Making the Right Location Decision

Transcription

1 Making the Right Location Decision Moderator: Vann Cunningham, BNSF Railway Presenters: Tom Scorsune, Yusen Logistics (Americas), Inc. Rob Tecco, Coleman, Inc. Tom Scorsune vice president, Business Development Yusen Logistics (Americas), Inc. Warehouse Division 2 NAIOP Do not reproduce or distribute without permission. 1

2 Discussion Agenda Future supply chain trends and the potential impact on industrial real estate Strategic view of supply chain management Supply Chain Transformation, Case Study Example 3 Future Challenges Environmental Port Security Port and Rail Infrastructure Owner Operator Capacity Development of New Technologies 4 NAIOP Do not reproduce or distribute without permission. 2

3 Future Considerations Lazero Cárdenas Prince Rupert Inland Ports Panama Canal Expansion 5 Future Network (by 2015) Established Ocean Terminals Future Ocean Terminals Established Rail Hub/Network Future Inland Ports/Network 6 NAIOP Do not reproduce or distribute without permission. 3

4 Current State Summary The economic recession has slowed freight volumes worldwide Although not currently an issue, congestion at LA/Long Beach, combined with the geographic constraints for growth, have made alternative ports and trade routes more attractive. Container ships are increasing in size to take advantage of cost savings provided by economies of scale. Panama Canal is opening up to accommodate larger ships The east and gulf coast ports are making infrastructure improvements in anticipation of long-term growth 7 Future Supply Chain Trends and Potential Impact on Industrial Real Estate Transportation represents one of the largest cost buckets important to have efficient and effective inbound and outbound transportation Intermodal / rail options increasingly more attractive Sustainability/cost benefits Resiliency risk mitigation Expansion of Panama Canal driving interest in east and gulf coast port locations Closer proximity to U.S. population centers Availability of less expensive land/facilities Aggressive business and economic incentives Port diversification strategies more prevalent Trend to shorten supply chain near sourcing (e.g., Mexico vs. China) Inland ports expected to increase in importance Kansas City, Columbus, Chicago, etc. Availability of business & economic incentives, as well as labor issues, drive businesses to the southeast U.S. Increasing fuel costs will drive interest in more/smaller versus fewer/larger 8 NAIOP Do not reproduce or distribute without permission. 4

5 More Than Real Estate Understanding the total operating cost picture is critical to maximizing value 60% 40% 20% 0% 50.3% 21.8% Transportation, ti inventory and labor typically account for 80% of the operating costs Real estate typically accounts for less than 5% 9.5% 78% 7.8% 43% 4.3% 2.7% 2.2% 1.2% Transportation Inventory Labor Source: Herbert W. David & Company: Logistics Cost & Service Report 9 Corporate Decision Making Process How can we better address the key questions? Network Strategy (C-Suite/Supply Chain Executives) Objective: Define the optimal number and location of DC s to service our customers at the lowest overall cost with the highest levels of service Baseline of current state distribution network cost, service impacts, etc. Model alternative operating scenarios what if analysis Define target areas for deployment at 20,000 foot level Site Selection (Supply Chain/Subject Matter Specialists) Objective: Pin the strategy to a more specific location Which locations are best within the defined targeted areas Detailed review of specific sites at ground level Execution (Real Estate Professionals/Traditional Brokers) Objective: Finalize site selection decision and complete the deal RFP process initiated Negotiation on real estate, incentives, etc. Key Questions How can supply chain and real estate work more closely together to create more value? SAVE TIME MAXIMIZE VALUE How can we better execute and drive value when pinning the strategy to the ground? 10 NAIOP Do not reproduce or distribute without permission. 5

6 Case Study: Global Corporate Client 11 Original Supply Chain Network Seattle Secaucus San Francisco Cherry Hill, NJ Los Angeles Atlanta Tampa Central DC Regional DC Ocean Routes Landbridge Domestic Routes 12 NAIOP Do not reproduce or distribute without permission. 6

