APEC e-Trade and Supply Chain Management Training Course(Phase III: Logistics Management) Case Study of Supply Chain Integration 2010 November 10 Shinichi Ishii, Dr. of Eng. Strategy Group Member in GS1/T＆L IUG Expert in ISO/TC8, ISO/TC104, ISO/TC122 and ISO/TC204 Expert in UN/CEFACT/TBG3 Senior Manager for Business Strategy Consulting department Nomura Research Institute, Ltd. CONTENTS 1. Issue in Supply Chain Logistics 2. SCM Theory based on real life 3. Case Study 4. New Initiatives Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. 1 1. Issue in Supply Chain Logistics Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Logistics Chain End to end (door to door) transportation system trader supplier retail trader Flow of Products ( Goods) Depo Logistics center Container Yard Container Yard Vender Logistics center Depo Retail Flow of information 3 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Parties on Logistics Chain – Many and Diverse － Shippers (Consignor), exporters, importers, Consignee － Cargo Agents － Forwarders － Shipping agents, shipping lines － Terminal operators － Customs brokers － Drayage companies, land transport － Warehouses － Insurance － Bank: International Bank for L/C, B/L － Authorities ( CIQ) 4 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Problem in Each Logistics Party Lack of Sharing information Discontinuity of information flow because of behind computerization for small and medium sizes business, Re-entry system of Data on cargo Declining Papa overstock Parts Supplier overstoc k Assembler DEAD STOCK & OVERSTOCK Logistics Center Distribution Center Data Re-entry Mis-match for Demand Different formats of invoice, packing list Multiples barcodes must be attached ama Stores Congested Mega Stores Environment, Road Traffic Congestion NOx CO2 Truck Companies Wrong Delivery! Retailers Individual Home Low Occupancy Rate of Fleets Many Frequent Delivery absence at home A Parcel A Home Delivery service Re-delivery Individual Home Ordering from same individual causes different deliveries with internet shopping Re-delivery is usual because of absence at home when delivery Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Individual Home 5 Requirements for Supply Chain Management ・Changes happen every day from demand side ・Quick Response for Demand ・Minimizing both opportunity loss and inventory volume (trade-off) ・Management not based on intuition and experience but on scientific and logical analysis 6 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Logistics Exploiting IT Delivery system for Electronic Commerce Inventory reduction through whole supply chain Enhancing Logistics Management Increasing security for cargo delivery Improving environment and cost reduction based on improving fleets management Increasing efficiency for interfaces with governmental regulatory requirement for approval Parts Factories Assemble Factories Forwarder Truck Forwarder Maritime Transport End User Wharehouses Truck 12345 78910 7 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. One more issue for Global Logistics ○Impact of the Event of September 11 Enhancing Security Counter measurements for security in the US（CSI：Container Security Initiative,C-TPAT:the Customs and Trade Partnership Against Terrorism,SST:Smart&Secure Tradelane) ○Cargo Movement Transparency for Security Visibility Tracking and Tracing Device →RFID（Radio Frequency Identification, IC Tag etc） 8 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Multi-Organizational Approach to Standards Development INTERNATIONAL ORGANIZATIONS World Customs Organization (WCO) Facilitation Directorate International Electrotechnical Commission (IEC) e-Business MOU TC 9 RAIL JTC 1 SC 31 International Standards Organization (ISO) Trade Facilitation MOU e-Business MOU TC 8 United Nations Economic Commission for Europe (UNECE) UN/CEFACT SC 10 PTC e-Business MOU TBG International Telecommunications Union (ITU) International Maritime Organization (IMO) MSWG ITU-T BEST SG 16 RFID MOU SC 11 TBG 3 IMSC SC 32 LIAISON TC 104 DMWG SC 4 Technical Committee 104 - Freight Containers Subcommittee 4 - Identification and Communication Working Group 2 - RFID TC 154 Technical Committee 154 - Processes, Data Elements and Documents in Commerce, Industry and Administration Technical Committee 8 - Ships and Marine Technology Subcommittee 10 - Computer Applications Subcommittee 11 - Intermodal and Short-Sea Shipping JMA Technical Committee 204 - Intelligent Transport Systems Working Group 1 - System Architecture Working Group 4 - Automatic Vehicle and Equipment Identification (AVI/AEI) Working Group 7 - General Fleet Management and Commercial/Freight TC 204 WG 1 WG 4 Working Group 7.2 - Road Transport Interfaces/ Freight and Fleet Systems WG 7 REGIONAL/COUNTRY SPECIFIC ORGANIZATIONS American Association of Port Authorities (AAPA) Terminal Operators & Port Authority (TOPAS) American National Standards Institute (ANSI) ASC X12 EDI Institute of Electrical and Electronic DISA SCC 32 (ITS) ebXML MOU Category A Liason Organization for the Advancement of Structured Information Standards (OASIS) Comite Europeen de Normalisation (CEN) CEN 278 UBL TC CEN/BT/WG/41 ASC X12I Acronyms KEYCopyright（C） and Summarized2010 Descriptions Freight Standards Organizations follows. NomuraforResearch Institute, Ltd. All rights reserved. IEEE 1512 HAZMAT 9 2. SCM Theory based on real life Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Transport vs Logistics (Transport Business) ・Facility based industory, Network Industry ( For instance: Logistics center and delivery network) ・Scale of Economy, Load Factor, Improved efficiency with avoiding demand concentration to the facilities ・High Rate of Operation is achieved by Efficient use of Land, Facilities, Equipment, Buildings, Time, Human Resources (Logistics) ・Delivery of Appropriate commodities for appropriate place, timing within the constraints of cost and fleet management depending on market demand. ・Timing for market Demand is Appropriate ・Mathematical Planning and Optimization Theory, Mot manual but computer! 11 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Logistics is infrastructure for Supply Chain Management Important elements for Supply Chain management ・Timing( Appropriate time for delivery) ・Quick response with Speed ・Control for logistics ・Traceability 12 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Bull Whip Effect Gaps between Plan and Actual Sales with Bull Whip Effect The case of sales with Personal Computer Quantity 60 50 Plan for Purchasing Order 40 30 20 Actual Sales 43 41 39 37 35 33 31 29 27 25 23 21 19 17 15 13 11 9 7 5 3 0 1 10 Time 13 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Example of information sharing between companies to meet customer demands ② Planned short-cycle rolling Purchasing order / Purchasing plan information Procurement Plan Production Plan ① Improved forecasting accuracy Sales Plan Customer needs information / Plan information Supplier ④ Planning information shared with supplier ③ Plan readjustments by each order Emergency orders / order changes, others Customer ⑥ Understand and warn gaps between plan and actual operations ⑤ Provide instructions for carrying out the ever-changing plan Materials Procurement Purchasing Activities Production Activities Sales Activities Delivery commitment (ATP) 14 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. 3. Case Study Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Tracking and Tracing System with Global Logistics Providing inventory information through intermodal transport between Asia and North America Customs Consignor Logistics Center Consignee Asian Countries Land Transport 1 Land Transport 2 Asia U.S. Inventory status for Item No.69A7(Meg Hard Drive) are as follows; Waiting Dispatch Advice 25,551/ Just Completed loading 20,000/ On board 875/ Processing Customs Clearance 1,000/ Land Transport for Distribution Center(L.T.1) 125/ Distribution Center 500/ Land Transport for Customers(L.T.2) 1,000 Item No.69A7,Description;400 Meg Hard Drive Dispatch 25,551 Loading 20,000 On Board 875 C.P 1,000 L.T.1 125 D.C. L.T.2 500 1,000 16 Source) Professor Stanford University Copyright（C） 2010 Nomura S.J.Won Research Institute, Ltd. All rights reserved. No Inventory – Assembling and Delivery system based upon Orders Extreme Reduction of Lead time with Direct logistics model Large Lead time reduction リードタイムの大幅な縮小 Minimum case only 4 days for delivery 4 日で納品可能に 最短 is Customs Clearance Xiamen Factory Airlines 中国東方航空 Xiamen Airport l provided the Government with one year production plan and AirFedE ｘ Transport 佐川急便 Transportation plan. Dell requested to increase frequency of direct air transport Service to Japan. Since March 2001, 6 flights( to 3 kansai and 3 Chubu )a week transport the cargoes To Japan. Customs Clearance Order Status System 厦門工場から日本の物流拠点まで Tracking and Tracing with 29 Checkのpoints チェックポイントで製品をトレーシング between Xiamen Factory and Distribution ＝ 「オーダーステータス」システム Center in Japan 29 Chubu Airport or Kansai Airport Kansai Distribution Center Customers Realizing low cost and short lead time logistics operation with direct flight between Xiamen and Japan 17 Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Extremely high performance of inventory turnover Major Electronics Manufactures performance Comparison in 2005 Dell established advanced Global Supply Chain system Inventory Turnover = Cost of Sales/Inventory per Year Operating Profit Annual Turnover 100 Gross Profit （Gross Profit Ratio:粗利率） Annual Turnover ROA Dell Return on Asset 90 Annual Turnover Total Asset 80 Annual Turnover Inventory (Inventory Turnover Cost Inventory Ratio:在庫回転率) 70 