e-Logistics Services

From Warehouse to Logistics Service

Center
64157

2002 Spring, Week 4-2

Info@taskco.com
886-2-8772-2583

TASKCo Corporation

2002/04/13

CONFIDENTIAL

Complexity of a Typical Global Supply Chain

Ocean

Freight
Forwarder

Supplier

Plant
Roadways

Customs
Agent

liner

Port
Roadways

Airways

Road
+
Rail

Home

Consumer

Supercharging Supply Chains

Ernst & Young LLP

Customer
(Retailer)

Customers
Warehouse Roadways

RDC

CONFIDENTIAL

The Evolution of Enterprise

Applications
% Penetration

100%

ERP
Supply
Chain
Execution

Time

CONFIDENTIAL

What is Logistics?
Logistics is defined as the process of movement of
materials and products into, through and out of a firm.
The Logistics Flow
Chart
SUPPLIERS

SALES
FUNCTION

TRANSPORTATION

(SUPPLIER)

PURCHASING
FUNCTION
(CUSTOMER)

TRANSPORTATION

PURCHASING
FUNCTION
(DISTRIBUTOR)

SALES
FUNCTION

WAREHOUSING

(DISTRIBUTOR)

CONFIDENTIAL

The Logistics Channel

Suppliers
Sales

(Supplier)

Transportation
Purchasing

(Distributor)

Warehousing
Sales

(Distributor)

Transportation
Purchasing

(Customer)

CONFIDENTIAL

Cross Functional Nature of Logistics

Front

end - Distributor Purchasing and

Supplier Marketing Interface
Middle - Warehousing and Transportation
Back end - Customer Contact (Marketing)

FRONT END

MIDDLE

BACK END

Functions of Logistics

CONFIDENTIAL

Key Logistics Activities

Customer

Service Levels - Set by Marketing

based on Operations Capabilities

Transportation
Routing and Vehicle
Scheduling
Inventory
R.M. and F.G. stocking policies
Break Bulk
Consolidation

CONFIDENTIAL

Support Activities
Warehousing

How many?
What configuration?
Where to hold inventory?

Materials Handling - ASRS, RF, Bar Coding, Etc.

Purchasing - Supplier selection, Purchase timing,

Quantity, and Quality

Scheduling - Interface marketing and production

Information Maintenance
Data Collection
Data Integrity
CONFIDENTIAL

Objectives of Logistics Strategy

Process

Reduction - Cycle time, Lead time,

Automation

Capital Reduction - Inventory investment, number

of warehouses

Service Improvement - the antithesis of the foregoing

CONFIDENTIAL

Industry Specific Logistics Services

Siz
e

Si ze

New Logistics Center

Segments Market by
Traditional WMS Providers
Customers Vertical
Segment Market by Customer
Market
Size
Traditional:
CPG
Opportunity:
Apparel
Healthcare
Grocery
L
Electronics
Food Service
Automotive
3PL

S
Industry

Industry

CONFIDENTIAL

Logistics Goal: Close Gaps in the Supply

Chain
Retailer Requirements

Supplier Requirements

Speed to
compliance

Customer / retailer
satisfaction

Lower inventory

Operational
productivity

Cross-docking

Value-added
services

Transportation
efficiency

Improved in-stock
positions

Lower inventory

Flexible business
practices

Higher number of
SKUs

Direct-to-consumer

Configure-to-order

Imperfect
Information

CONFIDENTIAL

Traditional Distribution Systems Used

Multi-Tiered Warehousing
Bulk
Finished
Goods

Manufacturers
Distribution
Center

Manufacturer

Bulk
Shipments

Retail Outlet

Local
Retail
Distribution
Center

Store
Distributions

Hold inventory

Value added services

CONFIDENTIAL

Traditional Distribution Center

Process
1 Inbound receipt of
goods

2 Storage of
goods

3 Bulk outbound
shipments

1
3

CONFIDENTIAL

Quick Response Initiatives

Streamline Distribution Process
Manufacturers
Distribution
Center

on
su
m

re
ct
-to
-C

to

Advanced shipping notice

Bulk or discrete shipments
Store specific pricing
Aisle specific palletizing
High velocity

Di

ire

s
ct

D
re

ry
il ve

er

Manufacturer

Retail Outlet

Very high
volume
Mass
personalization
Integrated TMS
requirements

Lower inventory

Greater availability

Local
Retail
Distribution
Center
Cross-docking
Flow-through

CONFIDENTIAL

Value-added Logistics Center Process

1 Inbound shipment 4 Storage of goods
tracking
5 Order picking
2 Yard management 6 Value-added
services
3 Inbound receipt

7 Order packing
8 Pack and hold
9 Outbound customer

compliant shipments

of goods

3
1

5
7

6
CONFIDENTIAL

Continuously Changing Demands of

Retailers
K-MART

Western Publishing

Old Practice
# Orders

New Practice

17,000

Destination

Warehouse

Individual Stores

Frequency

Monthly

Weekly

Telephone/Paper

Electronic
Advanced Ship
Notice

IT Requirement

CONFIDENTIAL

From Warehouse to Distribution

Center

In order to enable greater customer

responsiveness, the traditional role of the
warehouse (WMS) is moving toward distribution
center. This is a major force in driving the
demand for e-Logistics applications.

