TDL & Exports Regional Intermediary Design II

TDL & Exports Regional Intermediary Design
SEMI/NWOH/SWON Workshop Two April 29, 2011
Sponsored by
New Economy Initiative
Hosted by
Detroit Regional Chamber
and
Michigan State University

Acknowledgements
MSU, DRC, WSU and all participants would like to personally thank NEI for the resources to continue with the implementation of project results
We are encouraged by the enthusiasm of all stakeholders to contribute to and continue with this important economic development and new jobs creation project
Thank you to NEI for your vision and support to help transform the region!

Workshop Two Agenda
Welcome
Introductions
Synthesize findings from Workshop One
Organizational model recommendation
Finalize Regional Intermediary design: Breakout
Discussion
Report out
Plans to work with pilot companies
Planning for next Workshop

Workshop Guidelines:
All participants will give the meeting our full attention, positive energy and commitment to the project
All participants will be open, candid and honest and allow others to do the same
Respect will be the foremost goal of all participants; we will center on issues, not personalities
All participants will center first on gaining understanding, second on convincing others
All input raised will be captured for future use and shared with all attendees
Think FUTURE; Think strategic; Think CAN DO !

Introductions
Name
Role
Representing

Workshop Two Desired Outcomes:
Finalize Regional Intermediary design
Develop plan for Regional Intermediary organizational model implementation
Discuss plan to work with pilot companies
Discuss Workshop Three topics

Workshop Two Agenda
Welcome
Introductions
Discussion
Report out

TDL and Exports Strategy: Future Vision
World class cross-border distribution hub
Air freight to motor freight
Rail freight to motor freight
Value added services
Lowest overall cost to serve for industry partners
Superior customer service for industry partners and their respective customers
State of the art supply chain technology
Excellent management and labor talent
Win-win-win relationships with industry partners, service providers, and supply chain hub

The Bottom Line !
Opportunity Assessment has re-enforced the economic development potential for the Hub
66,000 new jobs created
Doing nothing may run the risk of additional jobs lost
Maintaining momentum over the next few months will be critical to project success
Each of us will play a key role to assure 66,000 new jobs are created…..starting today !

Target Industries for SEMI/NWOH/SWON Hub
Heavy Manufacturing
Automotive renewal
Alternative energy
Carbon fiber manufacturing
Chemical processing
Defense
Electronics – industrial
Light Manufacturing
Food processing
Medical technologies
Water technologies
Distribution
Beverage and alcohol distribution
Retail importing and value add
Waste management

Summary of Enhanced Economic Activity

TDL and Exports Hub Capabilities from Best Practice Research
Supply Chain Expertise
Economic competitiveness and lowest supply chain cost to serve
Supply chain sustainability
Infrastructure / modal support
Economic Development
Competitive tax environment
Ability to serve global markets
Develop supply chain solutions
Strategic Infrastructure / Intermediary Funding
Infrastructure support and capabilities
Collaboration
Joint commission or authority
Strategic alliances

Hub Capabilities: Best Practices Research

Supply Chain Expertise – Workshop One Breakout Results

Economic Development – Workshop One Breakout Results

Strategic Infrastructure / Intermediary Funding – Workshop One Breakout Results

Collaboration – Workshop One Breakout Results

Highest Priority Capabilities: Summary ofWorkshop One Breakout Results

Workshop One Findings - Environment
While service is important, hub cost is not a determining factor unless it is out of line.
Flights from Asia can be differentiator.
Fuel cost increases will continue to drive local sourcing.
Recognize that firms consider economic rather than political boundaries.

Workshop One Findings - Facilitators
Skilled labor is an asset and selling point.
Supply chain solutions and service needs to be an intermediary service to both MEDC and industry.
Develop positive value proposition for pilot company
Network design
Quantify the impact of uncertainty and risk
Increase cross-border efficiency of truck traffic.
Improved railway intermodal facilities.

