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How to Cut Cost and Reduce Risk in Transportation and Global TradepDominic Regan – Senior Director, Oracle Transportation Management
Integrated Logistics PlatformOracle Supply Chain ExecutionOracle Supply Chain Execution
Distributed Warehouse
Management
Oracle Transportation Management
Global Trade Management
Landed Cost Management
Labour and Space UtilisationI t C t l
Cost ControlProcess
Regulatory ComplianceS C
Accounting Accuracy
Inventory ControlCustomer Service
AutomationVisibility
Shorten Cycle TimeVisibility
Financial VisibilitySourcing
Supply Chain Execution Market ShareBased on Total Software Revenue*
* Gartner defines total software revenue as revenue generated from new licences, updates, upgrades, subscriptions and hosting, technical support, and maintenance. Professional services training and certification and hardware revenue is not included in total software revenue
Gartner, Inc., “Market Share, All Software Markets Worldwide 2010,” March 30, 2011, By Colleen Graham, Joanne Correia, Fabrizio Biscotti, Matthew Cheung, Ruggero Contu, Alan Dayley, Yanna Dharmasthira, Tom Eid, Chad Eschinger, Bianca Granetto, Hai Hong Swinehart, Teresa Jones, Sharon Mertz, Rene Millman, Chris Pang, Asheesh Raina, Dan Sommer, Bhavish Sood and Laurie Wurster.
Professional services, training and certification, and hardware revenue is not included in total software revenue.
The Challenges We’re HearingControl the Costs of Increasingly Complex Supply Chains:How do I set up my extended supply chain to support high volumes given the many, geographically dispersed, suppliers and partners?
!
“Companies that manage their global ecosystems most effectively are as much as 73% more profitable than companies with less capable value chains.” – Deloitte Consulting
Aligning with Corporate Sustainability Objectives:How can I balance my extended supply chain with my corporate goal of reducing carbon usage?
!
“Sustainability should be automatically and fully integrated into supply chain management, used both as a standard performance measure and a means of driving performance improvement throughout the value chain. ” – Gartner
Regulatory Compliance:How do I ensure my products meet compliance guidelines to avoid any impact on my supply chain?
!
impact on my supply chain?“The EU has adopted several Directives which restrict the use of certain substances and specifies collection, recycling and disposal requirements. Compliance could create shortages or impact the continuity of our supply.” – Lexmark Annual Report
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Reducing Supply Chain Costg pp y
Why Logistics Costs are Important– Logistics Cost Components
– Logistics Cost By Industry
Source: Capgemini 2005 Third-Party Logistics Study, A T Kearney
Transportation Management Opportunity
42.1%
40%
50%he
d Transportation Mgmt
28.9%30%
40%
s R
esea
rch
Solutions can Save Most Companies 5%-25%
13.2% 13.2%20%
Com
pani
es
Source: The Logistics Institute at Georgia Tech (companies with annual transportation spend > $10M)
2.6%
0%
10%
% o
f C
0%1-5% 6-10% 11-20% 21-30% x > 30% Savings Opportunity
Company with € 500,000,000 in annual salesSpends on average € 37,500,000 on logisticsOf which € 20,625,000 is spent on transportation
At 8% savings € 1,650,000 saved annually by investing in a TMS
What is a Transport Management System?
Source: “The Forrester Wave™: Transportation Management Solutions Q1 2008” January 2008Source: “The Forrester Wave™: Transportation Management Solutions, Q1 2008”, January 2008
Oracle Transport ManagementCustomer Advisory Board
Logistics Service Providers Manufacturing Retail
Customer Advisory Board
Top Areas of Cost Concern in TransportL L i ti C tLower Logistics Costs
ChallengeChallenge BenefitBenefit
Cost of ‘rush’ or expedited transport
• Reduced cost through better planning and exception managementp p
Cost of poorly
management
• Reduced cost through i d t tili ti
Cost of resolving
consolidated loads
• Reduced cost / improved
increased asset utilisation
freight invoice disputes
Cost of manual
cashflow via automated audit and invoice reconciliation
Cost of manual planning, execution escalation & analysis
• Improved productivity via automated tendering, planning and event mngmt
Top Areas of Cost Concern in TransportL L i ti C tLower Logistics Costs
ChallengeChallenge BenefitBenefit
Inefficient mode, carrier and/or rate selection
• Lower costs through single point of logistics data and best in class optimisationselection
Inefficient rate negotiation with
best-in-class optimisation
• Accurate analysis of actual freight volumes and rates
Inability to measure
negotiation with carriers
• Accurate transportation
freight volumes and rates, improving rate negotiation
Inability to measure ‘cost to serve’ and contract profitability
costs allowing identification of profitable business
Opportunity cost of unrealised new business models
• Flexible and configurable solution enabling deployment of new supply chain modelschain models
Achieving Benefits Quickly and IncrementallyF th M t I t t P bl Fi tFocus on the Most Important Problem First
PAIN POINTS LOW HANGING FRUIT STRATEGIC SOLUTIONPAIN POINTS LOW HANGING FRUIT STRATEGIC SOLUTION
Reducing MaverickSpend
Reduced TransportCosts
Identifying Best
Strategic Transportation‘Control Tower’
Effective Modal/CarrierSelection
S i h h bi i i d l i ddi i l l i i ll
Carrier Rate Effective CarrierRate/Bid Management
• Start with the biggest opportunities and plug-in additional solutions incrementally • Try to make the project self-funding by realising the value from each phase• ‘Good enough’ is often good enough, so replace legacy systems only where justified
13
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Reducing Supply Chain Riskg pp y
What is Supply Chain Risk?
