Title: Global Logistics
1CHAPTER 13 Global Logistics
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6 Becton Dickinsons Worldwide Sources
7International Logistics
- Changes to political landscape affect logistics
- The end of Soviet rule in Eastern Europe
- EU economic integration
- Nontariff barriers-a rule that has the effect of
reducing imports - Restrictions on truck traffic, forcing freight
onto rail and water - NAFTA
- Multinational firms
8Comparison of Domestic and International
Logistics
Domestic
International
Estimated at 16 of world GDP today Mainly ocean
and air, with significant intermodal
activity Higher levels, reflecting longer lead
times and greater demand and transit uncertainty
Heavy reliance on forwarders, consolidators, and
customs brokers High, owing to differences in
currencies, inflation, levels and little recourse
for default High, owing to longer and more
difficult transit, frequent cargo handling, and
varying levels of infrastructure development Many
agencies involved (e.g., customs, commerce,
agriculture, transportation Significant
paperwork the U.S. Department of Commerce
estimates that paperwork cost for an average
shipment is 250 Voice and paper costly and often
ineffective movement toward electronic
interchange but variations in standards hinder
widespread usage Cultural differences require
significant market and product adaptation
Cost Transport mode Inventories Agents Financial
risk Cargo risk Government agencies Administratio
n Communication Cultural differences
About 10 of U.S. GDP today Mainly truck and
rail Lower levels, reflecting short-order,
lead-time requirements and improved transport
capabilities Modest usage, mostly in
rail Low Low Primarily for hazardous materials,
weight, safety laws, and some tariff
requirements Minimal documentation involved
(e.g., purchase order, bill of lading,
invoice) Voice, paper-based systems adequate,
with growing usage of electronic data interchange
and Internet Relative homogeneity requires little
product modification
9International Market Entry Strategies
- Exporting
- Licensing
- Joint ventures
- Ownership
- Importing
- Countertrade
10Major Participants in an International Logistics
Transaction
11The Global Logistics Environment
12Responding to Competition with Logistics
- Increasing the number of cross-national
partnerships, alliances, mergers, and/or
acquisitions. - Expansion of many previously domestic-based
organizations into international markets. - Development of global communications networks
operating 24 hours a day. - Establishment of country and regional warehouses
in major world markets. - Identifying and developing relationships with
logistics service providers that offer
transportation, storage, materials handling, and
other services on a global basis.
13Exporting Companies
- Export distributor
- Customs house broker
- International freight forwarder
- Trading company
- Non-vessel-operating common carrier (NVOCC)
14Documentation
- Country of Origin
- Bills of Lading
- Packing Lists
- Customs
- Certified Shippers - C-T PAT
15Free Trade Zones
- gt 225 in the US
- postpone payment of customs or taxes until item
is sold - avoid customs completely if consolidated and
re-exported
16Ocean Shipping
- Types of Ocean Cargo
- Petroleum
- Dry-bulk cargoes-grain, ores, sulfur, sugar,
scrap iron, coal, lumber, logs in vessel loads - Containers
- Shipping conferences and alliances pool resources
and extend market coverage
17Ocean Shipping
- Types of Vessels
- Containerships
- Lighter aboard ship (LASH) vessels
- Roll On-Roll Off (RO-RO) vessels
- Tankers
- Specialized vessels
18 A RO-RO Vessel in Jacksonville Florida
19International Trade Inventories
- May vary in small ways from country to
countryproducts may be tailored to fit - Less is needed (than in U.S.) to serve any one
country - Return items are impossible to accommodate
- Import and export quotas affect value of
inventories - Currency and language differences
- May actually increase inventory in total pipeline
20CHAPTER 15 Organizing for Effective Logistics
21Traditional Logistics Management
22Traditional Logistics Management cont.
23Control Exercised By Logistics Executives Over
Selected Logistics Functions
24Organization Design for Logistics as a Function
25Organization Design for Logistics as a Program
26Components of Corporate and Logistics Mission
Statements
- Targeted customers and markets
- Principal products/services
- Geographic domain
- Core technologies
27Components of Corporate and Logistics Mission
Statements (cont.)
