30 th International Supply Chain Conference Trends and Strategies in Logistics and Supply Chain Management - Insights of the new BVL study - Chair of Logistics Technische Universität Berlin Head of the Chair of Logistics, TU Berlin Berlin, October 23, 2013
Special-topic Sequence: Trends and Strategies in Logistics Prof. Dr.-Ing. Frank Straube moderation Director of the Institute of Technology and Management, Head of the Chair of Logistics, Berlin Technical University, BVL Advisory Board Pang Hee Hon focus on Southeast Asia Chief Executive Officer, Keppel Telecommunications & Transportation Ltd., Singapore Thomas Moik focus on Europe Vice President Airframe Supply Management, Material Procurement, AIRBUS Operations GmbH, Hamburg, Germany Joao Guilherme Araujo focus on South America Consulting and Business Development Head, ILOS Instituto de Logistica e Supply Chain, Rio de Janeiro, Brazil Prof. Dr. Sidong Zhang focus on China Head of the Kühne Foundation Chair for International Logistics Networks and Services, Chinese-German School of Postgraduate Study (CDHK), Tongji University, Shanghai, China Jean-Francois Arvis Senior Economist, International Trade Department, Trade Facilitation and Logistics, The World Bank Washington, D.C., United States Cordula Rastogi Senior Transport Economist, Sustainable Development, Europe and Central Asia Region, The World Bank Washington, D.C., United States Chair of Logistics 2
Study series: Trends and Strategies in Logistics Year 1988 1990 Trends in Logistics Trends in Logistics in the 1990ths 1993 Perspectives of Logistics 1996 1997 1997 Title Trends and Strategies in Logistics 2000 5 Focus Surveys in Logistics 1996 Towards the 21 st Century 1999 The Next Wave of Logistics 2000 Trends and Strategies in Logistics 2000+ 2002 Supply Chains in Transformation 2003 Trends and Strategies in International Procurement 2005 The Agenda of Logistics Management 2010 Enlargement of the international coverage Analysis of more than 200 studies and reports on developments in logistics Conduction of over 60 interviews with Top Managers Participation of more than 1.700 individuals in the online survey 2008 Change of Global Networks new 2013 Trends and Strategies in Logistics and Supply Chain Management 2.0 Chair of Logistics 3
Project Team and Research Partners Overall scientific supervision Robert Handfield Bank of America University Distinguished Professor Director, Supply Chain Resource Cooperative Poole College of Management North Carolina State University Prof. Dr.-Ing. Frank Straube Executive Director Department of Technology and Management Chair of Logistics Technische Universität Berlin Member of the BVL Advisory Board Prof. Dr. Dr. h.c. Hans-Christian Pfohl Head of the Supply Chain and Network Management Group Technische Universität Darmstadt Dr. Andreas Wieland Kuehne Foundation Center for International Logistics Networks Chair of Logistics Technische Universität Berlin Research Partners American Production and Inventory Control Society, USA Bundesvereinigung Logistik (BVL), Germany Council of Supply Chain Management Professionals, USA East Carolina University, USA European Logistics Association, Europe FDC Cabral University, Brazil Higher School of Economics, Russia ILOS Instituto de Logística e Supply Chain, Brazil International Association of Commercial and Contract Managers Shintao University, China Tongji University, China Chair of Logistics 4
Thank you for your Participation! 3% 1.757 participants from different regions 13% 12% Materials/Mining 3% Electronics 3% 4% Retail 9% 6% Other Manufacturing 18% 28% IT/Hardware/ Telecommunication industry 7% Textile Industry 1% Energy 4% Chemicals Industry/ Plastics Industry Fast Moving 5% Consumer Goods 6% Automotive 8% Logistics Service Provider 31% Machine and Plant Engineering 5% 34% USA Brazil Western Europe Eastern Europe Asia (except China) China Africa/Middle East Chair of Logistics 5
Logistics has Become Increasingly Complex Growth in New Markets (e.g. BRICS) Customization of Products Multichanneling in Retail Logistics Complexity Local Content Requirements Volatility and Risks across Supply Chains Chair of Logistics 6
Importance of Trends in Logistics Customer Expectations Networked Economy Cost Pressure Globalization and Complexity Talent Shortfalls Volatility Sustainability Today Five Years Increased Risk and Disruption Emergence of New Technologies Lack of Reliable Logistics Infrastructure Increased Government Regulation Cultural Challenges 1 1,5 2 2,5 3 Irrespective of region and industry increased customer expectations in terms of delivery reliabilty and cost pressure are perceived as the main forces in logistics today and in future. Companies are not aware of increased risk and disruption; sustainability will soon be challenging. Chair of Logistics 7
