e-Logistics Services From Warehouse to Logistics Service Center

e-Logistics Services From Warehouse to Logistics Service Center 64157 電子商務模式設計與應用 國立中山大學企管所 2002 Spring, Week 4 -2 太世科 Info@taskco. com 886 -2 -8772 -2583 TASKCo Corporation 黃光彩 博士 太世科公司 2002/04/13 1 CONFIDENTIAL

Complexity of a Typical Global Supply Chain Ocean Freight Customs Agent Forwarder Plant Supplier Roadways liner Port Airways Road + Rail Home Consumer Customer (Retailer) Customer’s Warehouse Roadways Supercharging Supply Chains Ernst & Young LLP 2 RDC CONFIDENTIAL

The Evolution of Enterprise Applications % Penetration 100% ERP Supply Chain Execution Time 3 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 (DISTRIBUTOR) SALES FUNCTION TRANSPORTATION (DISTRIBUTOR) (CUSTOMER) 4 WAREHOUSING CONFIDENTIAL

The Logistics Channel u. Suppliers u. Sales (Supplier) u. Transportation u. Purchasing (Distributor) u. Warehousing u. Sales (Distributor) u. Transportation u. Purchasing (Customer) 5 CONFIDENTIAL

Cross Functional Nature of Logistics u. Front end - Distributor Purchasing and Supplier Marketing Interface u. Middle - Warehousing and Transportation u. Back end - Customer Contact (Marketing) FRONT END MIDDLE BACK END Functions of Logistics 6 CONFIDENTIAL

Key Logistics Activities u. Customer Service Levels - Set by Marketing based on Operations Capabilities u u Transportation u Routing and Vehicle Scheduling Inventory u R. M. and F. G. stocking policies u Break Bulk u Consolidation 7 CONFIDENTIAL

Support Activities u. Warehousing u u u How many? What configuration? Where to hold inventory? u Materials Handling - ASRS, RF, Bar Coding, Etc. u Purchasing - Supplier selection, Purchase timing, Quantity, and Quality u Scheduling - Interface marketing and production u Information Maintenance u Data Collection u Data Integrity 8 CONFIDENTIAL

Objectives of Logistics Strategy u. Process Reduction - Cycle time, Lead time, Automation u Capital Reduction - Inventory investment, number of warehouses u Service Improvement - the antithesis of the foregoing 9 CONFIDENTIAL

Industry Specific Logistics Services M Siz e 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 3 PL S Industry 10 10 CONFIDENTIAL

Logistics Goal: Close Gaps in the Supply Chain Retailer Requirements Supplier Requirements n Speed to compliance n Customer / retailer satisfaction n Lower inventory n n Cross-docking Operational productivity n n Value-added services Transportation efficiency n Improved in-stock positions n Lower inventory n Flexible business practices n Imperfect Information Higher number of SKUs n Direct-to-consumer n Configure-to-order 11 CONFIDENTIAL

Traditional Distribution Systems Used Multi-Tiered Warehousing Bulk Finished Goods Manufacturer’s Distribution Center Manufacturer Bulk Shipments Retail Outlet Local Retail Distribution Center Store Distributions n n 12 Hold inventory Value added services CONFIDENTIAL

Traditional Distribution Center Process 1 Inbound receipt of goods 2 Storage of 3 Bulk outbound goods shipments 2 1 3 13 13 CONFIDENTIAL

Quick Response Initiatives Streamline Distribution Process Manufacturer’s Distribution Center Manufacturer n m su -C n n n -to n Retail Outlet n on D Advanced shipping notice Bulk or discrete shipments Store specific pricing Aisle specific palletizing High velocity ct D n Di re ct ire re to s n er ry ve eli Lower inventory Greater availability Very high volume Mass personalization Integrated TMS requirements n n 14 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 3 Inbound receipt of services 7 Order packing 8 Pack and hold 9 Outbound customer compliant shipments goods 4 2 8 3 1 9 5 6 7 15 15 CONFIDENTIAL

