Creating a Sustainable Supply Chain
The Cargo Show MENA 2015Dr. Igor Egorov
by Dr. Igor Egorov
To Be Covered:
• Automotive parts SC – intro
• Challenges’ ranking
• Ways to SC sustainability
• Sustainability by SC professionals
• Ways to SC sustainability
The Cargo Show MENA 2015Dr. Igor Egorov
• Highly complex logistics– Thousands suppliers
– Dozens thousand customers
– Millions of SKUs
– Global yet localized
• Parts - profitable business
– 20-30% of the revenue
– 30% net profit (capital good industry)
– US automotive aftermarket = $318.2 billion (2013)
• Right part, right time, right place at lowest cost
• Full speed while looking at rear mirror
Automotive Parts SC
The Cargo Show MENA 2015Dr. Igor Egorov
Triad markets – Central Logistics CentersSecondary: Mixed 2PL and 3PLLarge markers, partially with own production: 3PLLogistics hubs: 3PL
Dubai’s automotive spare parts trade: AED 37 billion
Automotive Parts SC
The Cargo Show MENA 2015Dr. Igor Egorov
1. SC visibility 2. Risk management 3. Cost containment 4. Customer demands 5. Globalization
Challenges Ranking*
* Reference: IBM Automotive SCM Study The Cargo Show MENA 2015Dr. Igor Egorov
Sustainability for SC Professionals
• 43% - cost reduction
• 35% - environmental impact
• 25 % - customer satisfaction
PwC, PwC’s Global SC Survey
Cost
Enviroment
Customer
The Cargo Show MENA 2015Dr. Igor Egorov
Elements of SC Sustainability
• Redesigned logistics
• Warehouse management
• Obsolescence management
• Product compliance
• Customer’s protection
• IT
• People
The Cargo Show MENA 2015Dr. Igor Egorov
Redesigned SC
• Transport management– Reduce air shipments
– Consolidation
– Avoid unnecessary transshipments
• Reverse logistics
• Partners with sustainable policies
• Localization:– Oil – move manufacturing from US to
Oman
– Batteries – to UAE
The Cargo Show MENA 2015Dr. Igor Egorov
Warehouse Management
• Reduce energy cost:– AC schedule, day-light, solar power
• Smart packaging, not “shipping air by air”• Packaging re-use• World Class Logistics policies reduce waste• Automation and Productivity• Interconnected inventory management
The Cargo Show MENA 2015Dr. Igor Egorov
Obsolescence Management
• Supply chain visibility
• End-to-end inventory planning
• Strict shelf life monitoring at each SC point
• Scrapping – environment certificate
The Cargo Show MENA 2015Dr. Igor Egorov
Product Compliance
• Automotive parts - high risk
(as per customs authority):
• SASO
• KUCAS
• EGYPT ECE – Brake pads (asbestos free)
– Chemicals
– Oils
– Batteries
• etc.The Cargo Show MENA 2015
Dr. Igor Egorov
Customers’ Protection
• Government agencies request wider inventory
• Heavy fines
• Additional costs - airfreight & inventory
• Disruptions in SC
• High customer expectations
The Cargo Show MENA 2015Dr. Igor Egorov
ICT: great servant, bad master
• Global networks impossible without IT-support:
ERP, WMS (Warehouse), TPS (Transport), SCM
• 50%+ of logistics systems outdated
• 3 of 4 companies’ systems “weak”
• Significant investments
* Reference: Study of Aachener Institut für Operations Research und Management GmbH (Inform)
The Cargo Show MENA 2015Dr. Igor Egorov
People
• Support educational needs
• Motive staff, incentivize improvements & environment initiatives
• Measure managers not only on
cost savings, but on sustainable factors
The Cargo Show MENA 2015Dr. Igor Egorov
THANK YOU
The Cargo Show MENA 2015Dr. Igor Egorov