1 CONFIDENTIAL

TASKCo Corporation 太世科Info@taskco.com 886-2-8772-2583

e-Logistics ServicesFrom Warehouse to Logistics Service

Center64157 電子商務模式設計與應用國立中山大學企管所

2002 Spring, Week 4-2

黃光彩 博士太世科公司2002/04/13

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Complexity of a Typical Global Supply Chain

Supplier

Roadways Roadways

Freight

ForwarderCustoms

Agent

Port

Ocean

liner

Airways

Roadways

Road+

Rail

RDCCustomer’sWarehouse

Customer (Retailer)

ConsumerHome

Plant

Supercharging Supply ChainsErnst & Young LLP

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100%

The Evolution of Enterprise Applications

% Penetration

Time

ERPERP

SupplyChainExecution

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What is Logistics?

Logistics is defined as the process of movement of materials and products into, through and out of a firm.

The Logistics Flow Chart

SALESFUNCTION(SUPPLIER)

TRANSPORTATION PURCHASINGFUNCTION

(DISTRIBUTOR)SUPPLIERS

SALESFUNCTION

(DISTRIBUTOR)TRANSPORTATION

PURCHASINGFUNCTION(CUSTOMER)

WAREHOUSING

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The Logistics Channel

Suppliers Sales (Supplier) Transportation Purchasing (Distributor) Warehousing Sales (Distributor) Transportation Purchasing (Customer)

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Cross Functional Nature of Logistics Front end - Distributor Purchasing and Supplier Marketing Interface

Middle - Warehousing and Transportation Back end - Customer Contact (Marketing)

FRONT END MIDDLE BACK END

Functions of Logistics

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Key Logistics Activities

Customer Service Levels - Set by Marketing based on Operations Capabilities

Transportation Routing and Vehicle Scheduling

Inventory R.M. and F.G. stocking policies Break Bulk Consolidation

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Support Activities Warehousing

How many? What configuration? Where to hold inventory?

Materials Handling - ASRS, RF, Bar Coding, Etc.

Purchasing - Supplier selection, Purchase timing, Quantity, and Quality

Scheduling - Interface marketing and production

Information Maintenance Data Collection Data Integrity

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Objectives of Logistics Strategy Process Reduction - Cycle time, Lead time,

Automation

Capital Reduction - Inventory investment, number of warehouses

Service Improvement - the antithesis of the foregoing

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Industry Specific Logistics Services

IndustryIndustry IndustryIndustry

Size

Size

LL

MM

SS

Traditional WMS ProvidersSegment Market by Customer

SizeTraditional:

CPGApparelGrocery

Food Service

3PL

Opportunity:HealthcareElectronicsAutomotive

New Logistics CenterSegments Market by Customers’ Vertical

Market

Size

Size

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Logistics Goal: Close Gaps in the Supply Chain

Speed to compliance

Lower inventory Cross-docking Value-added

services Higher number of

SKUs Direct-to-consumer Configure-to-order

Customer / retailer satisfaction

Operational productivity

Transportation efficiency

Improved in-stock positions

Lower inventory Flexible business

practices

Retailer Requirements Supplier Requirements

Imperfect Imperfect InformationInformation

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Traditional Distribution Systems Used

Multi-Tiered Warehousing

Manufacturer

BulkFinished Goods Manufacturer’s

DistributionCenter

Bulk Shipments

LocalRetail

DistributionCenter

Hold inventoryHold inventory Value added servicesValue added services

Retail Outlet Store Distributions

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Traditional Distribution Center Process

1 Inbound receipt of goods

3Bulk outbound shipments

2Storage of goods

11

22

33

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Manufacturer

Manufacturer’sDistribution

Center

LocalRetail

DistributionCenter

Retail Outlet

Quick Response Initiatives Streamline Distribution Process

Advanced shipping notice Bulk or discrete shipments Store specific pricing Aisle specific palletizing High velocity

Cross-docking Flow-through

Lower inventory Greater availability

Direct store Delivery

Direct-

to-C

onsu

mer

Very high volume

Mass personalization

Integrated TMS requirements

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Value-added Logistics Center Process

1 Inbound shipment Inbound shipment trackingtracking

2 Yard managementYard management

3 Inbound receipt Inbound receipt of goodsof goods

4 Storage of goodsStorage of goods

5 Order pickingOrder picking

6 Value-added Value-added servicesservices

7 Order packingOrder packing

8 Pack and holdPack and hold

9 Outbound customer Outbound customer compliant shipmentscompliant shipments

44

7755

66

33

9911

8822

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Continuously Changing Demands of Retailers