CONFIDENTIAL

Global Operations & Logistics Framework

Geographical
Integration

Sectorial
Integration

Functional
Integration

CONFIDENTIAL

Geographical Integration

Impact of Distribution and Transportation greater

due to Globalilty
Borders becoming more porous in terms of trade
Production on global scale --- no longer country-specific
International Sourcing
Selling in Multiple Markets
Data Processing and Communication technology help
with the geographical integration.

CONFIDENTIAL

Functional Integration

Logistics - cross-functional in nature. Cuts across activities

and creates interfaces to optimize overall performance.
Flow management in Global Logistics difficult
Internationalized Markets
Competitive products in the Market
Adaptation of new technology
Government Regulations

CONFIDENTIAL

Sectorial Integration

Companies are handling logistics issues together beyond

corporate boundaries.
Efficient Consumer Response (ECR)

Collaborate

Manufacturer

Distributor
Final aim to reach
customer

Consumer

CONFIDENTIAL

Freight Forwarders
Freight providers have the earliest instance of
hub and spoke systems
Tenders for freight services made worldwide
Development of Intermodal freight provision
Mergers between freight providers -- e.g. Airplane
companies
Globalization brings up several issues in order to
satisfy proximity service

Use of manufacturers sales network

Setting up Proximity Distribution Centers (PDC)

Developing central hub for express services and dispatch orders
Setting up inventory of class A products with storage
operator, distributor or agent

CONFIDENTIAL

International Trading Operators

International Freight Forwarders

Nonvessel-operating Common Carriers (NVOCC)
Customs House Brokers
Export Management companies
Export Trading Companies
Shippers Associations
Export Packers

CONFIDENTIAL

Dynamic Forces of Global Logistics

The firms adopt different orientations with varying intensities
due to the dynamic behavior of the global business environment.

RESOURCES

FO
IN

R
E
S
U
CONFIDENTIAL

Global Logistics Orientation

Resource Oriented Logistics

Emphasis towards optimal use of resources -- capital,
materials and people
Focuses on the relationship between the functional
and the geographical
Optimize

Functional

Geographical
Resources

CONFIDENTIAL

Global Logistics Orientation

Information Oriented Logistics

Emphasis towards optimal use of information.
Focuses on the relationship between the sectorial
and the geographical dimensions
Sectorial

Geographical

Optimal
Performance

CONFIDENTIAL

Global Logistics Orientation

User Oriented Logistics

Emphasis on the final customer.
Using all the supply chain partners to bring their
expertise in order to best service the customer
User oriented focus brings about flexibility in the
logistics channel

Customer

CONFIDENTIAL

Factors Pushing Global Logistics

Technological
Advances

Emergence of
Global Markets

Political & Macroeconomic factors

Global Cost
Forces
CONFIDENTIAL

Factors Pushing Global Logistics

Global Markets

Competition from foreign firms in local markets.

Incredible growth of demand in foreign markets.
Global presence used as competitive threat.
Change of priorities
Global markets growing faster due to technological
advances
Products need to be introduced in all markets
together.
State of the Art markets driven by customer preferences
Firms have to set up production in these areas to
maintain their competitive profiles. E.g. Japan - M/c
tools

CONFIDENTIAL

Factors Pushing Global Logistics

Improvements in Technology
Communication faster, easier and cheaper.
Markets characterized by fewer producers and greater
diversity in products
Shorter product life cycles
Technology advancement become global phenomenon
Firms have to start looking at international sources to
tap technological services
Global competition forcing companies to locate more
R&D and production units closer to the suppliers.
Joint ventures between firms to share technological info.

CONFIDENTIAL

Factors Pushing Global Logistics

Global Costs Forces -- Shift in Logistics costs

Shift in focus from direct labor costs
Global environment forcing companies to consider
a trade off between labor costs, cost of start-up,
fluctuation
of currency, inventory costs, cost of quality
management
and training the local workers leading to island hopping
strategy.
New Competitive priorities like speed,
quality,customization,
delivery reliability.
Production facilities are becoming more capital
intensive
high technology industries
R & D costs
CONFIDENTIAL

Factors Pushing Global Logistics

Political and Macroeconomic factors

Exchange rate fluctuations

Regional trade agreements --- NAFTA
Trade protection mechanisms
Tariff and non-tariff barriers
Technical Standards
Health regulations
Procurement policies

CONFIDENTIAL

How is Global Logistics creating Change?

