Trends in International Supply Chains Executive Seminar September, 2005

International Supply Chain Foundation questions for the international supply chain discussion … Who are the major role players, beyond your headquarters staff, managing your international supply chain? How are roles changing? What is the most efficient routing for international shipments? How important are global 3PL’s in the international supply chain? Are they doing a good job? Do you have contingency plans in place to work around significant supply chain disruptions?

Inbound Shipment Origins As background for today’s discussion, international inbound orders are coming primarily from China/Hong Kong and the Pacific Rim. With the trend moving to increased use of vendors outside of North America.

Serving Customers and Stores In … Again, as background for today’s discussion, international inbound orders are primarily serving customers and stores in North America. With the trend moving to more customers and stores in North America.

Who Manages the International Supply Chain? Global 3PL’s are key. Overseas sourcing offices gaining in influence.

Trends in Supply Chain Control What is the optimal balance in allocating responsibilities to the various role players. More responsibility close to vendors in origin countries? More centralized control? More outsourced support?

Incoterms Who controls each leg of an international shipment?

Incoterms – Trends How is control changing?

Contingency Planning In the past, the concern was labor unrest at West Coast ports. The current focus is on Katrina. What contingency planning is appropriate to protect supply chain operations?

International Freight Routing The trend is to more containers built at vendors. Ocean transport is the dominant mode and continuing to replace air freight.

International Consolidation Centers Outbound shipment consolidation is focused on a few sites. Problem or opportunity?

Routing Changes Routing changes are being driven by cost. Transit times are also important, but they are likely to suffer when reducing costs. Are transit times improving (becoming faster and more reliable)?

Third Party Logistics Providers (Global 3PL’s) Global 3PL’s play a significant role in managing shipments from every international region and their role is increasing.

Global 3PL Performance Where are the most important opportunities to improve overall supply chain performance?

Global 3PL Performance – High’s and Low’s Averages can be misleading. Individual operations may have significant performance gaps.

Expediting Inbound International Orders Are expedited orders an issue in the international supply chain? Are the root causes different than orders placed with domestic vendors?

Global Third Party Logistics (3PL’s) Providers While there are a few major providers (see below), the global 3PL provider base is extensive. The number of global 3PL’s used by each company varies from 1 to 13, with most responses at 1, 3, 7 and 2 providers. How many is the right number? Are large 3PL’s the best choices?

Global 3PL Providers – Satisfaction Ratings Providers have low ratings (satisfactory = 2.0) in several areas. What are the reasons? What process changes are required to raise the ratings?

Some Clues on 3PL Next Steps Could a greater involvement in selecting carriers and negotiating rates improve satisfaction ratings? Penalties and rewards do not appear to be the primary solution to more effective 3PL relationships. What is the best strategy?

Customs Brokers What is the most effective strategy – in-house our outsourced customs brokerage? Is a combined approach the best strategy?

Who Are the Leading Customs Brokers? The following customs brokers are used by more than one participant. Expeditors is the clear leader.

Theft Experience Theft losses do not appear to be a problem. Is the added emphasis on international security helping to reduce theft?

International – Learnings Performance measurement and aggressive goals can create a competitive advantage. The role of 3PL’s will continue to grow but will begin to shift away from managing carriers and towards value added services. Companies will need to become more skilled in sourcing and managing carriers. Overseas sourcing offices will play an increasingly important role in managing the import process. Vendor roles will not increase. Large carriers and large logistics service providers do not always turn in the best performances. The role of air freight in the international supply chain is small and decreasing. This trend will place a greater burden on companies to manage the factors that impact inventory. Contingency planning is becoming more important in international supply chains.

Questions?