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Future Trends of Logistics Strategy
A Normative Perspective
©Kenth Lumsden
1
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”Volvos recept för fusionslycka”
(Ny teknik, 060926)
©Kenth Lumsden
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Agenda
• Industrial trends • • • •
©Kenth Lumsden
Customer demand Function deliveries Industrial impacts Statements
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(EU, 2005)
1945 ©Kenth Lumsden
2030
2050 4
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Logistics cost as a percentage of US gross domestic product (1989 -2003) 12 10 8 6
Logistic costs (%)
4 Reduction rate ~ 2.2%
2 0 89 ©Kenth Lumsden
91
93
95
97
99
1
3 5
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LOGISTICS COMPLEXITY - LEAN PRODUCTION I
& m
x1
x1
A1
X1
v1
v1
X1 & m Freight flow = φ = v1 ⋅ A1
©Kenth Lumsden
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LOGISTICS COMPLEXITY - LEAN AND PARALLEL PRODUCTION V K = Capacity
LEAN PRODUCTION
x1
x1
K X2
v1 K1
Ki
Kn
x2
x2 v2
P1
P1
Complexity
P2
P2
X2
Increased performance of supply system
©Kenth Lumsden
Parallel flows Reduced unit capacity
n
K = ∑ Ki i =1
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Discussion based on the concept of ’The Japanese Sea’ • Flow speed – New system
• Reduced batch sizes – More consignments
• More controlling – Better information system
• More information – Focus on interfaces
©Kenth Lumsden
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Cost
Capital cost (product value)
Transport cost
”Transport time”
Paradigm: Capital cost – logistic cost ©Kenth Lumsden
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If T are to increase what is than needed? Cost
Capital cost (product value) Higher Transport Cost? Cost of Standard products Modules? Transport cost
”Transport time” T3
T2
T1
Paradigm: Capital cost – logistic cost ©Kenth Lumsden
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Annual 3PL/Contract logistics market revenue in the US 80 70 60 50 40
Revenue (BUSD)
30 20 10
Expanding rate = 14%
0 96 ©Kenth Lumsden
97
98
99
0
1
2
3 11
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Agenda
• Industrial trends
• Customer demand • Function deliveries • Industrial impacts • Statements
©Kenth Lumsden
12
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SUPPLY CHAIN and DEMAND CHAIN = Company in focus
Customer (Front tiers)
Supplier (Back tiers)
End customer (User) 1st tier
3rd tier 4th tier
Supply Chain - SC
©Kenth Lumsden
Distributors
2nd tier Demand Chain - DC
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Consequences on delivery set-ups = Company in focus
Customer (Front tiers)
Supplier (Back tiers)
End customer Supplier order Power Plans
“DDP or DDU” -Supplier responsibility Supply Chain - SC ©Kenth Lumsden
Customer demand Service Adaptation
“What ever” -Customer adaptation
Distributors
Demand Chain - DC 14
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SUPPLY CHAIN and DEMAND CHAIN Company in focus (old)
= Company in focus
Order
Order
Collaboration
Collaboration
Company in focus (new)
©Kenth Lumsden
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SUPPLY CHAIN and DEMAND CHAIN Company in focus (old)
= Company in focus
Driver of Supply
Order
Order
Collaboration
Collaboration
Driver of Collaboration Company in focus (new)
©Kenth Lumsden
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Flow Competition “Competition between companies”. Traditional paradigm.
“Not a competition between companies, a competition between Supply Chains”. Christopher M., 1995
“Not a competition between companies, not a competition between Supply Chains, a competition between Demand Chains”. Lumsden K., 2002 ©Kenth Lumsden
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SD CHAIN – Procurement of functions = Company in focus
Customer (Front tiers)
Supplier (Back tiers)
1st tier
3rd tier
1st tier 2nd tier
SC
©Kenth Lumsden
Distributors
DC
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Empirical findings Project focus
5
1 2
Cost Delivery service Environment
•87 % have cost focus •18 % have an external collaboration focus
Social
55
(Lindau et al.,2004)
©Kenth Lumsden
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Agenda
• Industrial trends
• Customer demand
• Function deliveries • Industrial impacts • Statements
©Kenth Lumsden
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LOGISTICS SYSTEMS FREIGHT
COMPLEXITY
Articles
P P
Supply Chain
MARKET
P
Product
ACCESSIBILITY
Consignments
Cross section
TRANSPORT
Vehicles
Network Chain
TRAFFIC
Infrastructure
©Kenth Lumsden
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LOGISTICS SYSTEMS ACTOR
FREIGHT
COMPLEXITY
Individuall
MARKET $
Money
$
$ $ $ $
$
Time FUNCTION Production Company -Design
P
P
P P
P
Production Company -Management
Interface
P
Articles
Supply Chain
$
P
Product
ACCESSIBILITY
Consignments
Cross section Logistic Company (Logistic Service Provider – LSP)
TRANSPORT
Vehicles
Network Chain
TRAFFIC
Society Infrastructure
©Kenth Lumsden
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Outsourcing ACTOR
FREIGHT
COMPLEXITY
Individuall
MARKET $
Money
Levels of OUTSOURCING $
$
Brand
$ $ $
$
$
Time
Design
FUNCTION P
Articles
P P
Supply Chain Production Company -Management
P
P P P
Subassembly Supply Chain
ACCESSIBILITY
Consignments
Cross section Logistic Company (Logistic Service Provider – LSP)
Production
Product
Warehouse Transport (3PL) TRANSPORT
Carrier Vehicles
Slot
Network Chain
TRAFFIC
Functional outsourcing