Workshop One Findings - Communication
Solutions should be used as a differentiator.
Develop positive message regarding suppliers, customers, and skilled labor building on industry and academic credibility.
Develop supply chain education and promotion message for legislators.
Improve communication between economic developers and local regulators.
Coordinate regional communication and marketing.
Strategy development
Strategy implementation

Workshop One Findings - Requirements
Streamlined public sector approach with involvement of private sector partners.
Intermediary model should reflect the strengths of the port authority lite, industry collaboration and public private partnership models.
Multi-nation, multi-state board with executive committee.
Should have planning and strategic visioning attribute.
One stop entry point.

Workshop Two Agenda
Welcome
Introductions
Discussion
Report out

Best Practices Research – Hub Geographies Including Additions (Bolded) from Workshop One

Organization and Governance Models
Port Authority Model
Port Authority “Lite” Model
Public / Private Partnership Model
Industry Collaboration Model

Critical Success Factors for Hub Models
Public sector funding
Integrated Regional and Statewide asset strategy
Commitment from a major logistics provider or shipper as a catalyst to Economic Development
Economic Development driven by aggressive lead management approach across all stakeholders to attract shippers and carriers
Available physical capacity (Land, Facilities, People) to support growth
Hub supply chain competitive advantages

Example Critical Success Factors from Columbus Hub Model
Successful programs require:
A clear regional vision with community buy-in
Active leadership engagement in all phases of the effort, not just the upfront strategy
A sense of urgency that acts as a forcing mechanism for change and coordination
Quality of life that reinforces economic-development efforts and regional prosperity
Belief that workforce development and K-12 education, which strengthen long-term regional health and talent availability, helps address reputation as a place for businesses
University involvement in research, commercialization and talent development
Multi-generational commitment to economic development and a systematic approach

TDL & Exports Regional Intermediary Model: Preparation for Break Out Session
Regional Intermediary Model Recommendation:
What are the strengths and weaknesses of our public/private partnership organizational model recommendation?
What model refinements or extensions would be necessary?

Organizational Model Recommendation: Public / Private Partnership Model
Provide private sector value propositions which offer economic competitiveness and lowest total cost to serve
Provide private sector the advantage of serving global markets
Provide public sector advantages of good Infrastructure and support capabilities
Provide public sector advantages of availability of very good human, land, supplier, and financial capital

Our Public/Private Organizational Model Must Focus on Private Sector Value Propositions
Economic competitiveness and lowest total cost to serve
Lowest Cost to Serve for Industry Partners
Streamlined government environment and competitive tax climate
Good Infrastructure and support capabilities
Availability of very good human, land, supplier, and financial capital

Our Public/Private Organizational Model Must Focus on Private Sector Value Propositions
Integrated U.S./Canada border community
Leveraged foreign trade zone locations
International/NAFTA transport links
Customs house, forwarding, and related services

Our Public/Private Organizational Model Must Focus on Public Sector Advantages
Excellent airport capabilities, railroad network, intermodal capacity and distribution facilities
State of the art supply chain security
Development incentives for transportation assets
Private investment for transport infrastructure

Our Public/Private Organizational Model Must Focus on Public Sector Advantages
Infrastructure and support capabilities
Supply chain expertise and skilled labor
World class technology enablers
Land and facility availability
Financial capital

Organizational Model Recommendation: Public / Private Partnership Model Example
Example Public/Private Model: KC Smartport
Board Consists of Public (DOT, MPO, Airports, Econ Develop Corps), Private (TDL, Consultant, Chambers) and Universities from two states
Funded in part by dues or donations (“investments”) from board members’ organizations
Roles
Market
Site Location Assistance (Real Estate and Transportation)
Advocacy for Global Logistics Mindset
Transportation Resources Connections
Supply Chain Education
Supply Chain Data Exchange

Recommendation Includes Private Features from the Industry Collaboration Model
Example Industry Collaboration Model – Columbus
Objectives of adding180,000 jobs by 2020 and attracting capital investment of $10 billion
Focus on value added potential rather than infrastructure
Pillars of activity
Retention and expansion of existing businesses
Attraction of major employers to establish operations in Central Ohio
Creation of more commercial enterprises by leveraging research assets
Support of civic infrastructure and political conditions that enhance the economic development environment

