Frederik Beelaerts van Blokland, Schenker on 'The Economy: Get Ready for the Rebound'
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Transcript of Frederik Beelaerts van Blokland, Schenker on 'The Economy: Get Ready for the Rebound'
DB Schenker
Corporate Flexibility as Success Enabler
DB Schenker
Frederik Beelaerts van Blokland
VP Automotive Logistics SCM/CL
Agenda
Company Introduction: DB Schenker
G4G (go for Growth)
reAct09
2
Flexibility through market trend adaptations
Flexibility within a global corporate environment
FLEX
Flexibility in Pricing
Logistics flexibility as an evolution
We are a leading passenger and logistics company
No. 1 Public transport in Europe
No. 2 Passenger rail
1)
Rev. (EUR mn) 3,523
EBIT (EUR mn) 306
Employees (‘000) 15
DB BahnLong Distance
Rev. (EUR mn) 4,654
EBIT (EUR mn) 307
Employees (‘000) 29
DB SchenkerRail
Rev. (EUR mn) 725
EBIT (EUR mn) 670
Employees (‘000) 41
DB Netze Track
No. 2 Passenger rail transport in Europe
No. 1 European rail freight transport
No. 1 European land transport
No. 1 Biggest rail network in Europe
As of 31.12.2008 1) Difference between the sum of the departments and DB concern result of other activities/consolidation
Employees (‘000) 240
EBIT (EUR bn) 2.483
Rev. (EUR bn) 33.5
Rev. (EUR mn) 6,687
EBIT (EUR mn) 857
Employees (‘000) 25
DB BahnRegional
Rev. (EUR mn) 14,680
EBIT (EUR mn) 381
Employees (‘000) 62
DB SchenkerLogistics
Rev. (EUR mn) 344
EBIT (EUR mn) 210
Employees (‘000) 5
DB NetzeStations
Rev. (EUR mn) 112
EBIT (EUR mn) 131
Employees (‘000) 25
DB Services
Rev. (EUR mn) 554
EBIT (EUR mn) 74
Employees (‘000) 2
DB NetzeEnergy
Rev. (EUR mn) 1,962
EBIT (EUR mn) 205
Employees (‘000) 12
DB BahnStadtverkehrDB BahnUrban
approved
(DB 2008)approved
(DB 2008)
reACT09 –An initiative to counter the recession and solidify our market positons
Counter Measures – human resources, adapting our expenditures
and investments1
Ziele
4
Market Strategy – Further improve service offerings and strenghten
business development initiatives.
Competitive Pricing –through processes and structure optimization
3
2
Flexibility on global scale - Go for Growth (G4G)
Situation:Massive recession in process of development (Nov 08)
Objectives:To structurally and globally counter the adverse contract logistic sales forecast
Measures: Establish four clearly defined industry segment: automotive, electronics, FMCG and industrialFocus on developing/emerging markets per regionFocus on developing/emerging markets per regionFocus on specific logistic servicesInvest in 100+ FTE for: business development, tender management and implementationexplore M&A opportunities to support our growth strategy
Requirements/Challenge: Ability within DB Schenker to demonstrate it’s global flexibility…and do it swiftly
Outcome:Short term incremental sales/revenue growthProactive sellingEstablished a clear regional & national logistic focus Increased our sales hit rateEstablished sales synergies through a globally aligned business development strategyReduction in participation of “benchmarking” RFQs
Flexibility in pricing:
Generic contract logistic costing model
FTE (partially)
Warehousing MHE (partially)
Consumable materials
Costs
Sales
prior
FTE (partially)
Warehousing MHE (partially)
V
A
R
I
A
B
L
E
V
A
R
66
Building & surface area
Facility equipment
Investments
Fixed workforce
Administration and overheads
prior
to
crisis
Sales
during
2009
Consumable materials
Building & surface area
Facility equipment
Investments
Fixed workforce
Administration & overheads
Transaction based
payment
Conflict: Not all costs can be convereted to variable costs
E
F
I
X F
I
X
Variable Costs
Variable-Kosten
Reduced of temp workers
Terminated of short term contracts
Reduced shifts
Flexibility in pricing:
Short Term counter measures
77
Fix-Costs
Fix-Kosten
No long term business sustainability
Reduced shifts
Terminated short term leases
Consolidated businesses
Reduced FTEs
Optimize Purchase
− Volume optimization, low cost sourcing, customer bundling
Conventional
Measures
„Quick Wins“
Proactive Service Maintainance
− Renovation & facility maintainance with own FTEs
Human Resource Training
− Raising skills set level, cross trainning, know-how transfer
Flexibility in pricing:
Long term measures for business sustainability
88
− Volume optimization, low cost sourcing, customer bundling
Driving Innovation
− IT refinements, process optim., lean engineering
Further Development of Management Systems
− EFQM, FLEX, 5S
Reinforcing Business Development
− Go for Growth, Cross-Selling, Investement in resources
Innovation
Measures
„Sustainable
Wins“
business sustainability
Flexibility within a global corporate environment
Some preconditions for flexibility
Global network
Predominately non-asset based
Structured global transfer of know how
Structure know-how (FTE) transfer – “flying team”
3+ years contracts – span recession
“Fair” contracts: gain sharing mechanism and price/volume structures
Shift our geogrpahic within our global network to focus on growth regions
Fully integrated solutions [SCM] covering all services (forwarding, rail & logistics)
Success CriteriaQualified, Motivated and Flexible Workforce
Flexibility through market trend adaptations
Service Bundling1.