K-MART Western Publishing

New PracticeNew PracticeOld PracticeOld Practice

# Orders

Destination

Frequency

IT Requirement

66

WarehouseWarehouse

MonthlyMonthly

Telephone/PaperTelephone/Paper

17,00017,000

Individual StoresIndividual Stores

WeeklyWeekly

Electronic Electronic Advanced Ship Advanced Ship

NoticeNotice

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From Warehouse to Distribution Center

“In order to enable greater customer responsiveness, the traditional role of the

warehouse (WMS) is moving toward distribution center. This is a major force in driving the

demand for e-Logistics applications.”

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Global Operations & Logistics Framework

Geographical Integration

SectorialIntegration

Functional Integration

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Geographical Integration

Impact of Distribution and Transportation greater due to ‘Globalilty’ Borders becoming more porous in terms of trade Production on global scale --- no longer country-specific International Sourcing Selling in Multiple Markets Data Processing and Communication technology help with the geographical integration.

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Functional Integration

Logistics - cross-functional in nature. Cuts across activities and creates interfaces to optimize overall performance. Flow management in Global Logistics difficult

Internationalized Markets Competitive products in the Market Adaptation of new technology Government Regulations

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Sectorial Integration Companies are handling logistics issues together beyond corporate boundaries.

Efficient Consumer Response (ECR)

Distributor ConsumerManufacturer

Collaborate

Final aimFinal aim - - to reach to reach customercustomer

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Freight Forwarders Freight providers have the earliest instance of hub and spoke systems Tenders for freight services made worldwide Development of Intermodal freight provision Mergers between freight providers -- e.g. Airplane companies Globalization brings up several issues in order to satisfy proximity service

Use of manufacturer’s sales network Setting up Proximity Distribution Centers (PDC) Developing central hub for express services and dispatch orders Setting up inventory of class A products with storage operator, distributor or agent

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International Freight Forwarders Nonvessel-operating Common Carriers (NVOCC) Customs House Brokers Export Management companies Export Trading Companies Shippers Associations Export Packers

International Trading Operators

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Dynamic Forces of Global LogisticsThe firms adopt different orientations with varying intensitiesdue to the dynamic behavior of the global business environment.

INFOUSER

RESOURCES

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Global Logistics’ Orientation Resource Oriented Logistics

Emphasis towards optimal use of resources -- capital,materials and people

Focuses on the relationship between the functional and the geographical

Optimize

ResourcesFunctional Geographical

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Global Logistics’ Orientation Information Oriented Logistics

Emphasis towards optimal use of information. Focuses on the relationship between the sectorial and the geographical dimensions

Geographical Sectorial

Optimal Performance

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Global Logistics’ Orientation User Oriented Logistics

Emphasis on the final customer. Using all the supply chain partners to bring their expertise in order to best service the customer User oriented focus brings about flexibility in the logistics channel

Customer

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Factors Pushing Global Logistics

TechnologicalAdvances

Emergence ofGlobal Markets

Global CostForces

Political & Macro-economic factors

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Factors Pushing Global Logistics Global Markets

Competition from foreign firms in local markets. Incredible growth of demand in foreign markets. Global presence used as competitive threat. Change of priorities

Global markets growing faster due to technological advances Products need to be introduced in all markets together.

State of the Art markets driven by customer preferences Firms have to set up production in these areas to maintain their competitive profiles. E.g. Japan - M/c tools

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Factors Pushing Global Logistics

Improvements in Technology Communication faster, easier and cheaper.

Markets characterized by fewer producers and greater diversity in products Shorter product life cycles

Technology advancement become global phenomenon Firms have to start looking at international sources to tap technological services

Global competition forcing companies to locate more R&D and production units closer to the suppliers. Joint ventures between firms to share technological info.

