![Page 1: The Logistics Chain and Competitive Strategy - OAS 2013... · The Logistics Chain and Competitive Strategy Presentación de: Paul E. Kent, Ph.D., Senior Vice President Infrastructure](https://reader031.vdocuments.us/reader031/viewer/2022022610/5b9516e409d3f2214e8c3e81/html5/thumbnails/1.jpg)
The Logistics Chain and
Competitive Strategy
Presentación de:
Paul E. Kent, Ph.D., Senior Vice President
Infrastructure Planning and Economics
Nathan Associates Inc.
Tel: 1-703-516-7830
FastPath
Welcome HelpAbout this Tool
Welcome to FastPath :A Computerized Transport Logistics
Diagnostic Tool
Define Scenario
.
Example Logistics Chain Exit
Created for USAID
by
Nathan Associates Inc .
Use Existing Scenario
and
Sophia Yu Consulting, Inc
Organization of
American States’
8o Meeting of the
Inter-American
Committee on Ports
![Page 2: The Logistics Chain and Competitive Strategy - OAS 2013... · The Logistics Chain and Competitive Strategy Presentación de: Paul E. Kent, Ph.D., Senior Vice President Infrastructure](https://reader031.vdocuments.us/reader031/viewer/2022022610/5b9516e409d3f2214e8c3e81/html5/thumbnails/2.jpg)
Presentation Topics
• Back to Some Business School Basics
• Applying Business School Concepts to
Transport Logistics Chains
• Upcoming Challenges in Latin America
• Possible Solutions for Greater
(Logistics) Competitiveness
2
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Back to Some Business School
Basics
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Back to Business School Basics
• Michael Porter underscored the need to assess competitive advantage in
terms of the various component activities and processes
• Value chain comprised of primary and support activities:
• Each activity assessed in terms of competitive advantage
• “Extended enterprise” is the vehicle to gain or lose competitive advantage --
the supply chain thus becomes the value chain
4
Primary Secondary
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and sales
- Customer service
- HR management
- Technology development
- Procurement
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Companies Have Changed Behavior in
View of Competitive Realities
• Companies traditionally sought cost reductions or
profit improvement at the expense of supply
chain partners
• Now companies seek to make the entire supply
chain more competitive through added value and
cost reduction – real competition has transitioned
from company vs. company to supply chain vs.
supply chain
5
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The New Realities
1. New rules of competition – the need to
create value delivery systems that are more
responsive to fast-changing markets and
are more consistent and reliable
2. Industry globalization – supply chains are
lengthened; time compression is a priority
3. Downward pressure on price
4. Customers take control
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Downward Pressure on Price
7
0
50
100
150
200
250
300
350
400
450
1980 1985 1990 1995 2000 2005
Pri
ce (
£)
Year
DVD
VCR
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Downward Pressures on Price
(continued)
• focus on JIT shifted inventory costs
elsewhere in the supply chain -- to suppliers
and customers
• True cost of inventory can be 25% or more per year of its
value; inventory costs include
- Cost of capital
- Storage and handling
- Obsolescence
- Damage
- Pilferage
- Insurance
- Management costs
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Customers Take Control
Source: D. Corsten and T. Gruen, “Stock-outs cause walkouts”, Harvard Business Review, May 2004
9
9%
15%
26%19%
31%
Do not purchase
item
Delay purchase
Substitute Different
brand
Substitute same
brand
Buy item at another
store
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New Realities, Old Story
“In 50 years. . .the cost of distributing necessities and
luxuries has nearly trebled, while production costs have
gone down by one-fifth . . . What we are saving in
production we are losing in distribution”
Ralph Borsodi, The Distribution Age, 1929 (!)
