Global Logistics &

Supply Chain ManagementMaking Sense of it All and Where It is Going

Tom Craig – tomc@ltdmgmt.com

LTD Management www.ltdmgmt.com

Topics

GLOBAL LOGISTICS--

West Coast & Domino Effect

Container Line Chaos

SUPPLY CHAIN MANAGEMENT--

Blue Ocean Strategy Using Supply Chain

Management

Global Logistics

West Coast Ports &

Domino

• Poor Service, Congestion

• Christmas

• Chinese/Lunar New Year

• Alternative Port Issues

• Air Freight

Questions

Do you use carriers directly or a forwarder?

Do you use West Coast ports?

How stable was and are your rates?

Did you have any booking problems?

Did you have any problems getting empties?

Did you make any adjustments? When?

How did you make out?

AND---

THE Question

What are you going to

do now?

Pending Chaos!?

Is There More Ahead than

West Coast Port Issues?

Ocean Imports

Issues

• Ship supply exceeds

demand

• Pricing/Rates

• Service & space

Need to know what is

going on in order to

negotiate and to buy

ocean transport service.

Mega Ships

Mega Ship Aircraft Carrier

CSCL Globe•19,100 TEU

Containers stretch 72 miles

156 million pairs of shoes

300 million tablet computers

900 million standard tins of baked beans

•Was biggest ship (for 53 days)

Now MSC Oscar

19,224 TEU

•One big ship or no megas vs fleet of ultra large??

Issues They Face• Megas / Ultra Large – 18,000+ TEU (vs.

1,000 TEU in 1970’s)

• Lower Operating Costs

• How Will Ships be Filled?

• Which Ports Will Handle Them?

• How Will Ports Handle Them?

• What’s the Investment?

• Bottlenecks!

Shake Out Ahead?

• Capacity adjustments—more frequent?

Financial

Much red ink for last 6 years

Rates

Transpacific vs Asia-Europe

Cost management

Differences with mega fleets

Revenue management

Maersk

Rates—Asia to Europe vs U.S.

DATE EUROPE USWC USEC

12/5/2014 $719/TEU $1825/FEU $4020/FEU

12/12 $1353 $2259 $4363

12/19 $1230 $2242 $4575

12/26 $1149 $2125 $4538

12/31 $1085 $2058 $4498

1/9 $975 $1930 $4500

1/16 $1008 $2089 $4747

SCFI spot rates

Will there be

fewer carriers in

the years ahead?

• If so, who will survive?

• What do you do now to

position with the survivors?

What would this mean to

OTIs/NVOs/FFs?

What does it do to pricing?

What does it do to service?

•

Service--Global

Supply Chain Erosion

What Carriers Are Doing

More to previous, with different take

Remember that need to know to buy transport

Alliances

P3 is now the M2

New -- Ocean 3 (CMA CGM, UASC, China Shipping)

Operating issues

Shipping Routes – revised

Carriers

Sailing Schedules – made and reworked

“Slow Steaming”

Skipped / blank sailings

Maersk closed 2 services in transpacifc (after losses in

trade for 9 of 10 years)

How do you manage a supply

chain—and your business—with this?

Remember, you are buying a service.

Service Performance--Top 20 Carriers--

Remember-- you are

buying a service

Aggregate for Asia-Europe,

Transpacific & Transatlantic

Rolling 3-month average—

Asia-Europe at 67%

Transpacific at 52%

Transatlantic at 59%

Top Carriers for 3 months

Maersk at 80%

Hamburg-Sud at 75%

Cosco at 70%Remember, you are buying

a service.

Service Performance

Rolling 3-month average--

Asia-Europe at 58%

Transpacific at 62%

Transatlantic at 77%

Top carriers for 3 months—

Maersk at 80.4%

Hamburg-Sud at 78.5%

Cosco at 69.9%

What It All Means

Irregular Performance

Will lower bunker/fuel prices improve on-time?

Lack of service reliability

Potential changes as to ports to handle ships

Which Means—For You

Increased uncertainty for planning

Negative impact on operations & sales

Undermine inventory yield maximization

More inventories

More capital tied up

Impact

TOTAL GLOBAL INVENTORIES

REQUIRED INVENTORY TO

MEET REQUIRED TO MEET SALES

SAFETY STOCK

ADDITIONAL BUFFER TO

COMPENSATE FOR

UNRELIABILTY

And expedited

freight?

