GRA 4303 Maritime Logistics Strategy

GRA 4303 Maritime Logistics Strategy
Session 1 & 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

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 Logistics outsourcing: It’s very important to add “involving 2 or more interrelated logistics activities.” Otherwise using any outside provider is outsourcing. For example very few shippers own ocean carriers. Virtually all use ocean carriers like WW for the ocean transport component of logistics. But is that outsourcing?

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. Logistics outsourcing: It’s very important to add “involving 2 or more interrelated logistics activities.” Otherwise using any outside provider is outsourcing. For example very few shippers own ocean carriers. Virtually all use ocean carriers like WW for the ocean transport component of logistics. But is that outsourcing?

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 Logistics outsourcing: It’s very important to add “involving 2 or more interrelated logistics activities.” Otherwise using any outside provider is outsourcing. For example very few shippers own ocean carriers. Virtually all use ocean carriers like WW for the ocean transport component of logistics. But is that outsourcing?

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. Logistics outsourcing: It’s very important to add “involving 2 or more interrelated logistics activities.” Otherwise using any outside provider is outsourcing. For example very few shippers own ocean carriers. Virtually all use ocean carriers like WW for the ocean transport component of logistics. But is that outsourcing?

Provider Spectrum Provider Freight forwarder 3rd party 4th party
Small, traditional Integrated forwarding Increasing: Process integration Management Performance metrics Risk/reward agreements Emerging global alliances Domestic, transport warehouse Technology driven, multi- modal, globally capable Responsible managing 3rd party & other providers Fully integrated strategic supply chain issues Customer

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

Globalization of Markets

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

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

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

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

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

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 Process Management IT integration along the supply chain

Formation of Strong Supply Chain Networks

Planning and Forecasting Distribution and Logistics
The Supply Chain Model S U P L I E R CUSTOMER S “Plan” “Buy” “Make” “Move” “Sell” Planning and Forecasting Distribution and Logistics Procurement Manufacturing . . . Organizations Buy, Make, Move, and/or Sell Goods . . . Change colors, harmony

The Customer: Share, Loyalty, Retention
SCM Implication Companies will in the future compete between supply chains and not within them Supply Chain “A” C o r e C o m p e t e n c i e s The Market Supply Chain “B” The Customer: Share, Loyalty, Retention Supply Chain “C” Customer Value

The Integrated Supply Chain
Global e-commerce Integrators End Customers Suppliers Manufacturing Distribution Product Flow $ Spend $ Spend $ Spend and Collect $ Collect Cash Flow Organizational Flow

The Supply Chain creates pockets of inventory
The challenge: to reduce inventory investment while still maintaining capacity utilization and achieving customer satisfaction. Factory Supplier Stores Warehouse Distribution Network Customer Components Raw Materials In Transit Inventory Raw Materials Work-in-Process Finished Goods In Transit Inventory Finished Goods In Transit Inventory VELOCITY 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.

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

Future Challenges for the Customers of Maritime Services

? Cost of Distribution Typically Quoted as 30% Dealer Manufacturer or
Dealer margin 10-18% The “black hole” Marketing % Manufacturer or distributor Organisation % Warranty % Logistics % Product development Distribution % Total cost Purchasing Manufacturing Contracting Expanding Platform Development Outsourcing Commonality Strategic sourcing Partnerships Lean manufacturing Outsourcing Network factory ? Source: WW ASA 2000

Deep Sea Transportation:
Cost of Distribution Typically Quoted as 30% Dealer Dealer margin 10-18% The “black hole” Marketing % Manufacturer or distributor Organisation % Warranty % Logistics % Product development Distribution % Total vehicle cost Purchasing Manufacturing Deep Sea Transportation: 0,3 - 1 % Contracting Expanding Platform Development Outsourcing Commonality Strategic sourcing Partnerships Lean manufacturing Outsourcing Network factory ?

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 Least important Most important Source: Lazard Fréres & Co. LLC

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

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

Shareholder Value Growth
S&P 500: 20% Overall Transportation Industry Third-party Logistics Services Equipment Leasing Railroads Air 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,

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

Source: FT World Motor Conference, Sept. 1999
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

The Logistics rationale

The Logistics rationale (1)
The key components of logistics represent about 10 % of world GDP, or about US$ 4.0 trillion This chart is based upon the following methodology. Total 1999 U.S. logistics cost, comprised of the components shown in the chart, was US$921 billion. This number was determined by Cass Information Systems and its associate ProLogis. $921 represents about 10% of US GDP. We have used this ratio to approximate global logistics costs. Since world GDP is approximately US$40 trillion, then we calculate that world logistics expenditure is about US$ 4 trillion and that component breakdown is roughly in the same proportion as U.S. breakdown. Note, this world logistics estimate may be on the low side. There are at least two key reasons for this. First, for the past 20 years, the U.S. has been aggressive in driving down logistics costs; logistics costs have dropped from around 17 % of GDP to 10% today. Second, international logistics is intuitively more costly: longer transport legs, more air cargo, higher inventory pipeline costs and more documentation and administration. For these and possibly other reasons, Michigan State University has estimated that global logistics expenditure exceeds $ 5 billion annually. Source: Cass Information Systems & ProLogis

Although global logistics outsourcing is a small % of global logistics today, it is still a significant number In billions USD 1999/ 2000 In billions USD 1999 4000 921 Outsourcing represents 5.7% of total logistics Extrapolating U.S. data suggests size of global market Total logistics Total logistics Note the US$53 billion assumes that 2000 logistics outsourcing will grow by 15 % over 1999 levels. Most any industry today that uses suppliers has a vast portion of total cost or revenues paid out to suppliers. The auto industry, for example is around 70 or 80 %. Airlines, railroads, truckers pay out significant amounts to connecting carriers. But these payouts are factored into quotable gross revenue numbers. If you focus on nets, you end up not comparing apples with apples. Even in numbers in this slide. The 4 trillion is gross world logistics. But other numbers are net revenues. I’d go back to other numbers. 531) 228 U.S. logistics & outsourcing market World logistics & outsourcing market 1) Net Third Party U.S. Based firms: Logistics revenues in the range of billion USD in 2000 Source: Cass Information Systems & ProLogis

