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Supply Chain Insights

Supply Chain and the Transition to Net-Zero

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As sustainability moves further up the supply chain agenda, Supply Chain Insights finds out how organisations can reduce their carbon footprint while increasing profits, efficiency and customer service.

According to a report by the Government’s Climate Change Authority, the transport sector accounts for 16% of Australia’s greenhouse gas emissions, which makes the sector the third largest source of greenhouse gas emissions in Australia. It’s also rising at the highest rate of any other sector in Australia.

Greenhouse gas emissions from transport come primarily from fossil fuels combusted in vehicles. Personal vehicles equate for around half of these emissions, with the remaining produced by freight and logistics operations nationwide.

It’s also predicted that transport emissions are set to increase in the period to 2030, as demand continues to outpace efficiency improvements. This has been exasperated by the dramatic shift to online shopping, as a result of almost two years of lockdowns and physical retail closures due to the coronavirus pandemic.

Earlier this month, world leaders gathered in Glasgow, Scotland for the United Nation’s COP26 conference to set out their plans for reducing carbon emissions and creating a more sustainable future.

One of the most significant climate change events to take place since the signing of the Paris Agreement in 2015, COP26 saw leaders from every corner of the world commit to making the world a more sustainable place in the next decade. Those in attendance included Australian Prime Minister Scott Morrison – who committed to targeting net-zero emissions by 2050 in Australia.

While climate change and sustainability has been high on the political agenda for some time, the shift to a more sustainable future is also being driven by consumer demand and behaviour and this is having a huge impact on supply chain and retail operations.

If Australia is to meet its net-zero emissions target, then supply chain has a significant role to play in creating a more sustainable future.

The need to act now

A new research report ‘Sustainability in the Australian Retail Supply Chain’ commissioned by Manhattan Associates, Shippit and Greener – in partnership with the National Retail Association and NORA, revealed 60% of Australian consumers are open to receiving a delivery at a later date if it meant it was delivered more sustainably.

“Cost, customer satisfaction and sustainability all get tackled by making smarter decisions with the right tools and technology,”Raghav Sibal

According to Raghav Sibal, managing director, ANZ at Manhattan Associates, consumers want to see a clear message from the companies they shop with on what they are doing to improve sustainability.

“Consumers are not prepared to just accept the convenience of delivery at the cost of the environment, and they are increasingly aware of the growing impact the eCommerce sector is having on CO2 emissions,” he says.

Similarly, Mark Delaney, thought leader & retail strategist at Zebra Technologies says the impact of the pandemic has shifted consumer priorities away from price and speed, to sustainability and safety.

“Everything is on the table right now and it’s a fascinating time to be looking at retail and tech,”Mark Delaney

“If it wasn’t for the pandemic, I don’t think we would have seen this shift. But with habits forever changed, consumers are increasingly focused on the sustainability of their order. Furthermore, the global pandemic has made consumers more concerned of the safety of associates and customers,” he says.

While sustainability is impacting most organisations, the focus on sustainability in supply chain is driven by an increase in innovation and experimentation since the onset of the pandemic.

“We’re seeing proofs of concepts that would usually take a year to 18 months now happening in four to six weeks. There is an incredible wave of innovation happening right now and this is driving advances in sustainability,” says Mark

Jamie Dixon, director at TMX says one positive to come out of the pandemic is that everyone realised how important supply chain is, and with that came a drive to increase efficiencies and improve operations.

“A lot of the work we’re doing when optimising networks and better utilising resources, network footprint and assets has a significant flow on effect in reducing carbon emissions,” says Jamie.

But it’s not just consumers who are putting the pressure on retailers and logistics providers to improve sustainability and reduce carbon emissions, it’s investors too.

“What we’re going to see in the very near future is investors making a requirement that a company is committed to net-zero emissions. They are starting to ask, are you a good corporate citizen?” says Jamie.

