Grow Your Business, Serve Customers Better and Save Costs with Logistics Analytics

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1 TRANSPORTATION & LOGISTICS Grow Your Business, Serve Customers Better and Save Costs with Logistics Analytics Genpact The past few years have been challenging for manufacturers and distributors whose success partly depends on their ability to move products or resources from points A to Z. Over the last 8 years, there has been a significant increase in oil prices, transportation spending in North America as well as complexity of managing global supply chains. Today, more than 20% of businesses spend greater than 5% of their revenues on domestic transportation. Shippers are not only wrestling with higher costs, but greater complexity. As business has gone global, shippers find themselves managing worldwide networks of suppliers and customers, a raft of new regulatory and environmental laws and customers everywhere demanding quicker deliveries. As a result, the freight forwarders, couriers and other third-party logistics (3PL) providers feel they have lesser control over their shipping costs than ever before. Faced with these challenges, many companies are searching for new insights on how to manage their logistics. Companies need to move fast. With the growth rate for global trade expected to slow by 2016, the global supply chain analysts at Gartner predict that this slowdown will force shippers to focus more on optimizing the flow of goods rather than concentrating on just getting the goods where they need to be, as is often the case today. The good news is that recent advances in analytics are giving shippers the intelligence they need to re-optimize their supply chains. Introduction Since the financial crisis of 2007, many businesses have been caught in a squeeze between sagging demand and the rise in transportation costs caused by higher oil prices. Logistics management has grown even more complex. Product lifecycles have continued to shrink, customer behavior has become even more fickle and the continued growth of the internet economy has commoditized even more products given that consumers can compare product and price data with greater ease than before. As a result, logistics has become one of the best ways for companies to build a competitive advantage and create value for its customers and stakeholders. That creates a new imperative for companies to build supply chains that are lean, efficient and flexible to changes in demand. But for companies to achieve their goals of building more efficient supply chains they not only need new insights they need new analytical tools. That s because the traditional supply-chain management systems were largely transactional in design providing the alert, monitoring and dashboard capabilities that enabled shippers to track the flow of goods and materials. But today, companies need new logistics

2 systems with the predictive analytics to help companies forecast what will happen next. Through the effective use of logistics analytics, organizations can reap real benefits in service levels and cost reductions, including: Higher customer service levels and the opportunities for 5% to 10% cost reductions through better visibility into carrier and network performance 5% to 10% cost reductions through effective sourcing, logistics network optimization and planning 10% to 15% reductions in total miles and improvement in asset utilization through better load consolidation But before shippers can realize these kinds of financial benefits, Genpact believes that a rigorous review covering the following four facets of logistics management should be conducted: analytics IN logistics operations Network design and optimization Network design and optimization Network visualization and opportunity assessment Dedicated fleet analysis Site selection strategies Network optimization Distribution center analytics Warehouse design and planning Warehouse performance management Labor estimation and planning Operations improvement carrier sourcing analytics Spend analysis Savings opportunity assessment RPF and RFI management and analysis Carrier performance management metrics rationalization and analysis Metrics rationalization and development Scorecard design and production Business intelligence reports Metrics ranalysis NETWORK DESIGN AND OPTIMIZATION: For a logistics network to perform at its best, companies must be able to map all of the processes and data in their supply chain including customer and supplier geographical data, supply and demand data, freight rates by mode, and service levels. This kind of extensive review will enable shippers to address these critical questions: What are the constraints or barriers to success? How are decisions regarding configurations and re-configurations made? Where do opportunities for expansion or consolidation exist? DISTRIBUTION CENTER ANALYTICS: No supply chain can function at an optimal level unless the shipper s distribution centers are located at the right locations. So any review must consider the location of each of the company s distribution hubs. Shippers must be able to: Determine the warehouse locations that optimize transit times, cost, and coverage Forecast the future warehouse sizes and labor needs that will be necessary to support the organization s growth targets Identify productivity improvements and optimization opportunities, both in manpower and through any necessary consolidations of existing facilities CARRIER SOURCING ANALYTICS: For many shippers, the decisions they make in selecting carriers and freight sources are critical. To make the right choices, companies need tools and metrics that will enable them to: Conduct a Spend Analysis of current outlays, with an eye toward identifying opportunities for cost reductions in their carrier selection and freight sourcing