Production Company -Design
Society Infrastructure
©Kenth Lumsden
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Consequences of Function focusing Function
Interfaces Function definition Converted into Contracts
Modules
Standard Commodities ©Kenth Lumsden
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S/D CHAIN - General Interfaces = Company in focus
Function 1 suppliers Module 1 Customer (Front tiers) Function n suppliers Module n
Line of modularization
Merge In Transit Customazation
Distributors
©Kenth Lumsden
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Structural Changes Industry Share of Total Value Added GERMANY
JAPAN
SW EDEN
UNITED STATES
UNITED KINGDOM
45
40
%
35
30
25
20
02 20
00 20
98 19
96 19
94 19
92 19
90 19
88 19
86 19
84 19
82 19
80 19
78 19
76 19
74 19
72 19
19
70
15
Källa, IVA 2005
Source: OECD National Accounts
©Kenth Lumsden
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Egenförädlingen (i %) för svenska teknikföretag har trendmässigt minskat de senaste 30 åren
Procent
55,0 50,0 45,0 40,0 35,0 30,0 25,0
Förädlingsgrad svenska teknikföretag
20,0 15,0
Definition och källa: Egenförädling (%) = Förädling/Omsättning, Teknikföretagens årliga lönsamhetsundersökningar
2003 prel 2002 2001 2000 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984 1983 1982 1981 1980 1979 1978 1977 1976 1975 1974 1973 1972 1971 1970 1969 1968 1967 1966 1965 Källa, IVA 2005
©Kenth Lumsden
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ENKÄT
What is the probability that the following statements will be a reality? If choosing a manufacturing site today Sweden would not be the choise If choosing a manufacturing site today a OECD country would not be the choise If choosing a manufacturing site today a low cost country would be the choise If transfering the manufacturing from Sweden the product development would be moved If transfering the manuacturing it will be closer to the customer The manufacturing will be transfered to Sweden Up to 2010 the companies will increase their insourcing of manufacturing Up to 2010 the companies will decrease their insourcing of manufacturing
46 33 61 36 44 13 20 46
(IVA, 2004) ©Kenth Lumsden
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= Company in focus
S/D CHAIN – Function supplier Function Supplier
Function
End customer (User) Time
Supply Chain - SC
©Kenth Lumsden
Demand Chain - DC
Function contracting
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Product- vs Servicecost 100
Procent
80
60
92
89
88
88
Service Product
40
20
0
8
11
12
12
Aircraft
Truck
Machinery
Transport equipment (Accenture, 2005)
©Kenth Lumsden
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Agenda
• Industrial trends • Function deliveries • Customer demand
• Industrial impacts • Statements
©Kenth Lumsden
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Inventory, Automotive industry
Industrial flow
(Hellveg, 2004)
©Kenth Lumsden
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Sales sourcing
(3DayCar and ICDP, 2000) ©Kenth Lumsden
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From Lead-time to Capacity Variation Asymptotic Factory
Capacity
Customer Lead-time
Fixed Capacity (FC)
Capacity
Customer Lead-time
Variation in Capacity (VC)
Delivered Lead-time
Time
CLT = DLT
©Kenth Lumsden
Time
CLT = DLT
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Tool Manufacturer
Chip
Manufactur er
PC manufactur er
Webb side manufactur er
•Clockspeed increases closer to the final customer •Clockspeed amplification in the Supply Chain:
(Fine, 1995)
©Kenth Lumsden
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The Long Tail % ”80/20 regeln”
•Large article number 80 •Indirect article number (”linked”) •Connected business •E-business 50 •Virtual inventory •Software •“Print on demand” •Make to order
”50/20-regeln”
20
50
%
50
50
The Long Tail ©Kenth Lumsden
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Agenda
• • • •
Industrial trends Function deliveries Customer demand Industrial impacts
• Statements
©Kenth Lumsden
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TRENDS AND POSIBILITIES The Product • • • • • •
©Kenth Lumsden
Increased product value Subcomponents Modules of function ”Time to Cash” – TTC Digitalization of products Individualization
38
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Statements • Logistics and Transport of freight do not have a life of its own • Energy cost is not the critical factor, rather the availability of energy • The infrastructure will be there • Information technology has to be used more effectively in logistics ©Kenth Lumsden
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Magnitude of change (ΔD)
SYSTEM CHANGABILITY Ideological (Political network concepts)
Information (Abstract network components)
Mobile resources (Physical network components)
Infrastructure (Physical network)
Implementation time
©Kenth Lumsden
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Information and Flexibility
”Adding information is a way to reduce the number of alternatives – it is reducing the flexibility” (Lofti, 2005)
©Kenth Lumsden
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Tack för att ni lyssnade
Be careful, i might be back!
©Kenth Lumsden
42
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From Supply Chain to Demand Flow Chain
Flows
• Goes both ways • Goes down- and upstream • Responsibility in time
• Goes one way • Goes downstream • No responsibility the next second
©Kenth Lumsden
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