A competitive distribution network strategy

Transcription

1 April 22, 2010 Dusseldorf, Germany A competitive distribution network strategy Breaking political & operational barriers GW ref. 9026X069/AB/it initial version 1.0

2 Agenda Supply chains costs General trends Chemicals benchmarked Recommended supply chains strategies Consolidation of distribution structures Logistics Collaboration Summary & conclusions 9026X069/AB/it initial version 1.0 Page 2

3 April 22, 2010 Dusseldorf, Germany Supply chains costs trends & benchmark 9026X069/AB/it initial version 1.0 Page 3

4 Supply chains costs Trends Logistics Costs / CoGS (%) 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 12.1% 1.3% 2.5% 2.4% 8.6% 1.2% 1.7% 1.8% 5.9% 3.9% 7.3% 6.4% 6.1% 1.0% 0.8% 1.0% 0.8% 1.6% 1.4% 7.3% 2.8% 3.1% Transport Handling Inventory Administration Source: ELA X069/AB/it initial version 1.0 Page 4

5 Supply chains costs Chemicals benchmarked Logistics costs / CoGS (%) 2008 others chemicals consumer goods 8.5% 7.9% 9.4% automotive retail 5.9% 5.8% pharmaceuticals 3.3% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% industry avg. 7.3% 9026X069/AB/it initial version 1.0 Page 5

6 Supply chains costs Recommended supply chains strategies 1. Consolidate in regional network structures - Regionalization of supply chains footprint - Declined number of storage locations 2. Control net working capital - Active management of inventories 3. Enhance flexibility - Reaction capability to fluctuating demand - Replenishment on customer specific basis 4. Apply stringent risk management - Mitigate payment & credit risks 9026X069/AB/it initial version 1.0 Page 6

7 April 22, 2010 Dusseldorf, Germany Distribution network consolidation & regionalization 9026X069/AB/it initial version 1.0 Page 7

8 Distribution network consolidation & regionalization The supply chain trade-off Flexibility Operational Costs Reliability transport warehousing handling Responsiveness Supply Chains Asset efficiency 9026X069/AB/it initial version 1.0 Page 8

9 Distribution network consolidation & regionalization The supply chain trade-off transport costs Total costs inbound transport Inbound vs. warehouses Total costs line haul transport Line haul vs. warehouses Total costs customer transport End customer transport vs. warehouses No. of warehouses No. of warehouses No. of warehouses 9026X069/AB/it initial version 1.0 Page 9

10 Distribution network consolidation & regionalization The supply chain trade-off warehousing & handling costs Total costs warehouse building Building vs. warehouses Total costs handling Handling vs. warehouses No. of warehouses No. of warehouses 9026X069/AB/it initial version 1.0 Page 10

11 Distribution network consolidation & regionalization The supply chain trade-off supply chains assets (inventory) Inventory vs. warehouses Total costs inventory No. of warehouses 9026X069/AB/it initial version 1.0 Page 11

12 Distribution network consolidation & regionalization The supply chain trade-off all operational costs Total operational costs SUPPLY CHAINS TOTAL COSTS Inventory Inbound transport & Line-haul Storage & handling End customer distribution No. of stocking points supply chains optimum 9026X069/AB/it initial version 1.0 Page 12

13 Distribution network consolidation & regionalization Distribution strategy determining factors Service Focus paper apparel automotive spare parts pharma market requirements Price focus metals bulk chemicals Agriculture commodities specialty chemicals high-tech FMCG / retail consumer electronics Low value density product characteristics High value density 9026X069/AB/it initial version 1.0 Page 13

