Roadmap for outsourcing

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Roadmap for outsourcing

Chemical industry

Warehousing & distribution Customer Manufacturing Sourcing Assets & facilities Transportation

Supply chain management

GW ref. 9026X021/vBr/ version 2.0

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Agenda

• Introduction Groenewout

• Trends & Outsourcing

• Roadmap

• Critical dimensions

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GW ref. 9026X021/vBr/ version 2.0 Page 3

Groenewout is an international independent

professional firm providing a comprehensive range

of consulting services and transition support across

all industry sectors focused on business

improvement within supply chains and logistics.

Warehousing & distribution Customer Manufacturing Sourcing Assets & facilities Transportation

Supply chain management

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Multi-disciplinary supply chain & logistics

consultants

Independent professionals

Identification and realization of the opportunities

Over 38 years of proven success

Leader in logistics consulting

Pan-European playground

Added value as perceived by our customers

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Pan European marketplace

The grey-scale indicates our experience in the individual countries. This

excludes the dozens of pan European references.

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Quality measured by our clients

Cross industries

z Pharmaceutical

z FMCG

z (Fine) chemical

z After market / spare parts

z Home-improvement

z Electronics

z And … … …

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Agenda

• Introduction Groenewout

• Trends & Outsourcing

• Roadmap

• Critical dimensions

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Sector trends – chemical industry

• Growth

• merger activity in chemical industry

• biggest chemical manufacturers are getting bigger and bigger

• globalization of chemical manufacturers

• Reduce Costs

• chemical manufacturers are looking for ways to reduce costs by

concentrating on the manufacturing process

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Logistics trends – chemical industry

• Service Provider

• more difficult to find qualified service providers for the chemical industry

compared to other industries

• Growth chemical logistics sector

• merger activity in the chemical logistics sector

• globalisation of chemical logistics service providers

• specialists in chemical sector get stronger

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Chemical race to succeed…

Control the power of “

AND

”

&

Overcome the cruelty of “

OR

”

Trends &

outsourcing

For

essential

but

not core

activities

outsourcing can be considered

High quality

AND

low costs

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Indispensable

for business

Not Core

Required by

customers

to protect core

Consider

Outsourcing

CORE

Essential,

not core

Outsourcing decision: what services

Warehousing

• Handling

• VAL

• Order entry / Invoicing

• After sales service

• Return handling / Repairs

• Inventory management / VMI

Transport

• Merchandise

• Spares

• Specials

• Return flows

• Transport management

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Outsource d

ecision

Outsource: No

Outsource d

ecision

Outsource: Yes

Outsource: No

Financial

Product characteristics

Organization

Strategy

Dependency

Flexibility

Financial

Product characteristics

Organization

Strategy

Dependency

Flexibility

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Agenda

• Introduction Groenewout

• Trends & Outsourcing

• Roadmap

• Critical dimensions

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(Operational) Due Diligence

Request for Information

Negotiations & Contract development

Request for Proposal

TPL:

Provision of Services

Client:

TPL Management

Implementation

Service

Agreement

Letter of Intent

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RFI: Request for Information

GOAL

DESCRIPTION

DELIVERABLE

First invitation to potential partners to check if they are able to, and

interested in an outsourcing partnership

Document containing rough indication of the business:

Service area

Type of products and characteristics

Logistics requirements

Rough indication of volumes

Request for information document that is to be sent to 10 – 15 possible

candidates.

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RFP: Request for Proposal

GOAL

DESCRIPTION

DELIVERABLE

Formal invitation for up to 8 interested candidates to provide a quotation

for the outsourcing workload

Fully specified body of work document containing exact descriptions of the

business characteristics and requirements:

Origins and destinations

Delivery profiles per product (group)

Full specification of Logistics requirements

Detailed indication of future forecasted developments

Usually an order profile for a representative period of business is attached

for the candidates to base their quote on.

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Letter of intent

GOAL

DESCRIPTION

DELIVERABLE

Outline of the principal terms and understanding of the proposed

partnership subject to negotiations

Letter of Intent can be a one-page document or can be more extended, but

it will contain at least:

summary of project history (RFI and RFP related)

terms & conditions

proposed planning & milestones

overview services / financial deal shape, etc.

possibility to use a penalties structure

Signed document, stating the formal agreement with the proposed new

logistics services provider to start negotiations to come to a partnership

contract.

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(Operational) Due Diligence

GOAL

DESCRIPTION

DELIVERABLE

Acquire a clear and unbiased picture of the proposed partner’s operation.

Identify & verify risks and potential benefits to be gained from the proposed

partnership.

