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Global Logistics &
Supply Chain ManagementMaking Sense of it All and Where It is Going
Tom Craig – [email protected]
LTD Management www.ltdmgmt.com
Topics
GLOBAL LOGISTICS--
West Coast & Domino Effect
Container Line Chaos
SUPPLY CHAIN MANAGEMENT--
Blue Ocean Strategy Using Supply Chain
Management
West Coast Ports &
Domino
• Poor Service, Congestion
• Christmas
• Chinese/Lunar New Year
• Alternative Port Issues
• Air Freight
Questions
Do you use carriers directly or a forwarder?
Do you use West Coast ports?
How stable was and are your rates?
Did you have any booking problems?
Did you have any problems getting empties?
Did you make any adjustments? When?
How did you make out?
AND---
Issues
• Ship supply exceeds
demand
• Pricing/Rates
• Service & space
Need to know what is
going on in order to
negotiate and to buy
ocean transport service.
CSCL Globe•19,100 TEU
Containers stretch 72 miles
156 million pairs of shoes
300 million tablet computers
900 million standard tins of baked beans
•Was biggest ship (for 53 days)
Now MSC Oscar
19,224 TEU
•One big ship or no megas vs fleet of ultra large??
Issues They Face• Megas / Ultra Large – 18,000+ TEU (vs.
1,000 TEU in 1970’s)
• Lower Operating Costs
• How Will Ships be Filled?
• Which Ports Will Handle Them?
• How Will Ports Handle Them?
• What’s the Investment?
• Bottlenecks!
Shake Out Ahead?
• Capacity adjustments—more frequent?
Financial
Much red ink for last 6 years
Rates
Transpacific vs Asia-Europe
Cost management
Differences with mega fleets
Revenue management
Maersk
Rates—Asia to Europe vs U.S.
DATE EUROPE USWC USEC
12/5/2014 $719/TEU $1825/FEU $4020/FEU
12/12 $1353 $2259 $4363
12/19 $1230 $2242 $4575
12/26 $1149 $2125 $4538
12/31 $1085 $2058 $4498
1/9 $975 $1930 $4500
1/16 $1008 $2089 $4747
SCFI spot rates
Will there be
fewer carriers in
the years ahead?
• If so, who will survive?
• What do you do now to
position with the survivors?
What would this mean to
OTIs/NVOs/FFs?
What does it do to pricing?
What does it do to service?
•
What Carriers Are Doing
More to previous, with different take
Remember that need to know to buy transport
Alliances
P3 is now the M2
New -- Ocean 3 (CMA CGM, UASC, China Shipping)
Operating issues
Shipping Routes – revised
Carriers
Sailing Schedules – made and reworked
“Slow Steaming”
Skipped / blank sailings
Maersk closed 2 services in transpacifc (after losses in
trade for 9 of 10 years)
Service Performance--Top 20 Carriers--
Remember-- you are
buying a service
Aggregate for Asia-Europe,
Transpacific & Transatlantic
Rolling 3-month average—
Asia-Europe at 67%
Transpacific at 52%
Transatlantic at 59%
Top Carriers for 3 months
Maersk at 80%
Hamburg-Sud at 75%
Cosco at 70%Remember, you are buying
a service.
Service Performance
Rolling 3-month average--
Asia-Europe at 58%
Transpacific at 62%
Transatlantic at 77%
Top carriers for 3 months—
Maersk at 80.4%
Hamburg-Sud at 78.5%
Cosco at 69.9%
What It All Means
Irregular Performance
Will lower bunker/fuel prices improve on-time?
Lack of service reliability
Potential changes as to ports to handle ships
Which Means—For You
Increased uncertainty for planning
Negative impact on operations & sales
Undermine inventory yield maximization
More inventories
More capital tied up
Impact
TOTAL GLOBAL INVENTORIES
REQUIRED INVENTORY TO
MEET REQUIRED TO MEET SALES
SAFETY STOCK
ADDITIONAL BUFFER TO
COMPENSATE FOR
UNRELIABILTY
And expedited
freight?
By The Way…• How does all this factor into
your importing and carrier selection (even if you use a NVO)?
• How do you factor all this into your business?
• Have you considered how much is about big and big – big carriers and big shippers?
• Do you form an IGA shippers association to leverage buying power for import freight rates and service?
“We typically lose out when a market
commoditizes and we no longer
differentiate, further aggravated by us
being too slow or expensive.”
Frans van Houten, CEO, Royal Philips Electronics
Any of these your business?
Commoditized?
Sell mostly on price?
Margin issues?
Customer retention/turnover?
Growth issues?
Little/ no competitive differentiation?
What do your customers think of you?
Start simple—
Percent of orders delivered
complete, accurate, and on time
Do you know?
If you don’t know, how
can you say you provide
good service?
Is it good?
If not, what are you doing
about it?
Where is your competitive
differentiation?
Uncontested market space
Create new industry –- OR—
Alter your boundaries (make blue ocean from red ocean)
Red ocean vs blue ocean strategy--
Red Ocean Strategy
Compete in existing market space
Beat the competition
Exploit existing demands
Make the value/cost trade-off
Align company activities with its strategic choice or low cost
Blue Ocean Strategy
Create uncontested market
space
Make the competition
irrelevant
Create and capture new
demand
Align company activities in
pursuit of differentiation
and low cost
Interesting study--
Firms that did incremental improvements to existing
offerings—
86% of firms (stuck in a rut?)
These line extensions were 62% of total revenues
These line extensions were 39% of total profits
Firms that created new markets—
14% of firms
These were 38% of total revenues
These were 61% of total profits
E-commerce
•$1.5 trillion sales global
•Part of Multichannel / Omnicommerce sales
•Can we say Alibaba?
Do you really think e-commerce is
for B2C retail only?
•Too big a way of doing business to just be……
•W.W. Grainger– 1/3 B2B sales are e-commerce (over $3bil)
• Global B2B $6.7 trillion by 2020
Old vs New
e-commerce
Immediacy
Amazon
Amazon Supply
Macy’s
Nieman Marcus
Same old-same old
Web site
Ship orders
UPS and FedEx dim pricing!
Multichannel
Expand ways to reach
customers
How to service them that
goes beyond just shipping
It’s about the customer
It’s not about you
Red ocean supply chain
•Is monolithic
•Is defined by functions
•Is measured by costs
•Focus on orders
•Carry more inventory—and invest more working capital—than is required
•Struggle to deliver orders complete, accurate and on-time
•Utilize technology primarily for functions, such as for warehouses and for “track and trace” transport
Blue Ocean Supply Chain
Deliver orders complete,
accurate and on-time per
Immediacy
Is defined by integrated
process
Utilize integrated supply chain
execution technology across
the supply chain
Use logistics service providers
that complement innovative
supply chain service
•Is segmented by channel
•Is measured by performance
and service
•Focus on customers
•Focus on delivery
•Focus on product positioning
and availability
Blue Ocean is
about how to
best service each
channel
Firms provide service they
want
Customers want different
HELLLOOOOOOOOOOO
Blue ocean is where competition is not
Immediacy (of
new e-
commerce) &
new supply
chain
Spreads across multichannel
Grows across the world
Expands across industries
Expands across markets
It is happening. Join the
blue ocean. Move to the
new supply chain. Or
keep validating Einstein
& lunacy.
The new supply chain that drives
blue ocean is innovation
Where will you be—
Innovator
Early majority
Laggard