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Demand Driven Logistics in the Global Economy


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A presentation featuring AMR Research, Dr. Larry Mallon of SM21, Chris Ives of Argos UK, and Todd Buelow of One Network Enterprises, discussing how to make your logistics operations thrive in the global economy.

As companies work to become demand driven, it is critical that demand and transportation are optimized in concert with each other. A stand alone transportation plan, optimized in isolation, can undermine the entire supply chain since it is not properly aligned with demand.

Published in: Business, Technology
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Demand Driven Logistics in the Global Economy

  1. 1. Demand Driven Logistics in the Global Economy AMR, Dr. Larry Mallon, Argos UK, One Network December 9, 2009
  2. 2. Featured Speakers <ul><li>Greg Aimi </li></ul><ul><li>Research Director </li></ul>Dr. Lawrence G. Mallon Program Director Chris Ives Supply Chain Operations Manager Todd Buelow Product Marketing
  3. 3. Agenda <ul><li>Demand Driven Logistics in the Global Economy </li></ul><ul><li>Challenges, best practices and value – Greg Aimi, AMR </li></ul><ul><li>Case study: The need for global logistics transformation in the public and private sectors – Dr. Larry Mallon, Strategic Mobility 21 </li></ul><ul><li>Case study: A retailers demand driven logistics transformation – Chris Ives, Argos </li></ul><ul><li>Solution enablers and value – Todd Buelow, One Network </li></ul>
  4. 4. Demand Driven Logistics in the Global Economy Greg Aimi, Supply Chain Research Director AMR Research
  5. 5. <ul><li>Logistics challenges companies are facing today in becoming demand driven </li></ul><ul><li>Key components to success when operating within a global economy </li></ul><ul><li>Transportation system touch points that drive demand driven success </li></ul>Demand Driven Logistics in a Global Economy
  6. 6. Demand-Driven Value Networks 20 th Century Innovation an Externality Deterministic Optimization Demand Values a Given The Efficient Enterprise 21 st Century Embedded Innovation Probabilistic Optimization Managed Demand Networked Profitability Demand Supply Product Plan, Source, Make, Deliver Plan, Sense, Pull, Supply
  7. 7. What are the DDVN Masters Proving? Deliver 20% more perfect orders… 68% 90% Laggards Leaders … while holding 1/3 rd less inventory… Laggards Leaders 72 Days 54 Days … and spend 5% of revenue less on SCM costs!! 26% 21% Laggards Leaders
  8. 8. DDVN Challenges Posed by Globalization <ul><li>Increasing global complexities </li></ul><ul><ul><li>Lead-time, variability, and inventory increase dramatically </li></ul></ul><ul><ul><li>Increased security and global regulatory environment </li></ul></ul><ul><ul><li>Monetary fluctuations, political instability, cultural differences </li></ul></ul><ul><ul><li>Many, many parties involved </li></ul></ul><ul><ul><li>Not just low–cost sourcing but also penetrating emerging buying markets </li></ul></ul><ul><li>Infrastructure challenges </li></ul><ul><ul><li>Road systems </li></ul></ul><ul><ul><li>Rail systems </li></ul></ul><ul><ul><li>Power / energy </li></ul></ul><ul><li>Heightened information system needs </li></ul><ul><ul><li>Real-time connectivity for tighter control / monitoring </li></ul></ul><ul><ul><li>Removing latency and “black-holes” of inefficiency </li></ul></ul><ul><ul><li>Data quality and sharing reliability across planning/shipping community </li></ul></ul>
  9. 9. Value Network Performance is Key Where is the status of my orders? When will it be shipped? Can I depend on my contract manufacturer? Are orders being held up? Is my 3PL satisfying my customers well? Are we losing money on this business? How easy is it to collaborate with my trading partners? RAW MATERIALS PROVIDER PROCESSING PLANT CONTRACT MANUFACTURER CONTRACT MANUFACTURER CONSUMER PACKAGED GOODS RETAIL 3PL WAREHOUSE RETAIL STORE DISTRIBUTION CENTER
  10. 10. Best Practices in Global Logistics <ul><li>Be strategic about logistics – increase awareness of risks across the organization and the network </li></ul><ul><li>Standardize and integrate globally – information and process </li></ul><ul><li>Consider alternative geographies using supply chain network re-design </li></ul><ul><li>Invest in technology – create a transparency infrastructure that combines global and domestic logistics control </li></ul><ul><li>Get visibility / take control of orders / shipments early </li></ul><ul><li>Select partners that provide quality information service as well as flawless physical execution service </li></ul>
