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Supply Chain Insights

eCommerce Boom Calls for More Sustainable Supply Chains in Southeast Asia

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By James Christopher, President – Asia, TMX

The COVID-19 pandemic has triggered a dramatic eCommerce boom, altering the way companies do business. It has also changed consumer buying experiences, shifting the retail landscape.

As retailers benefit from the significant increase in eCommerce orders – Southeast Asia saw more than 60% increase in gross merchandise value (GMV) to US$62 billion in just one year in 2020[1] – more needs to be done to ensure the sustainability of supply chains.

In today’s world where consumers are becoming increasingly environmentally and socially conscious, the transport and logistics sector needs to focus on operating sustainably. This is not just for corporate governance and operational savings, but to establish their social license to operate and become more environmentally conscious.

As an example, the spike in door-to-door deliveries amidst social distancing measures has been taxing on last-mile delivery vehicles. This is evident in the rise of emissions from last-mile services, which are projected to further increase by more than 30 percent in 100 cities globally[2]. Unfortunately, as companies focus on getting goods to consumers quickly, this means delivery trucks prioritise speed over efficiency, often running below full capacity.

Concerns from consumers

Consumer focus on the environmental and social impact of the companies and businesses they buy from has been around for some time, but more people are becoming aware. Today, almost half of Southeast Asia consumers expect retailers to eliminate plastic bags and plastic wrapping for perishable items, while slightly over half expect businesses to be accountable for their environmental impact.[3]

Meanwhile, research has found that companies that successfully match customers’ sustainability expectations are rewarded with customer loyalty and an increase in revenue growth[4]. This means that businesses must have visibility in their supply chains to trace raw material inputs to last-mile delivery, further underscoring the need for sustainable supply chains.  

Road to resilience

Those who have adapted their business and operating models and created more agile supply chains to meet the boom in eCommerce, have found themselves ahead of the race in a changing market.

The adoption of technology in transport and logistics has evolved over the past decade, but COVID-19 was the catalyst that pushed for dramatic and rapid change in a short window of time.

Many operators have taken up route-optimisation to improve customer experience and reduce carbon footprint. Others have considered the type of fuel they use.

eCommerce has put immense pressure on last-mile logistics with customers placed as top priority. But what happens when customers don’t quite understand the impact of cheap and fast deliveries on the sustainability of supply chains?

As operators have raced to deliver huge order volumes over various online shopping festivals, the question remains whether cost to serve is being covered. Those who can optimise their costs are more likely to reduce their carbon footprint, as well as increasing margins.

But if you’re overservicing and running deliveries on half empty trucks, then a levy such as road user charge or carbon charge, might be necessary to change business processes and consumer behaviours.

The big challenge

Senior supply chain executives face sustainability issues daily as they look to ensure the organisation’s activities are aligned to the expectation of shareholders, including internal and external stakeholders.

Having the capability and metrics in place to identify and communicate social, environmental, and economic achievements is paramount to embedding sustainability thinking within an organisation.

Supply chain strategies should enable businesses to exceed sustainability ambitions across logistics functions. At TMX, we have designed solutions that are practical and adaptable for different companies across Asia Pacific to meet environmental goals and targets in line with customer, shareholder and community values and expectations. Some organisations have also the added importance of complying with legislative requirements. Setting the right targets is crucial, including making emissions a critical key performance indicator for companies.

The new normal

The pandemic has forced businesses to throw out their old manual in order to survive – and ultimately thrive – in these uncertain times. As companies are forced to relook at the way they operate, the opportunity is ripe for factoring in sustainability in all that they do.

eCommerce is here to stay. As such, leading companies need to crack the code around supply chain efficiencies, which will simultaneously reap environmental gains. This could include understanding the cost to serve or exploring the feasibility of multiple smaller warehouses or fulfilment centres in lieu of one large one, to ensure orders arrive on time.

