Presentation is loading. Please wait.

Presentation is loading. Please wait.

1 GRA 4303 Maritime Logistics Strategy Session 1 & 2.

Similar presentations


Presentation on theme: "1 GRA 4303 Maritime Logistics Strategy Session 1 & 2."— Presentation transcript:

1 1 GRA 4303 Maritime Logistics Strategy Session 1 & 2

2 2 GRA 4303 Maritime Logistics Strategy Session 1 & 2 Course introduction: –Relation to GRA 4301 and 4302 –Lecturers –Cases –Definitions Globalization of Markets Introduction to –Logistics Management –Strategi –Vision and Goals

3 3 Definitions (1) Logistics: Logistics is 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 Logistics management: The process of managing logistics to achieve the established logistics goals of the company Supply chain: The supply chain involves all processes that a company uses to conceive, design, produce and deliver products or services successfully to customers, including receipt of payment. It is a vastly broader term than logistics Logistics outsourcing: The management of 2 or more interrelated logistics activities to an external provider, enabling the shipper to focus on core competencies and to receive enhanced cost and/or service value

4 4 Definitions (2) International freight forwarder: Usually an asset light entity, it acts as the agent of both the shipper and the carrier (ocean or air cargo). Common activities are cargo rate referral and booking, arranging for cargo delivery to port or terminal, preparing and delivering private and government documentation, e.g. letters of credit, insurance, shippers export declaration, and for assuring regulatory compliance. Compensation is customarily a combination of fees paid by the shipper for specific services rendered and commissions paid by the selected carrier. Many forwarders have established a customs brokerage capability. Some have created or purchased NVOCCs, which permit them to issue their own bills of lading (with limited liability). Compensation for this service is the spread between what’s billed to the customer and paid to the carrier. Traditionally each shipment represents a stand along transaction, where payment results when one or more of the service is provided.

5 5 Definitions (3) 3rd party provider: Acts on behalf of shippers, may possess some assets, especially distribution or transport equipment. Normally payment is directly from shippers, with few or no commissions paid by carriers. 3PLs stand apart from traditional providers as carriers and freight forwarders because of their ability to manage broad cross functional processes, e.g. order fulfillment. Many 3PLs provide an analytical and consulting capability as part of their service. The term logistics outsourcing became identified with 3PLs because 3PLs often took over selected activities within logistics departments and became responsible for managing process improvement. Generally compensation is in the form of management fees and performance incentives, e.g. increased order fill rates, reduced order cycle times, increased productivity, lower total costs, etc. Short and long term contracts between provider and user are sometimes employed

6 6 Definitions (4) 4th party provider: The 4PL term was first introduced and trade marked by Anderson Consulting in the mid 1990s. With the increasing popularity of using 3PLs to outsource broad transport and distribution management functions, Anderson concluded that a non-asset (few or no transport, equipment or distribution facilities) based entity would be needed to oversee and manage a wide variety of 3PLs and traditional providers engaged by large global shippers. 4PLs are expected to possess a comprehensive overview of logistics and its separate functions, understand the supply chain and and specific industry sectors, have process reengineering and consulting capabilities, and regularly employ state of the art technology and systems tools. Compensation is likely to be a combination of management fees, performance incentives and profit sharing with the shipper. Arguably no 4th party company exists today that can manage in the comprehensive manner and on a global scale described here. However, an amalgam of different types of alliances between consulting companies, E-logistics firms, asset providers and 3rd parties may result in the emergence of a bone-fide 4th party over the next several years.

7 7 Provider Freight forwarder3rd party4th party Customer Increasing: Process integration Management integration Performance metrics Risk/reward agreements Small, traditional Integrated forwarding Emerging global alliances Domestic, transport warehouse Technology driven, multi- modal, globally capable Responsible managing 3rd party & other providers Fully integrated strategic supply chain issues Provider Spectrum

8 8 Group Work Select a company who can be classified according to each of the definitions and explain why it fits to the definition –International Freight Forwarder –Logistics Management –Supply Chain Management –3PL –4PL –Logistics Outsourcing

