and process nificantly lower cost. This may involve
models incl. definition of roles, and innovations in products / services, in pro-
cesses or in business models.
• critical factors for successfully realiz-
ing innovations within logistics.
Top Innovators
Finally the additional potential benefits
that top innovators tap into when utilizing Top innovators have been identified by eval-
their innovation management capabilities uating the innovation management of all
are quantified. participating companies using Arthur D.
Little’s Innovation Index, which is based
on a variety of qualitative and quantitative

Customers

Idea/customer management

Customer-specific
Customer-specific
Strategic service
implementation
planning of development
Intelligence service
development Standard
service Service Launch
development

Project management

Partners

Figure 2: Logistics innovation process model

A
10 Innovation Excellence in Logistics – Value Creation by Innovation

criteria. Top innovators are characterized All participants completed a hypothesis-


by an organization that has implemented driven questionnaire with 15 open and
and internalized an effective and efficient multiple-choice batteries of questions.
innovation management system. The current situation (2007) and expected
future developments (2012) were assessed.
In addition, case study examples were
Logistics Innovation Process
identified and researched.
Model
In order to illustrate and differentiate the
variety of innovation processes within
logistics, the Arthur D. Little Logistics
Innovation Process Model was used (fig-
ure 2).

3.3 Study Scope and


Methodology
103 companies from all points of the
logistics value chain participated in this
European study. The participating com-
panies are logistics service providers (ser-
vice providers) and shippers from indus-
trial and trading companies, who cover 15
European countries with a focus on West-
ern Europe (figure 3).

Industry Company Size

Logistics service Industrial > 5,000


providers companies employees
(B2B)

31% 28%
34%

Others 4% 72%
14% 17% Industrial
companies ” 5,000
Trading comp. (B2C) employees

Sample size: 103 companies Sample size: 103 companies

Shipper Logistics Service Provider

Figure 3: Industry and company size of the participating companies

A
Innovation Excellence in Logistics – Value Creation by Innovation 11

4
Detailed Results of the Study

4.1 Identification of 4.2 Innovation Objectives


Top Innovators and Relevance in Logistics
As a starting point, top innovators within Today the most important objectives for
the participating companies at shippers innovation are the modularization of
and logistics service providers were iden- logistics services plus reduction of logis-
tified. For this purpose the evaluation tics costs. However, this importance will
results based on the Arthur D. Little decline significantly in the future. The
Innovation Index were mapped with the generation of new services to cover exist-
logistics cost for shippers and the EBIT ing requirements and to stimulate new
margin for logistics service providers as ones is likely to become the most impor-
the relevant output and success measures tant innovation objective (figure 5).
(figure 4). Price and reliability are no longer the only
Companies with a high Innovation Index, buying criteria, but will develop into pre-
meaning companies with an effective and requisites for contracting standard logistics
efficient innovation management system, services. Shippers are the prime drivers of
generally have lower logistics costs or this trend; they realize the importance of
higher EBIT margins. innovation ability as a deal-clincher that
will increase in significance. As a result
their main focus will shift away from cost-
oriented innovation activities towards a
customer-oriented approach (figure 6).
In contrast to shippers, logistics service
providers believe that price is more impor-

Shippers Logistics Service Providers

Ø Ø
EBIT Margin 2005 in %
in % of Total Costs
Industry-specific Logistics Costs

0%
7.6% –
10%

5.1% –
7.5%
Ø
10%
Ø
2.6% –
5.0%

0.0% –
2.5%
20%
0% 50% 100% 0% 50% 100%

Arthur D. Little Innovation Arthur D. Little Innovation


Index Index

Top innovators Average innovators

Figure 4: Top innovators among shippers and logistics service providers

A
12 Innovation Excellence in Logistics – Value Creation by Innovation

Extract Trend

Reduce process 4.3


costs -7%
4.0

Modularization/ 4.2
standardization -12%
3.7

New services to 3.9


cover customer +5%
requirements 4.1

3.7
Cover basic market
±0%
requirements 3.7

Importance ranking from 1 (very low) to 5 (very high)

2007 2012

Figure 5: Innovation objectives

Extract

Shippers Logistics Service Providers

Trend Trend

32% 39%
-12% Price -17%
28% 33%

Reliability/
30% 22%
-7% delivery -5%
29% reliability 21%

9% +26% Innovative +33%


9%
11% power 12%

Flexibility/
16% +13% +15% 13%
customer
18% orientation 15%

Distribution of 100% Distribution of 100%

2007 2012

Figure 6: Criteria for tendering process (shippers / logistics service providers)

tant. However they realize as well that


innovation ability and customer orienta-
tion will gain importance in the future.
Higher prices can be increasingly justified
by innovative solutions, whereas the dif-
ferentiation potential of price will be only
limited.

A
Innovation Excellence in Logistics – Value Creation by Innovation 13

4.3 Organization and Scope service providers do not provide adequate


and clear guidance for their innovation
of Innovation Activities in management activities (figure 7).
Logistics
Top innovators primarily anchor their inno-
vation activities in a dedicated line func-
Organization of Innovation tion or attach it to a line function close
Activities to the customer. This strong customer
orientation is often ensured by position-
The responsibility for innovation man- ing innovation management in Sales and
agement is more institutionalized at ship- Marketing. Average innovators use “one-
pers, but more often allocated within top man” staff functions, which mostly limit
management to logistics service provid- the impact within the organization (fig-
ers. However, over one-fifth of all logistics ure 8).
Shipper Logistics Service Provider

9%
25% 21%

18% 34%

9%

19%
15%
29%
21%

Comment: Only one answer possible

No clear
Managing director/ Integrated into Dedicated
Staff function personalized
executive board other line function line function responsibilities