The management has to consider the Global economy

Service in the Industry becoming more important than

Cost Saving

Logistics operations perceived more as Service Provider

for cost minimization

Logistics activities no longer limited to moving products

through the Supply Chain but as an Information Provider
for the SC.

Companies moving away from Vertical Integration

and towards Supply Chain Integration, with Logistics
activities provided externally.
CONFIDENTIAL

New concepts in Global Logistics

Delocalization - practice of adding value to the product at
different locations closer to the consumer.
Modularization - practice of assembling a product using modules
purchased from different sources
Delayed Differentiation & postponement - Customization
of the order after demand has been identified
e.g: Labeling the products in the language of the countries
that they have to be shipped to

CONFIDENTIAL

Benefits due to Globalization of Logistics

Globalization is necessary for long-term survival

Diversity of markets increasing giving rise to

Standardization across international markets
Product diversity

Ability to access multiple sources of technology

Ability to set up strategic alliances and R & D

CONFIDENTIAL

Global Supply Chain HP Example

HP DESKJET PRINTER SUPPLY CHAIN:

Printers made in Vancouver in two stages

Printed Circuit Assembly & Test (PCAT)
Final Assembly & Testing (FAT)

Components needed for PCAT & FAT taken from suppliers

worldwide & from HP divisions

Printer power supplies custom made for each country

with manuals written in that language packed

From Vancouver sent to Distribution Centers worldwide

CONFIDENTIAL

Global Supply Chain HP Example

IC
MANUF.

PRINTED
CIRCUIT
ASSM. &
TEST
VANCOUVER

FINAL
TEST
&
ASSM.
VANCOUVER

CUSTOMER
PRINT
MECH.
MANUF.
SUPPLIERS

WORLDWIDE

SUPPLIER
ACCESSORIES

DISTRIBUTION
CENTRES

WORLDWIDE
CONFIDENTIAL

Logistics Flows
Direct Flow
From companies to markets

Reverse Flow
From markets to companies

CONFIDENTIAL

Logistics Flows
Internal Logistics

External Logistics

Direct
Flows

Interplants

(supply of materials & components)

With customers

Plant/warehouse

With suppliers

(products, spare parts, promotional &

advertising materials)

With suppliers

(packaging, repairs)
Reverse
Flows

Warehouse/Warehouse

With manufacturers
(elimination, recycling)

With customers
(overstocks, repairs)
CONFIDENTIAL

Strategy for Global Logistics

Consolidation points
VIETNAM

IMPORT

USA/EUROPE

MALAYSIA
JAPAN
CHINA

TAIWAN

MAKE-BULK OPERATION

Break bulk
Capacity issues - whether to add processing capability or not
VIETNAM

USA/
EUROPE

MALAYSIA

TAIWAN

EXPORT

JAPAN
CHINA

BREAK-BULK OPERATION

Postponement
CONFIDENTIAL

e-Logistics A Modular Approach

Alert Monitor
Industry Standards

Inbound
ASN

Outbound

Receipt
Wave
Put-away
management
Movement Shipping
and slotting

Snap-on Modules
Snap-on module
architecture
Easily configurable and
upgradeable
Product is easily
customizable to fit
customer requirements

Third-Party Logistics
Billing
Optimization Suite

CONFIDENTIAL

Future Solution Strategy...

Productized logistics execution solution
Fast implementation
Extremely high price / value
Win high market share

Synchronize logistics in our core vertical markets

Expand deep industry knowledge
Integrate industry content databases
Architect for continuous upgradeability

Expand compliance guarantee to all supply chain

requirements
Guaranteed compliance with top 100 retailers
Develop additional high value, information-intensive
supply chain solutions

... Can lead to increasing returns solutions

CONFIDENTIAL

Integrated Logistics Services

Integrated Logistics is the fusion of information, logistics
and transportation technologies to provide rapid response
to track and shift assets even while in reroute, and to
deliver tailored logistics packages and sustainment directly
at the strategic, operational and tactical level of operation
Logistics functions will incorporate information
technologies and will work jointly and integrate with other
sectors to take advantage of advanced business practices,
knowledge economy, and global networks
Information technologies will enhance aircraft, sea liners,
and pre-positioning capabilities to lighten deployment loads

CONFIDENTIAL

Third Party Logistics Provider

Services provided are both physical and management.

Service levels improve due to improvement in flexibility

and inventory management

Cost reduced as compared to in-house logistics provider

In global logistics, versatile markets and products need

expert services which can be provided by several 3PL

CONFIDENTIAL

Third Party Logistics Provider

Use of 3PL allows the firm to penetrate new markets .