Just an FYI--

And chassis fees are going up

By The Way…• How does all this factor into

your importing and carrier selection (even if you use a NVO)?

• How do you factor all this into your business?

• Have you considered how much is about big and big – big carriers and big shippers?

• Do you form an IGA shippers association to leverage buying power for import freight rates and service?

Questions???

Blue Ocean StrategyUsing Supply Chain Management

“We typically lose out when a market

commoditizes and we no longer

differentiate, further aggravated by us

being too slow or expensive.”

Frans van Houten, CEO, Royal Philips Electronics

Any of these your business?

Commoditized?

Sell mostly on price?

Margin issues?

Customer retention/turnover?

Growth issues?

Little/ no competitive differentiation?

What do your customers think of you?

Start simple—

Percent of orders delivered

complete, accurate, and on time

Do you know?

If you don’t know, how

can you say you provide

good service?

Is it good?

If not, what are you doing

about it?

Where is your competitive

differentiation?

Blue Ocean StrategyWhat blue ocean is

What blue ocean does

Uncontested market space

Create new industry –- OR—

Alter your boundaries (make blue ocean from red ocean)

Red ocean vs blue ocean strategy--

Red Ocean Strategy

Compete in existing market space

Beat the competition

Exploit existing demands

Make the value/cost trade-off

Align company activities with its strategic choice or low cost

Blue Ocean Strategy

Create uncontested market

space

Make the competition

irrelevant

Create and capture new

demand

Align company activities in

pursuit of differentiation

and low cost

Interesting study--

Firms that did incremental improvements to existing

offerings—

86% of firms (stuck in a rut?)

These line extensions were 62% of total revenues

These line extensions were 39% of total profits

Firms that created new markets—

14% of firms

These were 38% of total revenues

These were 61% of total profits

Think about this

How much strategy is actually just a

reaction to competition?

Blue Ocean

OpportunitiesNew e-commerce

Multichannel

Global

Competitive differentiation

E-commerce

•$1.5 trillion sales global

•Part of Multichannel / Omnicommerce sales

•Can we say Alibaba?

Do you really think e-commerce is

for B2C retail only?

•Too big a way of doing business to just be……

•W.W. Grainger– 1/3 B2B sales are e-commerce (over $3bil)

• Global B2B $6.7 trillion by 2020

Old vs New

e-commerce

Immediacy

Amazon

Amazon Supply

Macy’s

Nieman Marcus

Same old-same old

Web site

Ship orders

UPS and FedEx dim pricing!

Multichannel

Expand ways to reach

customers

How to service them that

goes beyond just shipping

It’s about the customer

It’s not about you

Are we Looking at a paradigm

shift—

For Selling

For Supply Chain

Management

Global

Why not the world?

Why limit yourself?

Competitive

Differentiation

What sets you apart to

customers?

Why should they buy

from you?

Red ocean supply chain

•Is monolithic

•Is defined by functions

•Is measured by costs

•Focus on orders

•Carry more inventory—and invest more working capital—than is required

•Struggle to deliver orders complete, accurate and on-time

•Utilize technology primarily for functions, such as for warehouses and for “track and trace” transport

Blue Ocean Supply Chain

Deliver orders complete,

accurate and on-time per

Immediacy

Is defined by integrated

process

Utilize integrated supply chain

execution technology across

the supply chain

Use logistics service providers

that complement innovative

supply chain service

•Is segmented by channel

•Is measured by performance

and service

•Focus on customers

•Focus on delivery

•Focus on product positioning

and availability

Blue Ocean is

about how to

best service each

channel

Firms provide service they

want

Customers want different

HELLLOOOOOOOOOOO

Blue ocean is where competition is not

Immediacy (of

new e-

commerce) &

new supply

chain

Spreads across multichannel

Grows across the world

Expands across industries

Expands across markets

It is happening. Join the

blue ocean. Move to the

new supply chain. Or

keep validating Einstein

& lunacy.

For Blue Ocean Supply Chains

No quick fixes

No “you just”

It’s change

The new supply chain that drives

blue ocean is innovation

Where will you be—

Innovator

Early majority

Laggard

QuestionsAnd Comments

"You got to be careful if you don’t know

where you’re going, because you might

not get there." –

Yogi Berra