Next Generation Logistics and Supply Chains : Issues, Challenges and Scenario Planning

1. Next Generation Logistics and Supply Chains : Issues, Challenges and Scenario Planning Professor (Dr) Chandra Lalwani University of Hull Logistics Institute United Kingdom Taiwan , 15-18 November 2010

2. Research Background (Theory) • Automatic Control Systems • Systems Engineering • Modelling Commodity Flows • Logistics & Transport Systems • Supply Chain Management • Simulating Supply Chains

3. Research in Practice with Industrial Partners

5. Customers are driving supply chains .. “Innocence” 1985 90% weekly 72 hours ± 1 hour 4 weeks “Maturity” 1995 98% daily 48 hours ± 15 minutes 2 weeks “Excellence” 2008 99.9% 3 times a day 6 hours on time 0.5 week Industry Sector Food and Drink Automotive Food and DrinkRetail Electronics Stock availability Delivery frequency Order to delivery lead time Timed delivery slot Supply Chain inventory ... and product life cycles are measured in months not years

6. Meeting Customer Requirements • Fitness for Use • Process Integrity • Minimum Variances • Elimination of Waste • Continuous Improvement • Safety • Quality • Customer Support • Product Service • Product Support • Flexibility to Meet Customer Demands • Flexibility to Meet Market Changes • Service X Value = • Cost • Design and Engineering • Conversion • Quality Assurance • Distribution • Administration • Inventory • Materials X • Cycle Time • Time to Market • Concept to Delivery • Order Entry to Delivery • Response to Market Forces • Lead Time • - Design - Conversion • - Engineering - Delivery • Materials • Inventory Customer Value Criteria, Johansson et al, 1993

7. Current Practice in Supply Chains • Lean Logistics • Agile Supply Chains • Postponement and Decoupling Point in Supply Chains • Time compression • Carbon Footprints & Green Logistics • Customisation • Electronic Logistics Markets • Supply Chain Collaboration • Information Enrichment and Visibility in Supply Chains • Factory Gate Pricing and Consolidation • Vendor Managed Inventories in Supply Chains • Global Outsourcing

8. Hardfile Europe Vendors Components (Far East) Plant Europe Japan Components Sub-Assembly Plant Plant Europe Europe Final Components Sub-Assembly Distribution Authorised Assembly Plant Plant Centres Dealers 10 Europe Europe 10,000 Components Sub-Assembly Plant Plant PCB Vendors 100's 5 Decoupling point - material flow COMPONENTS ECHELON SUB-ASSEMBLY FINISHED GOODS DISTRIBUTION RETAILER END-USERS ECHELON ASSEMBLY ECHELON ECHELON ECHELON 12 WEEKS 16 WEEKS 2 WEEKS 1 WEEK 1 WEEK 4 Components = Company Unit Vendors (Global) (Europe) = Non-Company Unit No. of Units Vendor Base (Global) = Material Flow (Naim, 2003) 1000's Position of the Decoupling Point Demand downstream Demand upstream from decoupling point from decoupling point

9. Agile response Lean supply Decoupling lean and agile - “leagility” (Naim, 2003)

10. Bullwhip in a clothing supply chain Taken from Towill D.R. and McCullen, P., “The impact of an agile manufacturing programme on supply chain dynamics”, International Journal Logistics Management, December, Vol. 10, No. 1, pp83-96, 1999.

11. Design Design Design Design Design Fabrication Fabrication Fabrication Fabrication Fabrication Assembly Assembly Assembly Assembly Assembly Distribution Distribution Distribution Distribution Distribution Customisation vs. standardisation Pure Standardisation Segmented Standardisation Customised Standardisation Tailored Customisation Pure Customisation Standardisation Customisation Lampel and Mintzberg, 1996

12. Current Practices in Supply Chains • Lean Logistics • Agile Supply Chains • Postponement and Decoupling Point in Supply Chains • Time compression • Carbon Footprints & Green Logistics • Customisation • Electronic Logistics Markets • Supply Chain Collaboration • Information Enrichment and Visibility in Supply Chains • Factory Gate Pricing and Consolidation • Vendor Managed Inventories in Supply Chains • Global Outsourcing

13. Factory Gate Pricing • FGP has been defined as “the establishment of a price for completed goods excluding transport costs” (Finegan, 2002). • Under FGP, the retailer takes over control of the transport of the goods from the supplier.