Figure 7: Responsibilities for innovation management

Dedicated 31%
line function 11%

Integrated into other 23%


line function 16%

15%
Staff function
28%

Managing director/ 15%


executive board 30%

No clear personalized 15%


responsibilities 15%

Comment: Only one answer possible

Top innovators Average innovators

Figure 8: Responsibilities for innovation management

A
14 Innovation Excellence in Logistics – Value Creation by Innovation

Scope of Innovation Activities ideas and also display more efficient utili-
zation of resources. They deal more con-
Top innovators within shippers concen-
sciously with the topic of innovation and
trate on technological innovation, whereas
also have better access to relevant know-
method and process-related innovation
how and competences.
is left to service providers. Moreover
top innovators increasingly concentrate on
technology development which is often
performed in co-operations and partner-
ships. The resulting applications are often
developed in cooperation with service
providers.
Top innovators within service providers
engage in method and process-related
innovation, in line with internal mod-
ularization and standardization of pro-
ducts / services. Furthermore, they focus
on technological development rather than
on application development. However,
detailed analyses and interviews show that
optimization of processes alone is viewed
as new business models and strategies.
That is why the development of radically
new business models and strategies usually
receives little or no attention (figure 9).
Insufficient human and capital resources
are named as the main reasons for the fail-
ure to perform innovation activities at all
participating companies. Top innovators
apply a more efficient process for selecting

Shipper Logistics Service Provider

38% Method and 100%


process-related
75% innovation 55%

63% Technological 80%


30% innovation 34%

38% Development of 60%


new business
47% models/strategies 52%

38% Application 40%


40% innovation 45%

Comment: Multiple answers possible

Top innovators Average innovators

Figure 9: Innovation management tasks (shippers / logistics service providers)

A
Innovation Excellence in Logistics – Value Creation by Innovation 15

4.4 Triggers and Drivers for dardized logistics services or modules even
without a direct link to customer projects.
Innovations in Logistics
Project types  and  are innovations
Triggers of Innovations characterized by new solutions. These
“greenfield” innovations usually involve
Innovation projects in logistics can be char- more radical / genuine innovations.
acterized by their degree of novelty and
their degree of standardization. By means Finally project type  cannot be regarded
of the degree of standardization it is possi- as an innovation in the defined sense
ble to differentiate between customer spe- because it rather represents continuous
cific and customer independent problems improvements (CIP = continuous improve-
as the trigger of innovation. The degree of ment process).
novelty clarifies the extent of change. Only the smallest proportion consists of
Based on the insights derived from this strategically planned new developments
study, we can usually differentiate bet­ without direct connection to specific cus-
ween 5 kinds of innovation project types tomer projects. Innovation projects at
(figure 10): shippers are usually initiated as customer

high
(customer- 5 26%
independent
project) 10%

43% 5%

13% 4%
4 3
Degree of
Standardization 1 2
16%
10%
51%
22%

low
(customer
project)
low high
Degree of Novelty

Shipper Logistics Service Provider

Figure 10: Innovation project types

Project types  and  are innovations independent projects based on internal


characterized by the advancement of exist- market and technology intelligence. By
ing solutions. These “brownfield” inno- contrast innovation pro­jects at service
vations usually consist of incremental providers are often results or by-products
changes. In case of customer specific proj- of customer-specific projects.
ects  this usually means the adaptation
or advancement of existing solutions to
fulfill specific customer requirements. In Initiators of Innovations
the other case , knowledge generated While the majority of shippers see them-
through reference projects or Best Prac- selves as the source of innovation ideas,
tice examples can be used to develop stan- from the logistics service providers’ point

A
16 Innovation Excellence in Logistics – Value Creation by Innovation

54%

30%
27% 27% 26%

15%

6% 7%
5%
3%

Technology/
Logistics
software Supplier Shipper End-customer
service provider
company

Comment: Only one answer possible

Shipper Logistics Service Provider

Figure 11: Initiators of innovations

Shipper Logistics Service Provider


57%
55%
53%

34%
32%
29%

22%
18%
15% 16%
14% 14%
12% 11%
6% 7%
2% 3%
0% 0%

Tech- Tech-
Logistics Logistics
nology/ End- nology/ End-
Supplier Shipper service Supplier Shipper service
software customer software customer
provider provider
company company

Comment: Only one answer possible

Top innovators Average innovators

Figure 12: Initiators of innovations (shippers / logistics service providers)

of view all value chain participants are innovation competencies of their suppli-
involved. Both shippers and service provid- ers. Using this “innovation network” they
ers try to gather ideas from end-customers generate their own ideas and subsequently
(customer orientation, figure 11). often benefit from a “first mover” advan-
tage. By contrast average innovators ori-
Top innovators amongst shippers involve
ent themselves to the market (incremen-
their suppliers when looking for innova-
tal innovation), thus following a “me-too”
tion ideas and therefore make use of the
strategy.

