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Optimization of logistics services: a transnational companies’ experience in crisis environment Perry Neumann Managing Director Russia dialog e.V. Moscow, 26.03.2009
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17/08/2015p. 2 Kuehne + Nagel Global / Russia Kuehne + Nagel in Crises Case study Agenda
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17/08/2015p. 3 Kuehne + Nagel Global Air FreightSea FreightRoad & Rail Contract Logistics Global No. 1 Outstanding IT- based solutions Strong partnerships with preferred carriers Market Leader in Logistics for Industrial Projects Global Top 3 Global infrastructure for global contract logistics coverage Dedicated and shared warehousing & distribution management Global Top 4 Cargo 2000 Phase II certified (first mover!) Strong partnerships with preferred airlines Winner of the golden Chariot Award 2008 „leader in transport and forwarding industry in Russia“ European Top 7 Focus on network services, LTL & FTL business Pan-European coverage of 38 countries Innovative intermodal solutions
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17/08/2015p. 4 Kuehne + Nagel in Russia Russia is an important strategic market to Kuehne + Nagel even during crisis Since 16 years in Russia 620 logistics specialists in 4 branches (7 offices, 6 warehouses) ISO 9001 Global Certificate valid for 3 offices in RU (Mow, Led, Uus) Winner of the Golden Car Award 2008 Handling more than 7.000 tons airfreight per year 78,300 square meters of distribution space
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Kuehne + Nagel Global / Russia Kuehne + Nagel in Crises Case study 17/08/2015p. 5 Agenda
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17/08/2015p. 6 1890 Oil crisis Depth crisis in developing countries (i.e. Mexico) Kuweit- Crisis/ Irak War Asian Crisis Speculation crisis (new economy) Kuehne + Nagel in Crises 2009 Kuehne + Nagel established a stable and reliable market position based on innovation, creativity and solid financial management despite severe global crises
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17/08/2015p. 7 Costs Intelligent cost reduction with customer Solid stabilization of own finance management Focus on successful countries with potential Higher investments in important markets Market Technology Offer IT-Tools und IT-Innovations to be flexible within crisis Customer Expectations Increase quality and service level to keep customers Being reliable partner for customers during crisis Hiring and keeping qualified sales staff Environmental Concerns Supporting environmental oriented logistics Driving environmental responsibility and sustainability Proactive crisis management with creative customer solutions and stable financial management. Crisis driver Kuehne + Nagel – reliable anchor in crisis
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17/08/2015p. 8 Costs - reliable anchor Costs have to be reflected seriously and sustainable Intelligent cost reduction with customer within the complete supply chain instead of price dumping. Consequent cost saving programs and streamlining processes during crisis. Stabilisation of the company by increase of charter capital. Costs
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17/08/2015p. 9 Markets - reliable anchor Be a reliable and stable partner in and after crises Be present in all important markets in the future with stable resources and qualified staff for customers. Even in times of crisis taking investments to be able to offer high quality services in changing world markets. Differentiate from price dumping to be a reliable partner even through crisis. Market
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Auto-ID technologies can increase visibility of goods in the supply chain and thus reduce overall inventory requirements (RFID, active auto-ID). Advanced WMS technologies can help optimize picking operations, labor management and quality (Pick to voice, Labor standards and tracking, Layer picking). Agent based transportation management systems can optimize shipment activities in real time and reduce overall transportation costs (Node Optimization, Inter-node optimization). 17/08/2015p. 10 Technology - reliable anchor IT-Tools offer customers fast, efficient and flexible crisis management. Technology
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17/08/2015p. 11 Customer expectations - reliable anchor Even in crisis quality of service and customer care has to be on a high level and still be improved. Investment in training of staff for stable crisis management and operational excellence. Hiring new sales forces to strengthen customer care especially in crisis in order to keep customers and to create new product and services where necessary. Supporting of customers in their daily logistics processes. To be a sustainable logistics partner concerning repositioning and adjustments but also daily business. Customer Expectation s
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17/08/2015p. 12 customer expectations drive many decisions … Price Satisfaction Service Quality Relational Satisfaction Alternatives Commitment Personal Trust Extension of business by providing new services to existing customers Retention of existing customers through contract renewals Drivers of Customer LoyaltyCustomer Loyalty Customers’ evaluation of… Retention Extension …their 3PL‘s prices …their commitment to their 3PL …their 3PL‘s ability to proactively improve their logistics processes …their 3PL‘s service performance …market alternatives to their current 3PL …the trust they have in their 3PL …their interaction and cooperation with their 3PL Proactive Improvement Source: WHU Research Customer Expectation s
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17/08/2015p. 13 Environment - reliable anchor Develop environmental and payable solutions. Keeping reliable and sustainable towards customers especially in crisis. Driving innovations within logistics. Even in crisis offer responsible and sustainable behaviour and be open for innovations. Environment
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17/08/2015p. 14 Kühne + Nagel believes that environmental issues will dramatically impact how we do business in the future. Environment
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17/08/2015p. 15 The financial storm does not stop in front of logistics not only in Russia but also for the rest of the world. Logistics companies deliver stability, reliability and security even in rough times. Situation
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17/08/2015p. 16 Backup through professional and integrated crisis Management. Integrated crisis management in the field of logistics needs more streamlined operations for all parties Solution
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Kuehne + Nagel Global / Russia Kuehne + Nagel in Crises Case study 17/08/2015p. 17 Agenda
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Telecommunications market decline Company drive toward asset reduction and variable cost models Need for Supply Chain visibility tools; limited capital to invest Favorable experience with outsourcing manufacturing and logistics Telecommunications market decline Company drive toward asset reduction and variable cost models Need for Supply Chain visibility tools; limited capital to invest Favorable experience with outsourcing manufacturing and logistics STRATEGY Become an R&D and marketing company. Divest logistics business to single lead logistics provider. OBJECTIVES 1.Reduce logistics costs Risk-based compensation based on delivered savings 2.Create flexible logistics infrastructure 3.Improve service levels 4.Support revenue initiatives Market Factors Driving 4PL Consideration Case study Leading Telecommunication Provider 17/08/2015p. 18
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*savings achieved are independent of the cost impact of reductions in business volume Exceeded Savings Goal By 62.5% $ MM 16.0 14.0 12.0 0.0 2.0 4.0 6.0 8.0 10.0 Year 1 Year 3 Year 2 14.2 9.0 11.4 8.4 14.4 8.6 Savings Goal Actual Savings CONTRACT RENEWAL New 3-year-contract in 2008 Case study Leading Telecommunication Provider RESULTS Cost Reduction Reduced total logistics cost as percent of cost of sales of 14% Reduced per-unit transportation cost by 15% Increased use of ground, ocean modes Reduced warehouse space 45% globally and renegotiated fixed-rate contracts to 50% variable Administration Reduced LSP base from 300 to 150 Quality All service metrics sustained or improved during transition 17/08/2015p. 19
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