1. Latest Trends & Developments in Logistics for 2017
Agaton Teodoro O. Uvero
2Q GMM, PHILEXPORT
New World Hotel, Manila
September 19, 2017

2. Presentation Outline Introduction – Logistics Now Drivers to Change
How ‘Logistics’ will Change
Conclusion

3. Logistics Now synergies in mergers and acquisitions
integrated supply chain (including reverse logistics)
Vendor-Managed Inventory (VMI) / distributor-managed inventory
door-to-door / DAP and DDP terms of trade
“supply chain” alliances
value added services

4. Value Added Services consolidation centers
warehousing and inventory management
vendor hubs /supplier parks
customs and trade advisory services
transport management
kitting, packaging and bundling

5. Drivers to Change

6. Drivers to Change
shift in Big Business Mindset (paradigm shift in deriving profit)
evolution of Supply Chain Model (just-in-time, order first before manufacture, etc.)
related Party Transactions (approx. 60% of global trade)
“regionalization” of MNCs
developments in ICT / Bilateral and Regional Free Trade Agreements (FTAs)

7. Shift in Big Business Mindset
paradigm shift in deriving profit
logistics costs make up about 20 – 30% of total purchase cost of an item
management of logistics will require change in cost accounting system

8. Shift in Big Business Mindset
Traditional View
Selling Price = Cost + Profit
New View
Profit = Selling Price - Cost
Pass higher costs on to clients by increasing prices, because of “tied” markets & limits to customers’ ability to switch
Address inefficiencies to reduce costs to keep up profit levels in the context of internationally set market prices $$$
You believe customers will pay for your inefficiency!?
Preserve and grow your market share
Source: IPSM, International Trade Centre (UNCTAD/WTO)

9. Shift in Big Business Mindset
TOTAL UNIT
COST
Unit purchase price
Logistics costs (transportation,
storage and handling)
Deterioration and write-offs = +
Cost of capital (% interest x amount)
from date of supply invoice payment
until date of sales cash receipt

10. Evolution of Supply Chain Model
From the BHMHS model to the S3 Model
Buy
Hold
Make
Hold
Sell
based on company’s design
or previous requirements
full capacity
forecast based on historical demand
pay supplies upon receipt
title
custody
risk
title
custody
risk
Source: IPSM, International Trade Centre (UNCTAD/WTO)

11. Evolution of Supply Chain Model
From the BHMHS model to the S3 Model
Sell
Source
Ship
delivery date promise
E-commerce
collaboration & supply chain integration
forecast demand
vendor managed and distributor managed inventories
automatic order placement on sales order
direct shipment
pay on shipment
supplier competitiveness
minimum inventory
Source: IPSM, International Trade Centre (UNCTAD/WTO)

12. Related Party Transactions
80-20 rule (80% of customs collection coming from approximately 20% of all importers)
related party transactions (estimated at more than 60% of global trade)
MNCs have driven global trade

13. Regionalization of MNCs
Old Structure
company operate within national geographic limitations
company responsible for all aspect of business (manufacturing, sales, distribution, marketing and others)
New Structure
regional office decides on major aspects of business
local office acts as branch office; usually as sales and distribution arm
regional pooling of requirements (services/materials)

14. Regionalization of MNCs
from autonomous and self-sufficient national organization to regional organization
centralization of manufacturing facilities at a regional level
reduction of facilities (economies of scale, market access, incentives, labor costs, etc.)
regional centralization of functions (e.g. research and development, advertising and marketing, finance and administration)
toll/Contract Manufacturing

15. How ‘Logistics’ will Change

16. How ‘Logistics’ will Change
the modern consumer
instant need to receive goods and services; shorter lead times
phone as shopping device
pressure to deliver goods fast and cheap (e.g. drones)
visibility of order status, tracking and delivery

17. How ‘Logistics’ will Change
omnichannel / last mile Delivery
“price of automated labor has fallen by up to 50% since 1991”
multimodal options for delivering goods from distribution centers to retail shops
technology and online shopping are creating complexity

18. How ‘Logistics’ will Change
digital commerce (Internet of Things - IoT)
from 9%, online shopping is now 30% of retail (US)
Uber and Amazon has entered logistics
logistics means service plus automation (e.g. FLEXE, Convoy)
e-commerce is replacing the retail mid-market

19. How ‘Logistics’ will Change
digital commerce (Internet of Things - IoT) (continuation)
brick+mortar retail shops closing due to growing online shopping
3PLs and 4PLs continue to leverage on IT platforms
Unilever partnering with Convoy

20. How ‘Logistics’ will Change
direction towards SCM certification
product “clock speed” / on demand supply chain
product life span getting shorter
production and delivery based on demand
automated delivery / Warehouse Robotics
Otto by Uber
Amazon is using robots for warehouse and inventory handling

21. How ‘Logistics’ will Change
hyper-local supply chain
locally-produced/designed/sourced products for the local market
exclusive merchandise for retailers / customs rewards
“supply chain” externalities
understanding the impact of supply chain transactions on jobs created, carbon footprint reduction, sustainable procurement processes, types of labor used, modes of transportation, etc.
thinking global, acting local -- adopting to global trading trends with local flavor

22. Conclusion

23. Conclusion digital commerce (and logistics) is here
crowd-sourcing / “uber”ing
technology allows customization, results in complexity
“innovate or die”

24. Adopting to the Changing Times Preparing for Better Times
create an Innovation Strategy (eliminate-reduce-improve-create)
partner with IT-driven value-added services
use TCO tools to optimize supply chain planning
understand the trading environment (e.g. FTAs)
comply with evolving government regulations

25. Thank you