A
Innovation Excellence in Logistics – Value Creation by Innovation 17

62%

47%

23%
19%
16% 15%
11%
7%

Development Supplier Shipper Logistics service


cooperation provider

Comment: Only one answer possible

Shipper Logistics Service Provider

Figure 13: Drivers of innovations (shippers / logistics service providers)

50%

38% 38%

21%
18%
12% 12% 11%

Development Supplier Shipper Logistics service


cooperation provider

Comment: Only one answer possible

Top innovators Average innovators

Figure 14: Drivers of innovations (logistics service providers)

Top innovators amongst logistics service Drivers of Innovation


providers are more customer-oriented
Shippers and logistics service pro-
than average innovators: they are better viders each see themselves in the driv-
at picking up and implementing ideas at ing role for implementing innovations
their shippers. Average innovators, on the (figure 13).
other hand, try to generate ideas inter-
nally or from the end-customer’s side Innovation ideas at shippers are mostly
(figure 12). driven internally, showing that the success
of critical development projects is not left
Impulses for innovation at logistics ser- to third-party players. Being aware of the
vice providers should be driven externally; key role of the shippers, service provid-
internal impulses are rarely successful. ers pursue innovation in cooperation with

A
18 Innovation Excellence in Logistics – Value Creation by Innovation

them and integrate them continuously into If a two-step process is performed the
the process (figure 14). degree of novelty is usually determined by
the order of steps. “Greenfield” innova-
Average innovators amongst service pro-
tions, usually with a higher degree of nov-
viders try to pursue innovation internally.
elty, are carried out in step order A then B
However, resources and competences are
( Development of modules / standards,
frequently overestimated and initiatives
then customization):
tend to fail.
• Step A: Service modules / standards
are defined without a customer proj-
4.5 Innovation Strategy and ect
Process in Logistics • Step B: The modules / standards devel-
oped are adjusted to be customer-spe-
cific
Innovation Process
Innovations in logistics can reach the mar- “Brownfield” innovations, usually with a
ket in four distinct ways. The logistics lower degree of novelty, reach the market
innovation process model can be used to in step order B then A ( Development of
illustrate the alternatives (figure 15). customer-specific solutions, then modules
/ standards):

Development of Implementation and


customer-specific Customers
coordination of the
solutions/customization solution together with
of modules/standards Step B the customer team
Idea/customer management

Generation Customer-specific Customer-specific


of market Strategic service
and planning of development implementation
technology Intelli- service
intelligence gence development Standard Service
Step A service
development Launch

Project management
Planning of Marketing of
service service modules
modules in Development of service and standards
coordination modules and standards Partners
with service (one step process, green-
portfolio or brownfield approach)

Figure 15: Logistics innovation process model and steps

The steps A and B can be performed as • Step B: Definition of customer-spe-


single steps (one-step process) or in a cific solutions
sequence of steps (two-step process). If a
one-step process is applied, either step A • Step A: Definition of marketable mod-
( Development of modules / standards, ules / standards based on customer
no customization) or step B ( Develop- projects
ment of customer-specific solutions, no
modules / standards) is performed as a
single activity (see figure 16).

A
Innovation Excellence in Logistics – Value Creation by Innovation 19

Fundamental Differences Logistics service providers, by contrast,


predominantly conduct customer-specific
The innovation approaches of shippers
development projects and leave it at that
and service providers are fundamentally
. A minority use the experiences they
different but mutually complementary.
gain to develop customer-specific solu-
The approach of shippers is primarily
tions further into reusable modules / stan-
internally driven based on strategic plan-
dards . The others leave this potential
ning. Logistics service providers follow an
untapped . Own, internal impulses for
approach that is almost exclusively mar-
customer-independent solutions, driven
ket-driven, meaning that it is triggered by
by the providers’ own market and tech-
the customers in question (their shippers)
nology intelligence, can only rarely be
and a concrete customer requirement or
observed  and .
problem (figure 16).

One step process Two-step process

1
Development of modules/
3
Development of modules/ ™
“Internally standards, no customization standards, then customization
driven”
innovation 35% 22% 57%
process
6% 9% 15%

Development of customer- Development of customer-


2 specific solutions, no modules/ 4 specific solutions, then modules/
standards standards
“Market-
driven” 15% 28% 43%
innovation
process
50% 35% 85%

Comment: Only one answer possible

Shipper Logistics Service Provider

Figure 16: Innovation logic

The overwhelming majority of shippers Where modules / standards are developed,


are aiming for development of custom- they are customized by the majority of
er-independent product / service or pro- service providers, whereas the majority of
cess standards. Where a customer-specific shippers does not customize the modules /
solution was the initial starting point for standards they have developed initially .
the development activities, the majority of
shippers derive modules / standards out of
these solutions . Only about a third of The Innovation Process of
them fail to capitalize on the experiences Shippers
they gain . Top innovators amongst shippers conduct
Shippers aim at standards in order to man- structured product / service development
age the related complexity. Less than 40% in collaboration with Strategic Planning
of the initially developed standards are aimed at the development of standard
later customized . solutions . They follow a one step

A
20 Innovation Excellence in Logistics – Value Creation by Innovation

One step process Two-step process

1
Development of modules/
3
Development of modules/ ™
“Internally standards, no customization standards, then customization
driven”
innovation 58% 0% 58%
process
33% 15% 48%

Development of customer- Development of customer-


2 specific solutions, no modules/ 4 specific solutions, then modules/
standards standards
“Market-
driven” 32% 10% 42%
innovation
process
22% 30% 52%

Comment: Only one answer possible

Top innovators Average innovators

Figure 17: Innovation logic (shippers)

One step process Two-step process

1
Development of modules/
3
Development of modules/ ™
“Internally standards, no customization standards, then customization
driven”
innovation 0% 40% 40%
process
10% 0% 10%

Development of customer- Development of customer-


2 specific solutions, no modules/ 4 specific solutions, then modules/
standards standards
“Market-
driven” 40% 20% 60%
innovation
process
50% 40% 90%

