Rethinking the Supply Chain: successful experiences in times of crisis Milano, 16.09.2010 Univ.-Prof. Dr. Thorsten Blecker
Hamburg University of Technology Technische Universität Hamburg-Harburg (TUHH) 1978 Founded Increase the technical and scientific competence in the metropolitan region of Hamburg due to the needs of structural changes Aim Principles
[www.mygeo.info] Top 10 Logistic Service Providers
combinedturnoverof € 29 billion (13% of total marketvolume)
Key figures of the German logistics market Transport service in 2008 (in million ton-kilometer) Quantity of goods transported in 2008 (in 1000 tons) [www.destatis.de] [www.destatis.de] Germany‘slogisticssectorcan fall back on reliableand extensive infrastructures
The effects of the economic crisis on the German industry
The effects of the economic crisis on the German economy Gross domesticproduct Percentagedchangestothepreviousyear‘svalue(adjustedforprice; chainindex) Original value, trend, seasonallyadjustedvalue (adjustedforprice; chainindex) Export and Import Real Exports (seasonallyandworkingdayadjusted) Real Imports (seasonally andworkingdayadjusted) Current Rate1(right-handscale) Billion Euros (left-handscale) Annual Average² 1 Change frompreviousquarter in % ² Figures: Changesfrompreviousyear in % [www.destatis.de]
The effects of the economic crisis on the German economy (cont.) Gross domesticproductand IFO - economicclimate GDP (quartely), real, % compared with previous year Business situation (industrial economy), seasonally adjusted balances Business expectations (industrial economy), seasonally adjusted balances Business climate (industrial economy), seasonally adjusted balances GDP (annual average), real, % compared with previous year [www.bundesfinanzministerium.de] The strong exportfocusofthe German industryandthespecialization on capitalgoodsoutstandinglyincreasedtheimpactofthe global economiccrisis. [Monthlyreportofthe German Federal FinanceMinistry, August 2009]
The effects of the economic crisis on the German logistics sector „Due totheeconomiccrisis, a dropofupto 9% ofthelogisticsmarketwas expected.“ [Peter Klaus, authorof TOP 100 in European Transport and Logistics Services 2009/2010] The economic crisis had a negative impact on all transport modes Development of quantity of goods transported changescomparedtopreviousyear Hundreds of orders in shipbuilding (vessels, tankers, etc.) have been cancelled during 2009 Rail freight dropped considerably (e.g. Deutsche Bahn freight volumes decreased with 19% over 2009, with peaks of 40%) Truck traffic decreased (e.g. Deutsche Tollcollect income dropped with 18% over 2009) IATA numbers over recent months are showing double the downturn that we saw after 9/11! (Spohr, Lufthansa Cargo) air rail inlandnavigation maritime traffic road [www.destatis.de]
German companies affected by the economic crisis "We are far from overcoming the financial crisis, in particular with respect to its consequences on the real economy in 2009” [Norbert Reithofer, Chairman of BMW; Nov 4, 2008] "Following the dramatic drop in our global business in the fourth quarter of 2008, demand for chemical products has not picked up since the start of 2009. A reversal of the trend is not yet in sight“ [Jürgen Hambrecht, CEO and Chairman of the Board of BASF; Feb 26, 2009] "Our business is an early indicator, but we have no backlog, so I cannot say how things will develop“ [Frank Appel, Chief Executive of Deutsche Post DHL; Jun 19, 2009] “…because of the financial crisis parts of Siemens' business had experienced a decline of orders of as much as 70% … it will take a long time until there will be an expansion of our capacities again” [Peter Loescher, Chief Executive of Siemens; Oct 25, 2009]
The stock marketvaluesofthetransportsectorhavesufferedsomeseveresetbacks in thepastmonths.
Freightratesdeclinedsignificantly in 2008 and 2009. In thecourseof 2009 the Baltic Dry Index slowlypickedupagainand a futureupswing was tobeexpected.
The effects of the economic crisis on the transport sector Dow Jones Transportation Average Baltic Dry Index 2008 2009 2006 2007 2010 2008 2009 2006 2007 2010 [http:/www.bloomberg.com/ ] [http://www.bloomberg.com/ ]
A significant drop in the German logistics market The Nine-Percent-Drop in Logistics - Fraunhofer SCS-forecastconfirmed:
The Worst-Case-Scenario occured
The forecastoftheCenter for Applied Research on Supply Chain Services (SCS) of the Frauenhofer Institute for 2009 becametrueandthe German logisticsmarketdroppedby 11 percent
[Press release , Frauenhofer IIS; 22. Februar 2010] The Deutsche Bahn AG temporarywithdrawed 8 percentoftheirfreightcarsfromcirculation in December 2008. In containershipping in August 2009 upto 10 percentofthecontainerfleetlyingemptyatanchor. [DB] [http://www.spiegel.de/img/0,1020,1494030,00.jpg] [www.dnbgermany.de]
Container business in times of the crisis Container handling (in million TEU) The influence of the crisis on the container business was enormous.
