Cargo Flows & Hot Spots
Peter Colon
Buck Consultants International
German-Dutch Logistics Conference
March 2015
Buck Consultants International P.O. Box 1456 6501 BL Nijmegen The Netherlands P: +31 24 379 0222 M: +31 62 241 3921 F: +31 24 379 0120 E: [email protected]
1 Framework
Macro
level
Business
level
Regional
level
2
3
4
2 Macro level: global developments
(2015-2016), (% growth per annum)
2012-14
2015-16f
China
7.5
7.0
India
5.0
6.5
Global
3.2
3.8
United States
2.2
3.0
Australia
3.0
2.7
United Kingdom
1.8
2.6
Germany
0.8
1.5
Netherlands
-0.5
1.5
France
0.4
1.1
Japan
1.1
0.9
2011 PPP Rank Country GDP at PPP (2011 US$bn) 1 US 15,094 2 China 11,347 3 India 4,531 4 Japan 4,381 5 Germany 3,221 6 Russia 3,031 7 Brazil 2,305 8 France 2,303 9 UK 2,287 10 Italy 1,979 2030 Country Projected GDP at PPP (2011 US$bn) China 30,634 US 23,376 India 13,716 Japan 5,842 Russia 5,308 Brazil 4,685 Germany 4,118 Mexico 3,662 UK 3,499 France 3,427 2050 Country Projected GDP at PPP (2011 US$bn) China 53,856 US 37,998 India 34,704 Brazil 8,825 Japan 8,065 Russia 8,013 Mexico 7,409 Indonesia 6,346 Germany 5,822 France 5,714
Actual and projected top 20 economies ranked based
on GDP in PPP terms
1)Companies have more and more a global scope for all types
of operations
Global Scope
Operation
Regions within
US / Countries in
Europe & Asia
Regions of the
World / Continents
Global
Production
Distribution
R&D
Back offices
Marketing & Sales
3 Business level: supply chain
developments
The dynamics that impact the supply chain are numerous
Rapidly and unpredictably changing markets
A shift from mass markets to fragmented niche markets
Fast growth of e-commerce/ e-fulfilment
Ever shortening product life cycles
Growing pressure on financial impact of supply chain performance
Continuous pressure to squeeze waste (both time and cost) out of the
supply process
Supply chain management becomes ‘core business’
More flexible and tailored supply chains
Why focus on strategic network design?
The majority of the value
chains lifecycle costs are
locked-in at the start
Decisions Value
Source: AMR
Distribution network
Inventory locations
Assembly network
In-house vs. contract manufacturers
Logistics suppliers
20
%
Operational Tactical Strategic80%
It is not only about costs!
Network optimization Network scenario’s Leadtime requirements Operations costs Order fill requirements Transport costs Capacity flexibility Inventory costs Information availability Tax and duties Fixed vs. variable Existing partners Existing facilities Laws & regulations Existing sources Service objectives Cost objectives Design constraintsExample: BCI Client in FMCG industry
TO
FROM
Overall SC cost
from 132M€ to
117M€ (- 12%)
7M€ saving in
transport spend
OTIF from
below 70% to
>95%
RESULTS
FROM TO Locations 80 35Transport consolidation Not in place 2M saving
Purchasing Decentral Centralized
Main supply chain configurations
EDC-structure
Centralized control and execution (the 90’s)
Characteristics
Primary production In or near market region
Secondary production
Mainly integrated in primary
production function, trend towards integration in DC
Distribution Centralized in single Euro DC or
local market DC’s
Inventory European inventory
Planning Centralized
Customer service De-centralized
Main supply chain configurations
BDC-structure
RDC-structure
EDC-structure
From centralized control and execution (the 90’s)
Characteristics
Primary production Off-shore or Near-shore Secondary
production
In market/low cost region
Distribution Regional DC’s
Direct sourced
Satellite structure / X-dock
Inventory European inventory
Planning Centralized
Customer service Regionalized
Shared services Centralized / regionalized
1-tier
2-tier
Today:
Decentralized NETWORKS with
central control…towards
product-market specific, hybrid
supply chains
Network Re-Design in Healthcare Industries
Centralized
Central + Sats
Regionalized
Hub spoke per
Fully centralized
High value / low volume products
Often parcel type of
distribution
Main inventory in central
warehouse
Local sats replenished by EDC
Sometimes combined with
postponement
Strategic stocks in country DCs
Medium - High value products
Regional DCs (4-6) supplying a fixed
region
Logical clusters of countries
“Big Pharma” portfolios
Regional DCs (4-6) supplying a fixed
