Practical collaboration to improve logistics performance

1

Logistics and Supply Chain Forum

• Practical collaboration to improve logistics
  performance
• Alan Waller Chairman ELUPEG
• John Doran User Group Leader ELUPEG

Oriana 9 October 2003
2
AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

3
AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

4
Business pressures in the new millennium

• The top 5
• Globalisation
• Hypercompetition
• Focus on core competence
• Speed of change
• Stakeholder pressures

Source European Supply Chain Directors
Discussion Forum, - 2000 to 2002
Doing nothing is not an option
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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

6
A new customer is emerging
Consistency
Service
Convenience

• Customers want buying to be
• easier
• faster
• cheaper
• more fun
• real value

Selection
MORE
Quality
LESS
Risk
Price
Effort
Time
These trends are forced up through the value chain
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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

8
Our Focus is on markets and brands, but without
an effective supply chain, we cannot even begin
to compete
Chairman, Unilever
9
Focus on core competence
Businesses are responding by focusing on core
competencies and outsourcing non-core activity
creating networked organisations
Source Chatham House Forum
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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

11
Economies of scope in technology and innovation
...In automotive production resource sharing has
already happened

• One people carrier
• Galaxy
• Sharan

• Vehicle manufacturers share
• One plant
• One assembly track
• Purchased by the hour?

Contract Manufacturing Co-Makership will
increase
Partner with your competitors and compete with
your partners
12
Drivers of the 21st Century Value Chain

• Ever more demanding
• Pro-active
• Interactive

• Consumers

• Retailers
• Global
• Seek solutions
• Increase range

VALUE CHAIN RESPONSE

• Manufacturers
• Focus on core
• Network/outsource
• Agility

• Co-makership
• Mass customisation
• Process driven

• Systems
• ERP
• Bolt-ons
• Process driven

• Technology
• New channels
• New business
• Low cost

13
By end 2003, around 60 of SCM functionality
will be provided from outside the enterprise
Gartner Group
14
Bridging the Implementation Gap
Pan-regional supply chain integration across
Europe
of Companies

100
Opportunity Awareness
Strategy Planning
75
Active Implementation
50
25
Effective Implementation
0
Source Surveys 1992, 1994 , 1996 and 2002
86
88
90
92
94
96
02
98
00
There are major challenges in translating vision
into reality
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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

16
Supply chain outsourcing requirements in the new
millennium

• The top 5
• help with developing strategic supply chain
  vision
• help with implementing supply chain vision
• access to economies of scale
• access to skills and competence
• access to technology and innovation

Source European Supply Chain Directors
Discussion Forum 2000 to 2002
17
Collaboration - putting technology into
perspective
A business can have all the technology in the
world, but if I dont trust my trading partners
then it becomes very difficult. This is not
about beating a supplier into submission - its
actually about sharing information, some of it
competitive.
Gartner Group
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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

19
Leveraging Technology the key issues

• The technology is now available to do whatever
  we want in the supply chain ----
• ---- the problem is that either it is not mature
  enough to be used or we are not mature enough to
  use it
• Source Discussions groups Logicon Interactive
  2001 , 2002 and 2003

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How to move forward

• Improving European Transport/Logistics
  Catalysts for Change
• Initiative Source Ranking
• Collaboration 1
• Shippers 2
• LSPs 2
• E-Freight Exchanges
  4
• E-Marketplaces 5
• Technology Providers 6
• Capital Providers 7
• Consultants 8
• Source-European Survey Alan Waller 2001-2002

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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

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The Present A Case StudyShow me the network!

• John DoranLogistics Director (until 30/9)
• Sony Europe EMCS(Engineering, Manufacture
  Customer Service)

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About Sony Corporation

• FY to end March 2003

• Sales 58.5 billion
• Operating Profit 1.8 billion
• Employees 181,800

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About Sony Corporation

• Electronics 44.1 billion (68)(TV, HiFi,
  Cameras, PCs, etc)
• Games 5.3 billion (8)(Playstation)
• Music 4.9 billion (7.5)
• Pictures 4.4 billion (7)(Columbia Tristar)
• Insurance Finance 6.6 billion (10)

N.B. Does not relate back to first number because
of internal sales, financial treatment of
subsidiaries etc
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About Sony Corporation

• Japan 22 billion
• USA 18.5 billion
• Europe 10.4 billion
• Others 7.5 billion

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Sony Europe EMCS logistics

• Current situation
• Direct control and influence
• Consumer electronics
• 3PL / 4PL
• Games Playstation
• REE (Recording, Energy, Europe)
• BPE (Broadcast Profesional Europe)