15. Inherent Inefficiencies in Transport The Hidden WASTES of Transport • ExcessiveWaiting Time • PoorTurnaround Time • LowVehicle Fill Rates • PoorAsset Utilisation • UnnecessaryAdministration And Extra Logistics WASTES • ExcessiveInventory Holding

16. Vehicle Resources/Worked Day F Transport Unit Equivalent F F F F - Friday Days of the week (Mon-Fri)

17. “Joined up Thinking?” Transport is effectively the integrator of the supply chain. It connects all the different organisations together

18. Next Generation Supply Chain Issues and Challenges

19. Nex-Gem Partners and Duration Academic UK Professor Chandra Lalwani (Project Leader) , Dr Adrian Mondragon, University of Hull Professor Kulwant Pawar, Dr Ram Ramanathan), University of Nottingham Professor Neil Burns, Dr Samir Dani, Professor Chris Backhouse, University of Loughborough Professor Kai Cheng, Brunel University Professor Mo Naim, Laura Isoif, Dr Andrew Potter, Cardiff University India Professor Janat Shah, IIM Bangalore Professor Atanu Ghosh, and Professor Gajendra Adil, IIT Bombay Professor Manoj Tiwari, IIT Kharagpur Professor Balram Avittathur, IIM Calcutta Industry UK- GBA (Finished vehicle logistics), Rolls Royce, Corus Steel India- TVS Logistics Services Ltd Duration : Feb 2008 - Jan 2010

20. Identification of NEX-GEM Issues and Challenges Methodology • Literature Review • Workshops • Survey

21. Workshop at Bangalore • 21 partipants from the industry and 18 from academia • Industrial Participants • TESCO, Bosch limited, UB Global, SAP. Snowman Frozen foods limited, TVS logistics services Ltd. IBM, Wipro Ltd., IBM, INFOSYS, Titan Industries, Zymersolutions, L&T- Komatsu Ltd. and Dell. Kul Pawar and Ramanathan 21

22. Bangalore Workshop – Issues Identified • Green Supply Chains / Environmental issues with cost effectiveness. • People Skills/ HRM / Talent Management • Digital Capabilities / Role of IT • Demand Management / Mass Customization • Supply Chain Performance Management • Outsourcing and Risk Management Kul Pawar and Ramanathan

23. Bangkok Workshop • Held on 06 July 2008 as part of the International Symposium of Logistics, 2008 • Format similar to that of Bangalore workshop • Mainly academia that participated in ISL 08. Kul Pawar and Ramanathan

24. Bangkok Workshop – Issues Identified • Environment and social issues • Cost management and optimisation • New management models dealing with skills, collaboration and outsourcing • Managing uncertainty, complexity, customer responsiveness and risk • Emerging economy • New technology and ICT Kul Pawar and Ramanathan

25. Summary of survey findings • Green and Environmental issues – Some uncertainty about the effect but • recognition of need for carbon neutral supply chains. • Cost Issues– Chinese and Indian advantages may well erode as • other regions compete. Port congestion is also likely to be • problem in the future. • Risk and Security – Costs will increase as it becomes important to combat • security/theft risks. Terrorism and security risk are expected to • increase over the next few years. • Digital Technology and Capability – There is an expectation that this will • improve over the next few years solving some of the current problems. • People skills, talents and Relationships – There is a strong belief • that the educational capability of China and India will increase • over the next few years.

26. Workshop at University of Hull (27 May 2009) Objectives: To develop deeper understanding of issues related to next generation supply chains and consider the impact of current economic climate on these issues. To identify themes for future supply chain research To create a communitywho have interest in global supply chains

27. Workshop at Hull (36 delegates including 20 from industry) In addition to six identified issues following additional issue emerged: • Transport & Distribution Infrastructural Utilisation Delegates from industry highlighted that due to economic crisis there is lack of trust among supply chain partners and increased volatility in the markets making it very difficult to assess future demand.

