Emergence of Logistics and Supply Chain Sachin Bhanushali

Emergence of Logistics and Supply Chain Sachin Bhanushali Gateway Rail Freight Ltd. 17 September 2014 1

LOGISTICS ORIGIN: The prevalent view is that the term logistics comes from the late 19 th century: from French logistique (loger means to lodge). WIKI DEFINITION: Logistics is the management of the flow of goods between the point of origin and the point of consumption in order to meet some requirements, of customers or corporations. OTHER DEFINITION: According to the Council of Logistics Management, logistics includes the integrated planning, control, realization, and monitoring of all internal and network-wide material, part, and product flow, including the necessary information flow, industrial and trading companies along the complete value-added chain (and product life cycle) for the purpose of conforming to customer requirements 2

LOGISTICS – SEVEN R’S One definition that some individuals refer to as the layperson’s description of logistics is the Seven R’s, which means ensuring the availability of the 3

LOGISTICS OUTSOURCING First party logistics provider: § Manufacturers own equipment and carry out their own logistics. 2 PL provider: § Contract logistics § Vendor Based 3 PL provider: § Does not own equipment § Expertise § IT enabled services § MTO/House BL § Back to back arrangements with service providers 4 PL provider: § Consultancy advisory services to help choose best logistics approach between 1 / 2 / 3 PL as per specific requirement 4

LOGISTICS – METHODS OF CARGO MOVEMENT § Dry Bulk : Minerals, Cement, Chemicals, Coal, Dry edibles, Iron § Liquid bulk : Liquid chemicals, petroleum , LNG § Break Bulk – Non Containerized : Bagged cargo, baled cargo, barrels & Casks, corrugated boxes, reels, cars § Break Bulk – Containerized 5

TRANSPORTATION MODES & MULTIMODAL LOGISTICS Modes of movement 1. Road 2. Rail 3. Sea 4. Air 5. Pipeline MULTIMODAL TRANSPORTATION § More than one mode of transportation § International/Domestic journey § Single document for transportation § Governed by Hague Visby rules/MTO Act 6

LOGISTICS PERSPECTIVES § ORGANISATIONAL PERSPECTIVE 1. Vendor Logistics – 1 PL, 2 PL, 3 PL, 4 PL 2. Supply Chain Management § SERVICE PROVIDER PERSPECTIVES 1. Parcel & Express logistics 2. Less than Truck Load (LTL) / Less than Container Load (LCL) 3. Full Truck Load (FTL) / Full Container Load (FCL) 4. Large parcel size: Coal, Minerals, Steel, Cement, Food-grains 5. Distribution Model (Hub and Spoke) 6. ODC and Project Cargo 7

SUPPLY CHAIN MANAGMENT ORIGIN: The term "supply chain management" entered the public domain when Keith Oliver, a consultant at Booz Allen Hamilton (now Booz & Company), used it in an interview for the Financial Times in 1982. In the late 1990 s it rose to prominence as a management buzzword. WIKI DEFINITION: Supply chain management (SCM) is the management of the flow of goods. It includes the movement and storage of raw materials , work-in-process inventory, and finished goods from point of origin to point of consumption OTHER DEFINITION: According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing , procurement , conversion, and logistics management. It also includes coordination and collaboration with channel partners, which may be suppliers, intermediaries , third-party service providers, or customers. 8

SUPPLY CHAIN MANAGEMENT - TRENDS § Supply Chain Management is now part of the business vocabulary. § Impact of global marketplace drastically changed the landscape of business. § Change was rapid and continuous in the 1990 s. § Competition is no longer between companies; it is between Supply Chains 9

SUPPLY CHAIN MANAGEMENT - EXAMPLE SOURCES: Plants Vendors Ports REGIONAL WAREHOUSES Stocking points FIELD WAREHOUSES Stocking points SUPPLY CUSTOMERS Demand Centers Sinks Transportation costs Production/ purchase costs Inventory & Warehousing costs 10

FLOWS IN A SUPPLY CHAIN INFORMATION CUSTOMER PRODUCT FUNDS 11

MAJOR COMPONENTS OF LOGISTICS & SUPPLY CHAIN § Demand Forecasting and Planning § Procurement and Sourcing § Transportation § Packaging § Distribution § Order Processing § Warehousing and inventory management § Information sharing on forecasting and production § Customer Service § Material Handling 12