Environmental Risk Sources (Earthquake, Flood, Disease, etc.)
Network Risk Sources ( Border Closures, Embargo, War, etc.)
Organisational Risk Sources (Strikes, Fire, Regulatory Violations, etc.)Organisational Risk Sources (Strikes, Fire, Regulatory Violations, etc.)
Source: Uta Jüttner, Helen Peck, Martin Christopher, 2003
What is Supply Chain Risk?
Air Freight: 2% by volume, 35% by value10 000 tons of goods airfreighted daily between Asia and Europe10,000 tons of goods airfreighted daily between Asia and EuropeIndustries affected most: High-Tech, Retail, AutomotiveUS$ 8m worth of perishable blooms destroyedUS$ 8m worth of perishable blooms destroyed
Source: Economist & NPR, 2010
What is Supply Chain Risk?
Ports handling as much as 7% of the country’s industrial output damaged,ti $3 4b i l t b t d dcosting $3.4bn in lost seaborne trade per day
Industries affected most: Consumer Electronics, AutomotiveTechnology supply chain likely to be disrupted for 1-3 monthsTechnology supply chain likely to be disrupted for 1 3 months
Source: Economist, Citi, Lloyds List, BBC, NPR, 2011
The Supply Chain Risk Spiral
LACK OF LACK OF VISIBILITYVISIBILITY
LACK OF LACK OF LONG LONG CONFIDENCECONFIDENCEPIPELINESPIPELINES
INCREASE INCREASE BUFFER BUFFER STOCKSTOCK
Source: Lee & Christopher, IJPDLM, 2004
The Impact of Supply Chain Risk
PhysicalPhysical
Informational
Financial
Risk through Globalisation
DistributionFinal
AssemblySuppliers
Customers
Component Manufacturing
TransportationThe “Manufacturing” Corporation
Then Supply Chain Planning & Execution
Now Value Chain Planning & Execution
DistributorsFinal
Assembly
CustomersComponent
ManufacturingThe Manufacturing
Corporation
3PL’s
Assembly
Suppliers
Manufacturing
R t il StSuppliers
Corporation
3PL’s
3PL s Suppliers Retail Store
Visibility and Risk – Automotive
Moving a vehicle from plant to dealer involves the coordination of several service providers, systems and transportation modes
Assembly Pl t
Order – 1 VIN
Plant Dealer
Loading Compound
Hand OverPlant
Ex-Gate
German Staging Dealer
VSC Port of Exitp Staging
Area
Body-Builder
Visibility and Risk – Industrial Mfg
Visibility and Risk – Oil & Gas
23
Visibility and Risk – FMCG
Origin Destination
Visibility and Risk – Retail
40’ standard container $ 1,800 968.43
- Ready To Ship- Packing
Zhejiang Supplier
BAF – per TEU at Aug ‘06 $ 296 318.25
CAF at Aug ‘06 7.80% 100.36
Terminal handling £ 69 69.00
D t ti £ 20 20 00
- Container stuffing- Stevedoring
TL
Port of
Documentation £ 20 20.00
Clearance £ 35 35.00
Port Authority security fee £ 10.50 10.50
Demurrage ( * * ) £ 16 00 0 00
INCOTERMS: FOB
NingboDemurrage (WK 2; 3-4 *2 ; 5-1 *4) £ 16.00 0.00
Inland delivery £ 265 265.00
£ 1,788.54
Port of
Ocean29 days
PO to Receipt6-12 weeks
TL
Port of Felixstowe
UK DC
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Reducing Supply Chain CO2g pp y 2
Sustainability in Grocery – Collaboration
Source: IGD, Feb 2001
Sustainability in Grocery – Collaboration
Source: TDG, Kellogg’s, Kimberley-Clark, 2008
Sustainability in FMCGT t O ti i ti
By using optimization technology to minimize empty
Transport Optimisation
By using optimization technology to minimize emptymiles, Kraft eliminated more than 500,000 miles(800,000 km) last year.
The company also removed the equivalent of 1 500The company also removed the equivalent of 1,500trucks off the road and more than a million miles (1.6million km) off the highway system by maximizingproduct per truckload.