Recommendation Also Highlights Features from the Port Authority “Lite” Model
Example of Port Lite Model – Virginia Port Authority
Mission statement- To be the primary gateway for international cargo transportation through the Mid-Atlantic and Mid-West regions of the United States.
Indeed Value Propositions & Goals
Provide a level of service and convenience unmatched on the east coast (inland port is critical in achieving this)
Support and lobby for improved and increased rail capacity from VA to the Mid-West
Recruit companies to establish distribution centers for both direct economic benefit and to make VPA more appealing to international shiplines

Recommendation Includes Public Features from the Port Authority “Lite” Model
Virginia’s integrated supply chain asset strategy

II. Metrics for Regional Intermediary Model:
Validate the hub organization model evaluation metrics
Will our public/private partnership organizational model outputs exceed the thresholds for the metrics?

Hub Organizational Model Evaluation Metrics
Primary Metrics:
Number of jobs created (Direct & Indirect)
Economic activity benefits (Dollars)
Secondary Metrics:
The number of new businesses attracted
Business retention rate (New and Existing)
Investment amounts with ratio: Public vs. Private
Inbound/Outbound shipments (Volume and Value)

Hub Model Evaluation Metrics - Ohio
Primary Metrics:
Number of Jobs Created (Direct & Indirect)
Rickenbacker Park: 12,500+ New Jobs
Economic Activity Benefits (Dollars)
Rickenbacker Park: $705 million
Secondary Metrics:
The Number of New Businesses Attracted
Rickenbacker Park: Wal-Mart, Home Depot, Ford, Honda, The Limited, UPS and the US Postal Service, J. B. Hunt, Schneider, Norfolk Southern

Hub Model Evaluation Metrics - Virginia
Primary Metrics:
Port Related business provide over 343,000 jobs
Annually $41 billion in revenue, $13.5 billion in payroll compensation, and $1.2 million in local tax revenue
Secondary Metrics:
VPA has attracted more then 80 port related distribution facilities
$500 million commitment from Maersk to develop a new marine terminal
Inbound/Outbound Shipments (Volume and Value)
2010 VPA Imports/Exports: Exports 1,005,370 TEU’s
Imports: 889,648 TEU’s

Hub Model Evaluation Metrics - Georgia
Primary Metrics:
- Logistics Report: GA Logistics Providers Employ 142,000 Georgians
Georgia Port Authority: 295,443 jobs
- Logistics Report: Generate $16 billion in annual sales
Georgia Port Authority: $61.8 billion in annual sales
Secondary Metrics:
- Business Attracted by Hub Capabilities: Kia North America, Coca- Cola, Home Depot, Gulfstream, Blue Bird Corp., NCR, Mercedes-Benz
Inbound/Outbound Shipments (Volume and Value)
- Georgia Port Authority: Exports 1,139,983 TEU’s
Imports: 969,952 TEU’s

Hub Model Evaluation Metrics – Kansas City
Primary Metrics:
KC Smartport created 900 jobs in 2009
Studies estimated freight and transportation industry accounted for 40,000 jobs annually
MARC estimates 250,000 new jobs in the next 30 years
At the end of 15 years: Annual incomes of nearly $1 billion, Local and state tax revenues with a present value of $500 million
Secondary Metrics:
- KC Smartport new businesses: Home Depot, Lowes, Smith Electric Vehicles, Sara Lee, FedEx SmartPost, Kimberly-Clark, DHL and OHL

Hub Metrics - 2009 Shipping Volume in Mtons

Hub Metrics - 2009 Shipping Value in $B

III. Regional Intermediary Model Implementation:
What obstacles exist for model implementation?
Develop a plan to overcome the obstacles to implement our regional intermediary public/private partnership model
What is the structure of the Hub Operating Board and who are the stakeholders represented on the Board?