Industrial occupiers across Southeast Asia have been incorporating sustainable practices in their facilities for a while now. Many have also been investing in solar panels and water recycling plants among other environmental-friendly initiatives in industrial property, which is ultimately reducing carbon emissions.

Tenants are also now seeking sites that are as a minimum a Leadership in Energy and Environmental Design (LEED) Gold or Platinum standard certified or Green Mark Platinum rated, along with a requirement for LED lighting and efficient ventilation system. This demand is set to continue driving green initiatives in the industrial property market.

COVID-19 has propelled the industry forward by five years, having turbocharged online retail and forced businesses to pivot in order to stay relevant. Now more than ever, is the time to take charge of sustainable supply chains.

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Supply Chain

bp and Uber sign Global Strategic Delivery Partnership

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  • bp and Uber sign a new global strategic convenience partnership aiming to make more than 3,000 retail locations available on Uber Eats by 2025.
  • The partnership extends current local arrangements in Australia, New Zealand, Poland, South Africa and the west coast of US, adding the UK and eastern US in 2022 and with plans to launch in other European markets from 2023.

Today, bp (NYSE: BP) and Uber Technologies, Inc. (NYSE: UBER) are announcing a new global strategic convenience delivery partnership, extending their existing local arrangements to reach more consumers across the world. Together, the partners will offer a huge range of quality convenience products, including fresh and prepared ranges, from select retail locations.

bp is the first convenience retailer to team up with Uber Eats on a global level and aims to have more than 3,000 retail locations available on the delivery platform over the next three years. The partnership supports bp’s goal of growing its access to customers and expanding its delivery footprint, in response to soaring demand for food, groceries and everyday essentials brought to the door.

The new partnership covers retail sites in Australia, New Zealand, Poland, South Africa and the west coast of US. Sites in the UK and eastern US will be added to the app for the first time this year, with plans to launch in other European markets from 2023.

“We’re thrilled to team up with Uber Eats globally giving us the opportunity to reach many more consumers online in addition to those who currently visit our retail sites. We’ve seen how the pandemic has accelerated customer demand for delivered convenience and this partnership will allow us to scale up quickly on the Uber platform. And for the first time, we will be able to offer delivery options to existing customers on our own BPme app by the end of 2023,” said Emma Delaney, executive vice president customers & products, bp.

With 20,500 bp retail sites across the world and 550 million customers living within 20 minutes of a bp retail site, the partners see enormous opportunities for growth. bp sites offer a range of products tailored to local markets which may include hot and cold drinks, food-for-now options as well as staple groceries, fresh produce and ready meals, plus wine, beer and flowers.

  • In the UK, customers will be able to access a range of Wild Bean Café, and other branded food and products via Uber Eats – with the first 120 sites due live on the platform by the end of June.
  • In the US, the offer will be made available to bp’s network of independently owned retail locations to support the growth of their businesses. The goal is to make it easy for these partners to sign up to the Uber Eats platform and access benefits based on bp’s scale.

bp will benefit from Uber’s global brand and operations footprint, best-in-class technology for dispatching orders, and more than 4.4 million drivers and couriers on the platform worldwide.

As part of the agreement, Uber Eats and bp will work to introduce delivery options onto bp’s own app, BPme – initially planned to be available in the UK, US and Australia by the end of 2023 – powered by Uber Direct. This new offer will allow bp to directly connect its customers to delivery riders, making Uber Eats the trusted partner in fulfilling these orders. Since 2019, bp has seen a three-fold increase in users of the BPme app, with 16 million active loyalty users worldwide.

“With more than 20,500 locations around the world, bp’s reach is enormous—making them critical partners as we pursue our ambitions of helping consumers across the world get what they need delivered to their doorsteps,” said Pierre Dimitri Gore-Coty, Uber’s SVP of Global Delivery. “We are proud to support this next phase of the company’s convenience growth through this delivery partnership and look forward to deeper collaboration in the future.”

bp and Uber already work together in mobility with bp providing electric vehicle charging for Uber’s ride-hail drivers. The companies will explore other areas for future cooperation in convenience, including opportunities to utilize low carbon delivery methods to fulfill orders from bp sites.