Importance of Logistics Strategies Talent Management End-to-End Integration Integrated Planning Global Network Visibility Technology Investments Cost-to-Serve Models Governance and Process Standards Rapid Decision-Making Corporate Social Responsibility Today Five Years Horizontal/Vertical Cooperation Frequent Network Adaption Green Logistics Outsourcing/Insourcing Government Cooperation Globally, a lack of logistics talents can be observed; managers are seeking to cope with this challenge. Potentials for technology investments are often not fully recognized. There is no clear trend for outsourcing/insourcing decisions. Chair of Logistics 8 1 1,5 2 2,5 3
Agenda Strategies, Costs and Performance 9
Managers Have to Handle Numerous Logistics Objectives at the same Time 7,00 6,00 5,00 4,00 3,00 2,00 1,00 USA Brazil Germany China 0,00 Logistics manager have to cope with a large number of objectives at the same time. Delivery reliability and meeting customer expectations are the most important objectives. Chair of Logistics 10
Logistics Costs as a Percentage of Overall Revenue 14% 12% 10% 8% 6% 4% 2% 0% Chair of Logistics 11
Did the Costs of Logistics Decrease or Increase in 2012? 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% Decrease Stay constant Increase Do not know 10,0% 5,0% 0,0% Total USA Brazil Germany China One of six survey participants did not know the development of logistics costs in 2012. Chair of Logistics 12
Transportation Contributes Most to Logistics Costs 40 35 30 25 20 15 10 5 USA Brazil Germany China 0 Share of inventory costs is low with 10 to 17 percent of overall logistics costs depending on the region Logistics costs as a % of overall revenue varies between 6% (U.S.) and 14% (China) Chair of Logistics 13
Logistics Performance in the Automotive Industry International 2012 Latecomer Catch up Typical Advanced Best in Class Median Delivery time (days) > 35 35 >15 15 >5 5 >2 2 8,5 Delivery reliability (%) < 90 90 < 97 97 < 98 98 < 100 100 98 Germany 2012 Latecomer Catch up Typical Advanced Best in Class Median Delivery time (days) > 56 56 >16 16 >5 5 >3 3 12 Delivery reliability (%) < 80 80 < 97 97 < 98 98 < 99 99 98 Germany 2008 Latecomer Catch up Typical Advanced Best in Class Median Delivery time (days) > 12,8 12,8 > 10 10 > 5,8 5,8 > 3 3 9 Delivery reliability (%) < 93 93 < 97,2 97,2 < 98 98 < 99,4 99,4 98 Compared to our last study, logistics performance could not be improved in the automotive industry. Particularly, performance of latecomers has worsened. Similar findings can be found in other industries, too. Chair of Logistics 14
Agenda Risks and Sustainability 15
Close Coordination is the Most-applied Strategy to Cope with Supply Chain Disruptions Close Coordination with Key Partners Close Internal Coordination Business Continuity Plan Multiple Sourcing Local Sourcing to Reduce Global Volatility Buffer Inventory Strategy Flexible Contracts with Subcontractors Flexible Contracts with Temporary Staff Staff Explicitly Responsible for Logistics Risks Reduced Automatization (e.g., Warehousing) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% % of respondents Chair of Logistics 16
However, there is a Lack of Relationship Management Tier Two Suppliers Tier One Suppliers LSP Tier One Customer We have power and control the relationship We control performance through audits We exchange information and cooperate Tier Two Customer Final Customer 0% 10% 20% 30% 40% 50% 60% 70% 80% Chair of Logistics 17
CSR Green Logistics State of Integration of Sustainability into Logistics Strategy Percentage of respondents, Answer: "Yes (all industries) USA 62 Green Logistics Brazil Germany 45 57 China 57 USA 82 Corporate Social Responsibilty Brazil Germany 63 63 China 71 0 10 20 30 40 50 60 70 80 90 100 Logisticians have only in part integrated green logistics and CSR into their logistics strategies. Considerable differences between regions. Chair of Logistics 18
Suppliers' CO2 emissions CO2 of logistics processes CSR in your business unit Noise pollution However, Participants Expect a Lack of Measurement of Sustainability Even in Five Years Percentage of respondents, Answer: "Yes" Germany 56 Brazil 47 Germany 47 Brazil 47 Germany 44 In 5 Years Brazil 35 Germany 36 Brazil 41 0 10 20 30 40 50 60 Reason 1: Lack of measurement standards. Reason 2: High complexity to measure along the supply chain. Chair of Logistics 19
Discussion What are the main reasons for supply chain disruptions (apart from the disruptions that are caused by natural disasters)? Are these mostly due to regional issues or is the complexity of global supply chains the main driver? How could measurement of emissions and social standards be enabled across the end-to-end supply chain? Chair of Logistics 20
Agenda Outsourcing to Contract Logistics Service Providers 21
Logistics Outsourcing Globally (Manufacturing Firms) Percentage of respondents, Manufacturing, Today Transportation 9 32 59 Warehousing 12 42 46 Inventory Management Pre-assembly of products 6 6 17 39 55 78 Not outsouced Partially outsourced Completely outsourced reverse logistics 28 37 35 0 10 20 30 40 50 60 70 80 90 Past forecasts of an increasing outsourcing degree did not turn out to become reality Outsourcing degree of transportation processes is the largest globally compared to other processes Degree of outsourcing of warehousing processes is highest in Germany compared to other regions Chair of Logistics 22
