GLOBAL LOGISTICS - TRENDS & OPPORTUNITIES

SHAN SENTHILMarketing Manager

INTEGRATED LOGISTICS COMPANY

Introduction“Supply-chains are about people, processes, and technology people

are probably the most important element,” -Ray McDonald of Canadian Tire

The market situation, logistics service providers face today, differs a lot from the situation years ago. The trend towards globalization has steadily increased with the effect that supply chains have become longer and more complex. The term global logistics management pertains to the overall management system of a corporation's undertaking of worldwide market distribution, product design, customer satisfaction, production, procurement, logistics, suppliers and inventory.Two concepts are critical to have a global logistics management equipped with complete strategy brain and in meeting with the current environment: •firstly, supply chain management is no longer directed at the relations with local suppliers, but of global supply chain management. The focus stresses how to systematically consider commanding the information within the entire supply chain.• This then leads to the second concept of [Just-in-Time] from orders, material purchase, and manufacture to delivery.

THE LOGISTICS PROCESS

LOGISTICS PROCESS – ITS ACTIVITIES

An International Look at Logistics Trends Total supply-chain performance, rather than individual plants’ and

warehouses’, is the key to economic benefits. VIZ., Toyota, SONY, MERCEDES

These and other factors have led many European businesses towards integrated logistics. For example, Energizer’s pan-European logistics strategy required a number of reengineering measures including rationalisation of its distribution centres, changes to the organisational structure, and selective outsourcing of warehouse operations. To support the strategy, an integrated communications infrastructure was installed.

“This (installation) allows logistics planning support using centralised sales forecasting and distribution planning tools,” Laurence of Energizer—Ralston Energy Systems.

The logistics trends in North America are: Increased use of third party logistics providers; Formation of new collaborative supply-chain relationships between vendors

and retailers; Changes in logistics’ reporting relationships; and Increased use of information technology.

Global logistics trends and opportunitiesThe world is shrinking. Across all sectors of business, there is

a trend for companies to become larger and fewer in numbers through global mergers and acquisitions.

One driver of business globalisation is the development of major trading blocs around the world, such as the European Community or the North American Free Trade Association, which provide opportunities for expansion beyond home markets into regional trading environments

Twenty years ago supply-chain structures had to be designed to match the available information technology (IT). Now the physical infrastructures plants, warehouses, distribution centres, and inbound supplies, for example can be designed independent of system constraints. IT for communicating and sharing data between sites, countries, and supply chain players is now readily available.

A global culture, which is leading to the development of

global brands, is emerging.This is challenging companies to consider how to provide consistent

product offerings from manufacturing, distribution, and logistics perspectives.

few global brands currently exist. Even if products have the same name, their content may vary according to local regulations and so might their packaging.

Economic growth historically seen in Europe and North America is now being translated into other parts of the world, particularly in Asia-Pacific. Economic movement is also now being seen in Central and Eastern Europe.

Greater political stability exists throughout the world, and workforce and management skills are developing everywhere. This means that manufacturing plants can be built in areas never even considered just a few years ago. But none of these opportunities can be exploited unless the supply chain (or logistics) works efficiently. And effective management is the key to this.

OPPORTUNITIES TO BE REALISED Many manufacturing companies still see their key mission as minimizing

manufacturing costs and maximising the use of their assets. When their products leave the factory, they are someone else’s responsibility.

This view is rapidly disappearing. In the consumer goods businesses in Western Europe and North America, for example, the concept of customer-driven logistics has become increasingly important, and flexible manufacturing response is an essential part of this. This trend is rapidly spreading to other sectors and other continents. Integrated systems are needed to support the extended supply-chain activities.

Customer-service requirements are increasingly demanding. Customers now have more products from which to choose and they expect those products to be in stock. In the retail sector, this again results in pressure throughout the supply chain in terms of order lead times. Then there is the question of how to harmonise these products, and services for a regional or global market, while at the same time meeting local tastes and regulations

Product life cycles are also shorter, which means faster response from manufacturing and reduced lead times throughout the supply chain. Total delivered cost (i.e., cost to serve) needs to be a prime consideration. It makes little business sense to choose a manufacturing location that has cost-effective labour, low investment costs, and high subsidies, if the cost and time involved in delivering the product to the marketplace more than eliminate these advantages.

