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
3
Three of the Major Trends of Development
1. End-to-end supply chain optimization 2. Greening supply
chain
3. Intermodal rail
transportation
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
6
Sri Lanka Bangladesh
Vietnam Cambodia
Singapore
Philippines Malaysia
Indonesia Shanghai
Thailand
Hong Kong
Shenzhen Taiwan India
South Korea
- 15 major origin ports
in Asia -- pick and pack
store orders -- 2/3 retail outlets
located in the east of the Mississippi River -- Cross dock to more
than 300+ stores
Suppliers Central DC Transportation Hub Retail Store
The original supply chain which survived for decades:
Case Study: U.S. Apparel Brand
Supply Chain Network Optimization
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
8 Original supply
chain
Lowered warehouse
cost
Lowered ocean transportation
cost
Lowered store delivery cost in
the U.S.
12%
7% 4% 23%
100%
Supply chain optimization
Cost after supply chain
optimization
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
77%
23% cost reduction after supply chain optimization
Optimized Supply Chain Solution – 23% Cost Reduction
Sri Lanka Bangladesh
Vietnam Cambodia
Singapore
Philippines Malaysia
Indonesia Shanghai
Thailand ShenzhenHong Kong Taiwan Qingdao
LA Atlanta
Chicago
Greening Supply Chain
10
Environmental Consciousness
February 1, 2007 - 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, 2010 - 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
Consumer Needs
- Adapting to climate Change concerns
Product Design & Development.
- Environmentally- conscious - Green concern
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 Retailer
- carbon label / credential - take back regulations - green communications / branding
Factory & Raw Material Sourcing
- “near sourcing” to save emissions and costs - new client standards - regulation on product composition
Shipping Control -rising transport costs - transport emissions accounting
Li & Fung’s Challenge: De-carbonizing the Supply Chain
Multi-faceted, Multi-stakeholder Approach
Our Offices, Facilities &
Employees Our Partners:
Customers, Suppliers, Service Providers Our Communities, Shareholders & the Public
Energy Carbon Waste Water
Air
Buildings Technology Vehicles Management
Standards Best Practices Partnerships Co-development
Awareness Choices Knowledge Futures
Change Drivers
CONSUMERS REGULATION
ECOLOGY BRANDS
Intermodal Rail Transportation
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Advantages
Cheaper → less than ship, much lower than truck and plane
Safer → least accidents and casualties Greener → lowest carbon dioxide emission
Rail Transportation
Plane
Truck
Rail
Ship Inland
Water Transport
Pipeline High-
Speed Railway
Disadvantage
Needs other modes of transport to connect to the end customers
Global Transport Share in Major Countries
16
Comparison of Freight Emissions - Europe
Comparison of Freight Emissions - Japan
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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
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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
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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 11th 5 Year Plan
9,200 km for freight transport Operation distance will go up to 95,000 km in 2010
45% are multiple tracks or electrical tracks
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
Japan – Upgrading Rail Network Speeds Rural Development
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The New Eurasian Continental Bridges
27days 13 days
52% Time Reduction!
Conclusion
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How Prepared Are You For These Trends?
1. End-to-end supply chain optimization 2. Greening supply chain
3. Intermodal rail transportation
Thank you!
Tommy Lui IDS International
Managing Director of Greater China