The amount of goods transported declined significantly.
The Port of Hamburg experienced at 28% drop in container handling, which translates to 7,01 Million TEU.
Transport costs for standard containers dropped dramatically.
[http://www.hafen-hamburg.de/content/view/32/33/lang,de/] Container handling on specificshippingroutes
The decline in consumer demand had a strong effect on the amount of goods transported. This effected container handling on all shipping routes.
Placing the hopes on increasing transport volumes, especially on Asian shipping routes, no other country has ordered the number of container vessels Germany has.
Only when the Asian economy picks up again, transport volumes will also increase.
South East Asia Rest ofAsia North East Asia Baltic Sea LatinAmerica Rest of Europe North America Other shippingroutes
The end ofthedescent DAX and Dow Jones Original value, trend, seasonallyadjustedvalue (adjustedforprice; chainindex) [www.bundesfinanzministerium.de] Indicatorssignalizeeconomicupswing Gross domesticproduct Incomingorders (producingindustry)
Values of German Stock Index (DAX) and Dow Jones are on theuprise
Numberofincomingordersofthe German producingindustryincreasedby 3,2% in June 2010 comparedtothepreviousmonth
The GDP hasrecovered; comparedtothesecongquarterof 2009, the GDP hasgained 4,1%
The free fall of 2008 fortunatelydiscontinued.
BVL Logistics Indicator indexpoints normal level currentsituation climate expectations The willingnesstoinvestisincreasingandemploymentispickingupagain. [BVL, Logistik-Indikator, Institut für Weltwirtschaft (IfW), 2010-Q2]
Logistic service providers (LSP) are optimistic about the future Situationalanalysisby LSP Future expectationsof LSP bad capacityutilization good decrease investment materials bad good general order situation decrease investment employmentofstaff rising dropping incomingorders (abroad) rising incomingorders (inland) dropping better worse general order situation worse businessdevelopment better better businessdevelopment worse bad businesssituation good
The quarterly BVL-studyshows a continuingimprovementofthebusinessclimateamonglogisticserviceproviders. All aspectofthesituationalanalysishaveimprovedcomparedtothepreviousquarter.
The futureexpectationsarebyfarmoreoptimisticthanpreviousonesand a positive outlookremains.
„Sincethebeginningofthisyear, all businessdevelopmentindicatorsclearly signalizeexpansion in the German logisticsmarket. [Dr. Stefan Kooths, Professor andeditorofthe BVL LogisticIndicator] [BVL, Logistik-Indikator, Institut für Weltwirtschaft (IfW), 2010-Q1]
Learning from the crisis at the Port of Hamburg Container handling Business situation in Million TEU (1st half ofeachyear)
8% growth in total throughputforthe Port of Hamburg
Freightratesareincreasing, however, theeconomicrecoveryis still uncertainandfeederservicesare still down
Lessonslearned? Port of Hamburg launchesnewstrategy
Improvedtrafficconnectiontogrowthregionlike Eastern Europe andAsia
Business development in times of a crisis… “Only a crisis leads to a change of routines and changing routines means changing structures.” [Marc Borremanns, Head of Logistics industryatFinPro] Drivers for long term structural change in logistics: currentdrivers
modularization and dematerialization
globalization, foreign investment & local content
[www.bmvbs.de] Strategiesfordiversification[Ansoff-Matrix] Existingproducts&services New products &services Market penetration Existingmarket Product/ servicedevelopment New market Market development Diversification …comes in many forms!
Study (1) „2010-2012 – Global Supply Chain Trends – Are Our Supply Chains able to support the Recovery? Lessons Learned from the Global Recession“
Key Supply Chain Trends … Challenges Survey by PRTM Management Consultants „2010-2012 – Global Supply Chain Trends – Are OurSupply Chains abletosupporttheRecovery? LessonsLearnedfromthe Global Recession“.