Logistics:The coordination of information, material and finances ranging from
procurement, production and distributionincluding waste management
Service Bundling1.
Acceleration of Cooperation3.
Shift in purchasing criteria for logistic services2.
Light/complex assembly4.
VMI & O5.
1. Logistic Trends: Service Bundling
Bundling of logistic services (demand side)
A. OEM’s and increasingly tier-1 want:
One contract (multiple services)
Flexibility through market trend adaptations
One overhead
One pricing module
One system (IT)
Costs synergies through consolidation of services
OMS Outbound consolidation ForwardingCustoms Inbound warehousing Quality checksLight & heavy assembly JIS/JIT Waste ManagementComplete SCM visibility – IT Logistic / Lean engineering VMI & OSpare parts logistics Returns management & repair Reverse
1. Logistic Trends: Service Bundling
Flexibility through market trend adaptations
Procurement Production Distribution
Logistic service providers are largely fragmented in service offering….but with a growing tendency to bundle services
Loss of know-how
Loss of control
“All eggs in one basket”
Not a specialist in all fields
Challenges for Integrated Logistics
Customer concerns
Bridging the customers concern gap….
Develop partnership with stronger stakes between customer & logistic provider
Gradual expansion of services
Logistic providers seek partnerships with other
1. Logistic Trends: Service Bundling
Flexibility through market trend adaptations
Logistic providers seek partnerships with otherlogistic companies to offset their short comings
Establish customer Control Tower functions forlarge integrated projects
Establishment of new legal entities (customer & logistic provider)
Multiple suppliers contract 1 LP for common client
Challenges for Integrated Logistics
Customer concern
Loss of know-how
Loss of control
“All eggs in one basket”
Not a specialist in all fields
Challenges for Integrated Logistics
Customer concern
Price/RatesPrice/Rates
2. Shift in primary purchasing criteria for selelction for logistic providers
Service Quality 3Service Quality 3
References 2References 2
Flexibility through market trend adaptations
Decision
Process
Innovation 4
Process
Innovation 4
Risk
Aversion 5
Risk
Aversion 5
Financial
Stability 1
Financial
Stability 1
1 Financial stability of LP
2 Proven track record of performance
3 Reliability of service
4 Ability to reduce FTE, costs & time
5 Ability to mitigate/reduce previous risks
Service 2007 - 2008 2009
Forwarding Price/Rates Price/Rates
Risk Aversion Risk Aversion
Quality Process Optimization
Process Optimization Quality
Financial Stability References
Service 2007 - 2008 2009
Warehousing/JIS/
productionPrice/Rates Price/Rates
Risk Aversion Process Optimization
Quality Quality
Financial Stability References
Process Optimization Risk Aversion
Flexibility through market trend adaptations
2. Shift in primary purchasing criteria for selelction for logistic providers
References Financial Stability References References
20% of forwarding RFQs have increased their focus on process
Optimization. Forwarding is still predominately price driven73% of decisions are based on process optimization initiatives proposed in the initial
bidding. Fixed “Wall/people/process, IT” are open for optimization at bidding phase.
