Logistics Outsourcing
( Case Study Schiesser )
Eva Sikora
Russell Sahusilawane Serly Chandrakasih
Market Volume
83 51 5 11 Inhouse Logistics Transportation Services Warehouse, Cargo Handling & Commissioning Services Contract Logistics ServicesLogistics Market Volume Germany, Billion €
Total: 150 €bn
Outsourced Logistics Services
TOP 10 Germany
No Company Turnover 2001
in million €
Employees (Germany)
1 Deutsche Post World Net 4,449 40,000 2 DB Cargo 3,421 29,100 3 Schenker 1,959 10,400 4 Kühne % Nagel 1,480 4,000 5 Hapag-Lloyd 1,462 6,000 6 Lufthansa Cargo 1,300 5,411 7 Dachser 1,208 6,000 8 Volkswagen Transport 1,100 1,891 9 Panalpina (Hq. Basel-Switzerland) 950 1,500 10 UPS Deutschland 900 15,000 TOTAL TOP 10 18,229 119,302 Source: Klaus: „Die Top 100 der Logistik“, 2003
Potential of Logistics Services
z High growth expected by Contract Logistics Services
– Integrated distribution services for mass consumer goods
manufacturer and retail
– Integrated procurement and material control system for industrial
contract logistics (e.g. automotive industry, construction, health care)
z Trends from passive handling of logistics operations towards active construction of customers specific Supply Chain
z Capacity building by contract logistics service provider
(VW-Transport, Arvato/Bertelsmann, MGL/Metro, Hoechst, Schenker, DHL-Danzas, Dachser, etc.)
Role of Logistics Service Provider
z
Classic Freight Carriers,
z with own fleet and other assets (e.g. warehouse) and provide transportation, cargo handling and warehousing
z without own assets and provide only switching control services
z
3PL or 4 PL as well as Lead Logistics Provider, who
are specialists in Contract Logistics or IT, planning
and coordination of Supply Chain
z
Integrated Logistics Service Provider which offers a
wide service portfolio and work for all areas (as 1.
and 2.)
Opportunities
z
Increasing demand for Logistics Services in
industries and commerce
z
Various possibilities for logistics service providers to
stretch their performance features and integrate
themselves into logistics processes in many new
areas
Positioning of Logistics Service
Provider
z
Services go beyond operative area of logistics
processes in distribution and procurement
z Design of Outsourcing Processes
z Quality Management
z IT Management (Software Development, Hardware and Support)
Performance Features
91% 73% 70% 68% 64% 55% 48% 41% 39% 34% 34% 32% 30% 25% 95% 84% 86% 86% 75% 64% 73% 70% 59% 55% 59% 45% 50% 52% Distribution Quality Management Procurement Strategy & Conception of Outsourcing Projects IT Implementation Hardware Provision IT Management (Support etc.) Production Logistics Support of Development Processes Change Management Supplier Relationship Management Project Financing Recycling Customer Relation ManagementToday Future
Challenges
z
Contribution to information logistics
–Automatic operation process
–
Transportation optimization
–
Inter-company inventory management
–
Planning and controlling of complex process
chains
z
Intensive information exchange
–
Requirements of Information and Communication
Case Study Schiesser
Outsourcing of Procurement Logistics
Foundation Headquarter Sector Business fields Corporate structure Homepage Sales volume Employees Schiesser AG 1875 Radolfzell (D) Textiles
Daywear, nightwear, underwear, beachwear, homewear for men, women and children as well as baby clothing
zSchiesser Group, Küsnacht (CH), as holding company to which Schiesser AG and all foreign subsidiaries belong
zSales organizations in Europe and the USA
zProduction plants in the Czech Republic (Pleas), Slovakia (Gemtex) and Greece (Pallas)
http://www.schiesser.com 2001: € 250.5 million
Challenge in the textile Industry
z
Short-lived fashion trends
z
Product quality
z
On-time delivery
Punctual and cost-effective supply of raw materials to all production sites
Outline Procurement Process
z
Selection of suppliers initially according to
production size, delivery scope and quality
z
Purchase of raw materials and textile
accessories from the whole Europe, mostly
Southern Germany
z
Transport of goods to the production sites in
the Czech Republic, Slovakia and Bulgaria
including customs clearance
Problem Perception:
The procurement process was
time-consuming and expensive
Radolfszell Procurement Center Suppliers Production Sites •Planning •Scheduling •Tracking Delivery •Regrouping •Custom Clearance •Issue of pro forma invoices Incoming Goods and Invoice Inspection Transportation Service
Disadvantages
z
High Transport Costs
z
The level of on-time deliveries did not meet
requirements. Large safety stocks in the
plants were the consequence
z
Goods and invoice checking was split
between different companies. This caused
settling of discrepancies which was often
very time-consuming.