LOGISTICS & SUPPLY CHAIN ACTIVITIES and DECISIONS TRANSPORTATION § Rate and Contract Negotiation § Mode and Service selection § Routing and scheduling INVENTORY MANAGEMENT § Finished Goods Policies § Supply scheduling § Short term forecasting Warehousing § Private Vs. Public § Space determination § Warehouse configuration § Stock layout and dock design § Stock placement § Cross-docking Order Processing § Order procedure determination Customer Service § Determining Customer § Determining customer wants § Response to service changes Materials Handling § Equipment Selection § Equipment replacement § Order picking procedures Packaging design Production Scheduling § Aggregate production quantities § Sequencing and timing of production runs Facility Location § Determining location, number and size of facilities § Allocating demand to facilities 13

LOGISTICS and COMPETITIVE ADVANTAGE Logistics and Competitive Advantage § Successful Companies either have a productivity advantage or they have a “Value” advantage or a combination of the two § Productivity Advantage gives a lower cost profile and the Value Advantage gives the product or offering a differential ‘plus’ over competitive offerings § Supply Chain and Logistics Management can provide a multitude of ways to increase efficiency and productivity and hence contribute significantly to reduced unit costs § Companies have focused upon service as a means of competitive advantage 14

Low Value Advantage High LOGISTICS and COMPETITIVE ADVANTAGE Logistics and Competitive Advantage Service Leader Responsiveness Cost and Service Leader Commodity Market Cost Leader Efficiency High Low Productivity Advantage 15

DIFFERENT VIEWS OF SUPPLY CHAIN § Integrated Logistics Management § Cycle View § Pull Vs Push View § Process View 16

INTEGRATED LOGISTICS MANAGEMENT VIEW This view looks at Logistics Processes in the Inter-firm levels and the integration of the same. customers transportation warehousing transportation factory transportation warehousing transportation vendors 17

CYCLE VIEW OF SUPPLY CHAIN CYCLES STAGES Customer Order Cycle Retailer Replenishment Cycle Distributor Manufacturing Cycle Manufacturer Procurement Cycle Supplier 18

CYCLE VIEW OF SUPPLY CHAIN § The processes in a supply chain are divided into a series of cycles, each performed at the interface between two successive stages of a supply chain § Cycles: 1. Customer order cycle (customer-retailer) 2. Replenishment cycle (retailer-distributor) 3. Manufacturing cycle (distributor-manufacturer) 4. Procurement cycle (manufacturer-supplier) § The information flows from top to bottom and the products flow from bottom to top § Cycle view defines processes involved, the owners of each process. § Specifies the roles and responsibilities of each member and the desired outcome of each process. 19

CYCLE VIEW OF SUPPLY CHAIN In the customer order cycle, there are processes performing CUSTOMER CYCLE REPLENISHMENT CYCLE Customer Arrival Customer Order Receiving Retail Order Trigger Retail Order Receiving Customer Order Entry Customer Order Fulfillment Retail Order Entry Retail Order Fulfillment 20

CYCLE VIEW OF SUPPLY CHAIN MANUFACTURING CYCLE PROCUREMENT CYCLE Order Arrival Receiving Production scheduling Manufacturing and shipping Order based on manufacturer's production schedule or supplier’s stocking needs Receiving at Manufacturer Supplier Production scheduling Component manufacturing & shipping 21

PULL / PUSH VIEW OF SUPPLY CHAIN Procurement, Manufacturing and Replenishment Cycle PUSH PROCESSES Customer Order Cycle PULL PROCESSES Customer Order Arrives 22

PULL / PUSH VIEW OF SUPPLY CHAIN § Supply chain processes fall into push or pull depending on times of execution and customer demand § Pull: Execution is initiated in response to a customer order (reactive) – Made or Assembled to Order § Push: Execution is initiated in anticipation of customer orders (speculative) – Made or Assemble to Stock § Push / Pull boundary separates push processes from pull processes 23

PROCESS VIEW OF SUPPLY CHAIN Process is defined as “ a structured and measured set of activities designed to produce a specific output for a particular customer or market” Hewitt identified eight BUSINESS PROCESES § Customer Relationship Management § Supplier Relationship Management § Customer Service Management § Demand Management § Order Fulfillment § Manufacturing Flow Management § Product Development and Commercialization § Returns Management 24

PROCESS VIEW OF SUPPLY CHAIN § The Customer Relationship Management process provides the structure for how the relationship with customers will be developed and maintained. § The Supplier Relationship Management process provides the structure for how the relationship with suppliers will be developed and maintained. § Customer Service Management is the process that deals with the administration of the PSAs developed by customer teams as part of the CRM process. § Demand Management is the process that balances the customers’ requirements with the capabilities of the supply chain. 25

