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Enterprise Logistics and Integration into Global Supply Networks

Enterprise Logistics and Integration into Global Supply Networks. Nimish Jhaveri CARANA Corporation Consultant World Bank Knowledge Economy Forum April 2007. Overview. The Relevance of Transport & Logistics Challenges Successes Considerations.

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Enterprise Logistics and Integration into Global Supply Networks

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  1. Enterprise Logistics and Integration into Global Supply Networks Nimish Jhaveri CARANA Corporation Consultant World Bank Knowledge Economy Forum April 2007

  2. Overview • The Relevance of Transport & Logistics • Challenges • Successes • Considerations

  3. Industrial Country Average Import Tariffs Before and After the Uruguay Round Freight Costs as % of Import Value Source: Marcelo Paiva Abreu (2004), "Trade in manufactures: the outcome of the Uruguay Round and developing country interests" Source: UNCTAD, “Review of Maritime Transport, 2005,” Chapter 4, based on data supplied by the IMF. Trade liberalization increases the need for improved transport & logistics performance

  4. Transportation is just one element of logistics efficiency… 69 Warehousing 100 156 62 Inventory Carrying TRANSPORT COSTS OTHER COSTS Order Processing 15 10 Administrative MANAGE MOVE MANAGE TIME, INFORMATION & PROCESS

  5. … and logistics efficiency has a direct impact on trade A 10% reduction in… Shipping costs Trade related processing costs Trade related processing time Variation in processing time Results in a… 14.2% increase in trade 2.5% increase in trade 1.4% increase in trade 3.1% increase in trade Adapted from Study of 80 countries by Hausman, Lee and Subramanian, World Bank and Stanford University, 2005

  6. Planning and scheduling inefficiencies • Documentation errors cause delays at the border • Lack of fleet management technologies • Regional border customs not consistent Idle Time (27%) Load & Discharge (2%) Border Crossing (3%) Productive Time (23%) Drive Time (18%) Security Curfew (50%) Example: Nicaraguan CoffeeManagua to Miami via Puerto Cortes TRANSPORTATION UTILIZATION

  7. Result: Logistics costs for Nicaraguan exports are competitive regionally, but not internationally Logistics Costs as Percentage Of Market Value REGIONAL MARKETS International averages for developed and developing countries INTERNATIONAL MARKETS

  8. Impact: Low logistics efficiency curtails SME access to global supply networks and higher value markets REGIONAL GLOBAL Ad hoc transactions with intermediaries Compete on price, labor Independent operators Long term relationships with end-customers, transportation providers and value chain partners Compete on higher service and value Efficient supply chain

  9. Argentina Poland Brazil Kenya Romania Belarus Ukraine Logistics Costs/GNP Belgium • Transportation Network Efficiency • Logistics Infrastructure Availability • Customs and Border Requirements • Banking & Financial Services • Logistics Service Intermediaries Australia Canada Japan United States Singapore The constraints imposed by the logistics environment varies widely by country and industry

  10. Supply chain excellence • Higher service levels • Smaller, just in time shipments • Shorter delivery lead times • Global competitors with lower costs Moving up the value chain requires business innovation SUPPLIER More demanding business environment Limitations of logistics environment • Efficient Transportation Networks • Logistics Infrastructure • Customs and Border Requirements • Banking & Financial Services • Logistics Service Intermediaries CUSTOMER

  11. Case Study: Bulgarian Apparel ManufacturersLogistics innovation captures greater value Increasing Importance of Logistics BRAND MANAGEMENT SUBCONTRACT FULL PACKAGE CUT MAKE TRIM DOMESTIC TRANSPORT INTER-NATIONAL TRANSPORT SERVICES None None QC, Packaging Subcontractors Domestic suppliers International suppliers Distribution centers International retailers QC, Packaging Consolidation Warehousing Customs Distribution Subcontractors Domestic suppliers Buyer International supplier QC, Packaging Consolidation Warehousing Customs Subcontractors Buyer QC, Packaging Consolidation Customs

  12. Exporters increase value through better logistics

  13. Transferring Knowledge and Technology for ChangeChallenges • Enterprise culture • High dependence on few senior managers • Tactical, conservative mindset • Confident, entrepreneurial • Available Resources • Limited investment in plant, equipment, IT • Human resources • “Don’t know what you don’t know” • Limited exposure to leading management solutions • Limited demand for new knowledge

  14. Transferring Knowledge and Technology for ChangeApproaches we have successfully applied Awareness Building Publications 1-day, industry specific seminars Seminars for educators Case for Change Supply chain benchmarking Operations modeling & simulations Value chain analysis Education & Engagement Supply Chain Leadership Programs for executives Guided implementation of change projects Practitioner network Industry Resources Customer partnerships Logistics intermediaries Supplier integration IT vendors Funding EU Funds PPP Venture Capital Local Proof Points Industry specific success stories Quantification of benefits Local “champions”

  15. Lost sales, obsolescence, discounts • High Inventories & cash requirements TIME CASH Case: Value Chain ImprovementBulgarian exporter of industrial equipment SUB ASSEMBLY SUPPLIERS ASSEMBLY DISTRIBUTION CUSTOMERS • Value Chain • € 25 million in 49 countries • Seasonal products, 1000’s models

  16. NEW PARTNER Reduced cash requirements • Actions • Procurement • Reduced suppliers • Collaborative planning, QC • Manufacturing • Outsourced low tech • Increased capacity • VMI & delayed assembly • Product Design & Engineering TIME CASH Reduced inventory by 2% of sales Increased sales by 4% Case: Value Chain ImprovementBulgarian exporter of industrial equipment SUB ASSEMBLY SUPPLIERS ASSEMBLY DISTRIBUTION CUSTOMERS

  17. Case: OutsourcingArgentinean fruit producers • SITUATION • 1997 – fruit producers in Rio Negro Valley need to lower prices, increase delivered quality • Transportation infrastructure not adequate – both in terms of cold chain, and land transport services • IMPLICATION / CHALLENGES • Individual producers not able to negotiate on volume • High loss rates in produce during land transport (16yr fleet age avg.) • Unable to meet increasingly rigorous quality demands by market • SOLUTION SELECTED • 24 producers (75% of Exports) - Logistics Management Company • 65% ownership of Port Terminal with Port Operator Partner • Joint negotiations on land and maritime transport costs, rigorous infrastructure improvement • RESULTS • Price negotiations with trucking companies – profitable service, reduced damage • Consolidated shipping freight rates • Efficient T&L costs, compete on supply and quality, traceability

  18. Final Thoughts • Supply chain innovations expand opportunities • Innovators take a risk • Identify successful innovations & adapt the system to reduce risks for followers • Knowledge & know-how • Supply chain partnerships • Laws & Regulations • Performance Standards • Industry structure • Logistics Infrastructure • Access to capital • Information availability

  19. Questions?

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