ALMARAI FOODS – A FINE EXAMPLE FOR FMCG LOGISTICS

GLOBAL LOGISTICS – CHALLENGES AHEAD Manufacturers and retailers face a number of major challenges in the Asian

logistics environment. Some companies are building plants to meet the anticipated rapid market growth but have limited management resources available to overcome the biggest challenge effective distribution and logistics. Regulatory constraints prevent flexible provision of customized logistics services by restraining geographic expansion within a country or by preventing the integration of warehousing and transport operations into a single entity.

TNT’s experience setting up as a logistics-service provider in China illustrates some of the regulatory problems. First was the difficulty of obtaining a business license that required the company to summarise its business activities in 25 words when no word exists in Mandarin for logistics. Then China’s regional structure requires business licenses to be obtained for each province in which the company wishes to operate, which can take between 3 and 12 months per license. Deciding on appropriate technology is another challenge.

Some Asian economies will leap frog technological development; they cannot be seen as a dumping ground for yesterday’s technology. For example, TNT and many of its customers are using satellite technology for communications in some Asian countries where a fixed infrastructure does not exist. Joint venture partners are a requirement in many Asian countries and while they are invaluable for their local knowledge, they are unlikely to have the capabilities to manage logistics.

As a result, Western companies must retain tight control of their logistics operations in most Asian countries. The final major challenge is human resource management. Finding a balance between local, low-cost resources and highly-skilled expatriate resources is very delicate and critical to success in Asia.

Logistics Trends

The key trends in logistics are:Increasing assortments and assortment

dynamics;Individualisation of consumers;Increasing numbers of distribution channels;Manufacturing rationalisation and reallocation;Globalisation and increase of competition;Internationalisation of partners within the

supply chain;Demand for increased service levels; andDemand to drive inventories out of the supply

chain.

Sara Lee/Douwe EgbertsSara Lee/Douwe Egberts accepts the consequences of these trends. As

a result, our companies are focusing increasingly on logistics processes,

intensifying communications between partners within the supply chain and realigning the business organisation from a functional to a process and supply-chain orientation. This is inline with Sara Lee/Douwe Egberts’ international commitment to be “team players with individual responsibilities,” an important condition for ECR.

Supply chains are no longer country-based; increasingly, they are spreading across and among regions.

To design and manage these extended supply chains requires involvement from all supply-chain partners. Material suppliers, manufacturers, distributors, retailers, and service companies need to work together to ensure the creation of an efficient and effective global supply chain, which meets customers’ demands. Logistics is the key to successful supply chain management.

Future VisionBecton Dickinson’s vision is of a supply chain in which business planning and execution is shared. Information will be globally accessible. Demand plans will be generated by region, country, and customer. Replenishment will be automated. The status of all orders, shipments, and inventories will be known and accountability will

be shared. For the company, supply-chain management is a key company-wide initiative. It is part of a cultural transformation that started in 1994. Between 1995 and 1997, the company concentrated on improving the performance of

each business unit. Another three-year programme, which started in 1996, concentrates on improving

integration across the business units.

Becton Dickinson’s growth is linked to five key challenges: Maintaining focus on core businesses; Effectively managing technological change; Continuing expansion of its worldwide presence; Working together as one company, while maintaining the strength of individual product

lines; and Becoming a better self-managed organisation by becoming more responsive to change,

more adaptive to the environment, and more dynamic. As Professor Michael Porter of Harvard Business School says: “Coordination of complex global networks of company activities is becoming a primary competitive advantage.” This is also Becton Dickinson’s belief.

MAJOR PLAYERS IN GLOBAL LOGISTICSRS COMPONENTSFARNELLDHLFEDEXIKEACARREFOUR

CONCLUSIONThe logistics community is increasingly being pushed

to the forefront of business activity as competition increases. Logistics has a solid learning culture on which to build. New entrants into the field will need to acquire a huge array of skills, knowledge, and aptitudes, many of which cannot be taught, but require experience. The most critical transition enablers to help people in their logistics career path include information management and an employer management development cooperative that is, a cooperative of employers in the supply chain who are willing to provide the cross-functional experience needed by logistics professionals in the chain.