PROCESS VIEW OF SUPPLY CHAIN § The Order Fulfillment process includes all activities necessary to design a network and enable a firm to meet customer requests while minimizing the total delivered cost. § The Manufacturing Flow Management process includes all activities necessary to obtain, implement and manage manufacturing flexibility in the supply chain and to move products through plants. § The Product Development and Commercialization process provides the structure for developing and bringing to market products jointly with customers and suppliers. § Returns Management is the process by which activities associated with returns, reverse logistics, gatekeeping and avoidance are managed within the firm and across key members of the supply chain. 26

SUPPLY CHAIN RISKS § More reliance on supply chains means more risk § Fewer suppliers increase dependence § Compounded by globalization and logistical complexity § Vendor reliability and quality risks § Political and currency risks 27

FIVE DRIVING FORCES – LOGISTICS & SUPPLY CHAIN 1. 2. 3. 4. 5. The Empowered Consumer Power Shift in the Supply Chain Liberalization Globalization Technology 28

FIVE DRIVING FORCES – 1. EMPOWERED CUSTOMER § Impact on logistics is more direct. § Informed consumers have low tolerance for poor quality in products and services. § Changing demographics commands 24/7 service. § Increased customer service increases the importance of logistics and supply chains. 29

FIVE DRIVING FORCES – 2. POWER SHIFT Power shift in the supply chain towards retailers and customers from Manufacturing 30

FIVE DRIVING FORCES – 2. POWER SHIFT § Large retailers more demanding and commanding. § Focus upon distribution costs § Changing logistics and supply chain strategies resulted from shifts in the balance of economic power. But this can possibly cause something else in the supply chain!!!! 31

FIVE DRIVING FORCES – 2. POWER SHIFT Customer Demand Distributor Orders Retailer Orders Production Plan Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 32

FIVE DRIVING FORCES – 2. POWER SHIFT Customer Demand Production Plan Source: Tom Mc Guffry, Electronic Commerce and Value Chain Management, 1998 33

FIVE DRIVING FORCES – 3. LIBERALISATION § Changing economic controls empowered creativity and competition. § Changes in transportation – fewer or no economic controls over rates and services. § Change in financial institutions blurred traditional differences and increased competition. § Change in the communications industry also resulted in more competition. § Changes in the utility industry allows more competition. 34

FIVE DRIVING FORCES – 4. GLOBALISATION § Global marketplace concept § Global network sourcing, manufacturing, marketing and distribution § Global alternatives have blossomed § No geography --- access available to the world § Supply chain challenges § New supply sources 35

FIVE DRIVING FORCES – 5. TECHNOLOGY § Information Age provides new and unrestricted access to the place aspect of business. § My time, my place § IT as an enabler with internet and satellite communications 36

TECHNOLOGY IN RETAIL INDUSTRY & LARGE FORMAT STORES Flexible and Agile Supply chain : Cross docking, Direct delivery to stores Integration of 3 rd party logistics capability, cross functional integration ‘Store in a box’ concept Vendor managed Inventory E-Commerce; Retails cloud, web based retail management. Automated warehousing solutions like AS-RS, Voice assisted picking. Visibility adds value to inventory, inventory automation solutions. Predictive Logistics – Analytics brings science to the art of retail, BI systems, real time dashboards, predictive analytics solutions. 37

UNITISATION IN LOGISTICS TRADITIONAL WATERMELON Logistically designed WATERMELON 38

UNITISATION IN LOGISTICS Packaging for Transportation and Break bulk § § § Bags Jumbo Bags Flexi liners in containers Corrugated boxes Drums Boxes Crates Pallets Bales Bullets / Cement Carriers Powder carried in fluid form 39

MODERNISATION OF EQUIPMENT USED IN LOGISTICS GANTRY CRANES SHORE CRANES 40

MODERNISATION OF EQUIPMENT USED IN LOGISTICS RMG CRANES RTG CRANES 41

MODERNISATION OF EQUIPMENT USED IN LOGISTICS REACH STACKER RTG CRANES 42

MODERNISATION OF EQUIPMENT USED IN LOGISTICS STRADDLE CARRIER 43

MODERNISATION OF EQUIPMENT USED IN LOGISTICS MAST LIFT TRUCK 44

MODERNISATION OF EQUIPMENT USED IN LOGISTICS ROAD RAILERS 45