4 Regional level: hot spot
Overview of logistics hot
spots in Rhine corridor
(no order in numbering)
1 Rotterdam
2 Moerdijk-Tilburg
3 Venlo-Venray
4
Nijmegen-Arnhem-Emmerich
5 Duisburg-Düsseldorf
6 Mannheim-Ludwigshafen
7 Strassbourg
8 Rheinport Basel
1
3
2
4
5
6
7
8
+
Such as:
Labor costs
Transportation costs
Occupancy costs
Incentives
Taxes
etc…
Cost factors
Such as:
Labor availability
Labor flexibility
Business climate
Infrastructure
Utilities
etc
…
Quality factors
Listing of cost factors for a DC
Location categories Relative weight Location factors Relative weight
1 Cost of labor In Euro 1.1 Job title A 1.2 Job title B 1.3 Job title C
In Euro In Euro In Euro
2 Transport costs In Euro 2.1 Inbound transport costs: from airport to DC 2.2 Outbound transport costs: from airport to DC
In Euro In Euro
3 Warehouse costs In Euro 3.1 Rental costs DC (+ service charges) 3.2 Land costs
3.3 Building costs
3.4 Costs for utilities infrastructure 3.5 Real estate taxes
In Euro In Euro In Euro In Euro In Euro 4 Investment incentives and grants
In Euro 4.1 Capital grants
4.2 Employment incentives 4.3 Training grants 4.4 Other incentives In Euro In Euro In Euro In Euro Total In Euro
Costs will be calculated in Euro and forecasted for the next 3 years
Quality factors (next slide) are assumed: 1= poor ; 5= excellent
Listing of quality factors for a DC
Location categories Relative weight Location factors Relative weight
A Infrastructure & accessibility
….% A1 Availability of 3PL’s
A2 Distance to international highway networks A3 Distance to international airport
A4 Distance to international cargo hub A5 Distance to customers ….% ….% ….% ….% ….%
B Labor characteristics ….% B1 Availability of logistics personnel
B2 Productivity and loyalty B3 Unemployment B4 Multilingual skills ….% ….% ….% ….%
C Customs ….% C1 Time to obtain licenses-rulings
C2 Flexibility and business orientation customs
….% ….%
D Language skills ….% D1 English language speaking skills
D2 Other language speaking skills
….% ….%
E Labor regulations ….% E1 Working schedule flexibility
E2 Hiring & Firing regulations E3 Turnover of labor
E4 Works Council involvement
….% ….% ….% ….%
F Facility & sites ….% F1 Availability pre built facilities
F2 Availability of suitable land plots F3 Building permits / timing
….% ….% ….%
G Business climate ….% G1 Corporate tax rate
G2 Ease of doing business
….% ….%
Example: Project specific site selection results for a distribution center in
perspective: cost-quality assessment
Total costs in million Euro for first 3 years (all operating costs -/- investment incentives)
2.5 3 4.5 120 80 110 100 4 90 Location A 3.5 Location B Location D Location E Location C
Cost-Quality matrix
Location FLocation G Location H Location I
Q1 :
What is the competitive position of your DC/
location/ region?
Q2 :
For what type of DCs in what industries is your
DC/region a good fit?
Q3 :
For what kind of e-fulfilment centers does your
region qualify?
Example: Project specific site selection results for a distribution center in
perspective: cost-quality assessment
Total costs in million Euro for first 3 years (all operating costs -/- investment incentives)
2.5 3 4.5 120 80 110 100 4 90 Location A 3.5 Location B Location D Location E Location C
Cost-Quality matrix
Q1: What is the position of your DC location/ region?
Location F
Location G Location H Location I
Single tier
Two tier
European
Distribution
Center
(EDC)
Typical examples
Spare parts
Computers
Microchip
Typical examples
Critical
spare parts
Motorcycles
Specialty
chemicals
Euro-Regional
Distribution
Center
(RDC)
Typical examples
Fresh food
(cool chain)
Pharmaceu-
ticals
Typical examples
FMCG
Cosmetics
Food
Clothing
Q2: For what types of DCs, in what industries
is your DC/region a good fit?
Combination
Centers
Dedicated
Centers
Hybrid
Model
Q3: For what kind of e-fulfilment centers
does your region qualify?
Recent research UK, Netherlands,
Belgium, France and Germany
Source: VIL 2014
Top 10 locations for e-FC
Top locations for e-FC
1 DE – Rheinland-Pfalz 7.74 2 DE – Saarland 7.61 3 BE – Wallonia 7.54 4 NL – South-Netherlands 7.36 5 NL – West-Netherlands 7.10 6 BE – Flanders 7.04 7 UK – East of England 7.00 8 LU – Luxembourg 6.98 9 BE – Brussels 6.95 10 FR – East France 6.95 11 DE – NRW 6.75
