John Pattullo, CEVA Logistics on 'How Supply Chain Innovation Can Drive Customer Value'
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Transcript of John Pattullo, CEVA Logistics on 'How Supply Chain Innovation Can Drive Customer Value'
How supply chain innovation can
drive customer valuedrive customer value
John Pattullo, CEO
CEVA
1. CEVA
2. Innovation and value
3. Operational excellence
4. How supply chains can deliver value4. How supply chains can deliver value
Logistics market overview
€300 billion market€m
DHL 27.0
Schenker/ Bax 14.7
Kuehne + Nagel 11.3
CEVA 6.3
UPS 6.1
CH Robinson 5.9
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CH Robinson 5.9
Panalpina 5.6
Geodis 5.1
DSV 5.0
Agility 4.6
Source: Annual reports, ED Wolfe Research, Morgan Stanley, CEVA estimates (2008 figures)
Very fragmented, top 10 have 30% market share
Our vision & mission
● UNITY: One company – one team
CEVA will be the most admired company in the supply
chain industry exemplifying Unity, Growth and Excellence
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● GROWTH: Outperform market growth
● EXCELLENCE: Perfection is our goal
CEVA –Making business flow
Balanced global portfolio
Employees: 21,700 +
# Countries: 100+
Revenue ’08: €2.9bn – 48%
Europe, Middle East, Africa
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Asia Pacific
Employees: 13,100 +
# Countries: 30+
Revenue ’08: €1.5bn - 20%
The Americas
Employees: 19,300 +
# Countries: 40+
Revenue ’08: €2.1bn – 32%
1. CEVA
2. Innovation and value
3. Operational excellence
4. How supply chains can deliver value4. How supply chains can deliver value
A thought on innovation?
Human DNA and dinosaur DNA are 97% the same.
What matters is the 3% that separates the two species.
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Invention vs. innovation
Few ‘new to world’ ideas will ever come from logistics
BUT many innovation opportunities exist
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Some thoughts on innovation
• In the 1970s The automotive industry was fragmented & unprofitable
Industrial relations were poor
Car quality was worse
….and Toyota sparked a quality revolution
• In the 1980s The retail industry was national and fragmented
The customer proposition was narrow and limited
The prices were high (relatively)
…and Wal-mart gave us “every day low prices”…and Wal-mart gave us “every day low prices”
• In the 1990s The PC industry was fragmented with multiple players
Sold high price products that were often out of date
Had sales channels full of inventory
….and Dell reinvented the “supply chain”
• In 21st century The global logistics industry was highly fragmented
The service suffered from inconsistency
The customer saw little innovation and pushed margins down
….and how will our industry breakthrough?
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Drivers of supply chain innovation?
• Globalisation has increased the strategic and financial
significance of logistics
• Reducing product life-cycles creates a state of almost continuous
change
• Global imbalance of human talent supply and demand is • Global imbalance of human talent supply and demand is
challenging international business
• Consumers and governments force business to accept social
responsibility re-shaping supply chain design
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Accenture
4PL, adding a consultation/ strategic level to SC thinking
Toyota
LEAN techniques and approach to improve efficiency
Dell
Innovation in the supply chain – track record
Dell
Responsive manufacturing & 100% demand pull
Zara
Putting the supply chain at the heart of the company &
introducing global standardization
PODS
Bringing standardization to moving house and storage
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Innovation from the 3PL’s?
Some great, but isolated, examples eg NHS Supply
Chain
As an industry we are not known for innovation
There are several barriers:
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There are several barriers:
- open book contracts;
- development of supply chain mastery;
- low margins
Prerequisites for 3PL innovation
• Customer confidence in the industry
• 3PL industry willing to invest in R&D
• Greater industry education and professionalism
Innovation fuelled by strong partnerships
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The journey to innovation
Innovation
Responsiveness
Operations Excellence
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1. CEVA
2. Innovation and value
3. Operations excellence
4. How supply chains can deliver value4. How supply chains can deliver value
Operations Excellence culture in CEVA is built
on five pillars
LEANSmart
Solutions
Zero Defect
Start ups
Health, Safety
and
Environment
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Global Standard Metrics
Process driven approach
Leveraging
scale
Integrated service
portfolio
Sector
expertise
Smart Solutions• Leveraging
best-in-class
Zero defect startup
Operational review
• Full LEAN
implementation
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Project
management
Trained
experts
LEAN
• Operations Excellence
• Robust project management
• Trained experts
Implementation review
• Identification of
improvement potential
implementation
• Ongoing continuous
improvement
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1. CEVA
2. Innovation and value
3. Operations excellence
4. How supply chains can deliver value4. How supply chains can deliver value
Creating economies of scope
Inbound
4PL for an international automotive supplier
By re-engineering the supply chain and acting in a 4PL capacity, CEVA delivered a
productivity commitment over the five years of the contract and reduced total logistics cost
by 24%
Outbound
The LLP provided;
Centralised and standardised
- Communication, Project Org, Account Mgmt
- KPI Management and Reporting
- Blueprint specifications
(Processes in Material Flow and IT)
Standards for local Sub-Agreements
Customer Commitment: global exclusivity
CEVA Commitment: productivity
Delivering;
Reduced transportation
Reduced transaction cost
Reduced / variable transaction costs
Lower Inventory
Increased fill rates
Reduced waste
Increased productivity
17%
TRSP
cost
33%
WHS
cost
27%
In-Plant
cost
24%
Total
Logistic
cost20
Innovation in ocean freight
By focusing on the entire ocean freight operation and implementing enhanced visibility
processes throughout, CEVA delivered benefits in container utilisation, product
throughput and reduced cost
� Pre-payment of any origin fees under ex-works terms
� Monthly itemized billing
Management of supply chain from Asia = 1,700 FEUs pa
Management of complex CFS program
Vendor management to ensure bookings meet ordered ship windows and quantity commitments are maintained
Ocean carrier allocation management
Key Benefits� Option to build container direct to customer or trans-load in CEVA US facility enables postponement
distribution option & cost savings related to domestic re-handling
� Provide customized EDI 856 ASN information where needed
� Improved container utilization through consolidation process by 7%-10%.
