Olga W. Lemoine Institut for Transportstudier - Lyren 1 - DK-6330 Padborg Ol@transportstudier.dk

1. The impact of supply chain reconfiguration on transports.- The Danish mechanical, electronic and medical industries Olga W. Lemoine Institut for Transportstudier - Lyren 1 - DK-6330 Padborg Ol@transportstudier.dk www.transportstudier.dk

2. TheInstitute for Transport Studies • Is a Danish independent and non-profit R&D institution founded in 1988, on the initiative of the Municipality of Bov, the County of South Jutland and the Danish transport trade organisations • Carries out basic & applied research, consultancy and teaching activities in the areas of: • Infrastructure • Road freight transport • Ports & short sea shipping • Intermodal transport chains • Logistics & supply chain • Business partnerships/networks www.transportstudier.dk

3. SC reconfiguration and transport Organization of the presentation • Litterature review • Research objectives and methodology • Empirical results: Survey & Case study • Conclusions www.transportstudier.dk

4. Theoretical Approach – Structural changes in supply chains • Main trends: • Reduction supplier base • Reduction/centralization of production and warehouses distribution facilities • New distribution systems e.g. direct daily deliveries • Consolidation of the firm’s carrier base • (O’Laughlin et al., 1993; Abrahamssom, 1993; Abrahamsson & Brege, 1997; Juga, 1995) www.transportstudier.dk

5. Theoretical Approach –Structural changes in supply chains and transport • The analysis of the implications of SC reconfiguration for freight transport has received little attention. • Most of the studies focus on the development of models • Effects of global sourcing on transport (Wandel & Rujgrok 1993; Ruijgrok, 2001) • Effects of logistical decisions on transport (McKinnon, 1993; 1996; 1998; 2001; Drewes et al., 2003) • Model predicting impact of SC trends on European freight transport (Sulogtra study, 2002) www.transportstudier.dk

6. Theoretical Approach • It was found • Many examples of companies reconfiguring their supply chains • Quite limited empirical evidence on the consequences of reconfiguration process on transport • due to • Theoretical/empirical difficulties in determining cause-effect relationships between variables • Explanatory variables sensitive to individual logistical systems www.transportstudier.dk

7. Research objectives and methodology- Objectives • To illustrate the implications of reconfiguration supply chains on transport by using quantitative and qualitative data from Denmark • Focus on the future transport demands. Amount of transports and the total transport work www.transportstudier.dk

8. Supply chains under analysis • Three Danish supply chains: • Grain and feedstuff • Fresh-foods • Highly manufactured industrial goods www.transportstudier.dk

9. Results from the survey- Highly manufactured goods • No clear signs towards a reduction in the supplier base. Only carrier base has been dimished • Number of production facilities and warehouses do not show signs of modifications • Among those companies reporting and expecting changes: a trend towards a growth in the number of suppliers, production and warehouse facilities outside Europe • Direct distribution • New customers requirements www.transportstudier.dk

10. Results from the survey- Freight transport activity Firms expect a boost in the amount of tons from/ to Europe and, the rest of the world If we add new production and distribution facilities somewhere else in the world, and the new customers’ distribution requirements Increasing pressures onto transport activities must be expected But Difficult to uncover the interaction between companies’ logistics and transport activities by using the survey www.transportstudier.dk

11. Results- Qualitative data • An in-depth study • Goal: To achieve a better understanding of supply chain reconfiguration and firm’s transport patterns • The firm was just at the beginning of SC redesign, facilitating the analysis of the impact “old” and “new” logistics trends can have on the demand of transports www.transportstudier.dk

12. Results from case study- Supplier base • Supplier base • The number of suppliers has been quite stable • The firm has launched a project to reduce the amount of suppliers • Production: • Expansion of production capacity outside of Europe during the last five years. • No further changes are expected in the near future www.transportstudier.dk