Continuously Changing Demands of Retailers K-MART Western Publishing Old Practice New Practice 6 17, 000 Destination Warehouse Individual Stores Frequency Monthly Weekly Telephone/Paper Electronic Advanced Ship Notice # Orders IT Requirement 16 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. ” 17 CONFIDENTIAL

Global Operations & Logistics Framework Geographical Integration Functional Integration Sectorial Integration 18 CONFIDENTIAL

Geographical Integration Impact of Distribution and Transportation greater due to ‘Globalilty’ u Borders becoming more porous in terms of trade u Production on global scale --- no longer country-specific u International Sourcing u Selling in Multiple Markets u Data Processing and Communication technology help with the geographical integration. u 19 CONFIDENTIAL

Functional Integration Logistics - cross-functional in nature. Cuts across activities and creates interfaces to optimize overall performance. u Flow management in Global Logistics difficult u Internationalized Markets u Competitive products in the Market u Adaptation of new technology u Government Regulations u 20 CONFIDENTIAL

Sectorial Integration u u Companies are handling logistics issues together beyond corporate boundaries. Efficient Consumer Response (ECR) Collaborate Manufacturer Distributor Final aim to reach customer 21 Consumer CONFIDENTIAL

Freight Forwarders Freight providers have the earliest instance of hub and spoke systems u Tenders for freight services made worldwide u Development of Intermodal freight provision u Mergers between freight providers -- e. g. Airplane companies u Globalization brings up several issues in order to satisfy proximity service u u Use of manufacturer’s sales network u u u 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 22 CONFIDENTIAL

International Trading Operators u u u u International Freight Forwarders Nonvessel-operating Common Carriers (NVOCC) Customs House Brokers Export Management companies Export Trading Companies Shippers Associations Export Packers 23 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 U SE R FO IN 24 CONFIDENTIAL

Global Logistics’ Orientation u Resource Oriented Logistics u Emphasis towards optimal use of resources -- capital, materials and people u Focuses on the relationship between the functional and the geographical Optimize Functional Geographical Resources 25 CONFIDENTIAL

Global Logistics’ Orientation u Information Oriented Logistics u Emphasis towards optimal use of information. u Focuses on the relationship between the sectorial and the geographical dimensions Sectorial Geographical Optimal Performance 26 CONFIDENTIAL

Global Logistics’ Orientation u User Oriented Logistics u Emphasis on the final customer. u Using all the supply chain partners to bring their expertise in order to best service the customer u User oriented focus brings about flexibility in the logistics channel Customer 27 CONFIDENTIAL

Factors Pushing Global Logistics Technological Advances Emergence of Global Markets Political & Macroeconomic factors Global Cost Forces 28 CONFIDENTIAL

Factors Pushing Global Logistics u Global Markets Competition from foreign firms in local markets. u Incredible growth of demand in foreign markets. u Global presence used as competitive threat. u Change of priorities u Global markets growing faster due to technological advances u Products need to be introduced in all markets together. u State of the Art markets driven by customer preferences u Firms have to set up production in these areas to maintain their competitive profiles. E. g. Japan - M/c tools u 29 CONFIDENTIAL

Factors Pushing Global Logistics u Improvements in Technology Communication faster, easier and cheaper. u Markets characterized by fewer producers and greater diversity in products u Shorter product life cycles u Technology advancement become global phenomenon u Firms have to start looking at international sources to tap technological services u Global competition forcing companies to locate more R&D and production units closer to the suppliers. u Joint ventures between firms to share technological info. u 30 CONFIDENTIAL

Factors Pushing Global Logistics u Global Costs Forces -- Shift in Logistics costs Shift in focus from direct labor costs u 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. u New Competitive priorities like speed, quality, customization, delivery reliability. u Production facilities are becoming more capital intensive u high technology industries u R & D costs CONFIDENTIAL u 31

Factors Pushing Global Logistics u Political and Macroeconomic factors u u u Exchange rate fluctuations Regional trade agreements --- NAFTA Trade protection mechanisms u Tariff and non-tariff barriers u Technical Standards u Health regulations u Procurement policies 32 CONFIDENTIAL

