International Logistics & 3PLs

Contents Basics of International Logistics Trends in International Logistics Case Study

International Logistics - Basics Definition: that part of the supply chain process that plans, implements, and controls the efficient & effective flow and storage of goods, services, and related information from the point of origin to the point of consumption in order to meet customers requirements.

International Logistics - Basics Why is international Logistics necessary? - Reducing Cost - Improving Service (adding value for customers) -Competitiveness in Globalization Positive result of a liberal market?

Difference int. Logistics & SCM Logistics: Focuses on transportation and storage of materials and final goods The 7 R‘s: „ensuring the availability of the right product, in the right quantity and the right condition, at the right place, at the right time, for the right customer, at the right cost“ SCM: Also includes the management of supplier and customer relations

International Logistics - Basics The key to making a company’s international Logistics work is information -> how can this information in an MNE be provided and supervised?

International Logistics - Basics EDI (Electronic Data Interchange) - standardized format & structure to exchange documents and financial flows ERP (Enterprise Resource Planning) - every process of a company can be exercised via one integrated Information System (SAP, Baan, Oracle, MBS Navision Axapta) e-Commerce / e-Procurement / Intranet Enterprise Portals for managing & controlling the flow and storage of goods from any place & at any time (part of ERP, or at least directly linked)

International Logistics - Trends Government Trade Facilitation Systems - new trade facilitation systems support globalization of internat. Logistics Singapore -> trade permitting system allows traders to fill out one single form, a mainframe system routes form to 18 different agencies. Estimated savings for Traders: $ 1 billion per year Mexico -> Computerization reduced steps for Traders from 12 to 4. Numbers of operations at 1 entry point from U.S. increased from 800 to The processing time was reduced from 3 days to 20 minutes!! Estimated savings for Traders: $ 2 billion per year

Globalization & Logistics Globalization drives Logistics outsourcing Public and private companies are offering logistic services Complex business needs require specialization in logistics (eg. hazardous cargo) Companies doing business globally can benefit from outsourcing their logistics and supply-chain management needs Logistics is becoming an important source of revenue for MNE’s (IBM offers IT Outsourcing since 1990, now shifting to logistics, takeover of PWC in 2002)

International Logistics - Trends The “extended Enterprise” - Total real time connectivity between extended Enterprise Partners Global Third Party Logistics Providers (3PL) - avoid costs in IT-Systems and warehouse capacity - greater market leverage (air, ocean and surface transport) - volume purchasing discounts through aggregating its shipment base with those of the Providers other clients - higher flexibility in meeting customer needs because of access to more diverse channels eLogistics = web based logistic portals which seek to bring together shippers, 3PL’s and other interested parties to provide more effective collaboration

Logistics Outsourcing – 3PL’s The 3PL market will grow 5 to 10 times faster in the next decade then the traditional freight forwarding market 3PL’s include: Engineers, business consulting, materials handling, material specific skills, change management, business modelling, IT and management consulting

3PL Trends ¾ of MNE’s use 3PLs Most important feature of 3PLs is RFID (radio frequency identification) e.g.. Wal-Mart, US Dep. of Defense

3PL Trends

3PL – Pros & Cons + downsizing to core business + longer experience in internat. Logistics + reduce cost of ownership + increase flexibility - Lack of core knowledge during outsourcing process - open, honest communication necessary - Giving up of internal control of a business function and trusting others

Case Studies Examples of 3 PLs and Business Solutions

FILA / KUEHNE+NAGEL (K+N). Situation. Increasingly complex supply chain ( Incr. markets, product line and clients); Centralised supply chain management; PB: delays and inaccuracy in customer order; Lack of visibility; Variety of product/services= additional complexities.

FILA / KUEHNE+NAGEL (cont 1.). K+N Solutions: Re-engineering supply chain model. optimising transportation, merging shipment; Improve inventory management and services; Web-based data and documentation collection;

FILA / KUEHNE+NAGEL (cont 2.). Results. Flexibility and visibility: forward planning; Cutting costs and increase space utilisation; Adapting standard operating procedures to local requirements; Build a direct info exchange with partners; Automating massive amount of documentation.

XEROX / K+N. Situation: Xerox need 3PL Manage 6 of its District Parts Centres (DPCs); Mobilise and assume operational control of the 6 DPCs Provide accurate and reliable delivery of parts to engineers; Maintain and improve defective material processing time at the DPCs

K+ N solutions: Minimise service disruptions; Focuses on staff retention; Process improvement;

XEROX / K+N (cont. 1). Results: Improved service/shipping performance; Reduce order cycle time; Seamless logistics solutions

CARREFOUR / PENSKE Situation: To centralise logistics network; Improve order accuracy; Reduce inventory; Increase stock assortment

CARREFOUR / PENSKE (Cont.1) Penske Solutions: New distribution facilities; Warehouse technologies; Load planning

CARREFOUR / PENSKE (Cont.2) Results: Single system: ordering and shipping; Manage inventory flow Incr. supply chain visibility Deliver value: company, store, consumer level; Reduce distribution costs; Reduce delivery delays; Increase variety of products for stores.

General Motors Mexico (GMM)/ Penske. Situation: 3 locations: Pb Individual logistic decisions; Lack of collaborations; Complex transportation Network.

General Motors Mexico (GMM)/ Penske (Cont.1) Penske Solutions: New procedure for inbound transportation network; Logistics management system software; Establish accountability, procedures and measures for GMM.

General Motors Mexico (GMM)/ Penske (Cont.2) Results: (in the 3 plants) Transportation costs decr. 15%; Increase visibility throughout the supply chain; Reduce inventory and freight premium costs; Increase delivery of damage-free parts; Decrease carrier base from 100 to 20 carriers.

Thanks!

Bibliography “Logistics and the Extended Enterprise”, S. Boyson “TRANSPORT AND COMMUNICATIONS BULLETIN FOR ASIA AND THE PACIFIC”, Report of UN “Freight and Logistics”, Dablanc, L. Gart “The Role of Logistics in Stimulating Economic Development”, The World Bank, M.H. Juhel “Structuring Logistics Activities In Multinational Companies (MNCs)”, Yong Gao “Business Intelligence and Logistics”, Srinivasa Rao P. “ Supplier partnership essential to make new logistic concept work” G. Butschek “Latin American booming Logistics”, InfoAmericas Report “Shaping tomorrows Logistics” The Air Force Journal