• The wider supply chain is perhaps the remaining
opportunity for significant cost reduction
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Applying Business School Concepts to
Transport Logistics Chains
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Why Transport Logistics Chain Efficiency is
Important – Economics Perspective
• Initial interest in shipping/transport costs
― Limao and Venables (2000) – 10 % increase in transport costs reduces trade volume by 20 %
― Radelet and Sachs (1998) – doubling shipping costs slows GDP growth by 0.5 %
• Recent growing (research) interest in port and transport logistics chain efficiency
― Clark, Dollar, Micco (2001) – port inefficiency increases distance by 60%
― Wilson, Mann, Otsuki (2003) – efficiency improvement in ports has greater impact than Customs improvements and use of e-commerce
― Hummels (2001): Inventory costs due to transport delays equivalent to 0.8 %/day of delay of the value of the goods being delivered
― Kent, Fox (2004) – assess impact of port inefficiency on welfare – port inefficiency, when mitigated, induces GDP growth by 0.47 percent
― Djankov, Freund, and Pham (2006) -- each additional day required for a shipment imposes “extra” economic distance of 70 km per day
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The Transport Logistics Chain
• Transport logistics chain consists of
assets (links and nodes) and processes
associated with moving freight
― links are associated with freight movements
(roads, rail, inland waterways)
― nodes refer to where freight is processed
(ports, distribution centers, dry ports, border
crossings)
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Supply Chain Concepts Are Applicable to
the Transport Logistics Chain
• Need to get away from port-centric
thinking
• Majority of transport logistics chain
(links and nodes) is outside control of
port operator
• Majority of assets are outside control of
supply chain managers
14
important
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Clarity in the Transport Logistics
Picture
Entre, entre, por favor, toma un asiento
Between, between, please, drink a chair
Come in, come in, please have a seat
Understanding of transport logistics
needs clarity
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The need for a transport logistics
diagnostics tool
• Vast majority of logistics software devoted to supply chain
planning and management
• Most assessment tools devoted to single mode or node
―Lack holistic approach to transport logistics chain analysis
• Government and industry need ability to:
―Benchmark performance relative to historic performance and
global standards
―Measure impact in industry terms
―Identify and optimize solutions
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FastPath Schematic of Buenaventura-Bogotá Corridor
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Impact of Reducing Congestion Delay
by 30 Minutes at Each Point
• Bogota-Buenaventura Route
―Total volume = 351,322 TEUs• Imports – 175,661 TEUs
• Exports – 32,934 TEUs
―Import truck trips - 112,696 TEUs
―Full export truck trips: 22,226 TEUs
―Empty TEU export truck trips: 71,363 TEUs
―Total truck trips in both directions: 206,285
• 6 road bottlenecks
• Reducing congestion delay by 30 minutes at each bottleneck: total potential saving time is 3 hours. Current travel time between Buenaventura and Bogota is 30.5 hours, assuming 10 hours rest time
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Upcoming Challenges in Latin America
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Reduced Congestion Delay
Impact (continued)
• With the reduction of travel time and resulting truck productivity improvement, the same volume of containers could be handled using only 185,995 truck trips
• If the original number of trucks remains constant, the number of additional cargo volume that could be transported is about 34,500 TEUs
• Assuming a 100 truck company, operating costs reduced by 8 percent
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Colombia’s Transport Logistics
Challenges
• Panama Canal effect
―Deployment of larger fleets
• Decreased frequency of calls
• Higher peak load volumes
21
Period Workload Factor Increase
1975-2013 700+%
- mid-1990s (introduction of K and S Class Ships) 49%
- 2006 (introduction of E Class Ships) 69%
- 2012 (CMA CGM Marco Polo + EEE Class in
2013)
17% (estimated)
Source: Jeffrey Martin, Sally Martin, and Stephen Pettit, “Container ship size and the implications on port call
workload”, presented at IAME Conference, France, 2013 (based on experience in Northern European terminals)
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Challenges (continued)
• Higher peak load volumes
―Challenge terminal efficiency
―Require increased investment
―Who pays? Costs likely to be passed on to
shippers
―Greater stress on hinterland routes
22
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Possible Solutions for Greater
Competitiveness
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Possible Solutions for Improving Transport
Logistics Chain Performance
• Eliminate bottlenecks in national transport logistics system
― Identify problems by conducting transport logistics diagnostics
― Assess efficacy of proposed solutions
― Truck entry control system in port cities?
• Consider integrated Intelligent Logistics System
• Promote partnerships/collaboration
― Rationalize logistics assets, marketing, services via “co-opetition”
― Promote collaboration among public and private logistics players• Consider establishing National Logistics Council
• Increase trucking fleet utilization efficiency
― Establish freight auction exchange
24
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Intelligent Logistics System
25
Dry port
Source: ILS concept developed by Paul E. Kent, Ph.D., Nathan Associates Inc., [email protected]
Port/truck
staging area
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Components of Intelligent Logistics
System
• Network of dry ports and truck staging areas
• Monitoring and control IT technologies –
GPS/smart seals, data exchange
technologies
• Services to trucks, cargo, and drivers
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27
Framework for the Intelligent
Logistics System
Truc k S taging A rea
(expor ts only )
Inland C ontainer
Dep ot
R oad/R ail/Inland
W at erw ays
P o rt H in ter la nd T ra ns po rt S ys te m
Secure Network with
fixed or mobile
Control Center
Smart Sensor Network:
- indoor/outdoor fixed and mobile
location tracking
- smart seals
- other application specific sensors
Mobile Device: real-time access to all
secured data including:
-Complete logistics movement tracking
and subsequent identification of all key
personnel and cargo end-to-end
-Security/sensor feeds (including
audio/video/imaging)
-Event/incident management
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Truck Staging Area / Dry Port
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The Logistics Chain and
Competitive Strategy
Presentación de:
Paul E. Kent, Ph.D., Senior Vice President
Infrastructure Planning and Economics
Nathan Associates Inc.
FastPath
Welcome HelpAbout this Tool
Welcome to FastPath :A Computerized Transport Logistics
Diagnostic Tool
Define Scenario
.
Example Logistics Chain Exit
Created for USAID
by
Nathan Associates Inc .
Use Existing Scenario
and
Sophia Yu Consulting, Inc
Organization of
American States’
8o Meeting of the
Inter-American
Committee on Ports