9 9 Globalization of Markets

10 10 Trends: Consolidation and Globalisation Mergers and Aquisitions: Reduction in number of automotive manufacturers: Source: E-Business and the Automotive Supply Chain, London, 2000

11 11 Trends: Reduced Lead Times in Distribution Source: European Logistics Association/A.T. Kearney -33% -25% Reduction in time from order to delivery in automotive industry: Reduction in lead time in European distribution: Source: E-Business and the Automotive Supply Chain, London, 2000

12 12 Trends: Focus on Core Business - Outsourcing Source: Ernst & Young/University of Tennessee, 2000 Investigation of 277 large US shippers: Current degree of outsourcing and future intent ”Logistics”

13 13 Globalization of Markets ! Growth in numbers and size of global companies ! Standardization of products and services on a global basis ! Reduction of the number of players in each phase of the Supply Chain

14 14 Globalization of Markets ! Reduction in the number of competitors and increased market shares of the remaining ! Global division of tasks and skills ! Transportation and logistics share of the value chain will increase significantly

15 15 Globalization of Markets ! The survivors in the future global markets –Customer Loyalty –Production cost has to be equal or lower than competitors –Control over supply and distribution –Products and services must be differentiated from the competitors –Customer awareness –Supply Chain Integration PProcess Management PIT integration along the supply chain

16 16 Formation of Strong Supply Chain Networks

17 17... Organizations Buy, Make, Move, and/or Sell Goods... Planning and Forecasting ProcurementManufacturing Distribution and Logistics CUSTOMERSCUSTOMERS “Plan”“Buy”“Make”“Move”“Sell” SUPPLIERSSUPPLIERS The Supply Chain Model

18 18 SCM Implication –Companies will in the future compete between supply chains and not within them The Market Customer Value The Customer: Share, Loyalty, Retention Supply Chain “A” Supply Chain “B” Supply Chain “C” CoreCompetenciesCoreCompetencies

19 19 The Integrated Supply Chain Global e- commerce Integrators Product Flow Cash Flow Organizational Flow Supplier s Manufacturing Distribution End Custom ers $ Spend $ $ Spend and Collect $

20 20 The challenge: to reduce inventory investment while still maintaining capacity utilization and achieving customer satisfaction. Most companies have multiple product lines and many supply chains. Effective inventory management becomes more difficult and complex as products increase and service requirements expand. Supplier  Components  Raw Materials Stores Warehouse  Raw Materials Factory  Work-in-Process  Finished Goods Distribution Network  Finished Goods Customer  In Transit Inventory VELOCITY The Supply Chain creates pockets of inventory

21 21 Trends: Supply Chain Development Source: European Logistics Association/A.T. Kearney Supply Production Distribution Consumer 1980’s JIT (Automotive Industry) 1990’s (Retail Industry) 2000’s Customer Sophistication Power of IT

22 22 Future Challenges for the Customers of Maritime Services

23 23 Dealer Manufacturer or distributor Platform Development Outsourcing Commonality Strategic sourcing Partnerships Lean manufacturing Outsourcing Network factory ContractingExpanding Manufacturing Product develop- ment Purchasing Distribution % Total cost Dealer margin10-18% Marketing 8-15% Organisation 4-6% Warranty 1-2% Logistics 2-4% The “black hole” ? Source: WW ASA 2000 Cost of Distribution Typically Quoted as 30%

24 24 Dealer Manufacturer or distributor Platform Development Outsourcing Commonality Strategic sourcing Partnerships Lean manufacturing Outsourcing Network factory ContractingExpanding Manufacturing Product develop- ment Purchasing Distribution % Total vehicle cost Dealer margin10-18% Marketing 8-15% Organisation 4-6% Warranty 1-2% Logistics 2-4% The “black hole” ? Deep Sea Transportation: 0,3 - 1 % Deep Sea Transportation: 0,3 - 1 % Cost of Distribution Typically Quoted as 30%

25 25 Leading Factors in Awarding Logistics Contract Price Potential cost/inventory savings Product/business expertise Technology capability Geographical scope Industry reputation Breadth of service offerings Financial strength Prior relationship Other Sales presentation Source: Lazard Fréres & Co. LLC Least important Most important

