Council of Supply ChainManagement Professionals

Raw Material Purchasing

Factory Manufacturer’s DC Customer’s DC Consumer

Rick D. Blasgen President & CEO

CSCMP

September 24, 2013

History: Constantly Evolving

1963

1985

2004

Established as the National Council of Physical DistributionManagement

Council of LogisticsManagement

Council of Supply Chain Management Professionals

2

CSCMP Members Are…

• Individual members

• Corporate members

• Young Professional members

• Student members

• And from more than 60 countries

The most successful supply chain management leaders in the world have connections.

So do we.A CSCMP membership delivers all the connections

you need to succeed.

• Connect with your peers.

• Connect to the latest supply chain management knowledge, research, and industry developments.

• Connect to the global marketplace.

CSCMP: Educating and Connecting the World's Supply Chain Professionals

cscmp.org

CSCMP’s Annual Global Conference isn’t justan event—it’s an end-to-end supply chain

experience created just for you.One conference—hundreds of opportunitiesOctober 20-23, 2013 • Denver, Colorado, USA

• Reconnect with your customers.

• Reenergize your career.

• Renew your commitment to your company.

• Rediscover what you love to do!

Register today at cscmpconference.org.

Don’t miss Keynote Speaker, Felipe Calderón, former

President of Mexico

Expansion, Innovation, and Transformation: What It

Takes to Lead

Supply Chain Concierge Service

CSCMP’s Evolving Role

• GoalBetter deliver intellectual capital and

educational resources to corporate training/education and SCM personnel through greater collaboration and more formal relationships.

What is a Supply Chain?

SCM = Seed to Table

Tech

nolo

gie

s

Storage Manufacturer Storage Distributor Retailer End UserSupplier

A Typical Supply Chain P

eop

leP

rocesses

ProductSourcing ManufactureStorage Storage Distributor Retailer

CustomerOrderReceipt

Logistics Costs $1.204 t $1.287 t $1.331 t 3.4%

% of GDP 8.3% 8.5% 8.5% Flat

Trans Costs $769 b $821 b $846 b

3.0%

Inv. Carrying $387 b $417 b $434 b 4.1%

Logistics Costs $1.204 t $1.287 t $1.331 t 3.4%

% of GDP 8.3% 8.5% 8.5% Flat

Trans Costs $769 b $821 b $846 b

3.0%

Inv. Carrying $387 b $417 b $434 b 4.1%

Metric 2010 2011 2012 % Metric 2010 2011 2012 %

US State of Logistics

Logistics Costs have risen 102%

Average annual increase = $30b

2012 increase was $44b

Since 1990…

As a % of GDP, Logistics expense went from 11.4% to 8.5%, a reduction of 25%

Also….

Global Comparison of Logistics Expenditures

Asia 17% GDPChina 15% GDP

Europe 13% GDPIndia 13% GDPJapan 11% GDP

Mexico 14% GDP

EconomyHigher Output--GDPBetter use of resourcesMulti-use Infrastructure

BusinessesMarket AccessMarket IntegrationCost Efficiency

ConsumersMore Goods and ServicesWider AvailabilityLower Prices/Income

U.S. 8.5% GDP

Some Magnitudes

The cost of logistics in the US was $1.331 trillion in 2012, 8.5% of the US GDP. It was 17.9% in 1980.

US expenditures on logistics is larger than the national GDP of all but 12 countries.

Total domestic business inventories are valued at $2.2 trillion.

Wal-Mart's supply chain management success is improving productivity in the United States:

The effects of the company's supply chain innovations on the retail industry led to a 3.1 percent decline in overall consumer prices between 1985 and 2004.

In 2004, consumers spent $263 billion LESS than they would have if Wal-Mart were not around! That translates to $895 per person, or $2,329 per household.

When Supply Chains Work Well

When Supply Chains Don’t Work So Well

A study by Georgia Tech showed that a company’s stock price drops 8% when the company experiences a glitch in its supply chain.

