Developing a Logistics Strategy

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Developing a Logistics Strategy
Paul Price
Spatial Logistics
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PROGRAMME
THE PROCESS AND ITS EFFECT ON COSTS
TIME LINES AND METHODS
CHOOSING A LOGISTICS PARTNER
IN-HOUSE VS. OUTSOURCING
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THE PROCESS AND ITS EFFECT ON COSTS
ESTABLISHING CONSUMER NEEDS Sales Marketing
DESIGN RD (Why involve your logistics supplier
at this stage?)

• Suitability of product for transportation

• Size and shape ability to PKD or FKD in
• order to reduce
  transport costs

• Hazardous increased packing costs,
• limited transport
  options,
• increased transport costs

• Composition of the product
• effects on duty payments - for example

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THE PROCESS AND ITS EFFECT ON COSTS
The initial design
Tariff Heading 6404 1100 10 _at_ 16.9 Duty
The revised design
Tariff Heading 6403 9996 11 _at_ 8 Duty
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THE PROCESS AND ITS EFFECT ON COSTS
THE RESULT !

• What it meant in real terms increased profit
• 20 FCL Containing x shoes _at_ 2.00
• 4800 pairs of shoes 9,600 total value
• Duty at 16.9 1,622.40
• Duty at 8 768.00
• Saving 854.40

Courtesy of Paul Thompson
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THE PROCESS AND ITS EFFECT ON COSTS
Consider Your Manufacturing location - UK or
Overseas?

• If overseas you need to consider
• Quality
• Controls
• Supplier sole or duel-sourcing
• Increase in lead times
• Effect on transport costs
• Peak season surcharges
• Customs clearance and licencing issues

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Time lines and methods
Delivery Methods
UK and International Mail UK next day timed to
10 days International 3-5 days priority air up
to 13 weeks by surface to Australia! Very cost
effective for low value non time-sensitive
products but difficult to track if client claims
non-delivery. Compensation levels are low
unless extra premium is paid at time of
posting. Reliability to certain areas of the
world is questionable.
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Time lines and methods

• UK International Courier deliveries
• UK Next day timed deliveries to 2-3 days
• On the whole very reliable and deliveries are
  trackable.
• Establish clients delivery needs dont assume
  always next day!
• 2-3 day delivery can show significant savings
  especially if you have
• volume

• International Next day timed to 6 days
• As above, dont choose express services
  unless you have to.
• We have all come to expect it but do we really
  need it?
• Quote economy delivery and consider billing
  your client if they want a faster service.

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Time lines and methods

• UK Pallet deliveries
• Next day timed to 2-3 days
• Several good quality services now available and
  again deliveries are trackable.
• As with parcels check clients needs.
• Many 2-3 day services are delivered next day in
  order to maximise vehicle usage - although this
  cannot be guaranteed

• European Road trailer deliveries
• Again many good operators to specific areas.
• A good Logistics partner will know the horses
  for courses!
• Cost effective for even small quantities but
  PODs can still be difficult to get