26 26 3 PL- Third Party Logistics Providers Source. PwC analysis Historical Future Sender/ Passenger Organiser Organiser/ Supporter Recipient/ Passenger Air Transport Ground Transport Water Transport Intermodal Transport Sender/ Passenger Organiser Organiser/ Supporter Recipient/ Passenger Air Transport Ground Transport Water Transport Intermodal Transport Out- sourced Logistics Out- sourced Logistics Future Transportation Firm Activities = Potentially disintermediated

27 27 Internal Logistics Operations Client BOA Arrangement 1990s-2000s Client Service Providers + Greater Functional Integration + Broader Operational Autonomy Shippers 4PL Outsourcing 1980s-1990s Client 3PL Providers New entrants are approaching the market

28 28 Shareholder Value Growth Overall Transportation Industry S&P 500: 20% Third-party Logistics Services Equipment Leasing RailroadsAir Parcel Trucking - Truckload Ocean Carriers Source: Mercer Analysis. All figures for US public companies only, except ocean carriers. Compound annual growth rate for market capitalization,

29 29 New Entrants Are Approaching the Market Recent alliances between transporters and IT leaders: Examples

30 30 Retail Car Buyers Are Going To Use E-commerce... Use of E-commerce in car buying process Would buy on Internet Source: FT World Motor Conference, Sept. 1999

31 31

32 32

33 33 The Logistics rationale

34 34 The Logistics rationale (1) The key components of logistics represent about 10 % of world GDP, or about US$ 4.0 trillion Source: Cass Information Systems & ProLogis

35 35 The Logistics rationale (2) U.S. logistics & outsourcing marketWorld logistics & outsourcing market Total logistics In billions USD 1999/ ) Outsourcing represents 5.7% of total logistics In billions USD Total logistics 228 Extrapolating U.S. data suggests size of global market Although global logistics outsourcing is a small % of global logistics today, it is still a significant number Source: Cass Information Systems & ProLogis 1) Net Third Party U.S. Based firms: Logistics revenues in the range of billion USD in 2000

36 36 Logistics: Break-up of costs The logistics rationale (3) Source: Cass Information Systems, Inc. & ProLogis

37 37 The logistics rationale (4) According to Northeastern University and Armstrong & Associates, the outsourcing market is growing nearly 20 % annually Net revenue for 3PLs is approximately 53-55% (in the US), and profits before taxes are 6-8% of gross(?) revenues according to Cass information Systems Inc., ProLogic & Armstrong & Associates 125 billion USD in net revenue for 3PLs Billion USD The outsourcing market The difference between gross and net is that we take out the cost of transportation purchased for clients to calculate net revenue

38 38 The logistics rationale (5) Source: Ernst & Young/University of Tennessee, 2000 Survey: 277 US shippers Time frame: Growth in the outsourcing market

39 39 The logistics rationale (6) ”Would like the carriers to provide more value-added services, especially in booking and control of various supply chain activities like point to point services and contracts where land side processes at both origin and destination are managed by the ocean carrier” Bob Frinier, Vice President, Logistics, Nissan ”Movement towards more and more outsourcing to systems integrators” Lou Sorchevich, Director of international transportation, GM ”Our company intends to co-develop global process systems with our partners and integrate operations with a few of the best providers in the logistics area” Bill Carrigan, Manager Global Marine Transport, Ford ”Do not know whether VWT is profitable and feel it is probably irrelevant, since it is viewed as a ”strategic” investment by senior management” Joe Manschke, Ken Fletcher, Chuck Domke, Logistics, transport processes, VWT/VW Different customer philosophies with respect to outsourcing of logistics

40 40 Dealer Manufacturer or distributor Platform Development Outsourcing Commonality Strategic sourcing Partnerships Lean manufacturing Outsourcing Network factory ContractingExpanding Manufacturing Product develop- ment Purchasing Distribution % Total vehicle cost Dealer margin10-18% Marketing 8-15% Organisation 4-6% Warranty 1-2% Logistics 2-4% The “black hole” ? The Logistics rationale (7) Cost of Distribution Typically Quoted as 30% Source: A.T.Kearney