A study at Miami University of Ohio showed that when a company adopts a new supply chain innovation the company’s stock price increases.

A study by Bain & Company showed that companies employing sophisticated supply chain methods enjoyed 12 times greater profit than companies with unsophisticated methods.

Wall Street: New found respect for SCM. In one SCM MBA program in the US, 21/32 grads received job offers from Investment Banking firms because of the importance of SCM to their clients.

SCM Has Strategic Profit Impact

Top management is interested in what we do!

But we must communicate more effectively.

Transparency!

Decisions

Different Decisions?

$30

$145

The US needs a nationaltransportation policy

• Freight volume = 25 billion tons, $30 trillion

• Trucks will account for 75%

• Rail volume = 888 million tons, up 44% from today

• Distribution Centers are at both ends!

By 2020:

The US needs a nationaltransportation policy

•Demand will exceed capacity of many US ports by 200 %

• Interstate highways:

• Carry an average of 10,500 trucks per day

• By 2035, this figure will increase to 22,700 trucks.

• The infrastructure needs repair – Increased focus on real

estate’s role!

• Most estimates are between 2 and 10 percent productivity hit

• Shortage of 30,000 drivers right now

• 100,000 drivers that are expected to be needed as a result of the HOS rules

• Bureau of Labor Statistics estimate that 116,000 drivers will be needed by 2016

Expected Impact of New Hours of Service Rules

The Workforce Challenge

• Logistics jobs are growing

• Qualified applicants are not– Labor– Management

• There are labor shortages in key areas

• New regulations create new workforce requirements

1.1

1.7

2.6

1.6

1.21.0

0.2

1950-60 1960-70 1970-80 1980-90 1990-2000

2000-2015

2015-2025

ProjectedSO UR CE: Bureau of Labor Statistics. Rates in percent.

Annual rates of labor force growth, 1950-2025

Real Estate and Supply Chain

• The two are inextricably linked

• Real estate is critically important to the success of a company’s supply chain

• “Buildings” should be viewed as assets that contribute to supply chain value

Skechers consolidated its distribution operations which was spread out among six warehouses in Ontario, into a new 1.82-million-square-foot $250 million facility in Moreno Valley.

It's big enough to hold 40 football fields!

The 40-member Advisory Committee on Supply Chain Competitiveness was formed to provide the Secretary of Commerce with detailed advice on the elements of a comprehensive national freight infrastructure and freight policy to support U.S. supply chain and export competitiveness. The Committee’s work is intended to further the Administration’s export, economic, and job growth goals.

Per the charter, the Committee advises the Secretary on the necessary elements of a comprehensive, holistic national freight infrastructure, and a national freight policy designed to support U.S. export growth, foster national economic competitiveness, and improve U.S. supply chain competitiveness in the domestic and global economy.

CEO / CFO’s - discovered the power of Supply Chain Management.

Wall Street

• Watching industry dynamics• Logistics industry represents almost 10% of the

economy

Supply Chain Risk Management is critical – think about recent events, middle eastern uprisings, Suez Canal, Japan, Thailand, Sandy, etc.

3PL’s – Significant growth

What does this all mean?

U.S. Third Party Logistics Market

31

Source: Armstrong and Associates

Supply Chain Trends and Challenges

Globalization. Growing complexity and pressure of dealing with global partners, suppliers and competition. Culture and geopolitical issues

Renewed focus on minimizing NA border delays and inefficiencies

Panama Canal expansion - May provide more economies of scale and port diversification options to major US population centers

Regulation: CSA 2010, 2011, 2012, 2013….forever?

“Progressive” Shippers and Carriers are strengthening their relationships

Supply Chain Trends and Challenges

Consumer Attitudes and Demographics.

• Aging population. • Growing demand for environmentally sustainable

and socially responsible products by younger consumers.

• How to meet needs and maintain loyalty of the consumer?

Information Technology will continue to revolutionize the discipline.

Big Data! How big’s too big? How do we scale?

