Sum up of the logistics year 2007
- Report from a breakfast seminar

Congratulations – you’ve chosen the right trade! Those were the introductory words by Lars Larsson and Håkan Andersson when they opened the breakfast seminar on a sunny Thursday morning, the 14th of February.Aiming to inspire the audience into making big deeds during the logistics year of 2008, they spent this morning summarising the logistics year of 2007. They also presented some highlights on upcoming trends and Breaking News, taken from the book “Everyday is a Logistics Day” published by Establish for the third year in a row.Among the areas that were covered this morning were Green Logistics, Changing demographics, Performance based logistics, Demand Chain Leadership®, Scenario driven planning and Emerging markets.

Green logistics

Håkan Andersson started off by speaking of the latest trend within logistics - Green Logistics - an area that has grown rapidly during the last year. In the United States it’s already a huge movement and the prime drivers are consumer opinions, fuel and energy prices, governmental regulations and an efficient supply chain.

Now green logistics are becoming sustainable logistics - with focus on such areas as ethics, antiterrorist functions, working conditions and more. Naturally this affects the way companies work and the decisions they need to make on a daily basis and the three main steps for implementing green logistics are Direct action, as in reducing transportation fleets and Indirect actions, as in how to conduct sourcing activities. Thirdly there are Compensative actions – something Establish wouldn’t recommend.

In addition, companies need to take into consideration what suppliers they should use and where the suppliers should be based geographically. They also need to consider the choice of transport, material handling, choice of packaging and packaging material, consolidation, production and much more.

The extraordinary thing is that if a company succeeds in doing implementing green logistics, it will directly have a drastic effect on the environment. As an example Håkan used Procter & Gamble, who decided to start manufacturing concentrated detergent. This decision led to them using 60 000 trucks less when transporting the products.

Changing demographics
Every 7 seconds there’s an American citizen who turns 61 years old. And, when Americans retire they move. This is why the largest growing population in Florida is between 55-64 years old and the demographics of the States will mirror Florida in less than a decade. In Europe the total population is decreasing, loosing approximately 75 million people in the next 50 years. In Sweden the majority of municipals will see a declining population already in 2010. In other words, demographics are changing.

So, how will this affect business? Due to the fact that the elderly of today are healthier, better educated, wealthier, more technology interested and better informed, we will se different expectations and higher demands. This will lead to more differentiated products and developed services that simplify the lives of the elderly. There are already products on the market like smart cards for better shopping, in-shop services for older people, new functions in cars for elderly drivers and safety services at home.

In the working environments products and services are being developed to make it easier for people to work longer. In a warehouse or DC operation for instance, this could be automation, voice directed picking, ergonomic equipment, process change, goods to person and flexible hours.

But, Changing demographics do not just regard the elderly. The young are choosing new lifestyles which change consumption patterns as well as infrastructure and access to goods – especially for everyday needs.

Performance Based Logistics
There are new demands on the market today. Companies need to deliver measurable outcome instead of activities and customers pay for availability, response time, cost per unit, etcetera. The supplier looses revenue but gains profit as well as the possibility to climb the ladder and position themselves on top of the value chain.

In a Performance Based Logistics model companies can use fixed price, cost plus and gain sharing. A fixed price model is reliable for the buyer and creates savings for the provider but there’s no real incentive for co-operation. When using a cost plus model, there’s no incentive for improvement, while there’s a continuous transactional negotiation in the gain sharing model.

Demand Chain Leadership®
When comparing Supply Chain Management (SCM) with Demand Chain Leadership® (DCL), you will notice a couple of differences. For one, DCL is a competitive edge instead of a support function and includes product development and market focus instead of excluding it. That is, operations and sales work closely together. Also, DCL complements existing logistic services measurements with increased earnings and market share.

According to Establish the companies who succeed in making customers’ needs the drivers of DCL are successful Demand Chain Leaders. These leaders look beyond conventional solutions to work with tailor-made offerings and create real value for customers through customer focus, lifecycle leverage, disciplined innovation and Lean Production.

Scenario driven planning
The future is getting harder to predict and uncertainty is higher than ever. The question is how this will affect logistics? Well, if you can’t continue to ship products on trucks – what then? And will terrorism increase? How will that affect your business? Will there be a new cold war and will China be the new economic leader?

There are a lot of different possible future scenarios that companies need to take into consideration when planning ahead. To prepare an organisation for uncertainty the first step of action is to avoid the trap of Event Prediction Planning and develop capabilities and processes that can be quickly adapted to handle uncertain events. The second step is to create a sensing organisation that can effectively leverage flexibility and agility by tracking the future and thirdly, develop new mind sets.

The difference between earlier methods of planning, like Point Forecast and Risk Management, is that Scenario Driven Planning creates scenarios that are methodically constructed stories which help people perceive how decisions made today might work in alternative future environments.

Emerging Markets

The emerging markets of the world can be defined as economies with low to middle per capita income, with purchasing power parity and high growth rate. 70 percent of the world’s population lives in an emerging market like Brazil, India, China, Mexico, South East Asia, Russia as well as parts of Africa and Latin America. Sweden’s closest fast growing market is Russia.

What possibilities do companies have to source products and work with global logistic solutions in these markets? How do they execute marketing activities in countries with cultures that are hard to understand? And if distribution channels make it almost impossible to reach consumers, should you even bother?

One answer is to make use of unconvential methods which they develop from existing conditions on the specific market. In doing so, they also take the advantage of the fact that emerging markets also fuel supply chain innovation. Products and technologies then start showing up in developed markets.

The one hour seminar was rounded up with some “Breaking News” and a presentation of this year’s edition of the Establish Year Book of 2008 – Everyday is a logistics day!