Before contract negotiations are initiated the 2 partners investigate each

others operation, to make sure the proposed partner is able to perform as

promised. Operational verification main area’s:

Information system

Volumes

Operations

Business plans

Operational verification is a two directions process

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Negotiations

GOAL

DESCRIPTION

DELIVERABLE

Come to a service agreement with the preferred logistics provider for the

delivery of the required services and level of performance at a competitive

cost

Negotiation Team & Preparation Team

Both teams have a mirrored structure

Preparation Team prepares the

Service Agreement documents and

feeds the Negotiation Team

Negotiation team negotiates

commercial issues and signs of the

mutual agreed items

Deliverable is a mutual agree on the outcome

PREPARATION TEAM

Client

Proposed partner

NEGOTIATION TEAM

Client

Proposed partner

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RELATIONSHIP

MANAGEMENT

PRICE, PAYMENT

AND DURATION

TRANSITION

MANAGEMENT

PERFORMANCE

LEVELS

SERVICE

SPECIFICATION

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Agenda

• Introduction Groenewout

• Trends & Outsourcing

• Roadmap

• Critical dimensions

• References

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1. Relational fit

¾

mutual beneficial

¾

co-operation

¾

cultural fit

2. Motivation

¾

mindset

¾

ambition

¾

goals

3. Capabilities

¾

from direct control to indirect control

¾

from logistics process to logistics monitor

¾

from logistics knowledge to outsource management

Implementation: 3 critical dimensions

Capabilities

Motivation

Re

la

tiona

l fit

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Do not outsource to solve your operational disorder.

Outsourcing after

optimization

maximizes the benefits.

The

contract pricing

model deserves specific attention. It should support

an

optimal fit

between the specific operational characteristics and the

financial risk.

Sustain specific

supply chain expertise

within your company, develop a

clear and dedicated

contract management

structure.

Create

partnerships

with LSP rather than a “commodity” cost reduction.

Outsourcing has an

irreversible component

, it is a strategic decision.

Be aware: (warehouse) outsourcing does

not automatically

bring

savings

.

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Agenda

• Introduction Groenewout

• Trends & Outsourcing

• Roadmap

• Critical dimensions

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Description

Voridian, an operating division of Eastman Chemical Company (NYSE:EMN), is the world’s largest

manufacturer of polyethylene terephthalate (PET) for packaging and a global leader in the manufacturing of acetate tow. Voridian currently runs several factories, warehouses and stock holding points in Europe.

Opportunities

Voridian wanted to know if the performance of its European supply chain met the performances of

comparable European supply chains. Besides, Voridian wanted to define possible business opportunities.

Solution

Voridian’s current European supply chain was reviewed. Alternative concepts based on redirection of good flows, producing product groups closer to the market and reducing the number of stock holding points in Europe were analyzed and compared.

Furthermore, the transportation lead times to the

customers of the several concepts and the implementation complexity were determined.

Benefits

2.5% quick wins by redirecting of good flows

10.5% transportation kilometers savings by producing two product groups closer to the market

16.5% transportation kilometers savings and 10% inventory savings by closing 6 stock holding points throughout Europe and producing two product groups closer to the market.

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Description

Client is an international manufacturer of protective coatings and paint.

Opportunities

Client wanted to improve the customer service and reduce costs of European distribution especially in relationship to transportation costs to France.

Solution

The client’s logistics data in France was compared with the benchmark figures available in the Groenewout database. Their transportation costs of the logistics service provider was rated above the market average. A tender procedure was developed for a new

transportation contract to France.

Benefits

10% reduction of transportation costs to France 30% additional cost savings were identified and

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Description

Outsourcing support for an industry leader in imaging products and solutions for the digital home and digital office environments.

Supply chain characteristics: short product life cycle, high value products, mainly non-European suppliers, trend towards European centralization, pan-European distribution.

Opportunities

To increase flexibility and reduce company asset costs in preparation of an organizational change, Client was committed to selecting a Logistics Service provider to outsource the complete UK Warehousing and Distribution activities

Solution

Groenewout supported the tendering process to evaluate the 4 remaining potential LSP partners. Besides

comparing the quality of the financial proposals, during live presentations by the LSP management teams, a risk assessment and overall impression formed part of the final evaluation criteria.

After selection of the preferred partner, Groenewout supported the Due Diligence and contract negotiation process between Client and the proposed Logistics Service Provider.

Benefits

With help of Groenewout, Client managed to complete Due Diligence and contract negotiations in a very tight schedule.

Within a two month period, a complete outsourcing contract was set up and agreed, covering a.o.

•a performance based Service Level Agreement

•TUPE transfer of 100 staff

•facility sale & lease back

•subcontracted contract migrations

•IT usage & Legal settlement

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Space for photo

Description

Nestle Purina PetCare (formerly Friskies) is a producer and distributor of pet food and accessories. Nestle Purina PetCare owns several factories and numerous

warehouses in Europe.

Opportunities

Friskies European Logistics team was committed to improve their distribution in terms of performance and costs for the Benelux countries and Germany.

Solution

Groenewout analyzed different alternative distribution networks. Caused by the uniqueness of articles per

country market, consolidation per country was determined to be the optimal short term solution.

After executing a benchmark analysis Groenewout proved to Nestle that particular contracts for warehousing were too expensive. The decision was made to contract with one logistics service provider to consolidate the German warehouses.

Groenewout developed a RFP for selecting a new logistics service provider operating in a multi-client environment. Subsequently Groenewout supported Nestle in the

Benefits

The selected service provider proposed:

10+% Cost reduction in German warehouse costs Increased quality and flexibility

Future opportunities

Creating overlap of articles between countries, product rationalization and changes in product sourcing will reduce the annual logistics costs significantly.