With pressure from consumers and investors alike, retailers and logistics providers are faced with the urgent issue of improving sustainability in their supply chains.

The pursuit of true end-to-end sustainability

As more organisations focus on improving sustainability, organisations are asking how they can better report on, as well as better control their assets. But it’s not just about improving sustainability across an organisation’s own assets, but also any partner organisations ­– such as 3PLs.

“Any desire to improve sustainability has to also take into consideration, and improve, Scope 3 emissions. This includes any outsourcing of logistics or the production of raw materials,” says Jamie. “If you’re a large FMCG business and you outsource to a 3PL, all of those emissions are now your total responsibility. Just like the Chain of Responsibility includes safety and quality, it also includes sustainability.”

With the right tools and systems, retailers can calculate what their sustainability requirements are at both a strategic level as well as a day-to-day operation level. “This could be fuel type, vehicle type, route, transport mode and more,” says Jamie.

“What we’re going to see in the very near future is investors making a requirement that a company is committed to net-zero emissions. They are starting to ask, are you a good corporate citizen?” Jamie says. “If you’re a large FMCG business and you outsource to a 3PL, all of those emissions are now your total responsibility. Just like the Chain of Responsibility includes safety and quality, it also includes sustainability,” Jamie Dixon

This shift to a more sustainable operation is having a significant impact on 3PL operations, with retailers now looking to include sustainability requirements in contracts and service agreements. “Many larger retailers will no longer engage with a transport company who isn’t committed to reducing emissions,” warns Jamie.

Australia’s tyranny of distance

With a large reliance on road freight and the challenge of long distances and a geographically spread population, Australia has its own unique challenges when it comes to improving sustainability in the supply chain.

“Retail organisations in Australia have to deal with the fact that they need to create more points of distribution closer to the population, this is very difficult for a retail operation that utilises a centralised distribution model,” says Manhattan’s Raghav.

However, while Australia’s geography can be a disadvantage, Raghav says larger retailers in Australia have an established store network that can be utilised to fulfil eCommerce orders in a more sustainable way. Major retailers such as Kmart have already attempted this pivot during COVID-19 lockdowns, and he says this will be a regular feature as organisations attempt to improve sustainability in eCommerce.

Furthermore, technology has a huge role to play. “Cost, customer satisfaction and sustainability all get tackled by making smarter decisions with the right tools and technology,” says Raghav. 

Jamie emphasises the importance of a true digital supply chain to ensure full visibility and control of inventory. “It’s about optimising your assets, spreading driver hours, ensuring vehicles are full, minimising split orders – all of these things not only improve sustainability but efficiency as well.”

Grasping the opportunity

According to Mark at Zebra Technologies, we’re set to see some radical innovation in the route to net-zero.

“I’ve seen companies start to explore the use of drones in remote areas, which could be relevant in Australia.  They are very energy efficient and could be a great solution to deliver small packages. Everything is on the table right now and it’s a fascinating time to be looking at retail and tech,” says Mark.

Jamie also references a trend that is starting to take off in Asia in response to the sustainable impact of returns logistics – the consumer-to-consumer supply chain.

“What we might start to see is instead of returning products to a retailer, consumers might reuse and recycle the goods themselves through an online marketplace. Consumers with a sustainability focus will start to ask if there is a smarter way to return goods than sending them halfway across the country if someone in the same suburb can utilise them,” he says.

For Raghav, utilising the right tech to pick, pack and ship goods and to optimise routes and transport operations is critical when looking to more sustainable modes of transport. “While there is a trade off with slower, more sustainable modes of transport, if you have the right technology in place, you can ensure you are planning efficiently and make sure you continue to deliver a great experience to your customers regardless of the mode of transport you choose.”

Whichever route organisations take to improving sustainability in their supply chain, Zebra’s Mark says one thing is for certain: “to attract the future shopper, investor or employee, your messaging and commitment to sustainable practices will need to be very clear.”

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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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