14 Distribution network consolidation & regionalization Distribution strategy market requirements & product characteristics market requirements Service Focus Price focus reliable SC regional warehouses in main markets with operational focus on efficiency warehouses stock all products & support short lead-times locations of warehouses also based on transport costs operational efficient SC EDC based on operational efficiency lead-time is not a driver Inbound transport is an important factor Outbound transport optimization through FTL s, milk-runs responsive, flexible SC multiple national warehouses (or air transport) set for local markets warehouse combined with service organization SC costs is not a decision driver, with low ratio of logistics in CoGs focus reliability, responsiveness asset efficient SC EDC based on optimization inventory or virtual warehouses local satellites with fast-movers and/or local products only locations satellites based on customer presence Low value density product characteristics High value density 9026X069/AB/it initial version 1.0 Page 14

15 Distribution network consolidation & regionalization Distribution strategy viable solutions Service Focus reliable SC responsive, flexible SC Price focus market requirements operational efficient SC asset efficient SC Low value density product characteristics High value density 9026X069/AB/it initial version 1.0 Page 15

16 April 22, 2010 Dusseldorf, Germany Warehouse & transport collaboration 9026X069/AB/it initial version 1.0 Page 16

17 Warehouse & transport collaboration Stages of capability across supply chains Integration of business functions within one supply chain between business functions within business function alignment optimization integration stages of operational capability alliance networks 9026X069/AB/it initial version 1.0 Page 17

18 Warehouse & transport collaboration Stages of capability - Stage 1: functional focus across supply chains Integration of business functions within one supply chain between business functions within business functional focus Discrete sc processes & documented data flows Resources managed at department level -APS - work flow management alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 18

19 Warehouse & transport collaboration Stages of capability - Stage 2: internal integration across supply chains Integration of business functions within one supply chain between business functions within business functional focus internal integration Company wide process & continuously measured data Resources managed at both functional and cross-functional level - Distribution regionalization - Matrix organizations / SCO - S&OP - Global sourcing alignment optimization integration stages of operational capability alliance networks 9026X069/AB/it initial version 1.0 Page 19

20 Warehouse & transport collaboration Stages of capability - Stage 3: external integration Integration of business functions across supply chains within one supply chain between business functions within business functional focus internal integration external integration Strategic partners throughout the global supply chains to collaborate to: o Joint business objective & action plans o Enforce common process & data sharing o Define, monitor and react to performance metrics - EDI, VMI, CRP, ECR,.. - Single supply chains alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 20

21 Warehouse & transport collaboration Stages of capability - Stage 4: cross collaboration network Integration of business functions across supply chains within one supply chain between business functions within business functional focus internal integration -CPFR - across multiple supply chains external integration cross-network collaboration Establish a full collaborative supply chains strategy: o Aligns participating companies business objectives and associated processes o Results in realtime planning, decision making and execution of supply chains responses to customer requirements alignment optimization integration alliance networks stages of operational capability 9026X069/AB/it initial version 1.0 Page 21

22 Warehouse & transport collaboration Chemicals positioning across supply chains Integration of business functions within one supply chain between business functions within business functional focus Chemicals internal integration High-Tech FMCG Healthcare external integration Automotive cross-network collaboration alignment optimization integration stages of operational capability alliance networks 9026X069/AB/it initial version 1.0 Page 22

23 Warehouse & transport collaboration Chemicals initiatives Knowledge sharing Experience sharing Create platforms on logistics approach (e.g. HACCP) Share information on food issues per country Select vendors based on experience in FMCG / with validation If possible, purchase equipment / systems based on validated status Facility sharing Transport sharing Share (temperature controlled) storage areas Share storage facilities (also for postponement, Value added etc.) Share (temperature controlled) transportation Combine direct distribution transport 9026X069/AB/it initial version 1.0 Page 23

24 Warehouse & transport collaboration Benefits overview Transport pooling: consists of grouping together flows (order processes, storage, handling, inbound transport, and mainly outbound deliveries) from several manufacturers who have compatible finished goods intended for the same distribution networks, with shared points of departure and receipt. Customer Service Logistics Costs Working Capital Improving delivery frequencies Increase reliability through risk sharing Economies-ofscale warehouse Truck utilization rate improves (costs & environment) Reduction of inventory through acceleration of flows throughout the supply chains 9026X069/AB/it initial version 1.0 Page 24