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Supply Chain Insights

Officeworks to own and control Distribution Network.

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Officeworks invests in supply chain capabilities, will own and run it’s distribution centre.

Officeworks has changed its supply chain strategy in the wake of COVID-19 issues, with a view to owning and controlling a network of distribution centres across the country.

“When I joined we had a different strategy around our supply chain,” Officeworks managing director Sarah Hunter told The Australian, referring to the company’s previous outsourcing strategy.

“So we’ve worked really hard now to build our supply chain capability. We were in the process of outsourcing it, we are now in the process of building that capability.

Officeworks recently opened Australia’s first solar-powered robotic distribution centre in Derrimut, Victoria.

“We started in Victoria, and we have had approval to build, now board approval to invest, and we are building a new, similar (distribution centre) operation in Western Australia. That’s exciting,” she said.

“Looking at our capital expenditure three, four, or five years ago it’s a material step up in our investment in our supply chain.

“Most importantly for us as a business is that every team member who worked at the old facility has been completely retrained,” she said. “We have 120 team members who are now fully trained in how to work in an automated state-of-the-art environment.”

The need to control its own distribution became clear during the pandemic.

By December, Officeworks saw 46 per cent of its business come from online, including click and collect. Now it needs to move to retain this growth at a cost effective scale.

“We have created a facility that’s not only more productive, it’s going to enable our online business to grow in Victoria and into NSW at the rate that we expect our online business will grow.

“So now we have the capacity, the cost per pick is materially lower because it’s much more productive. It’s a win-win scenario for us. We’ve kept everyone employed with really great job security. We’ve scaled them up to work in the supply chain of the future.

“And on top of that, we now have the capacity for growth in Victoria that frankly we were struggling with through COVID.”

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Business Continuity

Skills shortage puts SAP projects on hold

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Business demand creates double whammy on recruitment pressure

Skills-related issues have hit a quarter of SAP users, in some cases putting projects on hold, according to a survey of companies in the Americas.

Research released by the Americas’ SAP Users’ Group (ASUG) shows that 26 per cent of organisations see skills in supporting, developing, and upgrading SAP systems as their number one challenge in working with the technology.

A quarter of users loyal to the German vendor said skills problems were holding up projects.

Geoff Scott, ASUG CEO, told a webinar last week that the combination of skills shortages in businesses and their technology teams created a vicious cycle of driving the demand for new tools and technologies.

“Business functions come and say, ‘Hey, I need to have all these things done.’ And technology teams say, ‘Well, I don’t have the same skills I used to have.’ And I think it creates a major disruption inside many of our member companies,” he said.

Skills were also a major issue for SAP users looking either to migrate to or support S/4HANA, the latest version of the tech giant’s ERP software based on an in-memory database.

“We are going to feel the pinch of that skill gap. My word of caution is that as you think about moving to S/4 if you have not already, the ability for you to plan that migration may hit some turbulence related to skill gaps with your external partners. That’s something that you absolutely positively should consider,” he said.

While technology issues were the greatest concern in the research overall, broken down, only integration problems were more cited than staff turnover and maintaining knowledgeable staff.

Of those with integration problems, 28 per cent said they were causing data errors to spread, 17 per cent said they were affecting the compatibility between SAP and other applications, and 17 per cent said it meant they were unable to keep up with new technologies.

One respondent said: “Changes made in SAP and Salesforce that do not get reflected in the other system are causing data inconsistencies.”

Overall, the majority of SAP users were increasing their spending on the technology. Fifty-two per cent said they were increasing spending, up from 46 per cent last year.

However, the proportion of users saying they were cutting spending on SAP also rose from 5 per cent last year to 8 per cent in 2022. The number of organisations making the same level of investment fell, according to the ASUG research.

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