13. Results from case study-Logistics structures • Warehouses: Bypass central warehouse of the corporation Warehouses in Denmark and other EU countries have been closing down. Only few national warehouses are maintained due to the physical distance Outside Europe no plans for closing down warehouses www.transportstudier.dk

14. Europe Europe Denmark Denmark Other countries Other countries Suppliers/ clients Suppliers/ clients Production facilitiesin Denmark Production facilitiesin Denmark Production facilities Production facilities Own warehouses Own warehouses Distributors, wholesalers, agents Distributors, wholesalers, agents Transport firms hubs Transport firms hubs Future development: Direct distribution to customers in Europe Customers Customers Denmark Denmark Other countries Other countries Europe Europe • Changes in Distribution patterns www.transportstudier.dk

15. Amount of goods produced Market and logistic strategies of the firm Quantity of tons transported Destination of the products Traveled distance Amount of lorries/trips traveling between the nodes Total nodes in the chain Frequency of transport/trips Results from case study- Freight transport activity www.transportstudier.dk

16. Firms’s logisticsstrategies scenario 25000 20000 Main reason: Newdistribution strategies Two scenarios were developed: No. 1. Status quo.No reconfiguration No. 2. Firm’s new logistics strategies In the status quo scenario the amount of trucks/trips is anticipated to grow linear(y=2009,2x+2256,9; r2=0,9828) In the scenario with firm’s logistics strategies the number of transports is anticipated to grow exponentially (y= 5348,9 e0,2444x r2=0,9999) 15000 Status-quo scenario Amount of trucks/trips 10000 9,057 5000 Amount of tonnes 3,640 0 1 2 3 4 5 6 Year 6,700 trucks www.transportstudier.dk

17. Denmark Other European countries Rest of the world 300% Elimination of warehouses in Denmark and Europe implies erradication of a node in the chain. Reduction in the national transport work. 200% Ton-km – Development in percent 100% 0% -100% 2001 2006 2006 Firm’s logistics strategies Status-quo scenario www.transportstudier.dk

18. Conclusions • Production, location, distribution and marketing decisions have a tremendous impact on the transport content of the supply chains. • There is no clear-cut cause-effect relationship between supply chain reconfiguration, and demand for transport. The demand for transport is influenced not only by company specific logistic and marketing strategies, but also by characteristics of the products and supply chains involved – e.g. fresh food vs. highly manufactured goods. • Transport demands also depend on how transport is organized, and how capable the global carriers are of consolidating and utilizing the capacities of their transport equipment www.transportstudier.dk

19. Conclusions • Logistics and supply chain managers decisions can help to • Slow down or boost the rate of tonne-km, the amount of vehicles/trips used And • The impact of transport on the environment www.transportstudier.dk

20. 3 % p.y. 75% of the transport is national • Ingoing deliveries from Danish suppliers. Production decisions: To produce, in Denmark, more processed/consumer ready products to meet the new consumer demands. Consequences: 250,000 The results show an increasing number of transports (vehicles) in order to meet national and international market demands 200,000 Amounts of trucks/containersper year 150,000 100,000 50,000 0 Trucks in Denmark Total transports Year 1 Year 3 - Fresh-food www.transportstudier.dk

21. Number of trucks 40,000 31,000 Logistics decisions: 25% of the slaughter activities will be located in a new slaughterhouse. Consequences: Concentration of transports in one region in Denmark. The number of lorries carrying living animals to the new slaughterhouse is expected to increase from: 30,000 11,000 20,000 10,000 0 Year 0 Year 1 - Fresh-food www.transportstudier.dk

22. Changes in logistics structures may be an efficient tool for limiting the growth in the transport work in Denmark. Placing different plants close to suppliers and to other facilities means that the distance between the nodes in the chain will not necessarily increase. Due to the new distribution patterns and marketing decisions most of the transport work is carried out in shipments to Europe. 35% 30% 25% 20% Growth in transport work – In porcent 15% 10% 5% 0% Year 1 Year 3 National Europe Other countries - Fresh-food www.transportstudier.dk