  11. 11. Transportation System Touch Points that Drive Demand Driven Success <ul><li>Order forecasting, order aggregation, load building, and mode selection </li></ul><ul><ul><li>Value: Reduce transportation costs and order to ship lead time </li></ul></ul><ul><li>Integrated close loop appointment scheduling with order-shipment-capacity prioritization </li></ul><ul><ul><li>Value: </li></ul></ul><ul><ul><ul><li>Ensure the right products are being received at the right time creating reduced inventory levels and increased same store sales; </li></ul></ul></ul><ul><ul><ul><li>Private fleet can ensure they have pickup appointments allowing executable backhaul movements; </li></ul></ul></ul><ul><ul><ul><li>Ensure carrier has delivery and pickup appointments prior to load being confirmed. </li></ul></ul></ul>
  12. 12. Transportation System Touch Points that Drive Demand Driven Success <ul><li>Factory direct shipping </li></ul><ul><li>Value: </li></ul><ul><li>Transportation cost may be reduced because lead time is eliminated between factory DC – forward DC – customer DC – resulting in opportunity to utilize cost-effective modes like Intermodal. </li></ul><ul><li>Storage costs are reduced because forward DC storage is no longer required </li></ul><ul><li>Last minute allocation </li></ul><ul><li>Value: </li></ul><ul><li>Increased same store sales </li></ul><ul><li>Service level improvements </li></ul>
  13. 13. Transportation System Touch Points that Drive Demand Driven Success <ul><li>Transportation forecasted demand to show carriers available capacity based on order forecast </li></ul><ul><li>Value: </li></ul><ul><ul><li>Reduced rates from carriers because they can strategically position assets </li></ul></ul><ul><ul><li>Improved carrier tender acceptance because carriers can see demand </li></ul></ul><ul><li>Replenishment based on actual execution constraints </li></ul><ul><li>Value: </li></ul><ul><ul><li>Realistic, executable orders are generated eliminating unnecessary inventory and reducing order to execution lead time. </li></ul></ul><ul><ul><li>Reduction of labor and inventory level because cross-flow processes can be identified and executed </li></ul></ul>
  14. 14. Transportation system touch points that drive demand driven success <ul><li>Supplier Portal </li></ul><ul><li>Value: </li></ul><ul><ul><li>Accurate origin sourcing points to truly determine prepaid/collect conversion opportunities </li></ul></ul><ul><ul><li>Allowance costs for all non-controlled movements, so prepaid/collect conversion analysis can be performed </li></ul></ul><ul><ul><li>Additional backhaul opportunities can be identified as well as continuous move opportunities for common carriers </li></ul></ul><ul><ul><li>Increased private fleet backhaul utilization </li></ul></ul><ul><ul><li>Automated claims management </li></ul></ul>
  15. 15. Dr. Lawrence G. Mallon, Program Director Strategic Mobility 21 The Road Map to the On Demand Network
  16. 16. A Transformational Web Enabled Service Approach to Logistics Transformation and Global Distribution Synchronization Strategic Mobility 21 Program
  17. 17. <ul><li>Strategic Mobility 21 (SM21) is: </li></ul><ul><ul><li>A Congressionally established, independently (501c3) managed consortium (government, industry, academic) </li></ul></ul><ul><ul><li>Developed as a multi-year advanced logistics Joint Concept Technology Demonstration (JCTD) equivalent </li></ul></ul><ul><ul><li>Funded through Department of Defense Office of Naval Research </li></ul></ul><ul><li>SM21 Mission: </li></ul><ul><ul><li>To design, develop, demonstrate, and deploy a dual use (military and commercial) prototype multi-modal transfer hub facility1 (Joint Deployment Distribution Support Platform (JDDSP)) at Southern California Logistics Airport (SCLA) and other strategic locations, which is scalable and replicable. </li></ul></ul><ul><ul><ul><li>1 Facility would be a “smart node” within the Joint Deployment Distribution Enterprise (JDDE) </li></ul></ul></ul>Strategic Mobility 21 Program
  18. 18. <ul><li>Military – changing adversaries, mission, strategies, and tactics requires agile logistics support to facilitate shift from supply to distribution based logistics paradigm focusing upon end user </li></ul><ul><li>Business – changing competitive spaces (e.g., supply/distribution chain) requires an agile global supply chain (concept to customer) and a trained and skilled work force </li></ul><ul><li>Individual and national perspective – The logistics industry is among the fastest-growing industries in the nation, vital to economic well being, security and recovery due to: </li></ul><ul><ul><li>Growth of international trade resulting in large volume of cargo entering the country requiring distribution </li></ul></ul><ul><ul><li>Trends in manufacturing production (moving off-shore) </li></ul></ul><ul><ul><li>Logistics requires diverse skills & has good pay overall </li></ul></ul>Global Logistics Transformation Why is it needed?