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Time lines and methods
Seafreight Up to 7 weeks Cost effective if
delivery time allows Established routes around
the globe offering scheduled departures and
arrivals Dependent upon the size of the shipment
and the destination check what packing is needed.
Dont over/under pack.
Airfreight Direct flights, deferred flights and
consolidations 2- 7 days Direct flights are
quick but expensive consider spot rates and
auctions. Deferred flights take advantage of
space availability and can offer considerable
savings. Consols are usually on set days and
your cargo moves with others for the same
destination. You cargo benefits from economies of
scale.
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Time lines and methods
Air/Sea Sea/Air Faster than seafreight more
economical than airfreight Recognised specialist
and hubs world wide Increasingly common and
again, a good logistics service provider can
ensure that you get the best deal
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Time lines and effects
Example
Yawn Limited (Thanks to Dave Pearson!) Manufactu
re bespoke valves and fittings in China
Manufacturing time for MOQ (1x20 Container) is 5
weeks
Loading, shipping,clearance and delivery time is
a further 5 weeks
Yawn quote UK clients 10 week delivery
Problem at manufacturing plant causes 3 week
delay in production
Customer threatens to cancel order
Yawn Limited have to order sufficient quantity by
air to appease customer or risk loosing this and
future orders
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Yawn Limited - Normal Time line
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Yawn Limited Problem Time line
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Time lines and effects
Be realistic
Involve your logistics provider at the outset
Build in time for unforeseen issues
Always have a contingency plan
Consider duel-sourcing if practical
Consider emergency stock holding either you
or manufacturer consignment stock is common
Consider use of bonded warehousing to take
advantage of bulk purchasing or seasonal discounts
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Choosing a logistics partner
Look at your existing arrangements on a regular
basis Are they adequate? Are you getting what
you want? Dont get complacent.
Look for flexibility be sure you get what you
want
Big isnt always best big fish small pond or
small fish big pond
Have they the ability to grow with you?
Check your chosen partner is fully accredited
ISO, IATA,FIATA,BIFA,RHA,UKWA.
Ask for references and examples of similar
operations to yours
Dont always choose the cheapest option always
consider service
Draw up a proper service agreement set down
KPIs
Hold regular review meetings
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In-House vs. outsourcing
With continual pressure to improve the efficiency
and reliability of transportation and logistics
operations without sending overheads through the
roof, shippers are realising the potential
economic advantage of outsourcing their logistics
activities.
Outsourcing opens the door to resources not
necessarily available in ones own organisation
without the need to invest in specialist
personnel, capital equipment or expensive
infrastructures.
In a recent survey, a third of the respondents
outsourced their logistics activities to avoid
the costs of expanding their own organisation,
while a third said that the need to coordinate
warehousing, manufacturing and inventory
management was the primary reason for outsourcing.
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In-House vs. outsourcing
Logistics outsourcing is a dynamic, shifting and
growing business environment, and shipper-3PLs
relationships are evolving into proactive and
cohesive partnerships.
3PLs need to immerse themselves in the client
companys culture and adapt to their ethos and
management style.
In return, shippers need to see their 3PLs as an
extension of their business, rather than merely a
supplier
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In-House vs. outsourcing
Clients who outsource their logistics activities
expect their 3PLs to operate as an extension of
their business, proactively seeking new ways to
reduce logistics costs without compromising
efficiency, and developing new and innovative
logistics solutions.
Communication and information sharing between 3PL
and customer is essential in order for a 3PL to
achieve agreed performance levels,
Those who share their business visions and
strategies, achieve far more in the long-term as
both partiers are empowered to plan ahead in
terms of improving operating efficiencies whilst
controlling and even reducing operating costs.
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In-House vs. outsourcing
Although the practice of outsourcing is clearly
increasing, there are obviously a number of
reasons why shippers prefer to retain their
logistics activities in-house.
Some of the main concerns that dissuade clients
from outsourcing their logistics activities are
Perceived service issues
Perceived higher cost
Loss of control
Reduced flexibility
Lack of expertise
In order for outsourcing to succeed, and as we
have mentioned before, it is vital that clients
share their current, short and long time
strategies with their chosen supplier.
BECOME A TRUE PARTNERSHIP!!
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In-House vs. outsourcing
Some benefits of outsourcing logistics activity

• Reduction of fixed overhead costs
• Releases your organisational time
• Allows you to concentrate on core activities
• Removes the burden of all export and bank
  documentation
• Provides constant year round cover
• Removes need for expensive export computer
  systems
• Reduces recruitment and training Costs
• Allows you to take advantage of your logistics
  partners group purchasing power

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Conclusion
Look at your existing logistics processes and
check your sourcing
Consider the pros and cons of outsourcing your
logistics operation
Involve the logistics experts early in new
product development and future plans
In consultation with your logistics
partner,choose the most suitable delivery method
for your product in order to satisfy both your
customers needs and your budget
Ensure that you are in control dont accept
someone else's systems that dont work for you
Adopt and embrace the partnership concept
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Thank you for your time this evening
And if you do feel you need assistance I know
a company that might just be able to help!