Challenges Ahead in Global Supply Chain Management: The “New” Norm

10/12/2016

Rob DinwoodieRegional Manager, Network Solutions

Direct 206-576-2544

Mobile 317-372-2968Email robert.dinwoodie@expeditors.com

Network Solutions creates value across the supply chain by designing solutions

for our customers’ supply chain networks, that drive improved responsiveness,

reliability & agility, while reducing cost and freeing up working capital

MISSION

PURPOSE

Supply Chain Planning and

Solution Design Group

Focused on helping Customers Improve their Supply Chain

Performance

Projects can be Developed by Customer or Expeditors

Expeditors Co-manages or

Supports Customer-managed Projects

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WHAT IS A BEST-IN-CLASS SUPPLY CHAIN?

By Optimizing

By Leveraging Enablers

To Achieve Desired Outcomes

TechnologyTalentProcess Design Orchestration

InnovationMeasurement CommitmentAlignment

Optimal CostOperational

Efficiency ComplianceOptimal

Inventory

Transparency Resilience Reliability Agility

Manages Three Flows

Money Material Information

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• Drivers

• Macroeconomic Trends

• Supply Chain Disruptions

• Consumer Requirements

• Technology

• Industry Gaps

• Trends and Challenges

• Innovation Areas

CONTINUOUS AND EVOLVING

GLOBAL TRENDS AND CHALLENGES

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RISING COST TRENDS

DRIVERS: MACRO-ECONOMIC TRENDS

5

Competition

Wages

Taxes

Regulations

• Increased regulations driving up cost of staying compliant and cost of non-compliance is catastrophic (lithium ion batteries, SOLAS, C-TPAT)

• High tax rates in western countries causing companies to constantly evaluate network footprint

• Rising wages worldwide are pushing manufacturing to developing nations and driving innovation in automation

• Near-perfect consumer information is causing fierce competition in markets

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GLOBAL UNCERTAINTY

DRIVERS: MACRO-ECONOMIC TRENDS

6

Oil Prices

Interest Rates

Consumer Demand

Political Instability

2016 ©Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only.

Drivers: Supply Chain Disruptions and Risk7

ComplexityRisk

Distance

DC

XD

DC

DC

DC

DC

DC

XD

2

8

56

448

224,000

∞Retail StoresE-Comm

October 31, 2016 Property of Expeditors International of Washington, Inc. and its subsidiaries. Reproduction by written authorization only. ©

• 2010 Iceland Volcano Cloud, Greece Debt Crisis, Earthquakes Chile / Haiti

• 2011 Earthquakes in Turkey, Japan Earthquake and Tsunami, Thailand Floods

• 2012 Hurricane Sandy

• 2013 Typhoon Haiyan Philippines, East Coast Work Slowdown/ Strikes, Bangladesh

factory collapse, Earthquake China

• 2014 West Coast Port Strike, Typhoons Halong & Rammasun S.E. Asia, Flooding NY

• 2015 Tianjin Port Explosion, Chennai Floods

• 2016 Military Coup failed in Turkey, Brexit, Zika, Hanjin Bankruptcy, Terrorist Attacks,

Hurricane Matthew

DRIVERS: RECENT SUPPLY CHAIN DISRUPTIONS

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DRIVERS: OMNI-CHANNEL CONSUMER REQUIREMENTS“INADEQUATE INFRASTRUCTURE AND THE ACCELERATING DEMAND FOR LAST MINUTE HOME

DELIVERY WILL TAX A SYSTEM THAT WAS NOT DESIGNED FOR E-COMMERCE.”

–2017 STATE OF LOGISTICS REPORT, CSCMP

Current Future

Fully Stocked Stores

Centralized Inventory

Case Pick and Pack

Truckload Deliveries

Globally Disbursed Customers

Decentralized Inventory

Single Unit Pick and Pack

D2D Parcel or Smaller

Economies of Scale Economies of Automation

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RAPIDITY OF CHANGE ERODES COMPETITIVE ADVANTAGE

DRIVERS: OMNI-CHANNEL TECHNOLOGY CYCLE

10

• Real Time Data

• Dynamic Relationships

• Efficiency• Speed

E-Commerce Automation

Inventory Accuracy

Connectivity

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• Supply Chain Strategy ≠ Corporate Strategy

• Focus on “Cheap” vs. Efficient Supply Chains

• Fragmented Supply Chain Data = No Actionable Information

• Big Data, Analytics, Internet of Things are only buzzwords

• Focus on “Segment” goals instead of “Ecosystem” goals

• Talent Management

INDUSTRY GAPS: INHIBITORS TO EFFECTIVE SCM

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TRENDS AND CHALLENGES: CURRENT SCM ISSUES

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Trends

Short Order to Delivery Cycle Times

Lots of Data, Little Actionable

Intel

“Origin” Distribution

(Retail)

Outsourcing Distribution

and Fulfillment

OPS

“Near Shoring” Manufacturing

(High-Tech, Industrial)

Eliminating Distributor Channels

Complete Outsourcing of Logistics Functions

Network Design

Supply Chain Data Accessible and Linked to Business Case

Real Time Inventory Linked to S&OP

Evaluation of “High Return” SC Functions

Network Design, Transport Flow

Analysis

Linking S&OP with

Logistics

Managing Relationships and

Network Performance

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• Agile Supply Chains: Risk Measurement–>Mitigation Plans–>Actionable Intelligence

• Cost-effective automation

• Professionals that can link supply chain, transportation, and logistics (SCT&L) data and information to business plans and develop business cases.

• Upstream planning engagement to reduce downstream SCT&L costs.

• More SCT&L involvement in sales, procurement, and demand planning

• Shift focus from operational problems to strategic ones.

• “Moving from warehouse floor to boardroom”

• Transformational NETWORK change vs. continuous process improvement

• Moving from “Vertical” thinking to “Systems” thinking

WHAT’S NEEDED TO TRANSFORM SCM?

INNOVATION AREAS

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