41 41 The logistics rationale (8) The 3PL industry appears poised for significant growth The world’s largest companies are heavy users (50% have used for more than 5 years) “Based on all research we have done, logistics stocks over the next 5 years will continue to outperform stocks of other transportation companies. The crux of it is that we think the logistics sector is at an early stage, maybe in the first or third inning, of a secular (long-term) growth found in the outsourcing of transportation functions”. “Marine shipping business is mature. Logistics will be our focus, equaling 1999 container revenue of $4.2 billion within 3 years.” Survey of 500 firms by Northeastern university & Andersen Consult, 2000’ Lazard Freres (NY investment bankers, 2000) Flemming Jacobs, CEO of NOL/APL, 2000’

42 42 The logistics rationale (9) Overall Transportation Industry S&P 500: 20% Third-party Logistics Services Equipment Leasing RailroadsAir Parcel Trucking - Truckload Ocean Carriers Source: Mercer Analysis. All figures for US public companies only, except ocean carriers. Compound annual growth rate for market capitalization, Shareholder Value Growth Some of the large ocean carriers are familiy owned and controlled, implying that stocks are under- priced. Competitive advantages from capitalisation if owners sell down. Note that 3PLs have no problems in receiving funds

43 43 The Logistics rationale (10) Source: Armstrong & Associates Net logistics revenues for some 3PLs 1999, [million USD]: Ryder Penske Logistics UPS Logistics APL Logistics

44 44 The logistics rationale (11) –Companies will in the future compete between supply chains and not within them The Market Customer Value The Customer: Share, Loyalty, Retention Supply Chain “A” Supply Chain “B” Supply Chain “C” CoreCompetenciesCoreCompetencies E.g. Ford/UPS/Exel

45 45 Players in Maritime Logistics

46 46 Asset based logistics companies - Maritime Global physical, IT, analysis & risk sharing capabilities are built into provider’s competitive offerings. Single purpose logistics firms Many container, break bulk and special purpose ships that provide high level maritime and even land transport services Some enhanced integrated logistics capability ANZDEL K-Line NYK Mitsui WWL Emerging profit driven logistics units Fully autonomous physical & I.T. based logistics units Future ?? OOCL COSCO Hapag Lloyd Yang Ming Maersk Logistics APL Logistics Logistics offerings can be seen as a continuum, ranging from single purpose offerings, to enhanced core business services to fully integrated separate profit centers

47 47 Maersk Logistics versus APL Logistics (1) A comparison of the key logistics attributes of two of the most advanced marine logistics providers today is useful to benchmark ones’ own market position Maersk LogisticsKey AttributeAPL Logistics Independent profit center. May link more closely to parent goals, e.g. IS joint strategy, & “exception management” approach. Note McKinsey & Mercer roles today Attitude of parent company top management Independent profit center & staff. Report direct to Moller not MS. Attempt to leverage liner investments and brand name Relationship to parent & sister companies Per NOL top management and CEO future is in logistics. Sees liner shipping as mature industry, growing only if trade expands Strong endorsement from parent A.P. Moller, although appears less enthusiastic than APL

48 48 Maersk Logistics versus APL Logistics (2) A comparison of the key logistics attributes of two of the most advanced marine logistics providers today is useful to benchmark ones’ own market position Maersk LogisticsKey AttributeAPL Logistics Link together all information from disparate operating units to enable end to end management of global customer shipments Estimated Financial status Handle all physical and information needs of key global industries and customers with strict accountability Revenues (net): $406m Margins (EBIT): $28m Revenues (net): $420m Margins: $12-24m Logistics mission

49 49 APL HomePort “Marine shipping business is mature. Logistics will be our focus, equaling 1999 container revenue of $4.2 billion within 3 years” Fleming Jacobs, CEO, APL From 10,000 to 67,000 Internet business transactions per month from Jan -98 to Sep -99 Types of transactions (Sep -99): Schedules 43% Tracing 32% B/L Print 8% Status 1% Other 14%

