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Global logistics and supply chain management are experiencing significant changes and challenges. Mega ships are now the norm, creating issues around port congestion and infrastructure. Ocean carrier consolidation is ongoing, with questions around future rates, service levels, and carrier viability. Unreliable carrier performance is driving up inventories and costs. To differentiate, companies should consider a blue ocean strategy of creating new market spaces rather than competing head-to-head. Opportunities include leveraging e-commerce, multichannel distribution, and global expansion through innovative supply chain practices focused on customer service. The future belongs to companies that embrace change through supply chain innovation.
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- 1. Global Logistics & SupplyChain Management Making Sense of it All and Where It is Going Tom Craig – tomc@ltdmgmt.com LTD Management www.ltdmgmt.com
- 2. Topics GLOBAL LOGISTICS-- West Coast & Domino Effect Container Line Chaos SUPPLY CHAIN MANAGEMENT-- Blue Ocean Strategy Using Supply Chain Management
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- 4. West Coast Ports& Domino • Poor Service, Congestion • Christmas • Chinese/Lunar New Year • Alternative Port Issues • Air Freight
- 5. Questions Do youuse carriers directly or a forwarder? Do you use West Coast ports? How stable was and are your rates? Did you have any booking problems? Did you have any problems getting empties? Did you make any adjustments? When? How did you make out? AND---
- 6. THE Question What areyou going to do now?
- 7. Pending Chaos!? Is ThereMore Ahead than West Coast Port Issues?
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- 9. Issues • Ship supplyexceeds demand • Pricing/Rates • Service & space Need to know what is going on in order to negotiate and to buy ocean transport service.
- 10. Mega Ships Mega ShipAircraft Carrier
- 11. CSCL Globe •19,100 TEU Containersstretch 72 miles 156 million pairs of shoes 300 million tablet computers 900 million standard tins of baked beans •Was biggest ship (for 53 days) Now MSC Oscar 19,224 TEU •One big ship or no megas vs fleet of ultra large??
- 12. Issues They Face •Megas / Ultra Large – 18,000+ TEU (vs. 1,000 TEU in 1970’s) • Lower Operating Costs • How Will Ships be Filled? • Which Ports Will Handle Them? • How Will Ports Handle Them? • What’s the Investment? • Bottlenecks!
- 13. Shake Out Ahead? •Capacity adjustments—more frequent? Financial Much red ink for last 6 years Rates Transpacific vs Asia-Europe Cost management Differences with mega fleets Revenue management Maersk
- 14. Rates—Asia to Europevs U.S. DATE EUROPE USWC USEC 12/5/2014 $719/TEU $1825/FEU $4020/FEU 12/12 $1353 $2259 $4363 12/19 $1230 $2242 $4575 12/26 $1149 $2125 $4538 12/31 $1085 $2058 $4498 1/9 $975 $1930 $4500 1/16 $1008 $2089 $4747 SCFI spot rates
- 15. Will there be fewercarriers in the years ahead? • If so, who will survive? • What do you do now to position with the survivors? What would this mean to OTIs/NVOs/FFs? What does it do to pricing? What does it do to service? •
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- 17. What Carriers AreDoing More to previous, with different take Remember that need to know to buy transport Alliances P3 is now the M2 New -- Ocean 3 (CMA CGM, UASC, China Shipping) Operating issues Shipping Routes – revised
- 18. Carriers Sailing Schedules– made and reworked “Slow Steaming” Skipped / blank sailings Maersk closed 2 services in transpacifc (after losses in trade for 9 of 10 years)
- 19. How do youmanage a supply chain—and your business—with this? Remember, you are buying a service.
- 20. Service Performance --Top 20Carriers-- Remember-- you are buying a service Aggregate for Asia-Europe, Transpacific & Transatlantic Rolling 3-month average— Asia-Europe at 67% Transpacific at 52% Transatlantic at 59% Top Carriers for 3 months Maersk at 80% Hamburg-Sud at 75% Cosco at 70% Remember, you are buying a service.
- 21. Service Performance Rolling3-month average-- Asia-Europe at 58% Transpacific at 62% Transatlantic at 77% Top carriers for 3 months— Maersk at 80.4% Hamburg-Sud at 78.5% Cosco at 69.9%
- 22. What It AllMeans Irregular Performance Will lower bunker/fuel prices improve on-time? Lack of service reliability Potential changes as to ports to handle ships
- 23. Which Means—For You Increased uncertainty for planning Negative impact on operations & sales Undermine inventory yield maximization More inventories More capital tied up
- 24. Impact TOTAL GLOBAL INVENTORIES REQUIRED INVENTORY TO MEET REQUIREDTO MEET SALES SAFETY STOCK ADDITIONAL BUFFER TO COMPENSATE FOR UNRELIABILTY And expedited freight?