SE Michigan Public/Private Partnership Organizational Model Opportunities
Cross-border distribution hub and NAFTA thoroughfare away from congestion of Chicago-Toronto
Trans-loading heavy imports from Canadian ports to U.S. using railroads
Good airport, highway, and rail infrastructure with limited congestion and very good reliability
Skilled Export and TDL management and supply chain labor talent is readily available
Economical outbound motor carrier capacity
Availability and affordable land
Unique Offerings of Our SEMI/NWOH/SWON Model:
Provide supply chain value propositions to attract companies
Commitment from State of Michigan to make this happen

Workshop Two Agenda
Welcome
Introductions
Finalize Regional Intermediary design: Breakout Groups
Discussion
Report out

TDL & Exports Regional Intermediary Model Recommendation – Break Out Session
Small group breakout: Finalize Regional Intermediary organizational model design (Page 1 of 2)
I. Regional Intermediary Model Recommendation:
What are the strengths and weaknesses of our public/private partnership organizational model recommendation?
What model refinements or extensions would be necessary?
II. Metrics for Regional Intermediary Model:
Validate the hub organization model evaluation metrics
Will our public/private partnership organizational model outputs exceed the thresholds for the metrics?

TDL & Exports Regional Intermediary Model Recommendation – Break Out Session
Small group breakout: Finalize Regional Intermediary organizational model design (Page 2 of 2)
III. Regional Intermediary Model Implementation:
What obstacles exist for model implementation?
Develop a plan to overcome the obstacles to implement our regional intermediary public/private partnership model
What is the structure of the Hub Operating Board and who are the stakeholders represented on the Board?

Workshop Two Agenda
Welcome
Introductions
Discussion
Report out

Pilot Company Partnerships
Review piloting value proposition with representatives from firms and development authorities.
Identify firms and firm demographics that might be interested in having support to identify and refine their value proposition for regional supply chain activities.
Complete end-to-end integrated supply chain value proposition for pilot company.

End-to-End Integrated Supply Chain Model
Relationship Management
Information, Product, Service, Financial and Knowledge Flows
E
N
D
C
O
N
S
U
M
E
R
S
SUPPLY
NETWORK
M
A
T
E
R
I
A
L
S
INTEGRATED
ENTERPRISE
MARKET
DISTRIBUTION
NETWORK
Order
Procurement
Administration
Logistics
Manufacturing
Capacity, Information, Core Competencies, Capital and Human Resources

End-to-End Integrated Supply Chain Total Cost Analysis Approach
Cost Components
Sourcing +
Production +
Handling +
Inbound Transport +
DC Handling +
Inventory +
Customer Transport +
Duties and Taxes
____________
Total Cost
Dealers

Pilot Implementation for Industry Partners:Step by Step Approach for Value Creation
Step 1: Identify Pilot Company Candidates
Is the company within the focused industries?
Is there high potential for job creation in working with the company?
Is the company interested in improving bottom line performance via innovative SEMI/NWOH/SWON supply chain solutions?
Step 2: Explain value proposition to pilot company
Explain process of assessing their current supply chain
Explain process of optimizing their future supply chain
Explain role of MSU Supply Chain in preparing the supply chain value proposition and conducting the opportunity assessment

Step 3: Complete value proposition by analyzing pilot company’s end-to-end supply chain
Analyze current process for company’s end-to-end supply chain
Evaluate economic, service, reliability and sustainability performance of current supply chain
Develop proposal for state of the art future process for company’s end-to-end supply chain using SEMI/NWOH/SWON as a Hub
Evaluate economic, service, reliability and sustainability performance of future supply chain
Compare current supply chain performance to future supply chain performance and document value proposition
Prepare value proposition for pilot company based on supply chain opportunity assessment results
Prepare for discussion associated with Step 4A or Step 4B

Step 4A: Positive value proposition to use region as a Hub and proceed towards implementation
Value proposition for future supply chain using SEMI/NWOH/SWON as a hub provides a competitive advantage to pilot company
MSU and MEDC work with company towards implementation
Step 4B: Value proposition to use region as a Hub needs more work
Value proposition for future supply chain using SEMI/NWOH/SWON as a hub does not provides a competitive advantage to pilot company
MSU and MEDC work with company towards defining economic incentives and economic policy changes to make the value proposition attractive to pilot company
Value proposition is now attractive; go to Step 4A

Step 5: Implement pilot approach and monitor value with key metrics
MSU and MEDC work with company to implement solution and transition from current supply chain
Key metrics are developed and tracked to assure value creation opportunity is harvested

Global Supply Chain Dynamics are Changing
Firms looking for more balance between scale and reliability.
Infrastructure congestion is becoming increasingly problematic.
Increased energy cost will shift supply chain mode selection and design.
Previous NEI workshops have emphasized the importance of being able to quantify the value proposition related to supply chain changes.

