What’s about logistics?
Philippe-Pierre Dornier Professeur à l’ESSEC Managing Partner Newton-Vaureal & Co ESSEC
Philippe-Pierre Dornier Copyright
Why to be interested by logistics?
F
Logistics is everywhere 4
by the industrial companies : for 5 years Michelin does the reengineering of its logistics u u u
4 4
ESSEC
closing of numerous local warehouses in Europe (more than 100) building of large regional distribution centers (more than 20) Legrand, France Telecom, Alcatel…
by the distributors : a trend to subcontract their logistics by the services industry : the case of the new European Hospital in Paris (flows of sick persons, of medicine, of food, of wastes…)
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Why to be interested by logistics? F
A key point in the strategy of the company 4 4 4
logistics as a competitive advantage logistics as a service producer logistics cost money u u u
4
logistics need major investments with high level of risks u u
ESSEC
2% to 4% of the sales for the high value products 5% to 8% of the sales for the food industry about 10% of the sales and more for low value products 1800 and 2200 FF/m2, about 305? (without the ground and the operational equipment) larger and larger warehouses (not scarce to find building of more than 50000m2 with possibilities of extension to 100000m2) Philippe-Pierre Dornier Copyright
How logistics is changing? F
A logistics that need to be adjusted : 4
to the new industrial strategies that deal with the upstream flows u u u
4
to the new distribution strategies that deal with the downstream flows u
ESSEC
delocalisation focus factories postponement of the product
use of the logistics tools to renegociate the prices with the suppliers
Philippe-Pierre Dornier Copyright
How logistics is changing? INFORMATION FLOWS ENGINEERING
EXTERNAL
SERVICE LEVELS
COST
INTERNAL OU
COUT
FLOW
ESSEC
REVERSE LOGISTICS
MANAGEMENT PHYSICAL FLOWS Philippe-Pierre Dornier Copyright
Integrated Logistics Costs (en %) 100 % 98 % 95 %
Frozen costs
75 % 50 % Costs really spent 5% R&D ESSEC
Production Distribution After sales Philippe-Pierre Dornier Copyright
Some ideas about how logistics costs Value
Logistics costs
9% of the sales price - 1% by the branch - 4% by the logistics center - 4% by the supplyer
Retailer margin
14,5% in France 22,8% in UK 22,7% in Germany 18% in Spain
Stock
43 days in France (28 days in UK) - 12,8 days by the supplyer - 20 days in the logistics center of the distributor - 10,6 days by the branch
ESSEC
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Typical flow system Customers Sales forces Outbound process
Pull Flows
Order processing
Supply chain management of the physical distribution Supply chain management of the inbound process
Inbound process
Push Flows
Production activities
Marketing ESSEC
Philippe-Pierre Dornier Copyright
Effect of the deployment of focused factories Multi products factory
Focused factory
B ABCD ABCD ABCD
ABCD
A ABCD
ABCD
ABCD
D ABCD
ESSEC
C
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Global logistics flows for Essilor
0,7 Mp
1,1 Mp 2,6 Mp
8 Mp 0,9 Mp 16 Mp
Mp= Million de pièces Echanges intercontinentaux: 29 Mp ESSEC
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Delocalisation and focused plants Germany
France
United States TV
TV 17
TV 16/9
TV, Vidéo Table stéréo 25''/29''
53
1997 Poland
136
1OO
6 5
1991 Thaïlande TV Portable 14''
Spain TV Table mono 20''/21''
7
1993 Indonésia
50
Mexico
télécommande
TV portable et chassis
Tunisia
Modules électroniques
5
Singapoure vidéo (fermé en 1993) 22
1991 Thaïlande TV Portable 14'' 7
ESSEC
Europe occidentale
Year of the plant opening country products Manpower costs (base 100 in France) Philippe-Pierre Dornier Copyright
The global logistics model Functional integration
ILS ILS Purchasing Purchasing
MODULE local local continental continental
GLOCAL
GLOBAL LOGISTICS ECR ECR
world-wide world-wide
Geographical integration
Sectorial Integration MUTUAL
ESSEC
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The postponement effect on the warehouses Order Production on forecasts
Production by order
X X X
Small batches
Large batches
Plant
Stock with low variety
X X
Customized products
X X X
Warehouse ESSEC
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Main sectors involved in the logistics reengineering F
The B to B sector : from a wholesaler activity to a distributor activity 4
the distributors are much more customer oriented u u
F
The third party logistics 4 4
ESSEC
building of distribution regional centers building of national or european distribution center
recent economic activities a growth between 8 and 12% each year
Philippe-Pierre Dornier Copyright
Warehousing today is close to a plant process F F F F
ESSEC
The warehousing process make use of cross-docking organisation EDI, information and telecommunication technologies Production operations to postpone the product as close as possible to the customer Increased emphasis on time reduction : processing order daily, multiple and small orders
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Historical and traditional design
purchasing purchasing inbound inbound logistics logistics
branch branch
Sales Sales force force of of the the industrial industrial
outbound outbound logistics logistics
Intra Intra branches branches emergency emergency delivery delivery
ESSEC
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The The “delivery “delivery mill” mill”
F F F F F F F F
Preparation Preparation of of the the customer’s customer’s order order Replenishment Replenishment of of the the branches branches stocks stocks Massification Massification of of the the suppliers suppliers delivery delivery Improvement Improvement of of the the quality quality service service 4 4 4 4
ESSEC
stock-turn stock-turn of of an an SKU SKU in in each each branch branch twice a year (no stocked) twice a year (no stocked) ifif40 40branches branchesconnected connectedto tothe thedelivery delivery mil the stock-turn is 80 time a year mil the stock-turn is 80 time a year (stocked (stocked and and so so available available for for the the customer) customer)
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The third party logistics trends F
A new economic sector 4 4
4 4
F
less sub-contractor than supplyer 715 billions FF of logistics costs in Europe and 180 billions FF spent with the third-party logistics growth between 10 and 12% per year a concentration in process
The size of the contract is growing 4
october 1998 : IBM in Europe decided to work with third party logistics u u
ESSEC
Germany, Italie, France : Geodis (5 billions FF over 5 years) UK : Tibet & Britain Philippe-Pierre Dornier Copyright
E-business is F
Changing the definition of intimacy within the supply chain to a single consumer denominator 4
F
Changing customer service level expectations 4 4
F
ESSEC
small, individual orders a worldwide customer a short time order processing
Singular boundaries have merged, collapsing cycle times for demand development, distribution and delivery
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E-business changes the logistics environment F F F F F F F
Transactional Dealers Vertically integrated Make to stock Mass production Products Products cycles
Customer relationship Customer access
F F
Lifetime Multiple channels Networks
Value chain Production planning Manufacturing capability Basis of competition
F F F F
Innovation
ESSEC
F
Make to order Mass customization Products and services Continuous experimentation
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Why to deal with third party logistics? F
Focus on the core business u u u
F
Risk management 4
F
ESSEC
the products line and the market are changing faster and faster
Growing costs and investment needed by logistics activities 4
F
Carrefour, Auchan… Marrs/Unisabi, KJS… Alcatel, Renault, Peugeot...
optimisation of the financial resources
Building of an economical sector
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