Total logistics spend gt 300 million
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Current network locations
5 Hub Warehouse
18 Country Stockholding Location
Helsinki
5 Plants
Copenhagen
Dublin
Hamms Hall
Pencoed
Thatcham
Tilburg
Cologne
Prague
Eragny
Ribeauville
Trnava
Zurich
Vienna
Godollo
Milan
Lisbon
Barcelona
Athens
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Network locations 2003/2004
5 Hub Warehouse
3 Country Stockholding Location
Helsinki
Plant
Copenhagen
Closed Whs.
Pencoed
Thatcham
Tilburg
Prague
Ribeauville
Trnava
Zurich
Godollo
Milan
Barcelona
Athens
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Sony Europe EMCS logistics
Current situation

• Warehousing mostly internal some outside
• Transport
• Very fragmented
• 125 companies
• 25 relationships with Deutsche Post
• 200 accounts with DHL
• Project to rationalise

30
3PL / 4PL PartnershipsIs it all B.S?

• 1992 single market
• One stop shopping
• Integrated networks
• One set of tariffs
• KPIs etc

No 3 PL offers this yet!!
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Who Can Satisfy Sony Requirements ?

• European One Stop Shop
• Channel
• Geography
• Relationship management
• Uniform standards
• Service
• KPIs
• Tariffs
• Partnership
• Share risk benefits
• Build long term
• Flexibility
• Allow our business to change
• Manage resource up down
• Share risk
• Innovate
• What value to do you add?
• Why should I choose TNT above Versteijnen
  Transport?

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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

33
ELUPEG Mission
Achieving step-change in the performance of
European Logistics
To achieve real improvements in the performance
of European Logistics by action -based
collaborative projects involving users, providers
and enablers whose business success depends on
sound European Logistics.
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Background to ELUPEG

• Alan Waller and John Doran (Sony) gave a
  presentation on board the Oriana for the
  Logistics Forum 2001 to tell the story of
  European Logistics as they saw it - the history,
  the current situation and the potential future
  developments.
• This was backed up by a survey which showed that
  the satisfaction levels of users, providers and
  enablers with the various aspects of European
  Logistics were between 40 and 60.
• At the request of Oriana 2001 delegates, a group
  was assembled to tackle the issues on a joint
  collaborative basis - this was the origin of
  ELUPEG

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ELUPEG Formation and Development

• Members engage in collaborative action-based
  projects to improve European Logistics.
• Open to all users, providers and enablers of
  European Logistics services - but members must
  engage in collaborative projects, which are
  intended to be self-funding.
• Representation must be at appropriate and senior
  level.
• Over 200 European companies are registered to
  receive ELUPEG progress reports.
• Full membership is currently approaching 100
  major businesses, with users representing some
  20 of the logistics spend in Europe.
• Run by members for members, with independent
  chairman plus steering group of
  user/provider/enabler leaders and secretariat.
• User driven but democratic.
• Non-profit-making with modest meeting/joining fee
  for 2003 to cover costs.

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ELUPEG The Future

• Collaborative Working Groups will generate
  commercial partnerships to the mutual benefit of
  participating companies.
• Lessons learned will be shared with the wider
  ELUPEG community.
• Future projects can include

• Standards Information / KPIs / Processes
• Systems / IT
• Transport / Warehousing physicals

• Synergies from membership growth will drive
  additional project opportunities.
• Group meetings are important touch points can
  drive project milestones BUT the action
  benefits must be driven by the Collaborative
  Working Groups outside these meetings.
• ELUPEG IS NOT A SPECTATOR SPORT

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ELUPEG Code of Conduct

• No selling - but it might happen.
• No criticism of competitors.
• No breach of confidence.
• Open discussion.
• Be constructive.
• Promote the group.
• Share learning.
• Network with other networks.
• Ensure fair play.
• Get results Win / Win / Win.

38
ELUPEG Collaborative Working Group Leaders

• CPG-Patrick Jahan (Georgia Pacific)
• FMCG-Malcolm Pope (H.J.Heinz)
• Automotive Andy Spratt (Ford A.G.)
• High Tech-John Doran/Dan Bowers (Sony Europa B.V)
• Automotive Aftermarket-Ludo van de Putte(G.M
  Aftersales)
• Logistics Services Providers-Steve Whyman (Exel)
• E-Portal-Brian Bolam (Columbus Logistics)
• Bulk Liquid Foods-Peter Jeffery(Logistics Support
  Services)
• Chemicals Industrial-Mark Bedeman (Accenture)

39
ELUPEG Progress 2003

• High Tech/Electronics Collaborative Working Group

• Opportunities being addressed
• Network Integrity Security/Track-and-Trace/e-POD
• Asset-sharingCombine deliveries/Warehouse
  use/Air Freight
• Benchmarking
• Customs
• User Companies Involved Include
• Sony
• Samsung
• Philips
• Panasonic
• EMI
• Xerox