Nearly 350 participantsfrom diverse industriesandthreemajorgeographicregions (America, Europe andAsia)
Top 8 Challenges to Logistic Service Providers: No mention of technical innovations, but for most of the measures are new technologies needed! 0% 20% 40% 60% [Global Supply Chain Trends; Annual Survey by PRTM Management Consultants, 2010]
Study (2) Green-Logistics – Great importance even in times of a crisis [BME-Study]
Reactions of German companies to the crisis “We have used the crisis year in 2009 to carefully review our processes, structures and management concepts.” [Bernhard Simon, spokesman of DachserGmbh & Co. KG] “Actively driving change, exploiting talent and innovation; and ensuring continuity in the provision of services and quality to the customer – these are the new post-crisis requirements for logistics service providers” [Dr. Detlef Trefzger, DB Schenker Board of Management Contract Logistics & Supply Chain Management] adjusting internal processes Whatactions do companiestaketoencountertheeconomiccrisis?* human resource management reassessing service provider relationships increasing outsourcing activities establishing networks and co-operations * BME-Survey of 171 German companiesoftheindustralsectorbytheGerman Association for Materials Management, Purchasing and Logistics (BME), 2009
Actions taken: adjustment of internal processes “Many companies use the economic crisis to optimize their internal processes and increase the efficiency of procedures.” [Prof. August-Wilhelm Scheer, PresidentoftheFederal Association for IT, Telecommunications and New Media] BME-survey “An increasing number of logistics companies and shippers use the break forced by the economic crisis to make targeted investments in internal IT-processes.” [Holger Schmitt, Chairman of AXIT AG]
Professional logisticsand IT-basedprocessmanagamentplay an essential rolefor:
Actions taken: human resource management BME-survey Development ofshort-time (2006-2009) Thausandpersons „The person, whoexploits all optionstomakecostsmore flexible before a staffreductionis in order, proveshimselfas a trueleader.“ [Andreas Wiele, Springer Vorstand] [www.bundesfinanzministerium.de] 2008 2009 2006 2007
Actions taken: relationship to service providers BME-survey Almost 60% of all respondents would like to the time of the crisis to re-evaluate their relationships with their logistics service providers to possibly consolidate their relationship.
75% of all respondents thinks that by developing a strategic relationship with their service provider will help them reduce total landed costs
58% of the respondents would like to increase the operational flexibility and become more demand driven
Another 58% aim at reducing capital costs, head count and operational expenses
* 2009 Study „'The Hidden Opportunities of Economic Crisis” by CapGemini, Panalpina and Oracle questioned logistic service providers and users concerning the effects of the crisis on their relationsship. Essentials forimprovingbusinessrelationships Knowledgeandexpertise Incentives Joint investment Willingnesstochange
Actions taken: outsourcing activities „The shareofoutsourcedservicesisestimatedatapproximately 50% ofthe total German logisticsmarket“ [Peter Klaus, authorof TOP 100 in European Transport and Logistics Services] BME-survey Companies focus on theircorecompetencies
The rate of 50% outsourcingis a relativelyrecentdevelopment in Germany
unlikethethe UK orBeNeLuc countries, theadvantagesofoutsourcingwere not recognized in Germany untilthe end ofthe 1990s, andthemajorityofoutsourcingprojectswereonlylaunched in the last fiveorsixyears.
Tomeetthecustomersneedswhenprovidingoutsourcingservices, a broadknowledgebaseisneeded. The successofoutsourcingactivitiesisstronglyrelatedtothequalificationsof ouremployees. [Dr. Detlef Trefzger, DB Schenker Board of Management Contract Logistics & SCM]
Actions taken: networks and co-operations For Renault Nissan Europe the crisis has been a key factor for extensive restructuring of logistics and supply chain Management into an alliance between the two OEMs. Merging the supply chain divisions from each OEM has created a single logistics function for the extended Europe region. “In putting together the two models, we are not saying that ‘one is right’, and ‘one is wrong,’ but it is the mix that is essential. We will take what is best from each.” [Francesca Gamboni, head of inbound logistics for Renault Nissan Europe] BME-survey
Trends: Investment in new markets Emerging markets – an opportunityforlogisticserviceproviders “There is tremendous growth in new markets and threshold countries, particularly in China and India, but also in Vietnam, Brazil and the Middle East. This is not simply due to the fact that these regions were not severely affected by the economic crisis, but because economic recovery is taking place far more quickly.” [Bernd Weiler, Head of Communications Transportation and Logistics of DB Schenker] [www.mygeo.info] Liner servicefromthe Port of Hamburg BLG seekingopportunity “It's a golden opportunity for Chinese automakers to enter the European market.” [Manfred Kuhr, vice-chairman of BLG’s executive board]
BLG Logistics is actively seeking business opportunities in China as local automakers gear up to sell their cars in European markets.
BLG is contacting automakers including Great Wall, Chang'an, BYD and Huatai to provide logistics services.