Changing Dynamics of Supply Chain Design
$/unit
Manufacturing Cost
Transport Cost
Economies of Scale

$/unit
Result of increased fuel cost
Manufacturing Cost
Transport Cost
Economies of Scale

Result of increase risk
$/unit
Result of increased fuel cost
Manufacturing Cost
Transport Cost
Economies of Scale

Example A: Pilot Company Implementation
Positive value proposition to use SEMI/NWOH/SWON as a Hub for SE Asia electronics manufacturer
Current Supply Chain:
SE Asia electronics manufacturer makes components in SE Asia, assembles the finished product in SE Asia, and ships finished product to US for US sales
Future Supply Chain:
SE Asia electronics manufacturer makes components in SE Asia
Manufacturer air freights unassembled components to Detroit
SEMI/NWOH/SWON Hub assembles the finished product
SEMI/NWOH/SWON Hub ships finished product for US sales
Value Proposition:
Reduced air freight by using Detroit as destination air hub
Reduced duty and taxes by shipping components
Improved service to customers using SEMI/NWOH/SWON Hub

Example B: Pilot Company Implementation
Value proposition to use SEMI/NWOH/SWON as a Hub needs more work for shipments from Europe
Europe manufacturer ships alcoholic beverages to US using NY/NJ Port Authority as destination port for US sales
Europe manufacturer ships alcoholic beverages to Port of Halifax
SEMI/NWOH/SWON Hub receives shipments from Port of Halifax
Value Proposition:
Improved service to customers using SEMI/NWOH/SWON Hub
No supply chain cost advantage by using SEMI/NWOH/SWON Hub
Identify regulations and constraints that impede the achievement of positive value proposition and design solution with economic incentives or policy changes to overcome constraints
Modified value proposition now becomes attractive

Example C: Global Supply Chain Reliability and Sustainability Opportunities
Global supply chain failures offer opportunities for automotive supply chain redesign
Japan automotive electronics manufacturer makes components in Japan, assembles the finished product in Japan, and ships finished product to US for US automotive sales
Global supply chain is world scale for performance but is very vulnerable to reliability and sustainability risks
Japan electronics manufacturer makes components in Japan
Manufacturer air freights unassembled components to Detroit
SEMI/NWOH/SWON Hub assembles the finished product
Value Proposition:
Reduced duty and taxes by shipping components
Improved reliability and sustainability and reduced risks

Pilot Implementation for Industry Partners:Summary of Five Step Approach
Step 1: Identify pilot company candidates
Step 2: Explain value proposition to pilot company
Step 3: Complete value proposition by analyzing pilot company’s end-to-end supply chain
Step 4: Positive value proposition to use region as a Hub and proceed towards implementation
Step 5: Implement pilot approach and monitor value with key metrics

Workshop Two Agenda
Welcome
Introductions
Discussion
Report out

TDL and Exports: Implementation of Opportunity Assessment Findings
Recommendation of organization model and Regional Intermediary
Intermediary Design Workshop One: March 11
Intermediary Workshop Two: April 29
Implementation Workshop Three: June 10
Education, sharing of findings, and communications
Piloting the implementation approach with partners
April 1 Symposium
Joint Workshop with MEDC: TBA

Preparation for Workshop Three:
June 10, 2011 at MSU Detroit Center
Workshop Three topics:
Finalize intermediary organizational model implementation plan
Develop plan for pilot company implementations
Develop framework for integrated supply chain asset strategy
Finalize project recommendations for review by sponsors

Workshop Participant
Feedback and
Follow-up Survey

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