Step 1 Reorganization of Procurement
Description Level Characteristic Interim Solution
Characteristic Old
z Central production planning
z Decentralized ordering responsibility
z Central production planning and ordering responsibility
z Manual process steps
z Delivery to production sites
z Manual process steps
z Predominant handling by headquarter -- --Strategy Process Systems
Procurement Process after
Optimization
Supplier Radolfszell Procurement Center Transportation Service Production Sites•Negotiate Outline Agreements •Sales & Production Planning
•Order control •Order Materials
•Tracking delivery •Incoming Goods
Inspection
•Custom Clearance •Pay Invoice
Inefficiency of the new procurement
process
z Through direct delivery, full truckload deliveries were split into large number of small transport jobs
z No central grouping of deliveries to the production plants: 10 – 20 vehicles to unload in place of the 2 – 3 large deliveries per week
z Overlapping tasks and competencies, especially in order monitoring and delivery tracking
z Lack of technical system support, in many cases the forwarder could only be ascertained by phoning the supplier or the
forwarder normally used
z Lack of transparency in the supply chain: Schiesser could not state problem deliveries and improve on-time delivery
Project to Reorganize Transport
Logistics: Goals
z
Punctual supply of purchased goods to the
production plants
z
Reduction in personnel costs by outsourcing
activities from the areas of transport and customs
z
Creation of a single point of contact for everyone
involved in the supply chain
z
Reduce transport costs, customs documents and
truck frequency at goods inward
z
A saving in transport costs through consolidated
transport
Project to Reorganize Transport
Logistics: Decision of Outsourcing
z
Outsourcing of the complete management of
the procurement process from order
placement through to delivery to the plant
z
Choice of the logistics provider Gebrüder
Weiss, due to their strength in business with
Eastern Europe
z
Increase of the transparency of the supply
chain with the aid of a software solution
Project to Reorganize Transport
Logistics: Execution
z Project was launched in August 2001
z Project team included the Managing Director Procurement at Schiesser AG, an assistant and the head of Customs/Transport
z In collaboration with experts from Gebrüder Weiss and the software supplier inet-logistics
z In June 2002 the chosen software solution from the Application Service Provider (ASP) went into operation with two pilot
suppliers
z Next stage will include the 30 strategically most important suppliers out of total of 68 currently active suppliers
Critical Success Factors
z Prompt communication to affected people and their involvement in the project work
z Interfaces with other processes were involved early
z Implementation was completed faster than planned
z Communication of workforce cut back started when 80% of the project has been completed
Procurement After the Outsourcing of
Procurement Logistics
Description Level Characteristics New Characteristics Interim Characteristics Old z Central production plan z Decentralized order responsibility z Outsourcing of procurement logistics z Central production plan z Decentralized ordering responsibility z Central production planning and ordering responsibility z Central control of supply chain z Handling by distributor z Manual process steps z Delivery to production plants
zManual process steps
z Predominant handling by headquarter z Join communication platform -- --Strategy Process Systems
Procurement After the Outsourcing of
Procurement Logistics
Strategy
z
Transfer of sub process procurement logistics to the
globally active Austrian logistics company “Gebrüder
Weiss”
z
The 3rd party logistics provider takes care of
operational management of the supply chain, the
grouping of deliveries and customs clearance of
goods
Systems
z
Supply chain management is taken care of
by the information logistics solution provided
by inet-logistics
Costs and Benefits
z Reduction of personnel costs by 85%
z Transport costs cut by 34% (approx. € 65,000 p.a.)
z approx. 320'000 p.a. through outsourcing of customs clearance
z approx. 300'000 EUR p.a. through transfer of operational activities to the production plants
z approx. 200'000 EUR p.a. through outsourcing of monitoring
z Reduction in transport time
z 80% reduction in queries
z Reduction of fail deliveries
z Improved and observable delivery reliability
z Transparency of the supply chain for all the parties involved (approx. 12,000 purchase orders and 3,800 transport jobs are annually handled with 100 suppliers)
Summary
z
Increase of speed and transparency of the supply
chain
z
Real-time information exchange
z
Shortening of process times and the reduction of
process costs through central transshipment of the
goods
z
More efficient transport handling and reduction of
workload involved for Schiesser
z
Improvement of process quality by giving Schiesser
the possibility to react quickly to any imminent
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