With an increaseof 6 linershippingservice in thefirst half of 2009 thebiggestimprovementscanbefoundatthe Asian shippingroutes
Trends: Green logistics “Over the past two decades [the transport sector is] the only sector in which CO2 emissions have gone up” [PawelStelmaszczyk, head of unit at the transport & energy department of the European Commission]
choosing between different modes of transport is not enough
an integrated transport system based on flows, not modes, is needed
“We need to focus less on CO2 emissions of trucks and ships and focus more on integrated and bundled services within a common logistics network” [Egon Christ, head of transport logistics for Daimler] [www.logisticsit.com] Benefitsofgreenlogistics
standard data on carbon emissions provides the user with valuable resource data about corporate supply chain activities
enables the user to make more environmentally-sound decisions and comply with certain regulations (e.g. Kyoto Protocol)
provides the ability to set a cap on carbon emissions in the supply chain by forcing a non-negotiable constraint on carbon footprint while evaluating logistics costs and service trade-offs [David Simchi-Levi,Ph.D.]
Supply chain innovations – Who is the driver?
Supply chain innovations - Who is the driver? Innovations of the Supply Chain - industry-driven or driven by the logistic service provider (LSP)? Customer-driven (industry) Logistic service provider (LSP)
Pilot study: “Cross borderVisibility“ (From Hong Kong to Unna)
Metro Group cooperation with partners like Intel, the logistics service provider Fat Kee Stevedores Ltd. and the standards organization GS1 Hong Kong
Fat Kee Stevedores Ltd. pools products from different manufacturers, prepares them for shipment and tags them with RFID transponders.
An RFID reader at the outgoing goods portal of the exporter records the consignment and automatically checks that it is complete.
Once the goods have arrived at the METRO GROUP distribution center in Unna, they are again checked using RFID. In a matter of seconds, a reader at the incoming goods portal checks whether all products ordered have arrived. [www.future-store.org]
Innovations driven by legislation, e.g. legislator-defined processes: Inspection methods screening
targeting and risk management process
screen 100% of all information of inbound containers
Container scanningis a time-consumingandcostlyprocess
The Port of Hamburg scanslessthen 0,6% of all containers (per year)
A newlawenactedbythe US governmentmakesthescanningof 100% of all containersdestinedtothe USA, mandatoryby 2012
[www.zoll.de] Endurance tests for the ports, but opportunities for new technologies, e.g. Neutron Bombardment instead of x-raying
Innovations driven by logistics service providers, e.g. SkySails The fact that most supply chain innovations are industry-driven, explains the excitement of the following press release: “…a [logistic service provider] from the ocean shipping sector counts on new, intelligent solutions. The Company developes – mind you as logistician! – new innovations for its customers on its own.” [Press release, Fraunhofer IIS, 15. April 2010] Beluga Shipping GmbH
worldwide leader in the project and heavy-lift shipping segment
developing future-oriented projects for the maritime industry in Germany
Constantly works on innovations and their effective implementation.
Research and Innovation Department:
Developing new propulsion systems or fuels that are more efficient and protect the environment:
towing kite propulsion system innovative coatings for ship surfaces
Innovations driven by logistics service providers, e.g. Container Security Box ID der CSB Innenraum- Sensor CSB® Container Security Box ofKühne+Nagel
Logistics andsupplychainmanagement will profitfromthecrisisandthefutureeconomicuprise.
Forecastsoffuturetrendsdiffer, criticalsituations will havetobemastered in thenearfuture.
Logistics and supply chain management are already important competitive and locational advantages and will become even more important.
Logistics service providers must be the driver of innovations in supply chains.
Contact Univ.-Prof. Dr. Thorsten Blecker HLI – Hamburger Logistik Institut GmbH Weidestr. 134 22083 Hamburg, Germany Ph.: +49 (177) 3009340 http://www.hli-consulting.de firstname.lastname@example.org Hamburg University of Technology (TUHH) Institute for Business Logistics and General Management (W-2) Schwarzenbergstr. 95 21073 Hamburg, Germany Ph.: +49 (40) 42878 - 3524 email@example.com For further information or specific inquiries please contact:
Goal 2015: exploitationofthetwobillion € market potential as well as securingjobsandcreatingnewones
„The objectiveistosolvetheeconomicchallengesoftomorrow: individual supplyofgoods, mobilityandproduction, with just 25% oftheresourcesfromtoday in an ecologicalandsocialway.“ [Prof. Michael tenHompel] European FullLoad Network of international carriers (Elvis AG)
About 8500 truckfleet
More then 80 partnersofeuropeanforwardingandcarriercompanies
Objective: Tofulfillthefuturerequirementsof a growingeuropeanfulltruckloadmarketbyconsolidatingtruckloadsandadditionallyproviding individual transportsolutionsforcomplexlogisticalrequirements