Key Development Trends in Supply Chain Management
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1 Key Development Trends in Supply Chain Management November 4, 2010 A member of the Li & Fung Group
2 Three Key Supply Chain Challenges These Days 1. Unpredictable Customer Demand 2. Sophisticated Supply Chains 3. Comprehensive Risk Management 2
3 Three of the Major Trends of Development 1. End-to-end supply chain optimization 2. Greening supply chain 3. Intermodal rail transportation 3
4 End to End Supply Chain Optimization
5 Needs for End-to-End Supply Chain Optimization Significant hidden costs in un-optimized supply chains Growing Supply Chain Complexity requires in sophisticated logistics modeling Shorter product life cycle and supply chain agility requires for dynamic logistics model and virtual logistics network Risk, quality and carbon footprint management are part of the equation 5
6 Case Study: U.S. Apparel Brand Supply Chain Network Optimization The original supply chain which survived for decades: Suppliers Central DC Retail Store Transportation Hub - 15 major origin ports in Asia -- pick and pack store orders -- Cross dock to more than 300+ stores -- 2/3 retail outlets located in the east of the Mississippi River South Korea Shanghai Bangladesh India Thailand Sri Lanka Cambodia Malaysia Singapore Shenzhen Hong Kong Vietnam Taiwan Philippines Indonesia 6
7 Network Optimization Tool Over a thousand scenarios were evaluated based on customer agreed constraints and assumptions to construct the least cost and lead-time model 7
8 Optimized Supply Chain Solution 23% Cost Reduction Qingdao Bangladesh Thailand Shanghai Shenzhen Hong Kong Taiwan Philippines Chicago Sri Lanka Cambodia Malaysia Singapore Vietnam LA Atlanta Indonesia Dynamic Asia hubs to pick & pack retail orders Optimized shipment planning Direct delivery to cross docking hubs in the U.S. to bypass central DC 100% Original supply chain 23% cost reduction after supply chain optimization 12% Lowered warehouse cost 7% Lowered ocean transportation cost 4% Cost after supply chain optimization Lowered store delivery cost in the U.S. 77% Supply chain optimization 23% 8
9 Greening Supply Chain
10 Environmental Consciousness February 1, started the Packaging Scorecard and expected a decrease of 5% of packaging waste before year 2013; Wal- Mart also expected to reduce 2,000 tons of greenhouse gas emissions before year 2015 June 10, Home Products began to assess its leading suppliers with the Supplier Environmental Sustainability Scorecard 2009 Shanghai General Motors started a new "green supply chain planning and has been successful in reducing 100 tons of water, 8,000 kilowatts of energy, and more than 50,000 tons of greenhouse gas 10
11 Li & Fung s Challenge: De-carbonizing the Supply Chain Consumer Needs - Adapting to climate Change concerns Retailer - carbon label / credential - take back regulations - green communications / branding Product Design & Development. - Environmentally- conscious - Green concern Factory & Raw Material Sourcing - near sourcing to save emissions and costs - new client standards - regulation on product composition Manufacturing Control - New environmental standards - Factory integrity - waste Clearing / Distribution / Wholesaler - new labelling laws - enviro- packaging requirements - more localization - shorter supply chain due to transport costs Shipping Control -rising transport costs - transport emissions accounting
12 Multi-faceted, Multi-stakeholder Approach Our Communities, Shareholders & the Public Awareness Choices Knowledge Futures Our Partners: Customers, Suppliers, Service Providers Our Offices, Facilities & Employees Standards Best Practices Partnerships Co-development Energy Carbon Waste Water Air Buildings Technology Vehicles Management
13 Change Drivers REGULATION ECOLOGY CONSUMERS BRANDS
14 Intermodal Rail Transportation
15 Rail Transportation Advantages Cheaper less than ship, much lower than truck and plane Safer least accidents and casualties Greener lowest carbon dioxide emission Disadvantage Needs other modes of transport to connect to the end customers Truck Inland Water Transport Rail Plane High- Speed Railway Ship Pipeline 15
16 Global Transport Share in Major Countries 16
17 Comparison of Freight Emissions - Europe
18 Comparison of Freight Emissions - Japan
19 Intermodal Rail Transport is growing Association of American Railroads:Intermodal transportation is the fastest growing source of income in recent years, now about ¼ of the total income of the U.S. railway industry JR Freight:Began to collaborate with COSCO since 2006 to develop sea-rail transport modes Germany:Has developed intermodal transport model for many years; there are complete marine, air and rail transport infrastructure in Hamburg and Bremen/Bremerhaven 19
20 China's Ambitious Railway Development Plan Eleventh Five-Year Plan 1. Four vertical-four horizontal and Three Region networks 2. Improve network coverage and expand into West China 3. Enhance technology upgrading and intermodal hub capacity Development of consolidation centers, centralized containerized transportation trunks, and double-decker container trains 20
21 China Transportation Infrastructure is shifting focus Until 2012, the passenger capacity will reach 2 billion and freight capacity over 5 billion respectively Total of 19,000 km at RMB1500B of new rail tracks to be built in 11 th 5 Year Plan 9,200 km for freight transport Operation distance will go up to 95,000 km in % are multiple tracks or electrical tracks 21
22 China has World s Largest High Speed Railway Network High Speed Rail is 200+ km/hour. Guangzhou-Wuhan is world s fastest rail link at 350 km/hour Expand from 6,000 km to 13,000 km in 2012 and 18,000 km in 2020 Current rail network to be gradually released to cargo volume Maglev (magnetic levitation) Train High Speed Maglev at 450 km/hr in Pudong to be extended to Hangzhou Low -Mid Speed Meglev at 100 km to be piloted in urban Beijing and Shenzhen
23 Japan Upgrading Rail Network Speeds Rural Development
24 The New Eurasian Continental Bridges 52% Time Reduction! 13 days 27days 24
25 Conclusion
26 How Prepared Are You For These Trends? 1. End-to-end supply chain optimization 2. Greening supply chain 3. Intermodal rail transportation 26
27 Thank you! Tommy Lui IDS International Managing Director of Greater China
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