7 Post-Distribution Concept -10 Days -72 HRS 0 HRS Depart Origin EDI 856 & 315 EDI 850 & 315 Arrive Dest 13 Post-Distribution Objectives Improve On-Time Efficiency from 46% Provide Floor Ready Distribution Replace Manual Process with Automated Transload Facility Provide Post Distribution Capability Track Shipments by Containers vs. Purchase Orders Maintain Flexibility to Provide Pre-Pack Distribution Provide UCC 128 Labels to the Store Level with ASN Capability 14 NAIOP Do not reproduce or distribute without permission. 7

8 Post-Distribution Benefits Benefits Requirements Delayed Decision Making Reduced Lead Time and Inventory High-Speed Automated Processing - Sortation - Label Application Capital Investment Vendor Compliance 15 Post-Distribution Results On-time performance improved from 46% to 99% Audit accuracy greater than 99.9% Reduced lead time by 14 days Eliminated a DC resulting in $11M annual cost reductions Less obsolete stock Domestic time saving from store-ready products Ability to leverage cost savings of inter-modal versus over the road 16 NAIOP Do not reproduce or distribute without permission. 8

9 Replenishment Hybrid Concept Point of Sale Replenishment 3 Year Forecast, $300M USD Sales Increase Capital Investment of $300M USD Weekly Order Cycle Core Items - Expansion of Program to 40 Vendors RF Environment EDI Capabilities Random Reserve Storage Locations Zone Picking Efficiencyi Transload Process Integration Full Shipment Audit Functionality 17 Rob Tecco director, logistics & distribution Coleman, Inc. 18 NAIOP Do not reproduce or distribute without permission. 9

10 Agenda DC Network Analysis Regional Site Evaluation Final Decision 19 Network Analysis Why are we located where we are today? 20 NAIOP Do not reproduce or distribute without permission. 10

11 Coleman History W.C. Coleman W.C. Coleman founded the Hydro-Carbon Light Company in 1900 in Oklahoma territory. Coleman moved his headquarters to Wichita in Network Analysis Prior Coleman Network 4 Cities with 16 different facilities Significant interplant movements Extended dray from rail hubs Alignment to outbound demand Redundancy (Labor, Security, Systems) 22 NAIOP Do not reproduce or distribute without permission. 11

12 Network Analysis Utilized external consultant Establish baseline cost Excluded manufacturing sites(import sites only) Multiple scenarios (1DC through 5 DC model) Safety stock Inventory levels Service levels and transit times Inbound/Outbound transportation costs Labor and overhead costs Forecast accuracy 23 Regional Site Evaluation 2 DC Scenario most favorable Southern California Fontana Midwest Kansas City, St. Louis and Louisville Detailed cost analysis Infrastructure» Rail Service, Transit Time Labor environment Local business environment» Corporate and personal taxes» Incentives» Community partnership 24 NAIOP Do not reproduce or distribute without permission. 12

13 Regional Site Evaluation Internal parties involved Operations Finance Sales Visits to potential sites High level meetings with local developers and economic development groups 25 Final Decision Operations, Finance & Legal Developer partnership Local incentives Local tax structure Expansion ability Infrastructure Near future intermodal facility Intangibles 26 NAIOP Do not reproduce or distribute without permission. 13

14 Coleman North America Today Headquarters: Wichita, KS Manufacturing: Wichita, KS, New Braunfels, TX, Sauk Rapids, MN U.S. Distribution: Gardner, KS, Fontana, CA, in addition to distribution from the manufacturing sites. 5 Cities with only 5 facilities Eliminated over 2 million miles of travel 27 Keys to a Successful Project Local Developer is crucial Interaction with local government Have clearly defined specifications Buy-in from all internal departments Plan, Plan and do more Planning Timing 28 NAIOP Do not reproduce or distribute without permission. 14