e-Logistics Services

1. 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 • 黃光彩 博士 • 太世科公司 • 2002/04/13

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

3. The Evolution of Enterprise Applications 100% % Penetration ERP Supply Chain Execution Time

4. What is Logistics? Logisticsis defined as the process of movement of materials and products into, through and out of a firm. The Logistics Flow Chart SALES FUNCTION (SUPPLIER) PURCHASING FUNCTION (DISTRIBUTOR) TRANSPORTATION SUPPLIERS SALES FUNCTION (DISTRIBUTOR) PURCHASING FUNCTION (CUSTOMER) TRANSPORTATION WAREHOUSING

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

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

7. 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

8. 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

9. 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

10. Industry Specific Logistics Services New Logistics Center Segments Market by Customers’ Vertical Market Traditional WMS Providers Segment Market by Customer Size Traditional:CPG Apparel Grocery Food Service 3PL Opportunity:Healthcare Electronics Automotive L Size M Size S Industry Industry

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

12. Traditional Distribution Systems Used Multi-Tiered Warehousing Local Retail DistributionCenter BulkFinished Goods Manufacturer’sDistributionCenter Manufacturer Bulk Shipments Retail Outlet Store Distributions • Hold inventory • Value added services

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

14. Quick Response Initiatives Streamline Distribution Process Manufacturer’sDistributionCenter Local Retail DistributionCenter Manufacturer • Advanced shipping notice • Bulk or discrete shipments • Store specific pricing • Aisle specific palletizing • High velocity Direct store Delivery Direct-to-Consumer • Very high volume • Mass personalization • Integrated TMS requirements Retail Outlet • Cross-docking • Flow-through • Lower inventory • Greater availability

15. Value-added Logistics Center Process • Inbound shipment tracking • Yard management • Inbound receipt of goods • Storage of goods • Order picking • Value-added services • Order packing • Pack and hold • Outbound customer compliant shipments 4 2 8 3 5 9 1 6 7

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

17. 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.”

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

19. 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.

20. 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

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

22. 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 manufacturer’s 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

23. International Trading Operators • International Freight Forwarders • Nonvessel-operating Common Carriers (NVOCC) • Customs House Brokers • Export Management companies • Export Trading Companies • Shippers Associations • Export Packers

24. Dynamic Forces of Global Logistics The firms adopt different orientations with varying intensities due to the dynamic behavior of the global business environment. RESOURCES INFO USER

25. Optimize Resources Geographical Functional 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

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

27. 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

28. Factors Pushing Global Logistics Technological Advances Emergence of Global Markets Political & Macro- economic factors Global Cost Forces

29. 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

30. 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.

31. 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

32. 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

33. 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.

34. 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

35. 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

36. 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

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

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

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

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

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

42. 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

43. 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

44. 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

45. 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

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

47. 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.

48. Development & Role of 4PL Client Internal Logistics Operations • Greater Functional Integration • Broader Operational Autonomy Client Business Process Management Client Client 3PL 4PL 4PL 1990s-2000 IT Service Providers Outsourcing 1980s-1990s Client 3PL Insourcing 1970s-1980s Source: Andersen Consulting http://www.ac.com/services/scm/scm_who_4pl_paper2_b.html

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

50. 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