Comment: Only one answer possible

Top innovators Average innovators

Figure 18: Innovation logic (logistics service providers)

innovation process, define the areas for By contrast average innovators amongst
innovation by applying upstream strategic shippers often conduct a market- and
planning (push principle) and develop cus- experience-driven two-step process for
tomer-specific solutions e.g. based on fac- their product / service development. Fields
tory / country demands . Best Practice for innovations are defined or enforced by
concepts are developed without customi- customers and not developed by strategic
zation  and the service launch is coordi- planning (pull principle). Customer-spe-
nated centrally and rolled out throughout cific solutions remain as single solutions
the whole company.  or are further developed into reusable

A
Innovation Excellence in Logistics – Value Creation by Innovation 21

modules / standards . Standard develop- Integration of Logistics


ment without customization is significant Service Providers in the
 but does not reach the levels of top inno- Process of Shippers
vators (figure 17).
Top innovators amongst shippers involve
logistics service providers in their inno-
The Innovation Process of vation process at an early stage, using
Logistics Service Providers their innovation ability for specific topics.
Innovative service providers can therefore
“One size fits all” modules and standards position themselves far more effectively,
are not relevant for service providers . which is already being done by top innova-
Service providers often develop customer- tors (figure 19).
specific single solutions without tapping
into any further commercialization poten- It becomes clear that with the help of
tial . Service providers should therefore innovation, top innovators amongst ser-
strive for a two-step process. Incremental vice providers can position themselves in
innovations can be reached by the reuse of higher margin businesses. All others are
customer-specific solutions . Top innova- integrated at a later stage and face higher
tors increasingly create modules and stan- pressure on their margins.
dards for subsequent mass customization
Admittedly most service providers are
 (figure 18).
integrated into the process at a quite late

Shipper Logistics Service Provider


44%
40%
37% 37%
35%
33%

25% 24%
20%
17%
15% 15% 15%
10% 11%12%
7%
3%
0% 0%

Implemen- Implemen-
Strategic Concept & Pilot & Launch & Strategic Concept & Pilot & Launch &
tation speci- tation speci-
planning & specifica- launch service op- planning & specifica- launch service op-
fication fication
idea mgt. tion preparation timization idea mgt. tion preparation timization
& test & test

Comment: Only one answer possible

Top innovators Average innovators

Figure 19: Start of involvement in the shippers’ innovation process (shippers / logistics
service providers)

The two-step, iterative process enables stage, because top innovators among ship-
top innovators amongst service providers to pers regard logistics as their own core
achieve a high level of customer orienta- competence and therefore integrate only
tion. They increasingly use the cost effi- selected strategic partners into their inno-
ciencies of modularization / standardiza- vation process. Insufficient concept design
tion in combination with subsequent mass and project management competences are
customization. By developing service stan- additional reasons stated by shippers for
dards they also tap more effectively into the late involvement of their service pro-
the commercialization potential. viders.

A
22 Innovation Excellence in Logistics – Value Creation by Innovation

54%
Measured for all
projects
37%

38%
Measured for
selected projects 56%

8%
Not measured
7%

Comment: Multiple answers possible

Top innovators Average innovators

Figure 20: Measurement of success within innovation process

Extract

Logistics/ 50%
production costs 70%

58%
Contribution margin
41%

50%
Delivery reliability
53%

50%
Revenue, price
48%

50%
Delivery time
44%

Comment: Multiple answers possible

Top innovators Average innovators

Figure 21: Business rationale for innovation projects

Measurement of Innovation Top innovators especially measure the value


Success added of their logistics by focusing simul-
taneously on costs and contribution mar-
Top innovators are increasingly measur-
gins. Average innovators mainly focus on
ing the success of their innovation proj-
costs; performance-related value added is
ects, opening up enhanced transparency
measured only infrequently (figure 21).
and controlling options (figure 20). Their
experience shows that “if it’s not being
measured it’s not getting done”.

A
Innovation Excellence in Logistics – Value Creation by Innovation 23

The success measures and business ratio- Internal and external material flow tech-
nales have a clear relation to the innova- nologies are regarded as the least impor-
tion objectives as stated at the beginning. tant in both relative and absolute terms.
Top innovators are already ahead in terms of
The fields of innovation can be mapped
adjusting to the future shift from cost-ori-
to the specific technology lifecycle (fig-
ented towards customer-oriented innova-
ure 22) with the help of the determining
tion objectives. They focus on the overall
factors of market penetration and degree
value added instead of cost only.
of technological maturity. The strategy
employed needs to be adapted to the spe-
cific lifecycle phase of the technology:
4.6 Fields of Innovation in • “Young” technologies should be devel-
Logistics oped with external partners.
Adaptable and flexible logistics systems • Growing technologies require a clear
and networks have the highest absolute market entry strategy as well as a strat-
potential for innovation within logistics egy for expansion.
from the participants’ point of view. In
particular, cooperation across the value • Mature technologies require new
chain is regarded as crucial for the realiza- applications and an optimization of
tion of improvement potentials. processes.

Virtual reality (such as for digital plant Shippers and service providers basically
planning) and automated control (e.g. by agree when it comes to the lifecycle stages
agent systems, RFID etc.) are seen as the of virtual reality and logistics systems and
most important growth areas for innova- networks. The expected growth areas and
tions. The key barriers for virtual real- potentials are consistent with these views.
ity, however, include insufficient degree of In terms of the other fields, the judgments
detail and reusability of models. of the two groups differ significantly in
some areas.