How is Global Logistics creating Change? u The management has to consider the Global economy u Service in the Industry becoming more important than Cost Saving u Logistics operations perceived more as Service Provider for cost minimization u Logistics activities no longer limited to moving products through the Supply Chain but as an Information Provider for the SC. u Companies moving away from Vertical Integration and towards Supply Chain Integration, with Logistics activities provided externally. 33 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 34 CONFIDENTIAL

Benefits due to Globalization of Logistics u Globalization is necessary for long-term survival u Diversity of markets increasing giving rise to u Standardization across international markets u Product diversity u Ability to access multiple sources of technology u Ability to set up strategic alliances and R & D 35 CONFIDENTIAL

Global Supply Chain – HP Example HP DESKJET PRINTER SUPPLY CHAIN: u Printers made in Vancouver in two stages u Printed Circuit Assembly & Test (PCAT) u Final Assembly & Testing (FAT) u Components needed for PCAT & FAT taken from suppliers worldwide & from HP divisions u u Printer power supplies custom made for each country with manuals written in that language packed From Vancouver sent to Distribution Centers worldwide 36 CONFIDENTIAL

Global Supply Chain – HP Example IC MANUF. PRINTED CIRCUIT ASSM. & TEST VANCOUVER FINAL TEST & ASSM. VANCOUVER CUSTOMER PRINT MECH. MANUF. SUPPLIERS SUPPLIER ACCESSORIES DISTRIBUTION CENTRES WORLDWIDE 37 CONFIDENTIAL

Logistics Flows Direct Flow From companies to markets Reverse Flow From markets to companies 38 CONFIDENTIAL

Logistics’ Flows Internal Logistics External Logistics l l Direct Flows (supply of materials & components) Interplants l l With suppliers With customers (products, spare parts, promotional & advertising materials) Plant/warehouse l With suppliers (packaging, repairs) Reverse Flows l Warehouse/Warehouse l With manufacturers (elimination, recycling) l With customers (overstocks, repairs) 39 CONFIDENTIAL

Strategy for Global Logistics u Consolidation points VIETNAM IMPORT USA/EUROPE MALAYSIA JAPAN CHINA TAIWAN MAKE-BULK OPERATION u Break bulk u Capacity issues - whether to add processing capability or not VIETNAM USA/ EUROPE MALAYSIA TAIWAN EXPORT JAPAN CHINA BREAK-BULK OPERATION u Postponement 40 CONFIDENTIAL

e-Logistics — A Modular Approach Alert Monitor Industry Standards Inbound n ASN n n Receipt Put-away Movement and slotting Snap-on Modules Outbound n n Wave management Shipping n n n Snap-on module architecture Easily configurable and upgradeable Product is easily customizable to fit customer requirements Third-Party Logistics Billing Optimization Suite 41 41 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 42 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 43 CONFIDENTIAL

Third Party Logistics Provider u Services provided are both physical and management. u Service levels improve due to improvement in flexibility and inventory management u Cost reduced as compared to in-house logistics provider u In global logistics, versatile markets and products need expert services which can be provided by several 3 PL 44 CONFIDENTIAL

Third Party Logistics Provider u Use of 3 PL allows the firm to penetrate new markets. u Access new technologies u Reduce inherent financial investment risks u Risks of using 3 PL u The same 3 PL might be providing services for competing firms u Manufacturer with a good image in the market might get tied down and their image linked with the 3 PL 45 CONFIDENTIAL

Complexity & Customization Range of Services provided by 3 PL Physical Contract Logistics Services High • Dedicated contract carrier • Dedicated warehousing Physical Services Basic Services • Common Carriage • Public Warehousing Low Integrated Contract Logistics • Integrated warehousing & • transportation Integrated carrier management & transportation Management contract logistics Services • Traffic Management • Warehouse Management • Import/export Management Services Complexity & Customization High Source: J. M. Africk & C. S. Calkins ( Transportation & Distribution, 1994) CONFIDENTIAL 46