60 50 Pana Sony Sharp CANON DELL NOKIA 40 Average Inventory (Day) 30 20 57 48 69 115 -37 -32 -143 4 26 45 -26 10 0 0% 10% 20% 30% 40% 50% Gross Profit Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Cash cycle ( Day) -63 60% = Deferred Payment Duty – Accounts Receivable – Average Inventory Global Supply Chain Management of Automotive Industry Fiscal Business Plan for manufacturing On Every October, review and create next three years business plan By December, Detail business plan by categories, regions, markets (individual product for regions) Review every six month Monthly Business Plan for manufacturing The first week of every month, purchase orders from local dealers to local sales companies Dealer’s Order is for next three months On 15th every month, Local sales companies decide an order to headquarter ( Regarding this order, sales companies have to buy from headquarter) and new order for next three month Confirming suppliers’ Capacities and Inventory, 14 days prior to next month manufacturing Final product allocation to domestic and foregin(export), 11 days prior to next month manufacturing Decide detail specification for individual car excluding coloring It is possible for domestic market user to decide and change coloring Source) World Business Review Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Buyer’s Consolidation Enhancing apparel department in China for mega-retailers Starting Buyers Consolidation Business with use of licenses with total logistics business in China Apparel Factory Port China 中国 在庫 Inventory 流通加工 Vanning （検針、検査、アソート） Customs clearance バンニング 通関など Logistics Center Japan 日本 Customer’s Distribution Center Consolidation Service Containerizing by Shippers 荷主ごとにコンテナ化 Maximum Cost 40% の by 30%最大 30% ～Reduction 40% 大幅な物流コストの削減 Processing and Distribution Center Qingdao, Shanghai Consolidation Service Customs 通関 Clearance Inventory在庫 Dividing仕分け Processing 流通加工など Port B港 【 青島・上海センターの拡充】 Capacity Expansion with Qintao and Shanhai Distribution Centers ? Qingdao Center ?青島センター 300 万枚→ 600 万枚 3million→6million ?上海センター ? 180 400 万枚 万枚→ Shanghai Center 1.8million→4million EDI Platform EDI ほかシステムプラットフォーム Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. 【Requirement from Customer】 【アパレル業者のニーズ】 ? ?リードタイムの短縮化 Reduction of lead time ?ロジスティクスコスト低減 ? Reduction of cost ? ?良品のみの決済 Payment for only inspected items ? Tracking for cargo 20 VMI Logistics Expanding its logistics system by using specialty with logistics for only electronic part, that request specific knowledge and know-how Providing High Quality of Vender Managed Inventory depending customer requirement enable their customers to decide to continue using Alpus Parts suppliers China 中国 Japan 日本 Out sourcing China 在庫 Inventory 通関 Customs clearance ピッキング Picking 払出 Packaging Assemblers Lead time reduction VMI Warehouse China （Tianjin、Dalian、Shanghai etc.） System Platform システムプラットフォーム Developed system by herself, providing customers with both system itself and logistics operation ? It is not easy for Customers to change Alpus logistics to other logistics provider ? 【Requirement of Electronic parts suppliers】 Cost reduction of investment for logistics center ? Cost reduction for logistics operation Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Function of VMI warehouse 【 VMI 倉庫の機能】 - controls inventory and delivery of parts for ? 部品ベンダーに代わって部品在庫を管理し、組立て designated places by assemblersJIT on behalf of suppliers メーカーから指定された場所に で配送 48 hours delivery system to customers with instruction ? ユーザーである組み立てメーカーから出荷指示を受 ofけた後、 assemblers 48 時間以内に中国各地の生産拠点に納品 21 Just In Time logistics with end to end Just In Time(JIT) Transport to Total Logistics service provider through Intermodal Transport Diversifying customer with obtaining management ability of Total Value Chain Alliance with COSCO Other Ocean Carrier の持つ経営資源 Land 内陸 Transport 輸配送 Terminal Operation ング 3: 3-4 Small vessels 外航海運（定期航路、小型船 International Shipping line( liner service)～４隻） 1隻） 内航海運（対日本・タイ、小型船 Domestic Shipping line : 1 Small vessel Terminal Operation 内陸 Land 輸配送 Transport 郵船航空サービス Air Transport for air cargo （航空貨物サービス） New Profit Source Previous profit generator but now facing heavy competition New Profit Source Realizing total value for customers トータルな顧客価値の実現 High Value added Logistics Service Collecting and providing 日本郵船の強みの集大成 competitiveness Customer involvement - Just in Time delivery service for automotive manufacturers in Guangzhou and Shanghai - New profit sources with Customs clearance service and terminal operating - Providing Modal diversity with International, Domestic, Air etc… for consumers - Promoting as a Provider of total logistics solution for automotive manufacturers Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. 