� Enable earlier visibility to production issues and potential delays prior to scheduled ex-factory dates thus reducing charge-backs from customers. Dynamic in-transit decision making options.
� Manage carriers to ensure compliance and reducing ocean freight expense
� Control supply chain earlier in the process and enjoy reduced costs by negotiating local trucking charges
� Number of pairs shipped per container increased by 22%21
� Monthly itemized billing of all import-related fees
� Packaging engineering
commitments are maintained
Goal is 40% of the cargo bypasses customer DC and ships direct to customer
Leveraging information in the supply chain
Optimizing our integrated solution to provide
real time visibilityFor a leading automotive company, our complex solution includes the management of
facilities and delivering the physical flows. IT is the critical enabler in managing all the
elements and provides real time visibility for supply chain milestones
Resulting in
synergy savings
of $1.8 millionof $1.8 million
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Customer
Using information to develop International
capabilities
Lines side staging
Multiple deliveries per shift
Air / Ocean Freight
500 air pallets p.a.
Global competition has resulted in this customer sourcing components internationally.
In partnership with CEVA has evolved the supply chain from purely domestic, to a fully
integrated, international operation.
68 Suppliers
• S.E Asia
• China
• Mexico
• Canada
• N America
• Europe
1000 containers p.a.
Warehouse receipts
International and domestic
102 Domestic
Suppliers
2424
Each partner focuses on core competencies
Fully integrated domestic and international JIT supply chains
CEVA is an extension of the customer’s manufacturing facility
No surprises, lowest total cost, and service reliability to the customer
Global Suppliers
Demand schedule
Demand Schedule
via Internet/EDI
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Customer
Transferring best practice to ‘white space’
Aftermarket logistics for Chinese automotive manufacturer
Warehousing
� Operate Shanghai Central Parts Depot (50,000 m2) and Xian Regional Depot
(10,000m2)
� Types of storage includes mezzanine, racking, stacking, vertical carousel, car
body cantilever
� Parts repackaging in warehouse
Distribution
� Distribute from Shanghai and Xian warehouses to more than 299 dealers in
By using LEAN and proved aftermarket solutions, productivity increased by 50% with
service, inventory and cost improvements at all stages of the supply chain.
Key Statistics:
� Total warehouse size: 60,000 m2
� No. of warehousing staff: 262
� Part numbers handled: 25,000+
� No. of dealers covered: 300
� No. of truckloads per year:
8,600+
Benefits to Customer:
� LEAN warehousing adopted and improve pick productivity by
> 50%
� Service level enhanced direct customer satisfaction improved
� Cost savings via transparent control on transportation
� CPD inventory well controlled -> cost reduction
� Distribute from Shanghai and Xian warehouses to more than 299 dealers in
Eastern China and Western China.
� Linehaul replenishment from Shanghai CPD to 4 Regional depot
� Direct delivery from suppliers to dealers
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Transferring best practice across sectors – I2M
CEVA has combined its GMM & VMI solutions with production capabilities to create an
I2M solution which has traditionally been utilised by technology and automotive
customers. This solution is moving more and more into the FMCG marketplace with
multiple projects and programs underway
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Fostering social responsibility
-18% CO2
-1399 ton
CO2 Reduction through supply chain
re-engineering By re-engineering all supply chain operations and focusing on CO2, emissions
reduced by 18% with more opportunities identified for the future
� Existing supply chain with
9 warehouses in Europe
� Customers all over Europe
and Suppliers all over the
World
� Different volumes per service
level and related transport
modality (air/road/sea)
Situation Analysis
� Compare CO2 emissions for 9
regional warehouses versus 1
central warehouse
(preferred)
� Predetermined modality per
origin–destination and
customer service level
� Predetermined emissions per
modality per ton-km
Results
� Optimal solution is
1 central warehouse:
� 18% CO2 reduction
� Inbound CO2 increases +7%
however outbound CO2
decreases -27%
� Even more CO2 reduction
opportunities identified
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In summary
• Historically, an industry which has under delivered on innovation
• Innovation starts with Operations Excellence and
• Is fostered by an environment of strategic partnership
• There are several broad channels:
- economies of scale- economies of scale
- leveraging information
- transferring best practice
- fostering social responsibility.
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Of course, there is an alternative ...
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