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7/30/2019 Bill Goldsborough
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SME in the Global Supply chain
Logistics: Key component of competitive strategy
Bill Goldsborough, Ph.D
Principal - LAS and associates(415 488 1491)
7/30/2019 Bill Goldsborough
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Todays agenda
Brief review of business globalization
Importance of supply chain in global arena
Logistics as a key component of supply chain
Processes involved in global logistics
One SMEs approach to global logistics
Why today is a good time for the SME to beginto upgrade its global logistics capability
Next steps for SMEs
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Drivers of business globalization
Market forces
Sell in international markets
Source from multiple markets
Invest in multiple markets, e.g. ops, R&D
Policy and technology forces
Trade and capital liberalization
Transport, communications & information technology
Market privatization
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A smooth functioning supply chain
is a key condition for success Get the right product, in the right quantities,
in the right condition to the right place at the
right time and at the right price To do this need to break down barriers
between traditional business functions, e.g.
manufacturing, marketing, etc. Focus instead on key customer related
processes like order cycle, complete orders,on-time deliveries
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Broadly there are 4 key processes a
company must perform
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Plan Source Make Fulfill
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Process improvement has had a
significant impact on the bottom line
IBM reduced overall costs by $12 billion
between 02 & 05, according to AMR
Increasing evidence of positive correlation
between process improvement and keyfinancial indicators, e.g. share price, materials
cost, cash to cash cycle times
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Software has been a key enabler of process
improvement and has led to closer cooperation
between firms
Enterprise resource planning (ERP), Supply chain
planning (SCP), Transportation planning (TM),
Customer relationship Planning (CRM), etc
Global trade management (GTM) software
Web-based portals 7
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Globalization and supply chain technologies have led to
a new phenomenon: Global production networks
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U.S.
BestBuy
Zoran
Applied
Materials
D&H
Asia
Toshiba
Contractfirms
TSMC
(1)
.(2)
(3)
(4)
(5)(6)
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Logistics (fulfillment) is a key process of the
integrated global supply chain
But, more limited in scope than the supplychain
Nonetheless it has huge cost and customerservice implications
This combination presents opportunity toimprove financial, operational and serviceperformance relatively quickly
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Global logistics is comprised of four key
activities that need to be carefully
managed today
Inventory management
Transport spend management
Import/export process management
Logistics outsource management
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Careful inventory management is more
important than ever because of the far flung
nature of the global supply chain Holding inventory is costly
Current recession could have long-term impact
on channel management Examples of tools for managing inventory
VMI
Cross docking
Merge in-transit Postponement
Optimization
Visibility software
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Visibility software is foundation for global
inventory operational and strategic
management
Operationally
Enables integration of disparate nodes & singlewindow on activities
Enables management by exception & problemidentification and resolution
Strategically Provides data for in depth analytics, e.g. root cause
analysis, forecasting
Drives ROI collaborative initiatives with partners
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There are various ways to obtain
visibility capability
Develop in-house, custom designed portals,
e.g. Dupont, Cisco
Lease from outside vendor
Receive from 3rd party provider, e.g. freight
forwarder or carrier
Buy over the web on a per usage basis-SaaS or
on-demand
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Global transport spend management-
Historically firms have controlled this poorly
Terms of sale
Viewed tactically rather than strategically within the
firm
Decentralized decision making
These practices have led to:
Mismatch between mode/service selected andactual customer need
Lack of awareness of increasing transport options
available to the firm14
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But recent changes in the global transport
environment enable a more strategic approach
to transportation
Virtual deregulation of ocean transport
Increased willingness and capability of 3rd parties
to enter into contracts today
Technology breakthroughs that enhance
shipper/provider interface
Rate/Service optimization software
Carrier contract management software
Cargo platforms, e.g. Inttra, G.T. Nexus, CargoSmart
Improved analytics 15
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The costs associated with failing to manage
import-export processes well are
significant
Excess duty payment due to misclassification
Failure to qualify for trade agreement
advantage
Failure to qualify for trade facilitation program
Government financial penalties Cargo delays, e.g. Brazil
Loss of shipping privileges
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For many firms global logistics outsourcing
will become critical to their success
Outsourcing phenomenon generally
Logistics provider industry is maturing:
Relationships now range from simple to
complex and from arms length to
strategic
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U P id l ti hi ti
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User Provider relationship continuum
Provider type
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Intl forwarder
increasing:
3rd
party Lead logistics provider
Relationship type
Transactional Strategic
Shared goals
Risk/reward
Robust Systems
links
Management
integration
Metrics
Modest systems
linksArms length
Traditl
services,
limited
Traditl
services,global
Integrated
forwarding &
fulfillment
Tech driven,
multimodal,
global player
Design,reengineering
consulting
Manage 3rd
parties,
carriers
Fully integrated
strategic
partner
Traditional Emerging
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Strategic relationships can form
between both large and small firms
Large firms
Cisco and UPS Logistics in Europe
Diebold and Menlo Logistics
Small firms Redback Networks and D.W. Morgan
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Case Study: Redback Networks develops global
logistics partnership (From Aberdeen Research)
$115 million designer & marketer of networkingequipment to customers worldwide
Business model is product leadership: provide bestmost reliable products, including 4 hr partsreplacement
Corporate strategy: leveraged business thatoutsources to experts all functions that dontinfluence customer buying behavior
The challenge: to align in-house logisticsoperations with corp. strategy throughoutsourcing
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Case study continued
Redbacks Provider requirements:
Meet stringent SLAs to customers
Reduce global service parts depots
Reduce inventory levels
Reduce # of people to run depots and fill orders Provider selected: D.W. Morgan
Closed 22 of 50 depots
Deployed a hub-spoke system S.J., Atlanta, HongKong, Amsterdam
Deployed high level web-based visibility software
Transferred employees to Morgan payroll
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Case study continued
Results were significant
Total logistics costs reduced by 30 %
Total service depots cut from 50 to 28
Overstocking minimized and inventory in field has
dropped by 50 %
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Today is a good time for SMEs to begin to
develop a global logistics capability
Availability of low cost on demand technology
Carrier options available due to deregulation, over
capacity, etc.
Opportunity to enter into strategic, goal basedrelationships with vendors
Possible opportunity to participate in production
network phenomenon To develop new sources of competitive advantage in
a slower growth world economy in which lower cost
and customer service will be king24
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Next steps for SMEs wanting to develop a
more strategic global logistics capability
Self assessment, (How are we doing today)?
SWOT
Industry structure analysis
Benchmark
Path forward (What do we want to become)?
What do we need to do to get there? - Gap analysis
Identify low hanging fruit that can be harvested
relatively quickly as recession recedes
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