  19. 19. <ul><li>Cloud computing replacing client server hardware (ERP) and application software (IT as enabler not constraint) </li></ul><ul><li>IT architecture that enables global supply network conversion to consumer driven on demand ad hoc mobile adaptive networks </li></ul><ul><li>Logistics paradigm shift from course of supply to course of action enabling all “C’” functions an unprecedented data visibility across enterprise </li></ul><ul><li>Global supply chain management becomes truly concept to customer with real time on demand feedback loop </li></ul>Emerging Technology Drivers
  20. 20. SM21 Enabling Capabilities <ul><li>Southeast Agile Supply Network Model (SEASN) regional node-arc model to validate “what if scenarios” for planning and network optimization </li></ul><ul><li>Multi-modal terminal model to plan inland port and network operating capabilities </li></ul><ul><li>Joint Deployment Distribution Support Platform including: </li></ul><ul><ul><li>Synchronizing road, rail, and air freight movement operations through network and region </li></ul></ul><ul><ul><li>Service oriented information technology architecture providing tracking and tracing, scheduling and appointment and simulation services across network proven with Dole Foods and DoD </li></ul></ul><ul><ul><li>Agile Port System (APS) maximizing and de-conflicting commercial and military port operations </li></ul></ul><ul><ul><li>Fourth party logistics provider with rail, truck, warehouse, IT partners </li></ul></ul>
  21. 21. <ul><li>Key Participants </li></ul><ul><ul><li>Dole Package Foods Logistics Group </li></ul></ul><ul><ul><li>SM21 – California State University, Long Beach Research Group </li></ul></ul><ul><ul><ul><li>Provide integration data from Dole (Shipments and Projected Loss Sales), GTNexus (Ocean) and Transcentric (Rail) </li></ul></ul></ul><ul><ul><li>One Network Enterprises </li></ul></ul><ul><li>Objective - Proof of concept to demonstrate capabilities that help Dole: </li></ul><ul><ul><li>Improve visibility and service levels from ocean, land and rail carriers </li></ul></ul><ul><ul><li>Reduce transportation and inventory costs </li></ul></ul><ul><ul><li>Optimize throughput capacity across value networks </li></ul></ul><ul><ul><li>Collaborate with value network partners </li></ul></ul><ul><li>Primary capabilities delivered </li></ul><ul><ul><li>Global multi-modal container visibility, status information, and monitoring across the network </li></ul></ul><ul><ul><li>Shipment prioritization at the Port of LA for containers destined to the Buena Park DC based upon the projected loss of sales and minimizing demurrage costs </li></ul></ul>SM21 / Dole Case Study
  22. 22. <ul><li>Before </li></ul><ul><ul><li>Check status of shipments in multiple systems because of no global track and trace (ocean carriers, rail carriers, GT Nexus, etc.) </li></ul></ul><ul><ul><li>No exception management or alerts; only status information available </li></ul></ul><ul><ul><li>Manually establish priority for ground/drayage carriers at the port. No reprioritization capability </li></ul></ul><ul><ul><li>Manual transportation capacity planning. Lacked global trade management optimization </li></ul></ul><ul><ul><li>Telephone and email intensive to keep DCs, logistics ops, and carriers synchronized to prioritize shipments and avoid demurrage and detention costs </li></ul></ul>SM21 / Dole Case Study
  23. 23. <ul><li>After </li></ul><ul><ul><li>Exception management (past due deliveries, departures, customs on hold, FDA clearance, USDA clearance, etc.) </li></ul></ul><ul><ul><li>Synchronization among Dole operations as well as carriers and other partners </li></ul></ul><ul><ul><li>Automated drayage shipment prioritization based upon projected loss sales, minimizing operation costs such demurrage, and based upon the latest execution activities </li></ul></ul><ul><ul><li>Enable total logistics costs and end-to-end / origin to destination visibility </li></ul></ul>SM21 / Dole Case Study
  24. 24. <ul><li>Value Drivers </li></ul><ul><ul><li>Minimize warehouse stock outs </li></ul></ul><ul><ul><li>Ensure stores have continuous supply of inventory especially during promotional periods </li></ul></ul><ul><ul><li>Shipment prioritization scheduling that considers capacity constraints </li></ul></ul><ul><ul><li>Longer range DC, transportation capacity, and staff requirements are visible </li></ul></ul><ul><ul><li>Exception management and alerts allow users to focus on the significant issues </li></ul></ul><ul><ul><li>Anticipated result: An inventory decrease from 16 weeks to 12 weeks, yielding a 25% reduction of inventory and its associated costs </li></ul></ul>SM21 / Dole Case Study
  25. 25. Demand Driven Logistics in the Global Economy Chris Ives, Supply Chain Operations Manager Argos Direct Imports