22 4. New Initiatives Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. The main issue is enhancing Global Supply Chain Visibility Manufacturers are trying to reduce lead time and inventory. Manufacturing automation ( Transparent) + Logistics to delivery (Black box) If in case of recall, VISIBILITY into supply chains is necessary Recycling Sorting by Store Aggregation Re-sorting Sorting Consumer In order to have VISIBILITY, it is essential to have…… Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Shipper (manufacture) ’s / Consignee (Retail) ’s expectations are more advanced and sophisticated than we thought ■SPEED : Wishing to reduce processing lead-time while complying requirements. ■QUALITY : Wishing to have logistics information systems which enable us to take agile actions by means of capturing exceptions precisely and timely within entire supply chain for better asset management. ① Reduce man-hours and lead-time related to the entire business processes ② Manage inventory uniformly regardless of the transportation company. ③ Quickly understand inventory situations, not only for on hands but also in transit, thus attain an uniform global grasp ④ Evaluate transportation results and use them for further transportation planning. . ⑤ Flexibly change delivery point, quantity, or mode of transportation. ⑥ An alarm sounds when the inventory level becomes too low or too high against standard. Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Concept : Pipeline Inventory Control ( Manufacturing + Logistics = One Controlled Process) Short Sea : Intra Asia within a week , But what happen in Deep Sea for North America and Europe 1 day Manufacturing Land transport 2～4 day Store 5~8 day loading & unloading Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. 9~14 day 15~21 day ・・・ Shipment Customs clearance Delivery Sales GS1 EPCglobal/TLS Global Pilot Tests supported by METI, JP Phase 3 Phase 1 Tokyo → Amsterdam Electronic Goods Ocean February 2009 Hong Kong → Tokyo Footwear Ocean February 2007 Fully automated reading of tags (fixed readers) Use of electronic seals on container (proof of closure) Parties involved are AEO (Authorised Economic Operator) Involvement of Customs (use of UCR; draft of “green lane”) Handheld readers Connect EPCIS’s in several countries Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Phase 2 Shanghai → LA Electronic Goods Agricultural Machinery Air, Ocean, Overland February 2008 Handheld readers Hibernating active tags in plane Connect EPCIS’s in several countries between different industries Review and new Direction Did we develop useful standards for user (Industries)? The pilots told us about potential benefits but difficulties for implementation Synchronization is need with not only RFID products but applications combined with RFID, Middleware and database for sharing real time data. METI, Japan organized a committee for discussing and developing a standardized platform for cargo visibility in cooperation with MLIT Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Not only Hardware but Software much more important Benefit over Investment Cost, Who will invest? Visibility is just an infrastructure for efficient SCM. Reduce Inventory, improve productivity of logistics operation, reduce lead time, decrease opportunity loss, User must develop benefits if they believe in the robustness of RFID. Prices for IC-tags are already coming down. However hardware can not be activate without software!! Software is still very expensive because of non-standard. Standard development is very slow There are some international standard development organizations related to global supply chain. Trade, Transport , Customs, Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Communication architecture among RF, Database and User User Internet Accessing Application Data Base Database Capturing Application ALE Middleware Reader IC-Tag Products with RF-tag Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Next Target is Interoperability of Global ID Code and Database Japanese Government(METI)’s Approach From APEC to the worldwide accounting management Shipper Production management Information to be shared Accounting management Operation management Logistics trader DB Database Standard interface Systemized code Sales management DB Internet Shipper repository Terminal repository Customs repository Shipping company repository Terminal repository Customs repository Logistics provider repository Production system RFID Customs system AIS TOS Customs system RFID Plant Container terminal Customs of the exporting side Ocean-going vessels Container terminal Customs of the importing side Warehouse Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved. Contact Information Thank you very much for your attention Shinichi Ishii Senior Manager Nomura Research Institute, ltd. [email protected] Copyright（C） 2010 Nomura Research Institute, Ltd. All rights reserved.