3 Assess savings opportunities. This begins with a marketrate analysis, benchmarking of low-cost carriers, and an exploration of ways to reduce empty truck returns Manage and analyze RFPs (Requests for Proposal). Shippers need to create a disciplined approach for preparing RFPs and RFIs (Requests for Information) and analyzing the resulting bids Manage carrier performance. Companies should create a scorecard for tracking the performance of their carriers, conduct periodic assessments of each carrier s capacity, and perform a tender/reject analysis METRICS RATIONALIZATION AND ANALYSIS: While there is no shortage of metrics that can be scrutinized within a logistics network, the truth is that many of these metrics will not enhance a company s performance. To conduct a thorough analysis, companies need to identify and track metrics that are consistent with their key strategies, such as inventory turns, cycle times, DPMOs (Defects per Million Opportunities) and fill rates. But this first means developing: Visibility into Key Performance Indicators (KPIs) that provide insights into cost, performance, efficiency, safety, productivity, accuracy and environmental impact Robust scorecards with accurate metrics and drill-downs to their key drivers Enhanced customer service levels, and identification of root causes such as capacity and processes Genpact s solutions Sensing the competitive advantages to be gained by streamlining their distribution networks, companies have a renewed focus on optimizing their logistics in ways that helps them reduce costs, achieve new levels of productivity and always be able to respond to stringent service levels expected by their customers. Genpact provides the insights and the tools to help clients in each of the four logistics review stages mentioned above. NETWORK DESIGN AND OPTIMIZATION: The first step in any network analysis is to map of all the processes and data in a supply chain. Genpact begins every assignment by creating detailed network visualizations using industry-standard mapping software such as PC*MILER and MapInfo. We then run diagnostics to determine weak points and potential savings areas, and use network optimization models to perform what-if analysis on changing product mix, plant shutdowns and hub locations. We conduct an analysis that looks for synergies and cost-saving opportunities between different business units and backhaul opportunity assessments. Our review also includes: Dedicated fleet analysis to optimize the routing of stops, shipments, fleet size and scheduling. We then provide a detailed financial analysis of our findings Site-selection strategies that analyze existing and proposed hubs, perform future-state analysis, and analyze each location by service and cost Network optimization that includes mode selection, an assessment of consolidation opportunities, and an analysis of hub consolidation and deconsolidation DISTRIBUTION CENTER ANALYTICS: Genpact provides the intelligence that companies need to optimize their distribution networks. Genpact supports organizations with: Warehouse design and planning. Genpact helps clients analyze their storage and materials-handling equipment; optimize dock sizes based on throughputs and layout and design facilities. PHARMACEUTICALS Building a Better Network through Simulations Challenge: A leading chemicals manufacturer wanted to determine the most efficient way to distribute finished goods through its network. This meant identifying the best number and best locations for its distribution centers, all while complying with the company s business rules and service requirements. The company enlisted the help of Genpact. Solution: Genpact s team gathered and calibrated the freight rates to simulate the actual shipment moves and costs for each facility. It then created and set up a baseline model using the company s current volume and cost structure. Genpact then conducted a site-selection analysis that recommended the optimal locations for the company s distribution centers, and performed a sensitivity analysis for each of these scenarios. Results: Genpact s analysis enabled the company to generate 17% cost savings from optimizing its network flow and location of its distribution centers.

4 Labor estimation and planning. This includes process design, time estimates for each activity, and building both direct and indirect manpower requirements. Warehouse performance management. The traditional focus of warehouse management systems has been limited to the inventory on hand. In today s high-velocity logistics environment, having end-to-end visibility into inventory, orders, and shipments across the supply chain is critical to reduce network-wide inventory levels, maximize customer satisfaction, and respond dynamically to events that occur during the execution process. Genpact helps clients design and develop Key Performance Indicators (KPIs) by which to measure distribution centers and then helps conduct statistical analysis of these KPIs. Operations improvement. Increased distribution efficiency and throughput can reduce the requirements for capital tied up in physical facilities and materials-handling equipment. Genpact supports clients with extensive analyses of labor productivity, inventory levels, and material-handling equipment and space usage. CARRIER SOURCING ANALYTICS: Given the cutthroat pricing that exists among carriers, it s easy to view shipping as a commodity service that should go to the lowest bidder. But such an approach can be short-sighted and result in higher costs. Genpact can help shippers lower their net costs by: Providing carrier analysis that compares current costs vs. the lowest-cost carriers Maintaining accurate routing guides based on the latest updates Identifying carrier consolidations that provide volume discounts Developing freight benchmarking tools that assess opportunity costs Creating carrier performance metrics for such measures as the percentage of on-time pickup and deliveries Modeling tools to identify and reduce spot purchase of expedited shipments METRICS DEVELOPMENT AND ANALYSIS SERVICE PORTFOLIO: Creating the right metrics by which to monitor the performance of a network is imperative. To this end, Genpact assists clients with: Development of key metrics. This includes setting the definitions, calculations and classifications of KPIs and then identifying the proper data sources Design and production of scorecards. Genpact designs cascade structures, and then prototype and automate scorecards Business intelligence reports. Our team designs the processes for the creation of automated reports, ad hoc reports, and digital dashboards that provide enhanced visibility with multi-layer drill down scorecards Metrics analysis. This is done to identify root causes and recommend process improvements. This includes impact analysis and trend analysis benchmarking tools that assess opportunity costs Chemicals Lower Costs by Consolidating Shipments Challenge: A leading drug and medical products company was looking to reduce excess delivery costs. While the company manages one of the largest private logistics fleets, too many of its trucks were leaving only half-full. The company asked Genpact for help. Solution: Genpact s team first selected representative data, prepared an As-Is transportation scenario, and then developed a consolidation strategy for this network. Genpact modeled for a range of strategies, including a shift from Less-Than-Truckload (LTL) carriers to full-load carriers. Genpact also analyzed the effects of a shift from low-weight LTLs to high-weight LTLs. Results: Genpact delivered a plan that would enable the company to reduce the annual costs of operating this delivery network by 13%.