- Survival, growth, and profitability
- Company philosophy
- Company self-concept
- Firms desired public image
28Ways of Improving Logistics Organizational
Effectiveness
- Strategic goal setting
- Resource acquisition and utilization
- Performance environment
- Communication process
- Leadership and decision making
- Organizational adaptation and innovation
29Logistics/Supply Chain Organization
A good organization structure does not by itself
produce good performance--just as a good
constitution does not guarantee great presidents,
or good laws, or a moral society. But a poor
organization structure makes good performance
impossible, no matter how good the individual
managers may be. To improve organization
structurewill therefore always improve
performance. Peter F. Drucker
30Activity Fragmentation in the Supply Chain
Responsibilities
President
Marketing
Finance
Operations
- Distribution channels
- Customer service
- Field inventories
- Revenue
- Cost of capital
- ROI
- Inventory carrying costs
- Supply alternatives and supply costs
- Warehousing
- Purchasing
- Transportation
CR (2004) Prentice Hall, Inc.
15-4
31Activity Fragmentation in the Supply Chain
(Contd)
Objectives
President
Marketing
Finance
Operations
- More inventory
- Frequent short production runs
- Fast order processing
- Fast delivery
- Field warehousing
- Less inventory
- Cheap order processing
- Less warehousing
- Long production runs
- Lowest cost routing
- Plant warehousing
15-5
CR (2004) Prentice Hall, Inc.
32Activity Fragmentation in the Supply Chain
(Contd)
- Reasons for fragmentation
- Lack of understanding of key cost tradeoffs
- Traditions and conventions
- Other areas considered to be more important to
the firm than logistics - Organization structure can be in an evolutionary
state - Benefits of fragmentation elimination
- Encourages important cost tradeoffs to be
effected - Focuses on an important, defined area by top
management - Sets the structure within which control can take
place
33Organizational Choices
- Informal structure
- Persuasion of top management
- Coordinating committees
- Incentive arrangements
- Profit sharing
- Cross charges
- Semi-formal structure
- Matrix organization
- Formal structure
- Line--creates value in products, therefore it has
operating status - Staff--provides assistance to the line
organization
34Logistics Matrix Organization
15-8
CR (2004) Prentice Hall, Inc.
35Tools to improve organization
36What is Systems Analysis?
- Systems analysis refers to the orderly and
planned observation of one or more segments in
the logistics network or supply chain to
determine how well each segment functions.
37General Questions
- Why do we perform each task?
- What value is added by it?
- Why are the tasks performed in the order they
are? - Can we alter the sequence of the processing steps
to increase efficiency? - Why are the tasks performed by a particular group
or individual? - Could others perform this task?
- Is there a better way for the system to operate?
38Problems in Systems Analysis
- Multiple business functions are impacted.
- There are trade-offs among conflicting
objectives. - Logistics system impacts are difficult to
precisely evaluate. - There are business issues unique to each
logistics system.
39Systems Integration Logistics Activities
Outside the Firm
- Third-party, or contract, logistics
- Integrated service providers
- Monitoring third-party performance
40Reverse Logistics
41What Drives Reverse Logistics and Returns?
Wal-Mart Costs up to 7-8 of costs of goods!
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43Impacts
44Impacts
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47SCOR and Returns
Suppliers suppliers
Customers customers
Processes associated with receiving returned
products for any reason. These processes extend
into post-delivery customer support. The
process includes communication between the
customer and last known holder or known return
center and the generation of associated
documentation.
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49Impacts of Reverse Logistics
- Forecasting
- Carrying costs
- Processing costs
- Warehousing
- Distribution
- Transportation
- Personnel
- Marketing
50Reverse Logistics - What is it?The Commercial
Perspective
- Reverse Logistics is the process of moving
products from their typical final destination to
another point, for the purpose of capturing value
otherwise unavailable, or for the proper disposal
of the products.
51Typical Reverse Logistics Activities
- Processing returned merchandise - damaged,
seasonal, restock, salvage, recall, or excess
inventory - Recycling packaging materials/containers
- Reconditioning, refurbishing, remanufacturing
- Disposition of obsolete stuff
- Hazmat recovery
52Reverse Logistics - New Problem?