25 Warehouse & transport collaboration Benefits example AS-IS Manufacturer A Manufacturer B Warehouse A Warehouse B 30 pallets 14 pallets 1 delivery / 5 days 1 delivery / 8 days Warehouse Customer C 9026X069/AB/it initial version 1.0 Page 25

26 Warehouse & transport collaboration Benefits example TO-BE Manufacturer A Manufacturer B Shared Warehouse A & B 26+ pallets 1 delivery / 4 days Warehouse Customer C 9026X069/AB/it initial version 1.0 Page 26

27 Warehouse & transport collaboration Benefits business examples cross chain collaboration Northern France The Netherlands The Netherlands 9026X069/AB/it initial version 1.0 Page 27

28 Warehouse & transport collaboration Stakeholders Shippers 3PLs Operational savings Reduction of supply chains assets Committed capacity Risk pooling Increased assets utilization Predictable efficiencies Customers Environment Improved customer service Visibility in inbound Reduced road congestion Optimization of available landplots Reduction of the CO2 footprint 9026X069/AB/it initial version 1.0 Page 28

29 April 22, 2010 Dusseldorf, Germany Summary & conclusions 9026X069/AB/it initial version 1.0 Page 29

30 Summary & conclusions If chemicals wants to bring their logistics costs to reach average industry standards on the short-term it should focus on.... consolidation and regionalization of warehouses.. operate multiple, differentiated supply chains structures Chemicals can break the mid-term barriers of stabilized logistics cost by.... external collaboration by grouping transport flows (mainly outbound deliveries).. developing full collaborating supply chain planning strategies with supplier, competitors & clients 9026X069/AB/it initial version 1.0 Page 30

31 Nijverheidssingel 313, P.O.Box DG Breda The Netherlands Tel: +31 (0) Fax:+31 (0) Visit us at M A K I N G SU P P L Y CH A I N S YO U R CO M P E T I T I V E A D V A N T A G E!

32 Profile Groenewout is an international, independent consulting company providing integrated value-added advisory and support services across all industry sectors to support our clients in achieving business process and operational improvements within supply chains and logistics. Supply chain management Assets & facilities Sourcing Customer Warehousing & distribution Manufacturing Transportation 9026X069/AB/it initial version 1.0 Page 32

33 Groenewout Our consulting portfolio in logistics - & supply chains management Supply Chains & Logistics Consulting Strategical Feasibility studies Warehouse tendering for building, logistics equipment & IT Distribution Network Studies Global sourcing Non Product Related Purchasing (NPR) Organizational - & functional design Business process (re-)design Key Performance Indicators (KPI s) Tactical Warehouse (lay-out) design Plant (lay-out) design Lean warehousing Insourcing / outsourcing warehousing Transport tendering Service Level Agreements (SLA) Insourcing / outsourcing transport Benchmarks Sales & Operations Planning (S&OP) Production planning Collaborative Planning, Forecasting & Replenishment Operational Loss Prevention & Security (LP&S) Facilities electrical, HVAC & temperature engineering Location studies & site selections IS selection & implementation (WMS/TMS/APS) Inventory Mgt. Materials Mgt. Physical Distribution Supply Chains Mgt. 9026X069/AB/it initial version 1.0 Page 33

34 Groenewout Our methodology in logistics - & supply chains management Data gathering Supply Chains Transparency Business Requirements Benchmark 2nd-opinion Audit Arbitrage Training Modeling & Simulation CAST-dpm WHAT-2-STORE WARE-2-STORE BUILD-2-STORE ABC-2-STORE Automod Project mgt. Tender- & contract mgt. Construction (site) mgt. Process improvement mgt. Transition mgt. Change mgt. Interim mgt. 9026X069/AB/it initial version 1.0 Page 34