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Factors Pushing Global Logistics Global Costs Forces -- Shift in Logistics costs

Shift in focus from direct labor costs Global environment forcing companies to consider a trade off between labor costs, cost of start-up, fluctuation of currency, inventory costs, cost of quality management and training the local workers leading to island hopping strategy. New Competitive priorities like speed, quality,customization, delivery reliability. Production facilities are becoming more capital intensive

high technology industries R & D costs

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Factors Pushing Global Logistics

Political and Macroeconomic factors Exchange rate fluctuations Regional trade agreements --- NAFTA Trade protection mechanisms

Tariff and non-tariff barriers Technical Standards Health regulations Procurement policies

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How is Global Logistics creating Change? The management has to consider the Global economy

Logistics operations perceived more as Service Provider for cost minimization

Service in the Industry becoming more important than Cost Saving

Logistics activities no longer limited to moving products through the Supply Chain but as an Information Provider for the SC.

Companies moving away from Vertical Integration and towards Supply Chain Integration, with Logistics activities provided externally.

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New concepts in Global Logistics

Delocalization - practice of adding value to the product at different locations closer to the consumer.

Modularization - practice of assembling a product using modules purchased from different sources

Delayed Differentiation & postponement - Customization of the order after demand has been identified

e.g: Labeling the products in the language of the countries that they have to be shipped to

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Benefits due to Globalization of Logistics

Globalization is necessary for long-term survival

Diversity of markets increasing giving rise to Standardization across international markets Product diversity

Ability to access multiple sources of technology

Ability to set up strategic alliances and R & D

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Global Supply Chain – HP Example

HP DESKJET PRINTER SUPPLY CHAIN:

Printers made in Vancouver in two stages Printed Circuit Assembly & Test (PCAT) Final Assembly & Testing (FAT)

Components needed for PCAT & FAT taken from suppliers worldwide & from HP divisions

Printer power supplies custom made for each country with manuals written in that language packed

From Vancouver sent to Distribution Centers worldwide

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ICMANUF.

PRINTMECH.

MANUF.

CUSTOMER

WORLDWIDE

SUPPLIERS

DISTRIBUTIONCENTRES

WORLDWIDE

PRINTEDCIRCUITASSM. &

TESTVANCOUVER

FINALTEST

&ASSM.

VANCOUVER

SUPPLIERACCESSORIES

Global Supply Chain – HP Example

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Logistics Flows

Direct Flow

Reverse Flow

From companies to markets

From markets to companies

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Logistics’ Flows

Internal Logistics External Logistics

DirectFlows

ReverseFlows

Interplants

Warehouse/Warehouse

Plant/warehouse

With suppliers(supply of materials & components)

With customers(products, spare parts, promotional &

advertising materials)

With suppliers(packaging, repairs)

With manufacturers(elimination, recycling)

With customers(overstocks, repairs)

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Strategy for Global Logistics Consolidation points

Break bulk Capacity issues - whether to add processing capability or not

TAIWAN

USA/EUROPEIMPORT

VIETNAM

MALAYSIA

JAPAN

MAKE-BULK OPERATION

Postponement

BREAK-BULK OPERATION

EXPORT

VIETNAM

MALAYSIA

JAPAN

USA/EUROPE TAIWAN

CHINA

CHINA

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e-Logistics — A Modular Approach

Snap-on Modules

Snap-on module architecture

Easily configurable and upgradeable

Product is easily customizable to fit customer requirements

Outbound Wave

management Shipping

Inbound Receipt Put-away Movement

and slotting

ASNASN

Third-Party Logistics Billing

Optimization Suite

Industry Standards

Alert Monitor

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Future Solution Strategy...

Productized logistics execution solution• Fast implementation• Extremely high price / value• Win high market share

Synchronize logistics in our core vertical markets• Expand deep industry knowledge• Integrate industry content databases• Architect for continuous upgradeability

Expand compliance guarantee to all supply chain requirementsGuaranteed compliance with top 100 retailersDevelop additional high value, information-intensive supply chain solutions

... ... Can lead to increasing returns solutionsCan lead to increasing returns solutions

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Integrated Logistics Services

Integrated Logistics is the fusion of information, logistics and transportation technologies to provide rapid response to track and shift assets even while in reroute, and to deliver tailored logistics packages and sustainment directly at the strategic, operational and tactical level of operation

Logistics functions will incorporate information technologies and will work jointly and integrate with other sectors to take advantage of advanced business practices, knowledge economy, and global networks

Information technologies will enhance aircraft, sea liners, and pre-positioning capabilities to lighten deployment loads

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Services provided are both physical and management.

Service levels improve due to improvement in flexibility and inventory management

Cost reduced as compared to in-house logistics provider

In global logistics, versatile markets and products need expert services which can be provided by several 3PL

Third Party Logistics Provider

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Third Party Logistics Provider Use of 3PL allows the firm to penetrate new markets .