Source: ARC Advisory Group, Logistics Viewpoint, 1 Dec 2009
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Controlling Global Tradeg
Typical Global Trade TransactionExport U.S. to EU
Product ClassificationEmbargo Check/ SPL Screening Export License Management
3 Import EU from U.S.Product ClassificationEmbargo CheckSPL Screening
4Import Mexico to USA
Product ClassificationEmbargo CheckSPL S i
2
Export License ManagementPrinting of Export DocumentsElectronic Communication (AES)
SPL Screening Import License ManagementFree CirculationTransit Procedures
SPL Screening Import License ManagementNAFTA
34
Transit ProceduresDuty & VAT Calculations Printing of Import DocumentsElectronic Communication 51
3 (NCTS, ATLAS, etc.) Export Europe to other countries
Product ClassificationImport China to USA1
25
Embargo CheckSPL Screening Export License ManagementPrinting of Export Documents
Import China to USA
Product ClassificationEmbargo CheckSPL Screening
1
g pElectronic Communication(NCTS, ATLAS, etc.)Trade Preference ProcessingRestitution Handling
Import License ManagementPrinting of Import Documents
GTM Impacts Many Processes
Global Trade Management
Oracle Global Trade ManagementBase Module
Key Business Benefits
Base Module
Key Features
• Master Trade Data Repository– Trade Party Master
• Centrally manage all trade related data worldwide
• Reduce redundant business– Trade Item Master
• Product Classification• Restricted Party & Sanction
• Reduce redundant business processes
• Provide visibility and collaboration to trading• Restricted Party & Sanction
Screening• Content Management
collaboration to trading partners
• Mitigate compliance risk
Oracle Trade ComplianceAdd-on Component
Key Business Benefits
Add-on Component
Key Features
• Compliance Rule & Policy Management
• Model own unique trade compliance globally
• Centralize trade compliance• Trade Transaction Management
• Trade Control Determination
• Centralize trade compliance screening on one platform
• Anticipate transactional compliance milestonesTrade Control Determination
– Licensing– Documents
compliance milestones• Mitigate compliance risk
– Other Controls
Oracle GTM Business Drivers
Trade
Trade Finance:• Post-Entry reconciliation & Audit
Compliance & Customs:• Risk mitigation & penalty avoidance
Trade Finance• Trade settlement
• Optimize use of strategic financial instruments (Letters of Credit, Open Accounts)
• Efficiency & process automation
• Achieve best practices
Global Trade Compliance Landed Management & CustomsCost
Landed Cost Management: Security:
Security
• Visibility to profitability
• Optimize margins
• Strategic sourcing decisions
• Secure supply chain strategies for Customs preferences
• Maintain compliance with Security initiatives
• Supply chain risk mitigation
Oracle GTM Value Proposition
Value propositionValue proposition– Automate and orchestrate cross-border transactions by
enabling companies to manage and control their trade compliance activities related to imports exports and othercompliance activities related to imports, exports and other types of regulatory, legal or company-mandated policies
Benefits– Accelerate supply chain and increase working capital utilization
Miti t l h i d li i k ld id b– Mitigate supply chain and compliance risk worldwide by centrally managing trade compliance
– Collaborate with trading partners g p– Maintain oversight, visibility and control of cross-border
transactions
Oracle Trade Compliance
Pain Points GTM Provides Benefits
x Lack of transaction-based visibility and control
Trade Transactions Management
Improve supply chain through proactively anticipating and executing compliance milestone requirementsmilestone requirements
x Risk exposure due to Reduce exposure to government audit finesp
lack of system controlx Inefficiency due to
manual processes
Trade Control Determination
government audit, fines, penalties, or the loss of import/export privileges.
x Lack of system control & flexibility to support global trade processes
Compliance Rule & Policy Management
Mitigate global compliance risksEasily adapt to changingglobal trade processes
worldwideManagement Easily adapt to changing
business models
SummaryB i B fit & E blBusiness Benefits & Enablers
C i ith b t i l l tfCompanies with best in class platforms…• Spend less on supply chain
• Deliver higher levels of service
• Have better information to make decisions – measure• Have better information to make decisions – measure performance on daily/weekly basis
A t t f ffi i d l bilit• Automate processes for efficiency and scalability
• Collaborate – integrate supply chain with internal processes and with trading partners
Where is the payback on our project?
Increase volumeIncreaseIncrease Increase price
Improve mixIncrease Increase
Increase Increase revenuesrevenues
Reduce production costsReduce distribution costs
&
profitprofit
Reduce Reduce tt Reduce R&D costs
Reduce marketing costs
Reduce admin costs
Increase Increase ROCEROCE
costscosts
Reduce admin costs
Reduce fixed assetsReduce Reduce capitalcapital
Reduce working capitalcapital capital employedemployed
For more about Oracle’s VCE Solutions: [email protected] stegwee@oracle [email protected]