28. Identified Issues 1 Environment and social issues 2 Emerging economy 3 Managing uncertainty, complexity, customer responsiveness and risk 4 Cost management and optimisation 5 New management models dealing with skills, collaboration and outsourcing • New technology and ICT • Transport & Distribution Infrastructure utilisation

29. Workshop in Shanghai, China NEX-GEM Workshop On Configuring Next generation supply chains between UK-Chindia Venue: Shanghai Wednesday 14th Jan 2010

31. New Supply Chain • It is strategic • Ability of the firm to develop and maintain strategic advantage in a competitive market • It is dynamic • It is constantly evolving as a result of changes • It is customer driven • It must focus on value proposition that are highly attractive to customers

32. Manufacturing in 2020 capegemini,2009 • Increasingly global • 80% of all manufacturers expected to have multy-country operations (over 50% today) • Increasing complexity and consolidation • Fewer suppliers but more distributors (to reach new markets) • Growing importance of sustainability • Reducing emissions a high priority

33. Gaps in SC management current practices, processes, and relationships IBM, 2009 • Strategic visibility and alignment • Talent management and leadership • Supply chain models including optimisation, risk, and cost • Process orientation including measures, information, and integration • Relationships and trust • Supply chain architecture and structure

34. In Times of Uncertainty • The environment has become too dynamic and unpredictable, and companies must expose their plans to multiple possibilities • Predictions?

35. Predictions!!! Some Predictions • 1901The world market for cars is 1 million • 1943There is a world market for maybe 5 computers - Chairman, IBM • 1968There is no market for Japanese cars in the USA • 1977There is no reason why everyone should have a computer - CEO, DEC • 1978All offices paperless by 1990 http://www.jiscinfonet.ac.uk/tools/scenario-planning

36. Predicting is difficult! • Future-gazing and making accurate predictions is notoriously fraught with difficulty. Scenario planning, by using trend analysis as its base, keeping a focus and reigning in the prediction period to somewhere around the 10-year mark, helps build tests of plausibility into the process. http://www.jiscinfonet.ac.uk/tools/scenario-planning

37. Scenario Planning • Scenario planning, also called scenario thinking or scenario analysis, is a strategic planning method that some organizations use to make flexible long-term plans. It is in large part an adaptation and generalization of classic methods used by military intelligence. From Wikipedia encyclopedia 2010

38. Scenario Planning • Scenarios are possible views of the world, providing a context in which managers can make decisions. • Scenarios may not predict the future, but they do illuminate the drivers of change, and understanding them can only help managers to take greater control of their situations.

39. Scenarios! 1. Nations think and act locally (e.g. Energy, food crisis means trade barriers!!!) 2. Trust and security issues dominate political thinking and corporate decisions (complex web of conflicting regulations, focus on more security) Question is: Should regulations or market forces be the advocate for trust and physical security?

40. Scenarios! 3. People change jobs frequently as there are global opportunities (problems with knowledge workers replacement, on going training, creating customised products relying on knowledge workers). ALSO Constantly shifting market demands, and technological breakthroughs!!!

41. Scenario Planning • Scenarios are tools for examining possible futures • Scenarios can be combined with traditional techniques such SWOT • This helps an organisation develop required responsiveness, flexibility, and preparedness, often source of significant competitiveness.

42. Next-Generation Supply Chains Nex-Gem 2009,IBM2009 • Strategic importance • Accountability • Transparency on environmental issues • End-to-end visibility • Social responsibility • Risk informed • Financial sophistication • Master volatility • Training and skills • Resource planning and utilisation (Impact of global climatic change! E.g. Energy, water and food prices)

43. Your Thinking and Experience? • Do you agree with the identified issues? • Is there anything missing? • Which issue is of most interest to you ? • What should be the strategy and execution plan to deal with this issue? • Do you agree with Future Supply Chain components? • What else could be added to give the competitive advantage for a company in a global supply chain?

44. “It is not the strongest of the species that survive nor the most intelligent, but the one mostresponsive to change”. Charles Darwin

45. c.s.Lalwani@hull.ac.uk Thank you