Introduction Growth Maturation Saturation

Adaptable, flexible, logistics


systems and networks
Market penetration

Material flow
technologies Transport
control and
Automated routing
control optimization

Virtual
reality

Technology maturation

Shippers’ view Logistics service providers’ view

Figure 22: Technology lifecycle

A
24 Innovation Excellence in Logistics – Value Creation by Innovation

4.7 Key Success Factors for of strategy and project management com-
Innovations in Logistics petencies, but the degree of implementa-
tion is far behind that of top innovators (fig-
Key success factors for top innovators ure 24).
amongst shippers are a structured gener-
ation of market / technological know-how With respect to the degree of implemen-
and stringent project management. These tation of key success factors, top innovators
factors also have the highest degree of are far ahead of average innovators, mean-
implementation. ing that average innovators face an imple-
mentation problem.
For average innovators amongst shippers,
a clear strategy for their logistics ser-
vice offerings is of paramount impor-
tance. However, their degree of imple-
mentation lags behind in 2 out of 3 factors
(figure 23).
Key success factors for top innovators
amongst logistics service providers are
again, the structured generation of market
/ technological know-how and the early
and ongoing involvement of their cus-
tomers. Consequently they attribute the
highest degree of implementation to the
most important success factors. By con-
trast, average innovators amongst logistics
service providers focus on development

1 1
Top Innovators

2 2

1
3
Rank Project management
6
Market/technological

2
intelligence
Interdisciplinary teams

3
1
2
Average Innovators

3
6
Rank Project management
7
Market/technological 9
intelligence
Interdisciplinary teams

Rank for importance Rank for implementation

Figure 23: Key success factors and implementation (shippers)

A
Innovation Excellence in Logistics – Value Creation by Innovation 25

1 2
Top Innovators

2 3
1

1
3
Rank Project management

Market/technological

2
intelligence
Interdisciplinary teams

3
1
3
Average Innovators

5
7
Rank Project management
6
Market/technological
10
intelligence
Interdisciplinary teams

Rank for importance Rank for implementation

Figure 24: Key success factors and implementation (logistics service providers)

4.8 Innovation Excellence The potential for reducing logistics costs


Improvement Potential in is between 7% and 14% for all shippers
and logistics service providers. For perfor-
Logistics mance-related indicators such as turnover,
An optimized innovation management sys- delivery reliability and delivery time, all
tem can boost company success – as mea- participants expect a significant improve-
sured by EBIT margin – by an average of ment potential.
3 to 8%-points.
Shippers believe EBIT margins could
increase by 4.4%-points if innovation
management is optimized. This self-as-
sessment regarding improvement poten-
tial seems realistic; positive effects on the
EBIT margin are known to top and aver-
age innovators (figure 25).
Top innovators amongst the logistics service
providers believe they can even realize an
average increase of 8.5%-points in their
EBIT margins. Average innovators amongst
logistics service providers consider the
potential to be much lower, although still
significant; with a 2.7%-point increase in
EBIT margins (figure 26).

A
26 Innovation Excellence in Logistics – Value Creation by Innovation

13.6%
Increase in revenues1)
6.1%

Increase of EBIT margin


Top Line

Reduction of 21.0% (%-points)


throughput time1) 16.0%

4.4%
Increase in delivery 3.6%
4.4%
reliability2)
3.8%
Bottom Line

Reduction of logistics/ 14.0%


production costs1)
12.4%

1) Reduction in % 2) Reduction in %-points

Top innovators Average innovators

Figure 25: Improvement potential compared to as-is (shippers)

11.3%
Increase in revenues1)
12.3%

Increase of EBIT margin


Top Line

Reduction of 7.5% (%-points)


throughput time1) 8.8%

8.5%
Increase in delivery 2.0%
2.7%
reliability2)
6.3%
Bottom Line

Reduction of logistics/ 7.0%


production costs1)
12.4%

1) Reduction in % 2) Reduction in %-points

Top innovators Average innovators

Figure 26: Improvement potential compared to as-is (logistics service providers)

A
Innovation Excellence in Logistics – Value Creation by Innovation 27

5
Case Studies

5.1 Rodenstock This initial situation resulted in under-


performance in terms of production costs,
Rodenstock is Germany’s leading manu-
logistics performance and brand appear-
facturer of ophthalmic lenses and spec-
ance (inconsistency). To address these
tacles frames. The company is based in
issues an innovation project within the
Munich and is represented in more than
area of logistics was set up. Before starting
80 countries with sales subsidiaries and
the innovation project, the concrete objec-
distribution partners. In 2006 Rodenstock
tives were defined, for example: reduce
generated with a worldwide workforce of
production costs by 20%, improve deliv-
approximately 4,600 a turnover amount-
ery reliability to industry standard: consis-
ing to € 371 million.
tently between 96 – 98%, etc.
The initial situation of Rodenstock in
Due to substantial enhancements to the
2000 was characterized by 12 production
logistics processes, Rodenstock was now
sites for lenses across Europe. For histor-
able to create a production network repre-
ical reasons the production processes and
sented by 3 sites in Europe. The improve-
inventory management have been strongly
ment of reliable target figures was par-
oriented to local market conditions.
ticularly critical for this well-functioning
Logistics have thus been characterized production network. All activities that did
by non-standardized processes and oper- not need to be performed locally were
ations plus sparse international commu- centralized (e.g. central warehouse). In the
nication and coordination of activities, new structure, European shops are mainly
combined with a lack of standardized supplied directly from central production
performance indicators and measurement / warehouse (figure 27).
systems.