Access new technologies

Reduce inherent financial investment risks

Risks of using 3PL The same 3PL might be providing services for competing firms Manufacturer with a good image in the market might get tied down and their image linked with the 3PL

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Range of Services provided by 3PL

Source: J.M. Africk & C.S. Calkins ( Transportation & Distribution, 1994)

Com

plex

ity &

Cus

tom

izat

ion

Complexity & Customization

LowLow

High

High

PhysicalServices

ManagementServices

Physical ContractLogistics Services

• Dedicated contract carrier• Dedicated warehousing

Integrated Contract Logistics• Integrated warehousing & transportation• Integrated carrier management & transportation

Basic Services Management contract logistics Services

• Common Carriage• Public Warehousing

• Traffic Management• Warehouse Management• Import/export Management

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Emergence of Fourth Party Logistics Providers ‘Globality’ and Supply Chain Integration are increasing the

functions of Logistics providers. This has lead to the emergence of consulting firms as fourth party logistics providers

4PLs have the advantage of being in sync with the rapid, enormous changes in Information Technology.

Consultants as 4PLs are used to review bids made by 3PLs, and to align the business processes with the supply chain -- especially critical in case of Global Logistics.

3PL have a larger, more efficient network of transportation & networking, but the 4PL have optimal combination of warehouse capabilities, transportation services and technology

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Development & Role of 4PL

Source: Andersen Consulting http://www.ac.com/services/scm/scm_who_4pl_paper2_b.html

Client Internal LogisticsOperations

Client 3PL

4PLIT ServiceProviders

3PL

Business ProcessManagement

• Greater Functional Integration• Broader Operational Autonomy

Insourcing 1970s-1980s

Outsourcing 1980s-1990s

4PL1990s-2000

Client

Client

Client

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Performance Criteria in Global Logistics

Looking beyond Financial indicators

Cost Initial Cost Lifecycle Cost

Quality Design Quality Conformance to set production standards

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Service Delivery Speed Delivery Reliability

Flexibility New-Product Flexibility-- Ability to introduce a new product fast Customization --- highly segmented markets Product Mix Flexibility --- adjust production mix for demand fluctuations Product Ramp-up Flexibility -- expansion to mass production for uncertain markets

Performance Criteria in Global Logistics

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International Freight Forwarders Buy space wholesale and sell it retail International Freight Forwarders handle more functions than the domestic freight forwarders:

Serve as consultant in export matters Advise on acceptance of letters of credit. Booking space on carriers -- Most of the movement is done via vessel or air. Arrange for insurance Prepare documents like export declarations and consular documents Prepare Bill of Lading -- Forwarders experience needed

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Other International Trading Operators NOVCCs

Perform most but not all of the functions of an international freight forwarder. Specific functionality is trade agreements with carriers NOVCCs affiliate with forwarders to offer the entire range of services

Customs House Brokers Take care of paperwork and movement of goods through customs

Export Management Companies Provides the US firm with information about the overseas buyer Advises the US supplier on requirements of the foreign market in issues like foreign labeling and other specialized functions

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Other International Trading Operators

Export Trading Companies Attempt to combine all facets of international business Used extensively by the Japanese

Shippers Associations Trade groups representing shippers of similar cargo that bargain with ocean steamship conferences as a single entity

Export Packers Expertise is specifically in packaging for the exporter. To allow goods to move through customs easily. E.g taking into consideration weight restrictions etc To prevent the decay/damage of products.

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Nature of the Product Value-add

Product processing Services

Technical Support Inventory Management Financial

Commodities vs. specialty items Delivery

Speed Dependability Flexibility

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Product Life Cycle and Distribution

INTRODUCTION Low Distribution Public Warehouse

GROWTH Projected growth Current network capabilities Changes

MATURITY Optimization

DECLINE Projected cost decreases Needed network scale backs

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Pricing

FOB pricing FOB factory - customer picks up freight

FOB destination - seller picks up freight

Title exchange implications insurance obsolescence

HIGH PRICE LARGE VOLUME ITEMS

LOWER PRICE HIGH VOLUME ITEMS

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Zoning

Quantity discounts Legal implications - must prove price difference is justified by lowered logistical costs to deflect

discrimination charges from small buyers

ZONE 2

DISTANCE AND NUMBER OF CUSTOMERS IMPACTS COST OF DELIVERY

ZONE 1

Pricing