Session 6-7 Supply Chain Basics Supply Planning

Atanu Ghosh
atanu.ghosh@nevaehtech.com

14-Dec-08

Supply Planning
Inventory management and safety stock planning Vendor managed inventory (VMI) Outsourcing Service parts planning Transportation management Logistics service providers

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Inventory management

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Inventory optimisation

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Inventory vs service level trade-off

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Improving trade-off balance

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Improving trade-off balance

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Protecting against uncertainty

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What is safety stock planning

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Safety stock planning in a perfect world

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Safety stock planning in a real world

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Safety stock planning with safety net

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Inventory policy practices

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Vendor managed inventory (VMI)

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Vendor managed inventory (VMI)

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Benefits of VMI

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Integrated process w/o VMI

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Integrated process with VMI

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Outsourcing trends

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Business values of outsourcing

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Challenges in outsourcing

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Challenges in outsourcing

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After-sales service business

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Service parts management is different

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Supply chain: finished goods and service parts

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Service parts supply chain

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Service parts supply chain

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Service parts management challenges

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Service parts planning

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Transportation

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Transportation scenarios

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Transportation process overview

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Transportation chain

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Route definition

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Logistics service industry landscape

Raw Source Suppliers
Contract Mfg (EMS) OEMs Distributor

Manufacturers

Component Mfg Sub Assy Mfg

Retailers
Retail

Configure & Package

VAR

Customer

Carriers

Distributors

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Logistics service industry overview

Total Logistics Spend (USA)
Total spend on logistics by American Industry totaled $936 Billion in 2003, which represents 8.5% of US Gross Domestic Product.
Annual logistics spend has doubled over the past two decades Logistics efficiency has improved nearly twofold over that period 1981 : Logistics was 16.2% of GDP 2003: Logistics was 8.5% of GDP Market inefficiencies caused by regulation and barriers to entry have been removed
$12.0 $9.0 $6.0 $3.0 $0.0
19 81 19 95 19 90 19 97 19 98 20 02 19 99 19 85 19 96 20 01 20 00 20 03

Annual Logistics Spend as % of GDP 20.0% 15.0%

16.2%

8.5%
10.0% 5.0% 0.0%
19 98 19 81 19 85 19 97 19 95 19 90 19 96 20 00 20 01 19 99 20 03 20 02

US GDP ($ Billions)

Source: Annual State of Logistics Report, 15th Edition Delaney, Bob., and Wilson, Rosalyn (Council of Logistics Mgmt., June 2004)

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LSP market segment overview

The LSP customers expect a One-Stop-Shop for all their logistics services, therefore LSPs have been growing their service portfolios significantly
Focus on core competencies as main driver
Core comp.

Core Business
Planning

Customer

Customer

Customer
Supply Chain Orchestrator

Logistics competence

Customer

4PL

LLP

Supply Chain Manager

Coordination

3PL/contract logistics

3PL/contract logistics

Execution

Freight forwardding

Warehousing

Value Freight WareAdded forwardhousing services ding

Value Freight WareforwarAdded housing ding services

Other Value Freight ProcesWareAdded forwardses1) housing services ding

Logistics

Logistics

Logistics

Logistics

( Other1)

1985
1) Sourcing, production, engineering Source: BCG analysis

1995

1999

2002

2005 2015

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LSP competitive landscape

As manufacturers and shippers have streamlined their business models and focused upon their core competencies, the third-party logistics marketplace has benefited from this trend, growing an average 13.4% annually over the past seven years1
3PL/Contract Logistics Revenues ($ Billions)
$70.0

+ 7.4%
$60.0 $50.0 $40.0 $30.0
39.6 34.2

+ 6.9%

3.0

9.0

+ 24.9% + 14.4% + 15.8% + 11.0%

45.3 60.8 56.6

16.9
65.0

$20.0 $10.0 $0.0

30.8

19.5 16.6

19 97

19 98

19 96

19 99

20 00

20 01

20 02

Dedicated Contract Carriage Trans. Mgmt (US) Trans. Mgmt (Int'l) Value-Add Warehousing 3PL Software

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Next Session: Configuring supply chain with SCOR Model

Atanu Ghosh
atanu.ghosh@nevaehtech.com

14-Dec-08

39