50 50 Asset based logistics companies – Motor/air origins Global physical, I.T, analysis & risk sharing capabilities are built into provider’s competitive offerings Single purpose logistics firms 10s of thousands of these firms exist today that provide single purpose capability Some integrated logistics capability Many firms claim to offer some level of multiple integrated services as part of core business Separate profit driven logistics entity Potential for conflict with goals of parent & customers leads to separation: - Schneider - Menlo Highly developed, technology rich company UPS Fed Ex RIL Future ?? Logistics offerings can be seen as a continuum, ranging from single purpose offerings, to enhanced core business services to fully integrated separate profit centers

51 51 Logistics outsourcing in auto industry Large scale outsourcing has occurred in the auto parts sector in recent years, but now there is evidence of expansion to include finished units, e.g. Ford/UPS alliance:

52 52 UPS/Ford: North America Source: Global Automotive Logistics conference, 2000 Transit time [days]

53 53 UPS/Exel/Ford: Europe Exel and UPS Logistics Group Europe have formed an alliance to review the effectiveness of all current inbound logistics processes for production parts and components for the Ford Motor Company in Europe. (10/24/00) Detailed process specifications will be jointly developed by Exel, UPS Logistics Group and Ford in an alliance that will provide supply-chain support across all Ford’s European plants. The deal follows the successful strategic alliance of the Ford Motor Company and UPS Logistics Group in the US and Exel's 20-year relationship with Ford, including established operations in Southern Europe, USA and Brazil. Ford's new inbound logistics network in Europe is designed to achieve significant improvements in transportation and distribution processes and inventory.

54 54 Non asset based logistics companies Who will emerge with sufficient IS content and SC skills to manage all or most customer logistics? Small under capitalized firms 10s of thousands of these firms exist today that provide a wide variety of services Niche focused intermed- iaries Many firms in this category that survive by customizing their services to particular customers or industry sectors. 2 types of mega global forwarders have emerged as result of acquisitions Type 1: Driven by public sector Type 2: driven by private FF expansion Hybrid re- lationships betwn asset and non asset firms Examples: - Lufthansa Cargo Services - Cosco and Bolero alliance Future ?? Public driven expansion Private driven expansion TPT Post Deutsche Post ABX Logistics Panalpina Schenkers NFC/ Exel Logistics offerings can be seen as a continuum, ranging from basic forwarding firms to complex public and private solutions driven enterprises

55 55 Competitor actions: Develop a competitor rating scheme Example only Parent company support Logistics vision Current financial Marketing strat Operating strat Logistics attribute Maersk Log APL Log UPS Log Deutsche Post NYK Key: - Low - Medium - High

56 56 E-logistics

57 57 Why e-logistics (1/2) Increase value to customers, partners and suppliers through expanded service offerings Improve communication channel with established market, open to new segments/niches Improve efficiency, reduce costs (automate)

58 58 Why e-logistics (2/2) E-logistics will bring three areas of functionality: Increased pipeline visibility, e.g. global inventory management Improved collaboration between all SC participants Improved functionality in managing global SC, e.g. applications that can be downloaded, e.g. booking in transport, trade compliance in trade management, finance and duty paid landed costs, etc.

59 59 E-Logistics: Trends (1) The significant increase ($1 trillion seems to be a consensus estimate) in global electronic logistics over the next 4 years will be driven by 3 forces: –Increase value to customers/partners/suppliers –Lower cost –Improved internet functionality

60 60 E-Logistics: Trends (2) Supply chain visibility – information transparancy –Internet – open standard infrastructure –Reduced IT systems cost (Internet/ASP) –Customer core business focus – outsourcing Supply chains ”without fat” – impossible to hide & protect high profit activities over time Logistics capabilities of increasing importance

61 61 E Logistics: Implications To compete globally shippers will focus on supply chain process improvement as a major source of competitive advantage. Increasingly this process improvement will be enabled by web-based information technology Carriers and other providers of logistics services must assess the impact these emerging logistics offerings have on their business and develop an appropriate strategic response

62 62 Group Work What effect will the future competition between value chains have on traditional shipping companies? What effect will the future development in e-commerce have on traditional shipping companies? Which new fields of competence should shipping companies develop to participate in the new economy?

