PDF - Conference 3

TheLastMileBattleintheValue
Chain
CarlosCordon
IMDProfessor
Agenda
• TheamazingcaseofYamato
– LeaderinJapan
– ExpandingtoAsia
– Challengesandopportunitieswithbigdata
• Thefabulousbusinessofthelastmilebattle
– Theriseofthelastmile
– Theneedforscale
– Themoneyinthelastmilebattle
• BigData:thesci-fifutureofthelastmilebattle
– Agamechangerinthelastmilebattleroutes
– Anticipatingthebehaviorofconsumers
– Newentrants:Amazon,drones,FMCG’s,retailers….
YAMATOTA-Q-BINPARCELSERVICE
Japanese parcel delivery market competitive
dynamics (2012)
Comparison of the parcel delivery
businesses the three majors
Yamato
TA-Q-BIN volume (million)
TA-Q-BIN Average Selling
Price (¥)
Delivery business revenues
(¥ billion)
Delivery business OP margin
Number of employees
Sagawa
Market share of major players by
volume (% of total)
Japan
Post
1,488
1,357
591
460
1,028
754
201
3.6%
-7.3%
3.9%
142,209
46,674
382
Less than
400
~ 100,000
Number of vehicles
43,849
25,965
31,183
Number of delivery centers
~4,000
~ 400
~ 2,500
Source: “Yamato Holdings (9064): high expectations a drag” J.P. Morgan equity research report, May 20, 2014; based on data/ analysis by Japan Direct
Marketing Association, METI and J.P. Morgan
History of Yamato’s innovations
Timeline of New Product
Development
Enabling Sender-side
customer service
1999
In 1999*, certain firms switched their existing parcels to express home
delivery, and the data for the year reflects this increase. Excluding this
extraordinary factor, year-on-year growth was 5.9%.
*The period April 1999 through March 2000 in this graph only.
Enabling Delivery-side Enhancing services
customer service
by proposing
solutions
2007
As the result of the privatization of the postal service in October 2007, Japan
Post Co. Ltd. now falls under the jurisdiction of the Motor-Truck Transport
business law, and is included in the survey starting from fiscal 2007**.
**The period April 2007 through March 2008 in this graph only.
Source: “New Era of Growth Potential. Advancing with “Value Networking” design and forge a robust corporate culture” Annual Report 2014 for the year
ended March 31, 2014, Yamato Holdings Co., Ltd.
Yamato Group business operations
Business
Description
Delivery
• Involved in small parcel delivery services for the general public
and corporations centering on TA-Q-BIN and Kuroneko Mail,
including high value-added services, such as Cool TA-Q-BIN and
TA-Q-BIN Collect
1,000
BIZ
Logistics
• Handles logistics and other B2B distribution operations
• Helps corporate clients manage their supply chains by providing
Home
Convenience
• Rooted in moving services, distribution services and lifestyle
e-Business
• Involved in a range of information services for corporations,
Financials
Autoworks
Other
Revenue(1)
(¥ billion)
+6.8% 1,159
1,085
3.1%
+4.5%
98
103
innovative logistics services and reducing total costs
support services, closely tailored to the needs of different regions
• The installation delivery business which installs electrical
appliances for customers is steadily growing nationwide
including ASP services and information system development
• Services around tracking, security, and packages
• Includes settlement and other financial services targeted at
consumers and business customers, starting with mail order firms
• Offers several types of settlement methods, including payment on
delivery and payment by credit card
• Mainly comprises maintenance of trucks and other
vehicles for transportation companies.
• Includes a broad range of shared services, including
highway transportation and personnel placement.
Notes: (1) Includes intercompany transfers (2) 2014 Operating income (% of revenues)
Source: Company website and 2014 Annual report
Operating
margin(2)
3.3%
+5.9%
59
63
0.3%
+10.5%
65
72
11.1%
+9.4%
61
66
14.2%
+5.8%
51
54
6.1%
+15.2%
59
2013
68
2014
16.9%
Yamato Group financial highlights
Key financial figures (Millions of Yen)
2009
2010
2011
2012
2013
2014
Operating revenues
1,251,922
1,200,834
1,236,520
1,260,833
1,282,374
1,374,610
Operating costs
1,167,764
1,110,971
1,143,006
1,163,777
1,181,834
1,274,471
Selling, general and administrative expenses
28,437
28,474
29,200
30,405
34,337
37,043
Operating income
55,721
61,389
64,314
66,651
66,203
63,096
64,284
65,882
Income before taxes and minority interests
Net income
48,996
60,434
61,836
45,817
25,523
32,282
33,208
19,787
35,144
34,776
Working capital
159,937
165,890
185,992
182,111
186,868
179,999
Total assets
869,606
878,641
899,363
919,295
950,153
1,032,134
Total shareholders’ equity
475,815
512,910
515,602
514,996
534,451
551,379
Capital expenditure
45,856
39,700
52,472
48,615
48,052
79,531
Depreciation and amortization
42,697
39,883
39,583
38,682
37,936
42,266
Net cash provided by operating activities
84,463
77,064
87,899
71,843
73,950
80,075
2009
2010
2011
2012
2013
2014
170,662
167,555
171,642
177,301
177,108
193,146
1,232
1,262
1,348
1,423
1,487
1,665
646
624
609
600
591
574
2,231
2,262
2,312
2,187
2,112
2,084
65
65
64
62
61
61
Key financial figures (Millions of Yen)
Numberofemployees
TA-Q-BIN deliveryvolume(Millionparcels)
TA-Q-BIN Unitprice(Yen)
Kuroneko Mailhandlingvolume(Million units)
Kuroneko MailUnitprice(Yen)
Source:AnnualReport fortheyearendedMarch31,2014,YamatoHoldings Co.,Ltd.