Access new technologies

Reduce inherent financial investment risks

Risks of using 3PL

The same 3PL might be providing services for
competing firms
Manufacturer with a good image in the market might
get tied down and their image linked with the 3PL

CONFIDENTIAL

Complexity & Customization

Range of Services provided by 3PL

Physical Contract
Logistics Services

High

Dedicated contract carrier

Dedicated warehousing

Physical
Services

Basic Services
Common Carriage
Public Warehousing

Low
Low

Integrated Contract Logistics

Integrated warehousing &

transportation
Integrated carrier
management & transportation
Management contract
logistics Services
Traffic Management
Warehouse Management
Import/export Management

Management
Services
Complexity & Customization

High

Source: J.M. Africk & C.S. Calkins ( Transportation & Distribution, 1994) CONFIDENTIAL

Emergence of Fourth Party Logistics

Providers
Globality and Supply Chain Integration are increasing the
functions of Logistics providers. This has lead to the
emergence of consulting firms as fourth party logistics
providers

3PL have a larger, more efficient network of transportation &

networking, but the 4PL have optimal combination of
warehouse capabilities, transportation services and technology

Consultants as 4PLs are used to review bids made by 3PLs,

and to align the business processes with the supply chain
-- especially critical in case of Global Logistics.

4PLs have the advantage of being in sync with the rapid,

enormous changes in Information Technology.
CONFIDENTIAL

Development & Role of 4PL

Greater Functional Integration

Broader Operational Autonomy

Client

Business Process
Management

Client
Client

3PL

4PL
1990s-2000
Outsourcing
1980s-1990s

Insourcing
1970s-1980s

4PL

Client

Client

IT Service
Providers
3PL

Internal Logistics
Operations

CONFIDENTIAL
Source: Andersen Consulting http://www.ac.com/services/scm/scm_who_4pl_paper2_b.html

Performance Criteria in Global Logistics

Looking beyond Financial indicators

Cost

Initial Cost
Lifecycle Cost

Quality

Design Quality

Conformance to set production standards

CONFIDENTIAL

Performance Criteria in Global Logistics

Service
Delivery Speed
Delivery Reliability

Flexibility
New-Product Flexibility-- Ability to introduce a new
product fast
Customization --- highly segmented markets
Product Mix Flexibility --- adjust production mix for demand
fluctuations
Product Ramp-up Flexibility -- expansion to mass production
for uncertain markets
CONFIDENTIAL

International Freight Forwarders

Buy space wholesale and sell it retail
International Freight Forwarders handle more
functions than the domestic freight forwarders:
Serve as consultant in export matters
Advise on acceptance of letters of credit.
Booking space on carriers -- Most of the movement
is done via vessel or air.
Arrange for insurance
Prepare documents like export declarations and
consular documents
Prepare Bill of Lading -- Forwarders experience
needed

CONFIDENTIAL

Other International Trading Operators

NOVCCs
Perform most but not all of the functions of an
international freight forwarder.
Specific functionality is trade agreements with carriers
NOVCCs affiliate with forwarders to offer the entire
range of services

Customs House Brokers

Take care of paperwork and movement of goods
through customs

Export Management Companies

Provides the US firm with information about the
overseas buyer
Advises the US supplier on requirements of the foreign
market in issues like foreign labeling and other specialized
functions
CONFIDENTIAL

Other International Trading Operators

Export Trading Companies

Attempt to combine all facets of international business
Used extensively by the Japanese

Shippers Associations
Trade groups representing shippers of similar cargo
that bargain with ocean steamship conferences as a single
entity

Export Packers
Expertise is specifically in packaging for the exporter.
To allow goods to move through customs easily.
E.g taking into consideration weight restrictions etc
To prevent the decay/damage of products.
CONFIDENTIAL

Nature of the Product

Value-add

Product processing
Services
Technical Support
Inventory Management
Financial
Commodities vs. specialty items
Delivery
Speed
Dependability
Flexibility

CONFIDENTIAL

Product Life Cycle and Distribution

GROWTH
Projected growth
Current network capabilities
Changes

INTRODUCTION
Low Distribution
Public Warehouse

MATURITY
Optimization

DECLINE
Projected cost decreases
Needed network scale backs

CONFIDENTIAL

Pricing
FOB

pricing

FOB factory - customer picks up freight

HIGH PRICE LARGE VOLUME ITEMS

FOB destination - seller picks up freight

LOWER PRICE HIGH VOLUME ITEMS

Title exchange implications

insurance
obsolescence
CONFIDENTIAL

Pricing
Zoning
ZONE 1

ZONE 2

DISTANCE AND NUMBER OF CUSTOMERS IMPACTS COST OF DELIVERY

Quantity discounts

Legal implications - must prove price difference is justified by

lowered logistical costs to deflect
discrimination charges from small buyers

CONFIDENTIAL