Logistics Strategies for a New China - The Best Business ... · Shanghai pres.ppt 3 Supply Chain...
Transcript of Logistics Strategies for a New China - The Best Business ... · Shanghai pres.ppt 3 Supply Chain...
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Supply Chain Management Conference 2004
Logistics Strategies for a
New China
Richard Zhu
UPS Supply Chain Solutions
April 14, 2004
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Agenda
• China transportation and
logistics market overview
• Four logistics strategies
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Compared to the U.S., China transportation and logistics
spend is small, but a relatively large percentage of GDP
US Japan China
$10,082
$1,008
10%$5,976
$657
11%
$1,150
$214
19%
GDP
Transportation and
Logistics Spend
Source: BEA National Economic Accounts; CSFB; Chinainfobank; European Commission; Securities
Market Size – 2001
($ U.S. Billion)
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China’s transportation and logistics market exhibits low efficiency
and poor service quality — attributable to four major factors
Low Efficiency and
Poor Quality
Under-developed
Infrastructure
Lack of Expertise
and TechnologyFragmented/
Segmented Market
Regulatory History
and Constraints
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Hurdles are being addressed
Low Efficiency and
Poor Quality
Under-developed
Infrastructure
Lack of Expertise
and TechnologyFragmented/
Segmented Market
Regulatory History
and Constraints• WT reforms
• Competition
• Multinationals and
integrated services
• National road and rail network
• Triple container port capacity
• 10,000 logistics
specialists
graduating
each year
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Growth of 3PL outsourcing
• From in-house to third party
• 25-30% 3PL growth rate
• More foreign-owned 3PLs establishing networks
• Domestic providers to play a role
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UPS Supply Chain Solutions in China
• 3PL air and ocean forwarding
• 1,000 people, 24 locations, 1.5 million sq. ft. of
warehouse space
• 6 weekly direct flights
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Four strategies for efficient logistics management
• Integrate everything
• Share the pain
• By-pass the DCs
• Make sure you can see
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Integrate everything
• Fragmented suppliers hinder visibility,
increase hand-off problems
• 3PLs handle suppliers, for one point of contact
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A High-tech Manufacturer
• World’s largest manufacturer of
hard disk drives
• Vertically integrated manufacturer –
heads, media, PCB, final assembly
• Technology leadership and
leverage
• Very competitive industry with
steep year-over-year reductions
in price
• Strategic focus on R&D, marketing
and sales
• VMI hubs for inbound
component parts
• Airfreight (2,000+ tons/month)
• Ocean freight
• Customs Brokerage
• LTL/TL transportation
• Global finished goods distribution
• Reverse logistics for
warranty/repair
• Supply chain visibility –
in-transit and in-site
About the Company Scope of UPS Solution
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UPS manages the Company’s China pre-manufacturing VMI
logistics, finished goods fulfillment and returns consolidation
Beijing
VMI
60+ Global
Suppliers
Wuxi EPZ
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UPS manages the Company’s China pre-manufacturing VMI
logistics, finished goods fulfillment and returns consolidation
Beijing
Wuxi EPZ
North America
Asia Pacific
DC
VMI
60+ Global
Suppliers
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UPS manages the Company’s China pre-manufacturing VMI
logistics, finished goods fulfillment and returns consolidation
Global Repair
Mexico
Dallas, TX
Singapore
Beijing
DC
VMI
60+ Global
Suppliers
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The Client has reduced costs, improved performance
and simplified their supply chain
Program Results
Economics
• Logistics cost per drive reduced by 25% over 2 years
• Improved asset utilization and lower capital expense
• 5% US transportation expense reduction
Simplification
• Air freight providers reduced from 6 to 2
• US carriers reduced from 62 to 7
• Materials reduction via site consolidation
• Lower capital expense
Service Levels and Optimization
• Direct fulfillment improved from 20% to 83%
• Utilization of ocean for selected products
• Customer error reduction
Visibility and Integration
• Elimination of redundancy and wastedcommunication time
2001 2002 2003
-10%-15%
Freight Cost: $ per drive
2001 2002 2003E
-64%
-50%
Loss Management: $ per drive
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Share the pain
• Sharing regional distribution facilities with
other companies
• Share costs, minimize delivery times
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By-pass the DCs
Speed to market
• UPS Trade DirectSM Ocean – An integrated solution combining ocean freight and
customs clearance with final UPS package, TL or LTL delivery.
• UPS Trade DirectSM Air – An integrated solution for moving time-sensitive shipments
from your international origins direct to customers or stores. Combines air freight and
customs clearance with final UPS package or LTL delivery.
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DC By-pass video clip
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Make sure you can see
• Customers demand visibility
• Track products, track costs,
speed delivery
• Using 4PL is one way to
achieve visibility
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Lucent Technologies
• Increased complexity in logistics coordination
• Over 40 regional and 2nd tier warehouses
• Over 14 transportation LSPs
• Global industry slowdown led to organization
downsizing and cost reduction pressure
• Increased competition led to lower margin
and higher service levels
• Project-based deployment practice requires
greater flexibility in resources
• Global realignment to the virtual
manufacturing model requires the SCN
organization to outsource
• Freight forwarding
• Inland Transportation
• Customs Brokerage
• Express Package
• Freight payables
• Visibility Systems
• Warehousing
• Transportation Management
• Order Fulfillment
• Inbound Process Management
• Outbound Process Management
China Logistics Activities Challenges
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Lucent Technologies
China Lead Logistics Provider
• Logistics network
management and
execution
• Total supply chain
visibility solutions
• Management of
logistics service
providers
Lucent China
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Logistics in China:
From a question mark to an exclamation mark!
Supply Chain Management Conference 2004
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Thank you
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Supply Chain Management Conference 2004