  26. 26. Argos Home Retail Group Direct Imports <ul><li>Supply Chain Overview: A Truly Global Operation </li></ul><ul><li>Over 50 world wide origin locations </li></ul><ul><li>£1.9 bn Turnover through the DI/DS channel </li></ul><ul><li>70m+ DI Units sold every year </li></ul><ul><li>Largest container importer into the UK </li></ul>
  27. 27. Supply Chain Overview - Stakeholders
  28. 28. Time based process analysis revealed systems and process shortcomings <ul><li>Lack of up to date and consistent management information meant a slow response to changes in customer demand from merchandise </li></ul><ul><li>Inconsistent information across supply chain stakeholders meant lack of clarity and time delays in making key decisions </li></ul><ul><li>Lack of information around product characteristics incurred logistics costs and unloading delays </li></ul><ul><li>Merchandise lifecycle was less efficient due to inability to view container holding by product type </li></ul><ul><li>Most processes were based around spreadsheets and e-mails, they also relied overly on key individuals creating a business risk </li></ul><ul><li>Very hard to transfer existing processes if 3PL strategy changed or when logistics processes refined </li></ul>
  29. 29. <ul><li>Rapid response to customer needs by: </li></ul><ul><ul><li>Improved UK stock visibility including overlaying of current company stockholding to container contents meaning faster responses to changes in customer demand </li></ul></ul><ul><ul><li>Virtual real time consistency of UK container and location visibility for merchandise and logistics planning UK stakeholders – Argos and 3PLs </li></ul></ul><ul><ul><li>Easily identifiable product characteristics for each container making logistics and capacity planning more transparent and efficient </li></ul></ul><ul><ul><li>More effective lifecycle management of merchandise </li></ul></ul><ul><ul><li>Straightforward web based access and customisable views for different users </li></ul></ul><ul><ul><li>Easy to implement, flexible solution with new logistics partners </li></ul></ul>“ Push” to “Pull” – An Agile Solution for Argos Through One Network
  30. 30. Demand Driven Logistics in the Global Economy Todd Buelow, Product Marketing Manager One Network Enterprises
  31. 31. Global Logistics Stakeholders: Challenges Importer / Shipper Factory Freight Forwarder Distribution Retail Stores Trucking Companies / Rail Lines US Ports / Terminal Operators Foreign Ports / Terminal Operators Ocean Carrier Customs Broker Consolidator / NVOCC
  32. 32. Importer / Shipper Factory Freight Forwarder Distribution Retail Stores One Network Platform Global Logistics Stakeholders: One Network Solution Consolidator / NVOCC Customs Broker Trucking Companies / Rail Lines US Ports / Terminal Operators Foreign Ports / Terminal Operators Ocean Carrier
  33. 33. One Network Solution Overview Claims & Settlement Planning Appointment Scheduling Private Fleet Management Global Trade Management Execution Business Analytics Shipment Visibility Freight Forwarding / 3PL Brokering
  34. 34. A Global Demand Driven Solution <ul><li>Address global supply chain complexities with a single solution platform </li></ul><ul><li>Orchestrate demand and transportation </li></ul><ul><li>Integrate inbound and outbound transportation processes </li></ul><ul><li>Increase visibility and improve planning and execution across partners, logistics service providers, and internal business units </li></ul><ul><li>Sense and respond dynamic supply chain changes and plan and execute accordingly </li></ul><ul><li>Embrace current processes and solutions </li></ul><ul><li>Deploy rapidly via cloud computing technology with immediate return on investment </li></ul>
  35. 35. Demand Driven Benefits <ul><li>Reduce transportation costs </li></ul><ul><li>Reduce inventory levels </li></ul><ul><li>Reduce order to ship lead-time </li></ul><ul><li>Increase same store sales </li></ul><ul><li>Improve service levels </li></ul><ul><li>Increase inventory turns </li></ul><ul><li>Reduce labor costs </li></ul><ul><li>Minimize outside storage costs </li></ul>
  36. 36. Summary of Benefits <ul><li>Today, you have heard how global leaders in demand driven logistics are: </li></ul><ul><li>Reducing cost while increasing service </li></ul><ul><li>Integrating systems and processes across all parties in the value chain </li></ul><ul><li>Considering demand as part of the transportation optimization process </li></ul><ul><li>Orchestrating inbound and outbound movements </li></ul>
  37. 37. Next Steps <ul><li>Connect with One Network </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li>LinkedIn Community Supply Chain Group </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Facebook Demand Driven Supply Chain Group </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>One Network’s Facebook Page </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Twitter </li></ul></ul><ul><ul><li> </li></ul></ul>
  38. 38. Thank you! For questions and more information contact: Todd Buelow: [email_address]