TA-Q-BIN international expansion
Description
• Launched via President Transnet Corporation, a Joint Venture with local Uni-President Group.
Taiwan
(2000)
Singapore
(2010)
Shanghai
(2010)
Benefitted from Uni-President’s established relationship with 7-Eleven convenience store chain
• Utilized motorcycles for same-day deliveries, which was offered only in Taiper metro area. Used
trucks as mobile warehouses
• Key challenges: high cost of operations mainly due to parking violations
• Launched in 2010 via a fully owned subsidiary
• Key challenges:
− Low TA-Q-BIN brand awareness, non-existent demand for C2C services, low demand density
− Low productivity, high staff turnover
− TA-Q-BIN offering was too costly and its quality perceived as excessive
• Launched via a Joint Venture with local Shanghai Bus Logistics. Served Japanese e-commerce
companies, then spread to Chinese e-commerce and retail clients
• Key challenges
− High demand for COOL TA-Q-BIN, but poor local infrastructure made service problematic
− Absence of service mentality and low customer expectations
Hong Kong
(2011)
•
•
•
•
Launched using Japanese convenience and laundry shops as collection agents
High speed deliveries possible due to well-developed subway infrastructure
Succeeded in B2B document delivery, COOL TA-Q-BIN, logistics/repair of manufacturing parts
Key challenges:
− Negligible C2C segment (as in Singapore) and high staff turnover
Malaysia
(2011)
•
•
•
•
Due to large service area operated its own long haul trucks and mobile hub
With no Japanese business in market, relied on local printing and e-commerce industries
Next-day TA-Q-BIN delivery service was in demand while time-specific offerings irrelevant
Key challenges:
− B2C and C2C segment non-existent due to lack of trust
− Lack of service mentality, high employee turnover
Source:“Yamato Transport Co. Ltd: TA-Q-BIN” Case Study No. 9B13D021, NUS & Ivey School of Business Fnd. Feb. 2014.
“Value Networking” concept
Source: “Yamato Group Presentation of the New Medium-Term Management Plan”, January 30, 2014, Yamato Holdings Co., Ltd.
Comparative historical trends in the mail-order
and retail industries
Mail-order market vs. overall retail industry: revenue trends
FY02 = 100
Source: “Yamato Holdings (9064): high expectations a drag” J.P. Morgan equity research report, May 20, 2014; based on data/ analysis by Japan Direct
Marketing Association, METI and J.P. Morgan
Comparative historical trends in the mail-order
and retail industries
Mail-order market vs. overall retail industry: revenue trends
¥ billion
Source: “Yamato Holdings (9064): high expectations a drag” J.P. Morgan equity research report, May 20, 2014; based on data/ analysis by Japan Direct
Marketing Association, METI and J.P. Morgan
Reforming income structure and maintaining
growth
Source: “New Era of Growth Potential. Advancing with “Value Networking” design and forge a robust corporate culture” Annual Report 2014 for the year
ended March 31, 2014, Yamato Holdings Co., Ltd.
ChallengesandOpportunitieswithBig
DataforYamato
ThekeytoYamatosuccess
istheSalesDriver(clients
androutes)andthe
densityofdeliverypoints
Thisknowledgeand
densityareonlyexistingin
Japan
ChallengesandOpportunitieswithBig
DataforYamato
Toreplicatethisknowledgeanddensitythe
solutionmightbeBigDataandm-commerce
Theriseofthelastmile
In10years15%ofU.S.shoppingmallswillfail
Theneedforscale
high
Leverage
thenetwork
profit
golden
in
low
waste
invest
low
high
Buildthenetwork
Themoneyinthelastmile:Yamato
Repair,hospital
high
Leverage
thenetwork
profit
Golf,ski,
luggage
in
golden
T-Q-Bin
low
waste
low
invest
high
Buildthenetwork
Amazon:theomnichain
• Amazon’snewdistributionarm,AmazonLogistics,willbecomea
logisticscompanyinitsownright,competingwithcompaniessuchas
UPSandRoyalMail.
• ThemovewillsaveAmazon$3billionayeargloballyand£122
millionintheUKalone.
• AmazonneedsitsownlogisticsoperationtofurtherincreaseSunday
andSameDaydeliveries,supportingitsambitiousPrime
membershipplans.
• LongertermAmazonhaspatentedusing3Dprinterstoproduce
itemsenroutetocustomers,isalreadyintroducingthe’Internetof
Things’,andistrialling deliveriesdirecttoyourcar.
• Finally,webelievelong-termAmazon’slogisticsplansmean
everythingwillonedaybedeliveredthroughapipecalledAmazon.
ParcelHero report, April2015
Conclusions
• Thelogisticsfieldisripeforadisruption…
• …companieshaveconsolidatedoverthelast30yearsto
obtaindensityofdeliverypointstocreateanadvantage…
• …YamatoisaprimeexampleofdominatinginJapanthanks
totheiramazingdensityofdeliverypoints…
• …thesameadvantageisanobstacletoexpanding
internationallyorganically…
• …theyareplanningtousebigdatatocreatethat
advantageoutsideJapan…
Conclusions
• …mostlogisticcompaniesaretryingtofollowasimilarroute…
• …retailersandshoppingmallswilldeclineslowly..
• …newplayerscouldcomefromm-tailers orFMCG’swithbig
densityofdelivery …
• Anewlogisticsecosystemdrivenbybigdataandm-commerceis
emerging