63 63 WW ASA’s Logistics Strategy

64 64 The Need for Change ProcurementManufacturing Distribution/ Sales Planning and Forecasting Customers’ Value Chain Customers’ Value Chain WW ASA’s’s Global Services (and Internal Processes) WW ASA’s s Organisation & Systems

65 65 Possible Project Approach Understand the market development Identify core competencies Develop standardized products and services Develop global infrastructure Train organization Implement strategy (Balanced Scorecard)

66 66 Strategic Challenges WW ASA has to develop a thorough understanding of both its customers and customer’s customers value chains

67 67 Strategic Challenges Market developments –The customers and customer’s customers value chains –Competitors value chain Standardization of products and services Throughout identification of core competencies

68 68 Scenarios GLM Concept Development Pilot 1 Pilot 2 Pilot 3 Implement new services Balanced Scorecard Scenarios Market Analysis The Strategic Processes in WW ASA

69 69 WW Global Logistics Strategy Manufacturer Land Transport Port Sea Transport Port Land Transport Customer/ Dealer WWL BI BARWIL WW Chartering Physical cargo flow and WW focus

70 70 WW Global Logistics Strategy Logistics Strategy WW WWL Wilship Barber Int. Barwil 50% Develop cross-functional competence and cooperation in the WW Group: - between the principal companies - between the principal companies and corporate - within the principal companies WW Group Logistics Strategy

71 71 Logistics Strategy Project Structure Main Project Feasibility Study Dec ‘99 - April ‘ Implement new services

72 72 Global Logistics Strategy Project Future Market/ Scenario Analysis Future Market/ Scenario Analysis Present & Future Customer Requirements Present & Future Customer Requirements Logistics Services Logistics Organisation Logistics Organisation IT Solution Alliance Agreements Alliance Agreements Competitor Analysis Requirements Implications Knowledge Management Tools Requirements Implications Knowledge Management Tools Process Re-engineering Methodology Process Re-engineering Methodology Performance Measurement System Performance Measurement System Alliance Building Process Alliance Building Process

73 73 Supply Chain Reengineering

74 74 New Holland’s Supply Chain Model Order inquiry (Locator) POCQA explosion Demand capacity Reconcil (MOP’s creation) Market allocation Markets forecast Manufacturing Sequencing (W+2) Supplier call-off Order entry Manufacturing Scheduling (W+7) Schedules to suppliers Shop floor control (W+0) Credit check management Order tagging and specs change Distribution Scheduling Shipment Invoicing Develop and Implement Improve- ments Reporting Interaction between New Holland and WWL 1. Plan 2. Schedule 3. Execute 4. Report 5. Implement Improvements

75 75 Physical Cargo and Information Flow Manufacturer Land Transport Port Sea Transport Port Land Transport Customer/ Dealer Pre Book- ing Load- ing Dis- charge Cust- omer Follow- up Evalu- ation Pre Loading Load- ing Sea Voyage Pre Booking Evalu- ation Pre Loading Pre Loading Land Voyage Post dis- charge Planning (orders/ prognosis) Customer Follow-up Logistics follow-up Delivery/ production Physical Cargo Flow Land Transporter WW Land Transporter Manufacturer Pre Book- ing Cust- omer Follow- up Post dis- charge Dis- charge Evalu- ation Cust- omer Follow- up Post dis- charge Dis- charge Land Voyage Load- ing Evalu- ation

76 76 Process Re-engineering Main deliveries:  Detailed mapping of existing distribution process/lanes  Proposed improved distribution process - validated and improved distribution process from WWL  Identified possible improved IT solutions with; infrastructure, software and potential alliance partner(s) Reengineer distribution process/lanes Test & evaluate new distribution lanes Implement improved solution Map present state

77 77 Germany - UK Dealer logistics chain

78 78 (Detail ed 1) Germany - UK Dealer logistics chain

79 79 Germany - UK Dealer logistics chain

80 80 Time Mapping Time Process 1 Pr 2 Process 3 Process 4 Process 5 Process 6 Process 8 Pr 7

81 81 Cost Mapping


Download ppt "1 GRA 4303 Maritime Logistics Strategy Session 1 & 2."

Similar presentations


Ads by Google