Emergence of Fourth Party Logistics Providers u ‘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 u 3 PL have a larger, more efficient network of transportation & networking, but the 4 PL have optimal combination of warehouse capabilities, transportation services and technology u Consultants as 4 PLs are used to review bids made by 3 PLs, and to align the business processes with the supply chain -- especially critical in case of Global Logistics. u 4 PLs have the advantage of being in sync with the rapid, enormous changes in Information Technology. 47 CONFIDENTIAL

Development & Role of 4 PL • • Greater Functional Integration Broader Operational Autonomy Client Business Process Management Client 3 PL 4 PL 1990 s-2000 Outsourcing 1980 s-1990 s Insourcing 1970 s-1980 s 4 PL Client IT Service Providers 3 PL Internal Logistics Operations CONFIDENTIAL Source: Andersen Consulting http: //www. ac. com/services/scm_who_4 pl_paper 2_b. html 48

Performance Criteria in Global Logistics Looking beyond Financial indicators u Cost u u u Initial Cost Lifecycle Cost Quality u Design Quality u Conformance to set production standards 49 CONFIDENTIAL

Performance Criteria in Global Logistics u Service u Delivery Speed u Delivery Reliability u Flexibility u New-Product Flexibility-- Ability to introduce a new product fast u Customization --- highly segmented markets u Product Mix Flexibility --- adjust production mix for demand fluctuations u Product Ramp-up Flexibility -- expansion to mass production for uncertain markets 50 CONFIDENTIAL

International Freight Forwarders Buy space wholesale and sell it retail u International Freight Forwarders handle more functions than the domestic freight forwarders: u Serve as consultant in export matters u Advise on acceptance of letters of credit. u Booking space on carriers -- Most of the movement is done via vessel or air. u Arrange for insurance u Prepare documents like export declarations and consular documents u Prepare Bill of Lading -- Forwarders experience needed u 51 CONFIDENTIAL

Other International Trading Operators u NOVCCs u Perform most but not all of the functions of an international freight forwarder. u Specific functionality is trade agreements with carriers u NOVCCs affiliate with forwarders to offer the entire range of services u Customs House Brokers u Take care of paperwork and movement of goods through customs u Export Management Companies u Provides the US firm with information about the overseas buyer u Advises the US supplier on requirements of the foreign market in issues like foreign labeling and other specialized functions 52 CONFIDENTIAL

Other International Trading Operators u Export Trading Companies u Attempt to combine all facets of international business u Used extensively by the Japanese u Shippers Associations u Trade groups representing shippers of similar cargo that bargain with ocean steamship conferences as a single entity u Export Packers u Expertise is specifically in packaging for the exporter. u To allow goods to move through customs easily. E. g taking into consideration weight restrictions etc u To prevent the decay/damage of products. 53 CONFIDENTIAL

Nature of the Product u. Value-add Product processing u Services u Technical Support u Inventory Management u Financial u Commodities vs. specialty items u Delivery u Speed u Dependability u Flexibility u 54 CONFIDENTIAL

Product Life Cycle and Distribution GROWTH u Projected growth u Current network capabilities u Changes MATURITY u Optimization INTRODUCTION u Low Distribution u Public Warehouse DECLINE u Projected cost decreases u Needed network scale backs 55 CONFIDENTIAL

Pricing u. FOB u pricing FOB factory - customer picks up freight HIGH PRICE LARGE VOLUME ITEMS u FOB destination - seller picks up freight LOWER PRICE HIGH VOLUME ITEMS u Title exchange implications u insurance u obsolescence 56 CONFIDENTIAL

Pricing u. Zoning ZONE 2 ZONE 1 DISTANCE AND NUMBER OF CUSTOMERS IMPACTS COST OF DELIVERY u Quantity discounts u Legal implications - must prove price difference is justified by lowered logistical costs to deflect discrimination charges from small buyers 57 CONFIDENTIAL