Service 2007 - 2008 2009
IT (Visibility
Tooling) Quality Quality
Process Optimization Process Optimization
Risk Aversion Risk Aversion
References References
Price/Rates Price/Rates
Financial Stability Financial Stability
Service 2007 - 2008 2009
Trading
Finance* Quality Risk aversion
Price / rates Price / rates
Risk Aversion Financial Stability
References Process Optimization
Process
Optimization Quality
Financial Stability References
No change in decision priority.Implementation timing guarantees and start-up cost models
Many RFQs = few bidders
Key issues :Product liability, Pricing, Inventory duration, Engineering changes
Traditional Automotive Cooperation
In establishing new cooperations, industries are focusing on innovations that lead to cost improvements as opposed to
functional improvements
This development of cooperations is driven and accelerated by financial crisis.
3. Acceleration of Cooperation
Flexibility through market trend adaptations
Cooperation of Mutual Support - Network
by financial crisis.
Tier 1
Tier 2
Tier 3OEM
LP1
LP2
Tier 0
Demand for value-add services are developing to include assembly functions
Why? Shortage of production space at OEM/tier-1It’s cheaper on account of LP wage structureLess FTE on OEM/tier-1 payrollOEM/tier-1wish to focus on their core competenceCost pressure
Flexibility through market trend adaptations
4. Light & complex assembly as an integral part of SCM
Cost pressure
These services are predominately rendered outside OEM/tier-1 facility
Demand is growing in particular where warehouse outsourcing opportunities have already exist
Inventory is increasingly often owned by LP
Move from basic/simple assembly to complex
Modules (IPs, engine dressing, axles, etc.)
Consequence: Emergence of production and engineering oriented LP
Instrument panels Engine drerssing
Axels Tyre and wheel
Headliners Pedal boxes
Wire harness Fuel tank
Main Outsourced modules
There is an increase in demand for VMI& O for intercontinental supply chains- China to US,EU to Russia & S. America
- inbound SCM
Supply chains with high value-add components (i.e. forwarding with: warehousing, quality control, light assembly)
Flexibility through market trend adaptations
5. VMI & O (Vendor Managed Inventory & Owned)
forwarding with: warehousing, quality control, light assembly)
Supply chains with high commodity value
International banks were increasingly addressing this demand by offering newsolutions to LPs
VMI: a process in which a supplier generates orders for its distributor based on demand information sent by the distributor
The coordination of information, material and finances ranging from procurement, production and distribution
including waste management.
Flexibility through FLEX: Flawless Execution The business excellence model for contract logistics
Regional FLEX program
with specific target setting
Co
mm
on
targ
ets
C
om
mo
n t
arg
ets
Region
1
Region
2
Region
… Region
Country
Operation
Region
7
Growth
Profitability
Customer satisfaction
Efficient reporting
Management
reviews
Tool kit &
HQ Services
Feed back
Human
Resources
Continuous
Improvement
Process
WorkflowManagement
Knowledge Management
Glo
ba
l su
pp
ort
+
FL
EX
Sco
reC
ard
Regional FLEX program
with specific target setting
Co
mm
on
targ
ets
C
om
mo
n t
arg
ets
Region
1
Region
2
Region
… Region
Country
Operation
Region
7
Growth
Profitability
Customer satisfaction
Efficient reporting
Management
reviews
Tool kit &
HQ Services
Feed back
Human
Resources
Continuous
Improvement
Process
WorkflowManagement
Knowledge Management
Glo
ba
l su
pp
ort
+
FL
EX
Sco
reC
ard
� Vision
Implementing first class
benchmark practices within time
and budget
� Approach
Develop measures within a
global team that can support
FLEX Program
FLEX Tool Box global team that can support
local business units.
� Applications
Complete supply chains
solutions including business
development, tender
management, implementations
and business monitoring
FLEX Tool Box
Knowledge ManagementKnowledge Management
Human ResourcesHuman Resources
FLEX
Continuous
Improvement Process
Continuous
Improvement Process
Workflow ManagementWorkflow Management
Human Resources
Carrier development
Taskforces for project implementation
Bonus mechanism based on KPI-Performance
Continuous Improvement
Schenker- 5S-Audits
Customer Centric Value Map´s
Roll out of Six-Sigma LEAN Methode
Knowledge Management
PM Training for contract logistics
Vertical Market Training
Process standardization for BD,tender management, contracts & implementaiton.
Workflow Management
Standardized logistic process .reporting tools
Implementation support tools
Establishment of project control, Risk-Management mitigation
Flexibility as an evolution
Market Trends Worldwide for LSP
Thank you!