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Horizon 2020
Framework
Programme of the
European Union
Results
Reducing cost and vehicle impacts
Applying the learnings (case study)
BACKGROUND
UK Grocery eCommerce:
A market facing many challenges
Against a broadly static grocery retail market, online is growing rapidly
• Growth c.17% per annum with projected value of £17bn by 2020
• Future environmental impact CO2 175 m tonnes pa with NOX and PM’s
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UK Grocery eCommerce:
A market facing many challenges
3 main Supply Chain models have evolved:
• Store based picking fulfilment is the most common operating model
• As volumes have grown, there has been investment in upstream capacity e.g. dark stores and fulfilment
centres
• Dark stores are regional fulfilment that look like stores with no customers and avoid conflict with shop
customers and give some productivity improvements
• Historically – large central facilities have not proved economic. Now Ocado and Morrisons fulfil from large
central facilities with the technology provided by Ocado
• There is a cost trade off between picking and delivery – local picking costs more but the delivery is
cheaper
The Economics are Challenging and the retailers have a significant dilemma:
• Average Cost per order of c. £21, the delivery element circa £10
• Break even order c. £70 ~ embrace growth unprofitably or lose market share
• Collaboration is not on retailers’ agendas
Customer intimacy and feedback from the final delivery is a key part of the brand
Periods of peak demand are unsustainable
• So, retailers need to find ways to cut costs and improve customer choice
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USING DATA
Data Sources:
We used primary and secondary data
Primary data received from 2 retailers:
• Covering 1 calendar year and geographic area of London
• Circa 7m transactions
• Order level including order size, date, delivery time, delivery point at
postcode / sector level, and route origination
• Retailer 1 is one of the big six, retailer 2 a smaller UK player
• Data has been used with market share and demographics to synthesise
the market
Orders Weighting
A combination of Secondary data was used to
Total
Postcode
Sales
Population
Sales
Population
Sales synthesise postal sector
Online demand per retailer. For
Population Index \ Index Index Grocery
Sector
Population
method
method
method
method
example:
Orders
per Year
5,615 16,227 2,835 702
• Population statistics
1,770
AL1 1 50% 50%
AL1 2 6,716 19,411 3,392 840 • Market
2,117 and company reports
50% 50%
AL1 3 4,303 12,436 2,173 538
50% 50%
• Results
1,356 from published surveys
AL1 4 10,090 29,159 5,095 1,262
50% 50% • Undertook
3,180 in house a research survey on Consumer
AL1 5 10,529 30,430 5,317 1,317 attitudes
3,318 to Grocery Online shopping
50% 50%
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Data Challenges:
Challenges and workarounds led to unintended benefits
Significant effort to gain data from other retailers:
• 16 meetings and various email correspondence
• Genuine interest but competitive landscape has intensified since the
outset of project
• They have become increasingly guarded about data sharing
• However retailer interaction has enabled a very in depth view of the
market to be developed and ability to test assumptions and understand
capabilities and future strategies
• This has helped to develop a community of interest – major event 14th
March 2017
• As project develops still more opportunity to interact as needed
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Data Generation:
Monte Carlo Simulation
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Data Generation:
Vehicle Routing Problem
Supply 20 micro hubs
R1: R2:
Shared Model:
Source:
9 vehicles are needed, 425 kilometres Cranfield School of Management
10
Modelling Scenarios:
Using Micro Hubs in the ‘To Be’ landscape
We established the typical supply chain Understanding the role for Micro-hubs
models (micro consolidation centres)
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Modelling Scenarios:
Examining Retail Collaboration
Source:
Cranfield School of Management
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Modelling scenarios:
Identifying New supply chain structures
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RESULTS
Results:
A snap shot of the opportunities
Improvements up to:
15
Results:
Applying the learnings (E-Cargo bikes Case Study)
Sainsbury’s trials UK’s first grocery deliveries service by zero emission electric
cargobike
• e-cargobikes to deliver online orders to customers in Streatham, London, from
April 17th 2018
• Trial tests greener grocery deliveries in congested cities:, one e-cargobike can
deliver as much as 3.5-tonne lorry in a day
• Trial shows Sainsbury’s strategy to serve customers whenever and wherever they
want
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Results:
Applying the learnings (E-Cargo bikes Case Study)
U-TURN has been supporting and coaching the E-Cargo Bikes team through their
development of the trial with Sainsbury
Professor Alan Braithwaite used elements of the U-TURN analysis and results to:
• Provide regular sense checks and options discussions to the directors as they
pieced their way through the pre-revenue stage of their business planning and
design
• Provide data from U-TURN to validate likely volumes and drop densities to
arrive at the 2 to 3.5 mile radius number
• Supporting the design of the early trial runs, timing and productivity potential
• Coaching on the sales engagement and contractual expectations when
opening discussions with the retailers
• Reviewing the route data provided by the retailers and working on the
consequent productivity assumptions
• Creating revenue, cashflow and investment models
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THANKYOU