Ɣ Focused local activities


with limited portfolio

Ɣ Central production facilities


(1 site for high-tech production, 1 site for innovation,
1 site for high-volume production)
Ɣ Central warehousing activities

Figure 27: Illustration of new logistics concept

A
28 Innovation Excellence in Logistics – Value Creation by Innovation

Reductions in production costs and sig- This case analyzes the situation for the
nificantly improved delivery times within Valeo Service distribution center for Ibe-
Rodenstock accompanied the changes to ria (Spain and Portugal).
the logistics concept.
Valeo offers 176 product families grouped
Rodenstock identified the following suc- in 12 lines (climate control, transmissions,
cess factors that were key to the achieve- wiper systems, lighting etc.) with items
ment of the described changes and that vary enormously in size and weight.
improvements: Moreover, the individual orders from cli-
ents also vary in their item composition,
• Clear strategy for logistics services/
resulting in additional complication in
products:
picking activity.
It is critical to have a clear-cut and
The initial situation faced by Valeo Ser-
commonly understood concept and
vice was characterized by high stock lev-
plan for logistics structures and pro-
els and poor delivery performance. In an
cesses
effort to broaden the product coverage
• Utilization of interdisciplinary teams: and service to customers, 2,500 new prod-
ucts were launched. This resulted in a
Interdisciplinary teams simplify com- total of almost 15,000 SKUs (stock keep-
munication of project news within ing units). In 2006 Valeo Service decided
the organization and justification for to address the identified issues by focusing
change/ restructuring. Moreover, mar- its efforts on improving customer satisfac-
ket know-how, market requirements tion through greater emphasis on logistics
and internal data are always available excellence and better service levels while,
“By winning a recent tender, Rodenstock at the same time, improving the financial
increased its sales by 10% – without the new situation.
logistics concept the customer’s requirements The objective was to be achieved by
would not have been met!” addressing the two areas of inventory
management and warehouse automation.
At the same time, all activities were to
5.2 Valeo be integrated within the Total Quality
Valeo is one of the world’s top 10 suppli- approach of the Valeo Group.
ers of components, systems and modules Various changes were applied to the plan-
for the automotive industry, with annual ning process to achieve the objectives.
operating revenues of € 10 billion. Pres- For example monthly Sales, Inventory
ent in 29 countries, the group employs and Operations Planning (SIOP) meetings
69,800 people at 129 production sites, were held by Sales, Marketing, Finance,
68 R&D centers and 9 distribution plat- Logistics and Human Resources in order
forms. The aftermarket activities of the to generate a sales forecast at product fam-
Valeo Group are conducted by a divi- ily level (for 3, 6 and 12 months) and to
sion called Valeo Service, which accounts integrate the input of market conditions
for 18% of the total turnover and has two (promotions, competitors’ actions) to over-
branches: Independent Aftermarket (dis- ride automatic explosion to SKU level. In
tributors, garages, auto-centers) and Orig- addition to the changes in the inventory
inal Equipment Spares. management process, other projects were

A
Innovation Excellence in Logistics – Value Creation by Innovation 29

1 – Sales forecast 2 – Demand planning


Ɣ Monthly Sales, Inventory and
Operations Planning Meeting
Ɣ By Marketing, Sales, Logistics, Prod. 12
Finance & HR line
At product family level Prod. family 176
3A - Input of market info
Ɣ Monthly

SKU 15.000
3B – Explosion to SKU level

4 – MRP 5 – Purchase program

Ɣ Monthly
Supplier
24-week
Ɣ Weekly
updates
horizon EDI – weekly

Figure 28: Illustration of the new planning concept

launched within the warehouse activities 5.3 Woolworth


with the main goal of reducing the error
Woolworth is a retail company with approx.
levels in the fulfillment rates (figure 28).
330 stores in Germany and 12 stores in
Valeo identified the following success fac- Austria. In 2005 Woolworth was offer-
tors that were key to the achievement of ing 50,000 active products and employed
the described changes and improvements: 14,800 employees who generated turnover
of about € 1 billion. All Woolworth stores
• Full commitment and involvement of
are supplied by a single distribution cen-
executive levels was critical.
ter (DC) in Germany. Originally this cen-
• During the project, the “Quick ter was built to store 80% of NOS (never
Response Quality Control (QRQC) out-of-stock) products and 20% one-time
approach” was utilized, so that any products. But after a change of the com-
problem which arose was immediately pany’s strategy, its stock breakdown dra-
identified and analyzed on the spot by matically changed to 50% NOS products
the parties involved, and corrective and 50% one-time products. The result
action was defined and implemented was a free capacity of 50% in the high-
within 24 hours. rack warehouse as well as 25% in the pick-
ing areas. The reflection on this situation
“By closely linking logistics to the marketing motivated the Woolworth management to
and sales department, significant improve- hive off the DC to offer NOS capacity to
ments in the fulfillment of customer require- third parties. The management of the DC
ments can be achieved!” was therefore suddenly confronted with
several issues such as developing a market
entry strategy, offering marketable con-
ditions, services and prices, reducing the
share of fixed costs by increasing the uti-
lized capacity, etc.

A
30 Innovation Excellence in Logistics – Value Creation by Innovation

Woolworth decided to increase the high enabled the DC to offer logistics services
profile of offerings to third parties by at market quality and conditions. Today,
measures including intensive press rela- the Woolworth DC is prepared for the
tions, and to create the ability to com- third-party market and has already won
pete for business in the third party mar- new external customers.
ket by identifying profitable niche markets
Woolworth identified the following suc-
and potentials for commercialization. The
cess factors that were key to the achieve-
objective was to capitalize on synergy
ment of the described changes and
effects from 330 Woolworth stores that
improvements:
are supplied with goods on a daily basis.
• Project management capabilities:
In order to meet market expectations, an
integrated management system in com- The necessity that management lives
bination with a continuous improvement by the common rules of successful
process was implemented. The combina- project management (such as binding
tions of these two innovations plus the timelines, assigning responsibilities,
continuous improvement process alone tracking of tasks)
are innovations within the retail indus-
try. The DC received various ISO certif- • Clear strategy for logistics services:
icates and applied for international logis- The management of the DC is now
tics awards, which were seen as external using staff meetings to communicate
benchmarking and a publicity booster the success of the company’s strategy.
(figure 29). Moreover, news updates are published
Within 6 weeks, the 600 employees of the “The correlation between innovation,
DC generated more than 200 ideas regard- quality improvement and company growth
ing the improvement process. Woolworth was confirmed!”
is measuring the success of the imple-
mented ideas in terms of money, quality
and operational safety.
The implementation of these ideas and
of the integrated management system