Satisfaction with the Performance of Logistics Service Providers View of customers View of logistics service providers USA 7 33 60 USA 13 27 60 Brazil 14 41 45 Brazil 8 30 63 Yes Germany 10 38 52 Germany 2 17 81 No Neither China 21 36 43 China 8 42 50 0 20 40 60 80 100 0 20 40 60 80 100 Degree of customer satisfaction in the U.S. and in Germany is sligthly higher Noticeable is the strong discrepancy between perception of German LSPs and their customers A lack of proper communication and different expectations may be the reasons Chair of Logistics 23
Discussion Why has the level of outsourcing not been increased during the last years? What are the potentials for future outsourcing in your region and your business segment? Customers of logistics services turn out to be less satisfied than assumed. What are the reasons? Chair of Logistics 24
Agenda Talent Management 25
Talent Shortage Can be Observed on all Management Levels Skilled Labor Supply Chain Planners Entry-Level Logistics Managers Today Five Years Truck Drivers Warehouse Staff 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% % of companies Talent shortfalls can be observed for different positions across all regions. There is a competition for talents between logistics and other functional areas. We need to invest in strategies to cope with talent shortages, e.g., further eduction. Chair of Logistics 26
Many Companies are Engaging in Training and Recruiting Events Employee Training University Recruiting Events Social Media Recruiting Today Five Years Print Media Recruiting Marketing of Logistics 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Chair of Logistics 27
Discussion What are reasons for talent shortages in your region? What are the specific initiatives to cope with them? Chair of Logistics 28
Agenda Infrastructure and New Technologies 29
Lack of Quality of Logistics Infrastructure in BRIC Countries 8 7 6 5 4 3 Roads Railroads Ports Air Transport 2 1 0 Brazil China Germany India Russia Singapore In all regions, improvements need to be made for logistics infrastructure. Multi-modal networks of different types of infrastructures are needed. The World Bank is concerned with these issues. Source: World Economic Forum: The Global Competitiveness Report 2012 2013; the scale indicates the quality of the infrastructure (0 low / 10 high). Chair of Logistics 30
Expected Growth in New Technology within the Next Five Years RFID Inventory Optimization Software Network Redesign Software/Systems Advanced Planning Systems Business Analytics Platforms as a Service Analytics Data Collection Planning Smart Sensors Object Recognition Technologies Social Networks (Internally, B2B) Product Life Cycle Management Transport Management Systems 2D Code Technologies (e.g. Barcode, Data Matrix Code) Warehouse Management Systems IT Security / Cyber Protection Technologies Enterprise Resource Planning Systems 0% 5% 10% 15% 20% 25% 30% 35% Chair of Logistics 31
Discussion What do you consider the main application areas of new technologies? Chair of Logistics 32
Agenda Conclusion 33
Characteristics of Top Performers* Wider scale and scope of measurement systems and dedicated and evaluated action plans to improve sustainability 38 % of the top performers integrate their suppliers in the implementation of sustainability measures 28 % report their greenhouse gas emissions Sustainability Management of competences Highly professional recruiting process with clear job specifications Standardized process for the analysis of competence gaps and the development of competences Logistics organization Logistics as a discret organizational function in close cooperation with procurement and manufacturing Functional logistics strategy and innovation process to serve specific requirements Transparency on end-customer s demand and supplier capacities Application of cost-to-serve models in all logistics decisions 75 % share demand forecasts with their supply chain partners 64% have integrated customers in their planning processes End-to-end planning Supply chain visibility Global availability of identification technology and systems for supply chain analytics Almost 40 % of the top performers already use big data applications * calculated based on high delivery reliabilty and low overall costs. Chair of Logistics 34
Logistics Needs Global Solutions Strategic importance of logistics widely underestimated Transport of goods and people is key process for the world of tomorrow Logistics has multiple stakeholders Role of politics is to create a framework for successful logistics Global collaboration between logistics associations for global solutions Harmonization, knowledge transfer and access to best practices is needed Special workshops should be held to focus on topics discussed Chair of Logistics 35