Need to quickly predict the transportation and logistics business environment that is undergoing transition

The business environment of Japan’s transportation and logistics industry, mainly urban logistics is amidst a major transition with strengthening of e-commerce channels of retail and services industry, the demand for retail logistics is increasing. However, on the other hand, the number of people working in the transportation and logistics industry is decreasing steadily due to economic stagnation, low birth rate and aging population. Due to this, the supply of logistics infrastructure that supports the demand is likely to become severely constrained making the limits of delivery capacity apparent in the logistics industry. Also, in the transportation industry, “MaaS^＊” will prevail because of innovation in digital technologies. Hence, it is necessary to form strategies to find business opportunities in the urban and rural areas by using digital technologies. Moreover, it is required to foresee the likely future changes and incorporate this in long-term scenarios and strategies for the client depending on the business environment.

＊ Mobility-as-a-Service

It is effective to create scenarios focussing on “driving force of changes” before the advent of the uncertain future

In a continuously changing business environment, it has become increasingly difficult to predict the future by using the past accumulated data. Hence, many transportation and logistics operators find challenges in creating a suitable strategy. It is important to shift the focus to the future changes in the social environment, to envisage several possible future states through scenario planning and create a strategy for each possible future state.
The development of several scenarios will help in gaining a comprehensive view of the possible future states, which can help in linking them to a suitable strategy. Furthermore, the risk of not being able to predict the future and delay in taking measures by considering only one scenario can be reduced.

■ Environmental Changes and Issues in the Transportation and Logistics Industry

Support for identifying suitable factors and deriving strategies based on in-depth understanding about the clients

As a think tank, NRI has a wealth of detailed insights of the trends in social environment and predicting the future. Moreover, we have many specialized consultants who have rich experience in the transportation and logistics industry. By accumulating such knowledge, we implement scenario planning in 4 steps, (1) Identify the driving force of changes, (2) Establish the basis of evaluation, (3) Select critical factors and (4) Create scenarios.
We form a team of consultants who possess knowledge of conducting social surveys, quantify the market scale and demand, and identify the competitive advantage of our clients to get a comprehensive view of the multiple scenarios and create and examine strategies. We have used this approach in many cases where we discuss with the clients and develop a suitable strategy for each of them.
We seek to obtain an understanding from our clients that scenario planning is not a single assumed state of what will happen, and we seek to tailor the optimal strategy for each of the scenario that can be envisaged.

Case: Scenario building and strategies on urban logistics of Japan, US and China in 2030

NRI provided support for a project for a component manufacturer A by implementing scenario planning on state of urban logistics of Japan, US and China in 2030 and derive strategic hints against each scenario drawn.
Company A was looking for a strategy which could respond to the changes in business environment surrounding the future urban logistics. However, amid significant changes in the environment due to innovation of digital technologies, etc., the company was facing a challenge in implementing long-term forecast based on the past trends and creating and examining strategies.
NRI implemented scenario planning based on the possible factors of change and had a thorough discussion regarding the future strategy. As a result, we noticed a gap between the company’s original business scope and the strategy formulated based on the scenario planning, which required a revision of the company’s position within the industry and their target customers.

■ Scenario Planning by NRI

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Companies reliant on their employees for all the operations is likely to face challenges

Recently, the environment for infrastructure companies has been changing drastically, including increase in globalization of businesses, rapid development of IT technologies, such as AI, Big Data and IoT, entry of new players due to policy changes such as deregulation, serious resource constraints as Japan faces population decline, etc. and issues that need to be addressed are increasing and becoming more complex.
If the business management cannot respond to uncertainty, diversity and complexity, this can lead to a decrease in efficiency, delay in making important decisions from a competitiveness perspective and significant deterioration of management indicators.

“Now” is the time for supply chain reforms to be implemented at the corporate level

In order to maximize the efficiency of management resources (people, things, money and information) and improve sales, profit and cash flow simultaneously, it is necessary to promote reforms at a corporate level under the direction of the management layer.
If the scope of SCM reforms is restricted to extremely narrow domains, such as only in logistics and procurement, the effect of improvement activities will also be limited.
It is the time to optimize the entire supply chain and dynamically evolve it by using more IT technologies, and ensure that SCM reforms are recognized as a top priority management task.

■ Changes in the Environment of the Infrastructure Companies and Issues of Management and Business

A steady viewpoint can help in implementation of SCM reforms that is considered as a management issue

In order to ensure that SCM reforms generate promising results, it is necessary to carry out examination and promotion in consistency from two perspectives, i.e., from the view of overall optimization and effectiveness of on-site operations. For instance, if we start from Fit/ Gap analysis that is restricted to specific businesses, various inefficiencies can be detected, but priorities are not set and resistance from employees towards the changes in business cannot be overcome would not see the maximum benefits. We have good track record in providing consistent support, including implementation of design by ensuring consistency between management/business strategy and SCM, introduction of business/IT, incorporation of Human Resources (organizational or evaluation scheme) changes at the employee level, as well as data analysis and PDCA at the time of operations. Moreover, we have a team of management consultants who are familiar with the industry, business/IT consultants who are also experts in SCM reforms and engineers from Systems Department for implementing the reforms. We also have a rich network of solution providers that can be used to quickly implement PoC^*.

＊ Proof Of Concept

Case: Developed a mechanism of supply chain that can act as a base for business management

NRI provided support to an industrial machinery manufacturer A, from creating a plan for SCM reforms to designing operations and rules. However, even if the mechanism for overall optimization is created, it is ineffective if the organization and employees are not convinced. In order to prevent this, we also engage in consensus building within the company on the objective and target effect of SCM reforms and maintained a balance between the roles and responsibilities of each organization. Moreover, we created an environment where the organization and employees can get a return corresponding to their efforts by ensuring that data accumulated through SCM operations can be used for other operations as well.
With such reforms, unnoticed inefficiencies become apparent, for example, when visualizing the inventory responsibility. Hence, we build consensus by conducting workshops across organizations. In addition, establishment of a steering committee by the management helped in promoting reforms without any setback caused by “NIMBYism”^*.

＊ NIMBY: Not In My Back Yard

■ NRI’s Approach for Implementing SCM Reforms

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