- 25. Just an FYI-- Andchassis fees are going up
- 26. By The Way… •How does all this factor into your importing and carrier selection (even if you use a NVO)? • How do you factor all this into your business? • Have you considered how much is about big and big – big carriers and big shippers? • Do you form an IGA shippers association to leverage buying power for import freight rates and service?
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- 28. Blue Ocean Strategy UsingSupply Chain Management
- 29. “We typically loseout when a market commoditizes and we no longer differentiate, further aggravated by us being too slow or expensive.” Frans van Houten, CEO, Royal Philips Electronics
- 30. Any of theseyour business? Commoditized? Sell mostly on price? Margin issues? Customer retention/turnover? Growth issues? Little/ no competitive differentiation? What do your customers think of you?
- 31. Start simple— Percent oforders delivered complete, accurate, and on time Do you know? If you don’t know, how can you say you provide good service? Is it good? If not, what are you doing about it? Where is your competitive differentiation?
- 32. Blue Ocean Strategy Whatblue ocean is What blue ocean does
- 33. Uncontested market space Createnew industry –- OR— Alter your boundaries (make blue ocean from red ocean)
- 34. Red ocean vsblue ocean strategy-- Red Ocean Strategy Compete in existing market space Beat the competition Exploit existing demands Make the value/cost trade- off Align company activities with its strategic choice or low cost Blue Ocean Strategy Create uncontested market space Make the competition irrelevant Create and capture new demand Align company activities in pursuit of differentiation and low cost
- 35. Interesting study-- Firmsthat did incremental improvements to existing offerings— 86% of firms (stuck in a rut?) These line extensions were 62% of total revenues These line extensions were 39% of total profits Firms that created new markets— 14% of firms These were 38% of total revenues These were 61% of total profits
- 36. Think about this Howmuch strategy is actually just a reaction to competition?
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- 38. E-commerce •$1.5 trillion salesglobal •Part of Multichannel / Omnicommerce sales •Can we say Alibaba?
- 39. Do you reallythink e-commerce is for B2C retail only? •Too big a way of doing business to just be…… •W.W. Grainger– 1/3 B2B sales are e-commerce (over $3bil) • Global B2B $6.7 trillion by 2020
- 40. Old vs New e-commerce Immediacy Amazon Amazon Supply Macy’s Nieman Marcus Same old-same old Web site Ship orders UPS and FedEx dim pricing!
- 41. Multichannel Expand waysto reach customers How to service them that goes beyond just shipping It’s about the customer It’s not about you
- 42. Are we Lookingat a paradigm shift— For Selling For Supply Chain Management
- 43. Global Why not theworld? Why limit yourself?
- 44. Competitive Differentiation What setsyou apart to customers? Why should they buy from you?
- 45. Red ocean supplychain •Is monolithic •Is defined by functions •Is measured by costs •Focus on orders •Carry more inventory—and invest more working capital— than is required •Struggle to deliver orders complete, accurate and on- time •Utilize technology primarily for functions, such as for warehouses and for “track and trace” transport
- 46. Blue Ocean SupplyChain Deliver orders complete, accurate and on-time per Immediacy Is defined by integrated process Utilize integrated supply chain execution technology across the supply chain Use logistics service providers that complement innovative supply chain service •Is segmented by channel •Is measured by performance and service •Focus on customers •Focus on delivery •Focus on product positioning and availability
- 47. Blue Ocean is abouthow to best service each channel Firms provide service they want Customers want different HELLLOOOOOOOOOOO Blue ocean is where competition is not
- 48. Immediacy (of new e- commerce)& new supply chain Spreads across multichannel Grows across the world Expands across industries Expands across markets It is happening. Join the blue ocean. Move to the new supply chain. Or keep validating Einstein & lunacy.
- 49. For Blue OceanSupply Chains No quick fixes No “you just” It’s change
- 50. The new supplychain that drives blue ocean is innovation Where will you be— Innovator Early majority Laggard
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- 52. "You got tobe careful if you don’t know where you’re going, because you might not get there." – Yogi Berra