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

The outsourcing market Billion USD According to Northeastern University and Armstrong & Associates, the outsourcing market is growing nearly 20 % annually 125 billion USD in net revenue for 3PLs 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 Armstrong Associates has estimated that domestic logistics outsourcing grew 17% in Since outsouring seems to occur at a higher rate in the international market, we are assuming a 20 % rate of growth. The difference between gross and net is that we take out the cost of transportation purchased for clients to calculate net revenue

Growth in the outsourcing market Survey : 277 US shippers Time frame : Source: Ernst & Young/University of Tennessee, 2000

Different customer philosophies with respect to outsourcing of logistics ”Movement towards more and more outsourcing to systems integrators” Lou Sorchevich, Director of international transportation, GM ”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 ”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 ”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

Cost of Distribution Typically Quoted as 30% Dealer Dealer margin 10-18% The “black hole” Marketing % Manufacturer or distributor Organisation % Warranty % Logistics % Product development Distribution % Total vehicle cost Purchasing Manufacturing Contracting Expanding Platform Development Outsourcing Commonality Strategic sourcing Partnerships Lean manufacturing Outsourcing Network factory ? Source: A.T.Kearney

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’

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 S&P 500: 20% Overall Transportation Industry Third-party Logistics Services Equipment Leasing Railroads Air 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,

Net logistics revenues for some 3PLs 1999, [million USD]: Ryder Penske Logistics UPS Logistics APL Logistics This is a chart that supports the growth of logistics generally, on a macro level. Sequentially, these charts show that even though asset based providers have higher net revenues, the market (investment bankers and others) do no necessarily value this higher. Thirdly, This asset vs non asset distinction is increasingly irrelevant. What’s important is that the provider become solutions oriented so it can improve the customer’s SC productivity. Source: Armstrong & Associates

Companies will in the future compete between supply chains and not within them Supply Chain “A” C o r e C o m p e t e n c i e s The Market Supply Chain “B” The Customer: Share, Loyalty, Retention Supply Chain “C” Customer Value E.g. Ford/UPS/Exel

Players in Maritime Logistics

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

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 Logistics Key Attribute APL Logistics Strong endorsement from parent A.P. Moller, although appears less enthusiastic than APL Per NOL top management and CEO future is in logistics. Sees liner shipping as mature industry, growing only if trade expands Attitude of parent company top management Independent profit center. May link more closely to parent goals, e.g. IS joint strategy, & “exception management” approach. Note McKinsey & Mercer roles today Independent profit center & staff. Report direct to Moller not MS. Attempt to leverage liner investments and brand name Relationship to parent & sister companies

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 Logistics Key Attribute APL Logistics Revenues (net): $420m Margins: $12-24m Revenues (net): $406m Margins (EBIT): $28m Estimated Financial status Handle all physical and information needs of key global industries and customers with strict accountability Link together all information from disparate operating units to enable end to end management of global customer shipments Maersk Logistics was an estimate. It was based upon their stated numbers of 99 of $350 million gross when it was just Mercantile. I estimated that Sealand Logistics was approximately the same size. Combined therefore they are estimated to gross around $700 million. (note since Sealand was just absorbed into Maersk, we really don’t know what Sealand Logistics revenues were. But my estimate was $350 based upon my experience. Therefore net of $420 is about right. My estimated margins were based upon an assumption (deliberately on the low side) of % return on gross of between 1.75 and 3.5%. Return may be a lot higher but requires investigation. 1. EBIT. Earnings before interest and taxes. Bottom line profit margins include charges for interest, taxes, extrodinary items, etc. and is therefore lower than EBIT. EBIT is a better measure of operating performance of a firm. So in APL Logistic's case EBIT of $14million in the first half of 2000 was up 17% over first half 1999. Again, if we annualize this for 2000, then EBIT would be $28million. And, second half's for container carriers out of the Far East are usually higher than first half due to seasonal realities. Once again, to remind you, we don't have hard data on the Maersk Logistics. All we really know are gross numbers, which I have indicated. The bottom line numbers are estimates based on a possible 2-4% return on gross revenues. Logistics mission

APL HomePort 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% “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

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

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:

UPS/Ford: North America
Transit time [days] Fewer, higher-density lanes Reduced number of destinations from each plant Mixing centres serve as consolidation hubs Source: Global Automotive Logistics conference, 2000

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.

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

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

E-logistics

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)

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.

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

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

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

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?

WW ASA’s Logistics Strategy

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

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

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

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

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

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

WW Global Logistics Strategy
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 50% WWL Wilship Barber Int. Barwil Logistics Strategy Logistics Strategy Logistics Strategy Logistics Strategy WW Group Logistics Strategy

Logistics Strategy Project Structure
Feasibility Study Dec ‘99 - April ‘00 Main Project Implement new services 1999 2000 2001 2002

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

Supply Chain Reengineering

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 entry 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

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

Process Re-engineering
distribution process/lanes Test & evaluate new distribution lanes Implement improved solution Map present state 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)

Germany - UK Dealer logistics chain

(Detailed 1)

Time Mapping Time Process 1 Pr 2 Process 5 Pr 7 Process 8 Process 3

Cost Mapping

GRA 4303 Maritime Logistics Strategy

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