Supplier DC Retailer Supplier DC Retailer

Deutsche Woolworth DW Logistics Deutsche


Woolworth
NOS NOS

one-time One-time
products Products

Figure 29: Illustration of the integrated management system (before / after)

A
Innovation Excellence in Logistics – Value Creation by Innovation 31

5.4 APL Logistics Party Logistics service provider) firm.


APL Logistics is recognized as a lead- While APL already had a small contract
ing innovator in worldwide logistics and with the retailer, the challenge was to win
technology management. With more than this major contract against competition
300 offices serving over 100 countries, from far larger 3PL players. APL wanted
the 5,000 seasoned logistics profession- to achieve this objective through offer-
als offer local expertise throughout a truly ing an innovative bundle of services and
global network. APL Logistics’ revenues demonstrating its ability to implement the
have grown to nearly $ 1,3 billion (USD). proposed solution.
This case analyzes the logistics solution The retailer’s specific objectives for this
APL offered to one of its clients. The cli- project were to design and implement a
ent is a major Western retailer that has logistics system to support direct sourc-
shifted its sourcing from Europe to the ing for several lines and to be able to rep-
Far East over the recent years. Despite this licate this system, with standard processes,
change in sourcing strategy, the logistics on other lines in the future.
concept has remained largely unchanged:
For the implementation of the projected
the suppliers maintained their own distri-
new logistics concept “FOB sourcing”,
bution centers (DCs) in their home nation
APL logistics was acting for the retailer
and stock was called off by the retailer. As
in organizing logistics from country of
a result, supply chain costs were far higher
origin, covering important aspects like
than necessary, with over 90 DCs being
vendor management at origin, shipment
maintained by the clients’ suppliers. The
consolidation, control of air freight autho-
retailer is now increasing the proportion
rization to balance cost vs. benefit, devel-
of directly sourced lines, changing the
opment of “slot management” software to
logistics concept from delivered sourcing
manage truck slot constraints at DC and
to FOB ( Incoterm On Board) at coun-
prioritize key lines, etc.
try of origin. The retailer recognized that
a major challenge was a shortage of logis- APL and the retailer agreed upon an “open
tics and implementation skills internally – book” approach to charging for these ser-
hence the easiest way to implement this vices in order to increase the efficiency of
change was to engage a skilled 3PL (3rd the overall project (figure 30).

Shop

Shop

Shop Emergency Air freight

Shop Far East manufacturing


facility
Shop
UK import
Sea freight Consolidation
Shop process
Retailer DC
Shop

Shop UK import Central European


Truck freight Consolidation
process manufacturing facility
Shop

Shop APL Retailer Supplier

Figure 30: Illustration of the new logistics concept

A
32 Innovation Excellence in Logistics – Value Creation by Innovation

APL identified the following success fac- tial for expansion of the production lines.
tors that were key to the achievement of The idea was to find a solution to free up
the described changes and improvements: spaces and resources for use in the “core
business”. The main objectives for Rivalta
• APL’s Solution Engineering organiza-
were to eliminate cocoa butter storage and
tion is a catalyst for developing inno-
preparation, to reduce logistics cost for
vative service offerings and is seen as a
storage and transportation and to generate
differentiator by customers; neverthe-
full customer satisfaction for Ferrero.
less implementation skills are critical.
Moreover, Rivalta wanted to capitalize the
• The use of a joint venture with another
new logistics product and also offer the
logistics firm added critical skills to
same service to other producers.
APL and strengthened APL’s position
in winning this contract. To devise a solution, Rivalta had to deal
with the following situation:
“A structured innovation process driven by
a dedicated department leads to a significant the cocoa butter was delivered both from
improvement of market opportunities and the Port of Genoa and from the Inter-
increasing revenues” porto warehouse. The manufacturer was
responsible for inbound goods logis-
tics, warehouse management, unpacking
5.5 Interporto Rivalta and preparation. The production cycle
included blending the cocoa butter (25
Interporto Rivalta (IR) is the only mul-
kilos per batch) with an additional quan-
tifunctional logistics Interporto in Italy
tity of melted cocoa butter delivered from
to directly manage logistics flows of raw
the port at extra cost. The administration
materials (soft commodities). In 2006, the
costs of this secondary phase in particular
company generated a turnover amount-
were too high.
ing to € 40 million with 100 employees (+
450 contractors). Rivalta has two lines of Rivalta therefore proposed splitting the
business, a multifunctional terminal and process into two phases, to take over part
an integrated logistics system (raw materi- of production and simplify logistics. Work-
als and final products). Both business lines ing together with the client, Interporto
are focused on logistics outsourcing for used its plant to develop new technologies
manufacturing clients and industrial activ- with high efficiency and cost-effective-
ities (inbound and outbound). The main ness. The cocoa butter is now delivered to
activities of Rivalta are in raw materials Rivalta warehouse in containers straight
(cocoa, sugar, coffee) and cocoa butter for from the harbor. Based on the monthly
the food industry. This case analyzes the production program Rivalta receives from
logistics solution Rivalta offered to its cli- Ferrero (now also from other producers),
ent Ferrero. Rivalta plans its own operations, and every
day the necessary quantity of cocoa butter
Ferrero, a global chocolate and confec-
for production is treated, transported in
tionery producer, needed to improve its
tank trucks and delivered straight to pro-
manufacturing logistics for chocolate, par-
duction plants.
ticularly for cocoa butter input. In the ini-
tial logistics concept, the cocoa butter As a result new services are offered, adding
was stored and pretreated near the pro- value and enhancing customer satisfaction
duction lines. The location of the storage (figure 31).
and pretreatment limited Ferrero’s poten-