Top 5 Trends

• Rise of Amazon• 30% Revenue increases, approaching $60B• Added 18 New Distribution Centers

• Technology merger mania• Increasing hope for US Manufacturing

• Caterpillar chooses Georgia• Apple and Lenovo announce they will start building PC’s in

the US• GE CEO Immelt says they will not chase low labor rates

around the globe

• Natural Gas reaches a tipping point• Multi Channel Madness!

• Macy’s, FedEx, UPS, Wal-Mart, etc.

By the end of 2013, there will be more mobile

devices on Earth than people.

65% of U.S. shoppers research products and services on a PC and make a purchase in-

store

Mobile internet usage is projected to

overtake desktop internet usage by

2014.

40% of shoppers consult 3 or more channels before

purchase, compared to 10% in 2002.

Talk about uber-connected: 75% of

Americans bring their phones to the bathroom.

71% of mobile browsers expect web pages to load almost as quickly or faster

as web pages on their desktop computers.

Nearly 40% of U.S. mobile phone owners will become mobile phone shoppers by

2017.

74% of consumers will wait 5 seconds for a web

page to load on their mobile device before abandoning the site.

Retailers’ apps take up the most of consumers’ time at

27%, followed by online marketplace at 20%,

purchase assistant at 17%, price comparison at 14%,

and daily deals at 13%.

46% of consumers are unlikely to return to a

mobile site if it didn’t work property during their last

visit.

Source: U.S. Department of Commerce: Census Bureau

U.S., e-commerce sales (in billions)

U.S., total retail sales vs. e-commerce sales annual percentage change

Retail sales, annual changeE-commerce sales, annual change

Order from Anywhere

Fulfill from Anywhere

Customer

Call Center

Tablet/Mobile

Web SiteBrick and Mortar

Stores

Catalogs

Flash Sales

Pop-Up Stores

Outlet Locations

Retail DC(s)

eCommerce DC(s)

Brick and Mortar Stores

Kiosk

To Succeed in Today’s Multi Channel Marketplace, You Will Need to…

• Ensure separate P & L's do not drive separate supply chains

• Allow common inventory piles and agile DC's to serve multiple channels

• Best of big, best of small – Scale where it makes sense, customization when necessary

So, what do we do?

• Examine the infrastructure – Distribution has become more complex

• Number/location of DCs to optimize costs• Designed for complexity & flexibility to

meet increasing customer demands• New requirements for order from

anywhere, fulfill from anywhere

Emerging (Emerged?) Supply Chain Trend

Collaboration

Emerging (Emerged?) Supply Chain Trend

Collaboration – “To cooperate with an enemy that has invaded your country”

Relationships are critical

The essence of SCM is collaboration – it is not an option.

involves all key participants working toward common goals.

Absent collaboration, the supply chain willbe nothing more than a collection of firms, eachfollowing their own pathways.

Supply Chain as a Revenue Generator

Distribution Operations can be a Revenue Generator

          • Design to optimize efficiency & cost saving 

• Use supply chain for competitive advantage    • Increase customer service

• Enable same day fulfillment & delivery  • Reinvest savings into building your brand

 

Summary• Distribution is becoming more complex and

strategic• If done right, and distribution operations

can be a driver to gain competitive advantage

• Don’t be afraid to market that value!• All initiatives need to start from a strong

business case

Summary

This discipline is a corporate necessity, yet can be a growth vehicle – a revenue generating engine.

We improve the financial position of companies and economies.

Our stature and credibility is increasing.

Supply chain professionals need to develop cross functional skills and a global mindset to maximize opportunities in the Multi Channel world.

To prosper, to tackle these challenges, to take advantage of the opportunities, we need to work closely together!

Peter Drucker

“If people are committed to maintaining yesterday, they are not available to create tomorrow”

Sometimes, we have to learn to

forget

Innovation!Be Creative in your Response to

Supply Chain Problems

Thank you!Rick Blasgen

630-645-3458rblasgen@cscmp.org