Eric Cagle Caterpillar Logistics Services, Inc. Deployment of Domestic Assets in a Global Sourcing Environment

Transcription

1 Eric Cagle Caterpillar Logistics Services, Inc. Deployment of Domestic Assets in a Global Sourcing Environment

2 Current U.S. Imports U.S. Imports have increased 144% from 1996 and 33% since 2004 Germany Canada 16.31% 16.0% Mexico 7.77% 10.8% Venezuela 1.38% 2.0% 4.08% UK 3.03% 2.9% France 1.95% 2.1% 4.8% China 5.39% South Korea 2.37% 2.4% 16.5% Japan 12.05% 7.4% % of total U.S. Imports in 1996 % of total U.S. Imports in Source: US Census Bureau

3 Leveraging our Capabilities in Logistics In 1987, Cat Logistics was established to leverage our strength in service parts logistics and market these services to other external companies wanting to improve their supply chain performance Learn from Client Clientele Leverage Apply to Client Apply to Cat Caterpillar Learn from Cat Supply Chain Supplier Manufacturing Distribution Dealer / Retail Consumer Manufacturing Logistics Warehouse Management Inventory Management Order Management Reverse & Repair Logistics We transformed our capabilities into service for other companies 3

4 Our Global Presence Americas Europe, Africa, Middle East & CIS 6 Continents 25 Countries 2 3 Languages 107 Facilities Shipping to Countries 12,000+ Employees AsiaPacific - 64 Facilities 37 Facilities 6 Facilities 4

5 A Tale of Two Companies To illustrate our points today we created two fictitious companies from our client and Caterpillar experience. Status Quo Inc. and Vision Corp. start from similar environments and networks but approach global sourcing with different strategies. 5

6 Both Companies Have Sound, Well Planned Logistics Networks Master Satellite From Suppliers Inter-Facility Environment Stable and sophisticated supply base Predictable lead times Customer demand drives safety stock Stable transportation requirements Network Attributes Custom designed Master facility Centralized/Minimal quality inspection Centralized network safety stock Efficient transportation Real time/near time communication with suppliers 6

7 Global Sourcing at Status Quo, Inc. Status Quo announces a goal to source 50% of current manufacturing volume to low-cost suppliers in China, India, Mexico and other countries. Their strategy is to actively manage landed costs and accommodate other requirements with the existing network without redeploying assets. 7

8 Global Sourcing Changes the Domestic Environment Master Satellite Environment Longer lead times Inconsistent lead times Rapidly changing supply base Unsophisticated supply base Changing transportation requirements 8

9 Status Quo, Inc.: Domestic Logistics Network with Global Sourcing $ $ Master Satellite From Suppliers Inter-Facility $ $ It was no surprise to Status Quo, Inc. that global sourcing caused: Increased safety stock and larger pipelines of inventory Increased inbound transportation spend 9

10 Status Quo, Inc. : Domestic Logistics Network with Global Sourcing Master Satellite From Suppliers Inter-Facility But over the next 3-6 months, other issues surfaced: Increased receipt variability Loss of In-transit inventory visibility Decreased ability to react to changing demand Increase in Quality rejections 10

11 Status Quo, Inc. Accommodation Strategy Master Satellite Environment Accommodations Longer lead times Increased safety stock Inconsistent lead times Increase inspection process Rapidly changing supply base Increase facility assets to hold more safety stock Unsophisticated supply base Increase supplier management function Increase customer service 11

12 Global Sourcing at Vision Corp. Alternatively, Vision Corp s chairs a multifunctional team to recommend necessary changes to their supply chain to mitigate these impacts. Vision Corp. is willing to consider redeployment of assets, people and processes rather than simply increase existing capacity where it exists today. The team s recommendation has 3 components 12

13 Versatile Facilities Master Satellite From Suppliers Inter-Facility The team recommended development of versatile facilities by deploying assets across the network: People and equipment to perform inbound processing Storage capacity for network inventory Technology and data to allow immediate changes to the bill of distribution 13

14 Versatile Facilities Recommendation #1: Facilities must be versatile Several facilities need to be capable of processing inbound shipments, including packaging, preserving, QC, supplier management Benefits: Inbound freight is minimized Inter-facility freight is efficient Inventory is received in the network sooner People skills deployed regionally generates broader career paths Decentralized inventory lessens the fill rate bias Requirements: Sufficient shipping volume between facilities to use full TL Appropriate deployment of people and training resources to all facilities Centralized process control must be maintained Technology that can plan inventory into multiple entry points 14

15 Flexible Network Master Satellite From Suppliers Inter-Facility The team further recommends a flexible network by dynamically deploying volume across the network. 15

16 Flexible Network Recommendation #2: Network must be flexible Facilities and technology need to be flexible to divert volume elsewhere. Benefits: Inbound workload balanced across network Better disaster mitigation / Business Resumption Planning More appropriate economies of scale Requirements: Alternate sourcing logic for sales orders to avoid inventory becoming mal-distributed in the network Cross-docking and pick-from-receiving capabilities 16

17 Scalable Facilities and Network Master Satellite From Suppliers Inter-Facility The team finally recommends a scalable network that would allow redeployment of the following assets: People and equipment to perform Inbound Processing Storage capacity for network inventory Technology and data to allow immediate changes to the bill of distribution 17

18 Scalable Facilities and Network Recommendation #3: Facilities and the network must be scalable Choose facilities with flexible space increments Use standard M&E with little automation / customization Benefits: Freight spend remains optimized M&E is easy to re-deploy or sell off Requirements: Strategic planning horizons for both supply and demand Possible investment in technology or processes to improve warehouse efficiency without the need for custom automation 18

19 Domestic Supply Chain Asset Deployment In Summary: Impacts of global sourcing don t stop at the border Domestic assets such as warehouse space, inventory, people, and transportation assets may need to be deployed so that they are: Versatile to support inbound processing into multiple entry points Flexible to allocate assets appropriately when variability is encountered Scalable to manage future shifts in sources of supply and demand 19

20 Thank You