A
Innovation Excellence in Logistics – Value Creation by Innovation 33

Interporto Client

Container

Rivalta
Production program
(Warehouse management)

Preparation

Liquefaction

20-25°
Production

Figure 31: Illustration of the new logistics process

Rivalta identified the following success


factors that were key to the achievement
of the described changes and improve-
ments:
• Withdrawing from low-value-added
phases of client’s production can be a
useful approach for logistics.
• The innovation proved to be a real test
of skills and competences in logistics.
“An early involvement of logistics service
providers can lead to a win-win situation if
necessary know-how is being transferred”

A
34 Innovation Excellence in Logistics – Value Creation by Innovation

6
About the Contributors

European Logistics Association


(ELA)

The European Logistics Association is a federation of national logistics associations


covering almost every country in Central and Western Europe. By working together
through their respective associations, these professional organizations serve the needs of
European logistics practitioners. As a formal European body, ELA provides the logistics
profession with a European voice at international level.
Through its 30-plus member associations, ELA has regular contact with over 50,000
senior logisticians across Europe.

Arthur D. Little A
We are a global management consultancy specializing in strategy and operations man-
agement, serving major corporations and organizations worldwide. We are recognized
as leaders in linking strategy, innovation and technology to solve our clients’ most com-
plex business issues, delivering sustainable solutions. We are different from others by our
deep industry insight and technology expertise. We are proud of our creative people with
their intense commitment to our clients.
As a global service provider we employ 1,000 staff members in over 30 countries.
Together with our partners at Altran Technologies, we have 17,000 professionals at our
clients’ disposal.
If you have further questions please visit our homepage: www.adlittle.com or contact the
contributors of this study directly (see below).

Darmstadt University of
Technology Chair of
Management and Logistics

The Chair of Management and Logistics at Darmstadt University of Technology is dedi-


cated to providing a coupling of theory and practice in the research fields of management
sciences and logistics. The committed business disciplines are: logistics, supply chain
management, cooperation and networks, leadership, and international management.
The Chair of Management and Logistics is one of the leading institutes for logistical
education and research in Germany.

A
Innovation Excellence in Logistics – Value Creation by Innovation 35

7
Acknowledgement

This report is a joint survey by the Euro- Heiko Frunzke


pean Logistics Association (ELA) and
… is a researcher at the Chair of Manage-
Arthur D. Little in cooperation with
ment and Logistics at Darmstadt Univer-
the Chair of Management and Logis-
sity of Technology. Logistics is his main
tics at Darmstadt University of Technol-
research interest, with a dedicated focus
ogy. Arthur D. Little was responsible for
on the management of logistics personnel
conducting the study, while the Chair of
and service innovations.
Management and Logistics at Darmstadt
University gave methodological support.
Arthur D. Little was in charge of editing Markus Achtert
the report.
… is a Manager in Arthur D. Little’s
Munich office and a member of the Auto-
Professor Dr. Dr. h.c. motive and Manufacturing Practice. He is
Hans-Christian Pfohl a member of the Technology and Innova-
tion Management Competence Center at
... holds the Chair of Management and Arthur D. Little and specializes in innova-
Logistics at Darmstadt University of Tech- tion management and supply chain man-
nology. He is the head of the Research and agement issues in the manufacturing and
Development Committee of the European automotive sector.
Logistics Association (ELA) and is a mem-
ber of the ELA Board. He is also head
of the Scientific Advisory Board of the
German Logistics Association “Bundes-
vereinigung Logistik e.V. (BVL)” and a
member of the Advisory Board of VDI –
Society for Materials Handling, Materi-
als Flow and Logistics Engineering (VDI-
FML).

Stefan Lippautz
... is a Director in Arthur D. Little’s
Munich office and a member of the Auto-
motive and Manufacturing Practice. He
specializes in strategy development in the
manufacturing and automotive sector.

A
36 Innovation Excellence in Logistics – Value Creation by Innovation

8
Contacts

For further information please contact: Prof. Dr. Dr. h.c. H.-Chr. Pfohl
Stefan Lippautz Fachgebiet Unternehmensführung
und Logistik
Arthur D. Little GmbH
Technische Universität Darmstadt
Leopoldstr. 11a
Hochschulstraße 1
80802 München
64289 Darmstadt
Germany
Germany
Tel: +49 89 38088 700
Tel: +49 6151 165423
E-Mail: lippautz.stefan@adlittle.com
E-Mail: pfohl@bwl.tu-darmstadt.de
www.adlittle.com
www.bwl.tu-darmstadt.de/bwl2

Markus R. Achtert
Nicole Gerkens
Arthur D. Little GmbH
ELA Head Office
Leopoldstr. 11a
Kunstlaan 19 Avenue des Arts
80802 München
B-1210 Brussels
Germany
Belgium
Tel: +49 89 38088 700
Tel: +32 2230 0211
E-Mail: achtert.markus@adlittle.com
E-Mail: ela@elalog.org
www.adlittle.com
www.elalog.org