Prof. Thorsten Blecker - Rethinking the Supply Chain: Successful Experiences in Times of Crisis - 16 settembre 2010

1. Rethinking the Supply Chain: successful experiences in times of crisis Milano, 16.09.2010 Univ.-Prof. Dr. Thorsten Blecker

3. interdisciplinarity

4. innovation

5. regionality

9. Supply Chain Security

10. Complexity and Variety Management

12. The effectsoftheeconomiccrisis on the German industry

13. Economicoutlook

14. Crisis-drivenchanges in supplychains

17. Italyisthethirdmostimportanttradingpartner in the EU for Germany

19. Joint undertaking with Contship Italia

20. Eurogate operates sea terminals in the regions of North Sea, Mediterranean Sea and the Atlantic

21. Strong through the crisis – drop in container handling very small[www.egim.eu]

24. large population

25. large shareofeconomybased on industryandtrade

27. railways: 41 896 km (99,3% standardgauge)

28. waterways: 7 467 km (Rhine river, Main-DanubeCanal)

29. pipelines: 31586 km (gas 24 364 km, oil 3 379 km, refinedproducts 3 843 km)

30. airports: 549 (330 withpavedrunways)[www.cia.gov]

31. The effects of the economic crisis on the German industry

32. 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]

33. 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]

34. 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]

35. 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]

37. 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/ ]

39. 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]

41. The Port of Hamburg experienced at 28% drop in container handling, which translates to 7,01 Million TEU.

43. Placing the hopes on increasing transport volumes, especially on Asian shipping routes, no other country has ordered the number of container vessels Germany has.

44. 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

45. Economic Outlook

47. Numberofincomingordersofthe German producingindustryincreasedby 3,2% in June 2010 comparedtothepreviousmonth

48. The GDP hasrecovered; comparedtothesecongquarterof 2009, the GDP hasgained 4,1%changescomparedtopreviousyear‘ quarter changescomparedtopreviousquarter [www.destatis.de] quarter quarter quarter quarter quarter

50. Expertslookconfidentlyintothefuture.

51. 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]

53. 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]

56. Increase in efficiency

57. New environmentallycompatibletechnologies

60. globalization, foreign investment & local content

62. lowerspeedofglobalization

63. climate change fight

64. increaseoflocalcontent [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!

65. Study (1) „2010-2012 – Global Supply Chain Trends – Are Our Supply Chains able to support the Recovery? Lessons Learned from the Global Recession“

67. Poor forecastaccuracy

68. Lowercustomerloyalitythroughmarkettransparencyandgreaterpricesensivity

69. Productcommodization

71. Deepeningcollaborationwithkeycustomers (e.g. „real-time planning“)

73. Future trends will come from international customers

74. Product variation will increase to fulfill customer expectations

75. Outsourcing toexternalpartners

76. Contractingstrategicsuppliers

77. Increasingfacilitiesformanufacturing, distributionandinventory

79. Reductionof end-to-end supplychaincosts

80. Outsourcing mainlyofproductdevelopment, strategicaland operational sourcingand SC planning[Global Supply Chain Trends; Annual Survey by PRTM Management Consultants, 2010]

83. Saleand lease back programs

84. Outaourcingandexternalpartners

86. Lack of integration between SC functions

87. Inability to respond fast to changes

88. Trulyintegrated SC

89. Focus on End-to-end optimization

90. Training top talentwith SC knowledgeTop 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]

91. Study (2) Green-Logistics – Great importance even in times of a crisis [BME-Study]

92. 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

94. increasingrentability

95. promote sustainabilityProfessional logisticsand IT-basedprocessmanagamentplay an essential rolefor:

96. 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

98. 58% of the respondents would like to increase the operational flexibility and become more demand driven

99. 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

101. 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]

102. 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

103. Study (3) transport logistics 2009

105. Focus on supplychainvisibility, restructuring, increasingefficienyandcooperatingwith innovative logisticserviceproviderscrisismanagement in thecenterofinterest

106. Future trends: focus on greenlogistics, securityandcooperationwithserviceprovidersRelevant supply chain topics and trends Survey on thetrade fair „transportlogistics 2009“ Today 2015 Fields of innovation: security, green logistics, supply chain visibility [DB Schenker Laboratories, 2009]

107. Additional trends

109. BLG is contacting automakers including Great Wall, Chang'an, BYD and Huatai to provide logistics services.

112. enables the user to make more environmentally-sound decisions and comply with certain regulations (e.g. Kyoto Protocol)

115. Cut down costs

116. Improvevisibility

117. Staycompetitive

118. Strengthenmarketposition

119. Developnewmarkets

120. Enlargeportfolio

121. Becomemoreresistantagainstdemandfluctuations

122. DecisiveFactors:

123. Price, Time, Quality

124. Problem:

125. Are the customers willed to bear any additional costs through the value adding activities e. g. in R&D, security…?

126. High price sensivity of customers

127. Collaborative vs. competitive customer- supplier relation

128. Potential:

129. high innovation potential through the knowledge of the whole SC

130. Existing mechanisms for knowledge transfer from end-to-end in the SC

131. Trade off betweenProactive actions meeting customer requirements Innovationsare a must tomaintain a competetiveposition in themarket – forbothsides!

133. Optimize goods flow

136. Fat Kee Stevedores Ltd. pools products from different manufacturers, prepares them for shipment and tags them with RFID transponders.

137. An RFID reader at the outgoing goods portal of the exporter records the consignment and automatically checks that it is complete.

141. visual inspection of contents

142. Container scanningis a time-consumingandcostlyprocess

143. The Port of Hamburg scanslessthen 0,6% of all containers (per year)

144. 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

146. developing future-oriented projects for the maritime industry in Germany

148. Innovations driven by logistics service providers, e.g. Container Security Box ID der CSB Innenraum- Sensor CSB® Container Security Box ofKühne+Nagel

150. Improved methods for process optimization

151. Modularization of logistic processes

152. Industrializing service providers

156. Logistics service providers must be the driver of innovations in supply chains.[www.hafen-hamburg.de]

157. 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 blecker@hli-consulting.de Hamburg University of Technology (TUHH) Institute for Business Logistics and General Management (W-2) Schwarzenbergstr. 95 21073 Hamburg, Germany Ph.: +49 (40) 42878 - 3524 blecker@ieee.org For further information or specific inquiries please contact:

158. Addendum

160. ParticipantsfromacrossEurope, the Americas, and Asia.

161. Composed of organizations from a diverse set of industries 

162. While nearly two-thirds of survey participants are companies with annual revenues greater than $1 billion, more than 10% have revenues lessthan $100 million.

164. Survey periodfrom September 7, 2009 untilOctober 16, 2009.

165. The majorityofparticipantsareindustrialcompanies. Amongothersthegroupofparticipantsiscomposedoftradingandservicecompanies (38%), logisticserviceproviders (23%), chemicalsandpharmaceuticalscompanies (10%) andengineeringcompanies (9%).

166. All participatingcompaniessumupto a total turnoverof 453 billion Euro.

168. DB Schenker Laboratories is an affiliatedinstituteofthe Technical University of Berlin.

169. 216, randomlyselectedtrade fair participantswereaskedto rate theimportanceofcurrentandfuturelogistictrendsandto express theirexpectations.

172. More then 80 partnersofeuropeanforwardingandcarriercompanies

173. Objective: Tofulfillthefuturerequirementsof a growingeuropeanfulltruckloadmarketbyconsolidatingtruckloadsandadditionallyproviding individual transportsolutionsforcomplexlogisticalrequirements[VisAvis Economy, 02/2010]