40
ELUPEG Progress 2003

• Automotive Collaborative Working Group

• Opportunities being addressed
• Common Inbound
• Spares and Repair
• Reverse Logistics
• User Companies Involved Include
• Ford/PAG
• GM
• Honda
• Pirelli
• Unipart
• Renault-Nissan

41
ELUPEG Progress 2003

• CPG/FMCG Collaborative Working Group

• Opportunities Being Addressed
• Common Trunking/Delivery Lanes
• Road Freight CubingHeavy on Light
• Reverse FlowsScandinavia/Baltic
• User Companies Involved Include
• Kimberly Clarke
• Georgia Pacific
• Rexam
• Heinz
• Sylvania
• Sara Lee

42
ELUPEG Progress 2003

• Chemical/Industrial Collaborative Working Group

• Opportunities Being Addressed
• Return Flows
• Tanker Pooling
• Shared Fleet Facilities
• IBC Consolidation
• User Companies Involved Include
• Du Pont
• Wavin
• Atlas Copco
• Dow

43
ELUPEG Progress 2003

• Collaborative Working Group Road-Map

• Find Suitable Partners
• Find The Value
• Enable The Value
• Extract The Value
• Share The Value
• Share The Experience
• Find More Partners

44
ELUPEG Progress 2003

• Thought-Provokers for Collaboration

• Seasonality
• Inbound/Raws Consolidation
• Flow Synchronisation
• Empty Running
• Security Issues
• Customs Issues
• Standards
• Night-time Distribution
• High-Street Delivery
• Reverse Logistics/Returns
• Others

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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

46
Collaboration in Action-1

• Manufacturing Consolidation Centre (NL)

• Opportunity
• Historically independent logistics hubs serving
  each manufacturer and separate delivery to retail
  DCs
• Approach
• Single Consolidation Centre serving both
  manufacturers with consolidated deliveries to
  retailer DCs
• Start-up Feb 2003
• Benefits
• Increased delivery frequency
• Fewer truck movements
• Increased on-time performance
• Lower inventory
• Fewer out-of-stock situations
• Players
• Lever Faberge
• Kimberly Clarke (NL)

47
Collaboration in Action-2

• Asset Pooling (UK)

• Opportunity
• Two Competing Breweries run own delivery using
  own barrels
• Three deliveries to outlets per week for each
  brewery
• Approach
• One consolidated delivery per week-or more-using
  common barrels
• Third party buys the barrels
• RFID tags on barrels
• Announced Sept 2003
• Benefits
• Reduced Barrel investment
• Reduced Supply Chain Inventory
• Reduced Distribution Costs
• Players
• Scottish Courage
• Carlsberg-Tetley
• Trenstar

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Collaboration in Action-3

• Fleet Pooling (UK)

• Opportunity
• Two Competing Dairy Businesses collect 4.5 m
  litres of milk from 7,500 farms using 500 trucks
  in the UK
• Approach
• Consolidated collection using common LSPs
• 6 month project to set the strategy
• Announced Aug 2003 to start Autumn 2003
• Benefits
• Increased fleet utilisation
• 8m pa saving
• Players
• First Milk
• Dairy Farmers of Britain
• Wincanton
• Lloyd Fraser
• Bibby
• Interoute

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AGENDA

• Business Pressures
• The New Customer
• The Changing Organisation
• The Value Chain
• Outsourcing and Collaboration
• The Role of Technology
• What is Needed-A Case Study
• European Logistics Users Providers and Enablers
  Group
• Collaboration in Action
• The Way Ahead

50
Conclusions

• The most important core skill for the future will
  be the ability to develop and sustain effective
  partnerships between providers, shippers,
  customers, business partners and with competitors
• This skill is probably the one shortest in supply
  at this point in time
• There is now an appetite for collaboration that
  is essential to drive forward improvement in
  Supply Chain Performance

51
Conclusions The Way Ahead

• Decide the critical elements of the proposition
  to the end customer and how the total supply
  chain needs to help deliver this
• Decide what your critical supply chain focus
  needs to be and which other supply chain players
  are critical to your success
• Decide who you are going to partner with and how
  you will do it
• Get your own house in order and then reach out
  to your supply chain partners
• Develop strategy, processes, and connectivity
• Start small and use trials to prove by doing
• Agree up front how to share the investment and
  benefits
• Ensure that technology and systems are backed up
  by cross business processes, new people skills,
  and a partnership culture across the organisations

52
ELUPEG

• Steering Committee
• Chairman-Alan Waller
• Secretariat-Sheila King
• Mark Bedeman (Accenture)
• Derek Bell (Compass Logistics)
• Brian Bolam (Columbus Logistics)
• John Doran (WPMS)
• Buddug Williams (Shakespeares)
• Website
  WWW.ELUPEG.COM