5 Why Genpact the key enablers of genpact s logistic analytics solution Class Leading SEP SM Framework 5,000+ Lean Six Sigma projects enabling continuous improvements 20+ Network design projects delivered in 2011 Process capability Deep talent Pool 250 man-years experience with LLamaSoft, JDA StratModeler etc. Pool of 200+ supply chain analysts and modelers 10+ years of experience in delivering logistics support solutions Expertise in different network design tools like JDA TMoD, JDA SCS, JDA TMS, LLamaSoft Supply Chain Guru Rich visualization and reporting technology experience Domain knowledge in 3PL, CPG, White Goods, Pharma across US, EU, Asia Planning and tracking over 250,000 loads annually, 24x7, across industry verticals Integrated modeling algorithms Relationships with over 1,500 carriers across, North America and Europe Manufacturers, distributors and third-party logistics providers choose Genpact for the technical knowledge, analytical capabilities, and transportation industry experience that it brings to each assignment. Today, Genpact helps clients manage more than 1,500-plus carriers across North America and Europe and the 100,000 loads they carry for Genpact s clients each year. Our logistics team has helped these clients reduce the costs of sourcing carriers by $33.5 million and has helped these companies realize $4 million in annual labor cost savings. In addition, Genpact has identified cost reductions of over $6.5 million with network design and optimization, and has helped save clients another $1.5 million by reducing freight bill rejects and eliminating revenue leakages. Genpact is able to deliver these results with resources and capabilities in logistics that other consulting firms can t match. Genpact brings to each assignment: An on-demand and virtual pool of more than 3,000 logistics and supply-chain professionals Extensive domain experience in the 3PL industry, and experience with manufacturing customers in more than 10 sectors Best-in-class technology with powerful proprietary analytical tools and partnership with industry-leading solutions Conclusion As a global leader in the field of logistics analytics, Genpact has helped shippers devise smarter strategies for everything from the design and optimization of a single distribution center to the recalibration of a global logistics network. By combining its proprietary analytics with strong process capabilities and a network of more than 3,000 logistics and supply-chain professionals, Genpact has helped clients cut transportation costs by an average 8% to 12% through logistics network optimization, improved carrier and network management, and better warehouse design and optimization. Our logistics team provides clients with the analytics-driven intelligence they need to select carriers, optimize their distribution centers, or reroute their shipping channels. With Genpact at their side, companies ranging from drug makers to energy producers are reaping the benefits of lower costs, improved turnaround times and better customer service. Contact Genpact specialists to identify ways to use insights from analytics to optimize your logistics.

6 About Genpact Genpact Limited (NYSE: G), a global leader in business process management and technology services, leverages the power of smarter processes, smarter analytics and smarter technology to help its clients drive intelligence across the enterprise. Genpact s Smart Enterprise Processes (SEP SM ) framework, its unique science of process combined with deep domain expertise in multiple industry verticals, leads to superior business outcomes. Genpact s Smart Decision Services deliver valuable business insights to its clients through targeted analytics, reengineering expertise, and advanced risk management. Making technology more intelligent by embedding it with process and data insights, Genpact also offers a wide variety of technology solutions for better business outcomes. For more information, visit Follow Genpact on Twitter, Facebook and LinkedIn Copyright Genpact. All Rights Reserved. Please contact us for more information at: [email protected] Visit us at: analytics-research/logistics-analytics