Bill Goldsborough

7/30/2019 Bill Goldsborough

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SME in the Global Supply chain

Logistics: Key component of competitive strategy

Bill Goldsborough, Ph.D

Principal - LAS and associates(415 488 1491)


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Todays agenda

Brief review of business globalization

Importance of supply chain in global arena

Logistics as a key component of supply chain

Processes involved in global logistics

One SMEs approach to global logistics

Why today is a good time for the SME to beginto upgrade its global logistics capability

Next steps for SMEs

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Drivers of business globalization

Market forces

Sell in international markets

Source from multiple markets

Invest in multiple markets, e.g. ops, R&D

Policy and technology forces

Trade and capital liberalization

Transport, communications & information technology

Market privatization

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A smooth functioning supply chain

is a key condition for success Get the right product, in the right quantities,

in the right condition to the right place at the

right time and at the right price To do this need to break down barriers

between traditional business functions, e.g.

manufacturing, marketing, etc. Focus instead on key customer related

processes like order cycle, complete orders,on-time deliveries

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Broadly there are 4 key processes a

company must perform

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Plan Source Make Fulfill


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Process improvement has had a

significant impact on the bottom line

IBM reduced overall costs by $12 billion

between 02 & 05, according to AMR

Increasing evidence of positive correlation

between process improvement and keyfinancial indicators, e.g. share price, materials

cost, cash to cash cycle times

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Software has been a key enabler of process

improvement and has led to closer cooperation

between firms

Enterprise resource planning (ERP), Supply chain

planning (SCP), Transportation planning (TM),

Customer relationship Planning (CRM), etc

Global trade management (GTM) software

Web-based portals 7


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Globalization and supply chain technologies have led to

a new phenomenon: Global production networks

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U.S.

BestBuy

Zoran

Applied

Materials

D&H

Asia

Toshiba

Contractfirms

TSMC

(1)

.(2)

(3)

(4)

(5)(6)


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Logistics (fulfillment) is a key process of the

integrated global supply chain

But, more limited in scope than the supplychain

Nonetheless it has huge cost and customerservice implications

This combination presents opportunity toimprove financial, operational and serviceperformance relatively quickly

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Global logistics is comprised of four key

activities that need to be carefully

managed today

Inventory management

Transport spend management

Import/export process management

Logistics outsource management

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Careful inventory management is more

important than ever because of the far flung

nature of the global supply chain Holding inventory is costly

Current recession could have long-term impact

on channel management Examples of tools for managing inventory

VMI

Cross docking

Merge in-transit Postponement

Optimization

Visibility software

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Visibility software is foundation for global

inventory operational and strategic

management

Operationally

Enables integration of disparate nodes & singlewindow on activities

Enables management by exception & problemidentification and resolution

Strategically Provides data for in depth analytics, e.g. root cause

analysis, forecasting

Drives ROI collaborative initiatives with partners

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There are various ways to obtain

visibility capability

Develop in-house, custom designed portals,

e.g. Dupont, Cisco

Lease from outside vendor

Receive from 3rd party provider, e.g. freight

forwarder or carrier

Buy over the web on a per usage basis-SaaS or

on-demand

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Global transport spend management-

Historically firms have controlled this poorly

Terms of sale

Viewed tactically rather than strategically within the

firm

Decentralized decision making

These practices have led to:

Mismatch between mode/service selected andactual customer need

Lack of awareness of increasing transport options

available to the firm14


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But recent changes in the global transport

environment enable a more strategic approach

to transportation

Virtual deregulation of ocean transport

Increased willingness and capability of 3rd parties

to enter into contracts today

Technology breakthroughs that enhance

shipper/provider interface

Rate/Service optimization software

Carrier contract management software

Cargo platforms, e.g. Inttra, G.T. Nexus, CargoSmart

Improved analytics 15


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The costs associated with failing to manage

import-export processes well are

significant

Excess duty payment due to misclassification

Failure to qualify for trade agreement

advantage

Failure to qualify for trade facilitation program

Government financial penalties Cargo delays, e.g. Brazil

Loss of shipping privileges

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For many firms global logistics outsourcing

will become critical to their success

Outsourcing phenomenon generally

Logistics provider industry is maturing:

Relationships now range from simple to

complex and from arms length to

strategic

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U P id l ti hi ti


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User Provider relationship continuum

Provider type

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Intl forwarder

increasing:

3rd

party Lead logistics provider

Relationship type

Transactional Strategic

Shared goals

Risk/reward

Robust Systems

links

Management

integration

Metrics

Modest systems

linksArms length

Traditl

services,

limited

Traditl

services,global

Integrated

forwarding &

fulfillment

Tech driven,

multimodal,

global player

Design,reengineering

consulting

Manage 3rd

parties,

carriers

Fully integrated

strategic

partner

Traditional Emerging


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Strategic relationships can form

between both large and small firms

Large firms

Cisco and UPS Logistics in Europe

Diebold and Menlo Logistics

Small firms Redback Networks and D.W. Morgan

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Case Study: Redback Networks develops global

logistics partnership (From Aberdeen Research)

$115 million designer & marketer of networkingequipment to customers worldwide

Business model is product leadership: provide bestmost reliable products, including 4 hr partsreplacement

Corporate strategy: leveraged business thatoutsources to experts all functions that dontinfluence customer buying behavior

The challenge: to align in-house logisticsoperations with corp. strategy throughoutsourcing

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Case study continued

Redbacks Provider requirements:

Meet stringent SLAs to customers

Reduce global service parts depots

Reduce inventory levels

Reduce # of people to run depots and fill orders Provider selected: D.W. Morgan

Closed 22 of 50 depots

Deployed a hub-spoke system S.J., Atlanta, HongKong, Amsterdam

Deployed high level web-based visibility software

Transferred employees to Morgan payroll

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Case study continued

Results were significant

Total logistics costs reduced by 30 %

Total service depots cut from 50 to 28

Overstocking minimized and inventory in field has

dropped by 50 %

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Today is a good time for SMEs to begin to

develop a global logistics capability

Availability of low cost on demand technology

Carrier options available due to deregulation, over

capacity, etc.

Opportunity to enter into strategic, goal basedrelationships with vendors

Possible opportunity to participate in production

network phenomenon To develop new sources of competitive advantage in

a slower growth world economy in which lower cost

and customer service will be king24


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Next steps for SMEs wanting to develop a

more strategic global logistics capability

Self assessment, (How are we doing today)?

SWOT

Industry structure analysis

Benchmark

Path forward (What do we want to become)?

What do we need to do to get there? - Gap analysis

Identify low hanging fruit that can be harvested

relatively quickly as recession recedes

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Bill Goldsborough

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