- Sherman
- Montgomery Wards - 1894
- Recycling/remanufacturing in 1940s
- World War II - 77,000,000 square feet of storage
across Europe with over 6.3 billion in excess
stuff - Salvage and reuse of clothing and shoes in the
Pacific Theater World War II
53 Costs - above the cost of the item
- Merchandise credits to the customers.
- The transportation costs of moving the items from
the retail stores to the central returns
distribution center. - The repackaging of the serviceable items for
resale. - The cost of warehousing the items awaiting
disposition. - The cost of disposing of items that are
unserviceable, damaged, or obsolete.
54Costs
- Process inbound shipment at a major distribution
center 1.1 days - Process inbound return shipment 8.5 days
- Cost of lost sales
- Wal-Mart Christmas 2003 - returns 4 Days of
Supply for all of Wal-Mart 2000 Containers - PalmOne - 25 return rate on PDAs
55Is it a problem?
- Estimate of 2004 holiday returns 13.2 billion
- of estimated 2004/2005 holiday returns 25
- Wal-Mart 6 Billion in annual returns 17,000
truck loads (gt46 trucks a day) - Electronics 10 Billion annually in returns
- Personal Computers 1.5 Billion annually
approximately 95 per PC sold - 79 of returned PCs have no defects
56Returns an Operations Perspective
- Emerging industry in infancy stage
- Many skill sets involved, deep knowledge of some
skills - Person on Warehouse floor needs tools
- No Schooling for Reverse Logistics
- No rules or standards
- No methods
- Few Best Practices
- Few comparisons
- How do we know WHAT we should be doing?
- How do we know HOW WELL we are doing?
- Where are the opportunities to improve PROFITS?
57Some Key Operational Challenges Operations people
face
- So many people, from so many departments, at so
many locations, from different companies, needed
to process one return - For the group managers, returns is a small,
annoying part of their group Most of a Return
is someone elses problem /fault - Turn Around Time is often very slow and
difficulties often arise that add days to the
processing of a Return
58Key Operational Challenges - 2
- Difficulties arise with process Hand-offs between
groups, Outsourced providers and multiple data
systems staff is continually reconciling - Collect little data about a Returned unit it
often has errors, so it may get handled
incorrectly or we have to believe what the
customer tells us
- Often time consuming or difficult to track down
the status of a unit - Stressful work environment due to frequent issues
that need to be resolved ASAP - Senior staff spend considerable time solving
processing problems or escalated issues
59Best Practices
- All Returns under control of ONE GROUP
- Very Defined Business Processes
- Process Mapping author of text found that
companies that develop process maps saved up to
40 - Map all processes and add timelines
- Automate processes where possible
60Why are the number of returns increasing?
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62Cell Phone Returns
- Nearly 75 of returned phones are determined to
have - No Trouble Found
- 63 of returned phones are resold as is
- More than 16 hours of use and phone is no longer
new - High returns rate impacts Original Equipment
- Manufacturers for products under warranty
- Resold phones are used as scrap or warranty
replacements - California legislation requires retailers to
establish system - for collection, for reuse, recycling or disposal
at no cost to - the consumer
63Source DHL Presentation to Reverse Logistics
Association, Feb 2007
64Source DHL Presentation to Reverse Logistics
Association, Feb 2007
65NASA Reverse Logistics
66Returns Impact All Operational Facets
Product Development
Marketing
Purchasing
Finance
Logistics
Production
Product Returns
Processes all different Groups Authorize,
Receive, Ship, Credit, Inventory, Inspect, Test,
Repair, Disposition Multiple Locations Outsourced
Parties Each with - their own processes
- their own priority
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68Supply Chain Integrity
- What is it?
- Why is it important? Because there is no way to
do the wrong thing in the right way!
69Supply Chain Integrity
- Perfect Order Fulfillment
- Information Security
- Parts integrity Boeing 787
- Product integrity Mattel
- Shipping Integrity
- Inventory Integrity
- Peanut Corporation of America
- Cornerstone of supply chain leadership
70Questions??
71Summary
- Global Logistics controllable and
uncontrollable factors - Impacts on global inventories
- Traditional vs. Non-traditional organizations
- Functional vs. Program design
- Reverse Logistics impacts, causes, best
practices - Supply Chain Integrity
72Final Exam
73Thank you for your time
- Best of Luck to You in Your Next Assignment!!!