what’s about logistics? - essecfaculty.essec.fr/pp.dornier/pdf/conference-model.pdf · the third...

ESSEC Philippe-Pierre DornierCopyright

What’s about logistics?

Philippe-Pierre DornierProfesseur à l’ESSEC

Managing Partner Newton-Vaureal & Co


Why to be interested by logistics?

F Logistics is everywhere4 by the industrial companies : for 5 years Michelin does the

reengineering of its logisticsu closing of numerous local warehouses in Europe (more than 100)u building of large regional distribution centers (more than 20)u Legrand, France Telecom, Alcatel…

4 by the distributors : a trend to subcontract their logistics4 by the services industry : the case of the new European Hospital in

Paris (flows of sick persons, of medicine, of food, of wastes…)


Why to be interested by logistics?

F A key point in the strategy of the company4 logistics as a competitive advantage4 logistics as a service producer4 logistics cost money

u 2% to 4% of the sales for the high value productsu 5% to 8% of the sales for the food industryu about 10% of the sales and more for low value products

4 logistics need major investments with high level of risksu 1800 and 2200 FF/m2, about 305? (without the ground and the

operational equipment)u larger and larger warehouses (not scarce to find building of more

than 50000m2 with possibilities of extension to 100000m2)


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 delocalisationu focus factoriesu postponement of the product

4 to the new distribution strategies that deal with the downstreamflows

u use of the logistics tools to renegociate the prices with the suppliers


How logistics is changing?

COSTO U C O U T

SERVICE LEVELS

INFORMATION FLOWS

PHYSICAL FLOWS

EXTERNAL

ENGINEERING

MANAGEMENTFLOW

REVERSE LOGISTICS

INTERNAL


Integrated Logistics

5 %

50 %

75 %

95 %

100 %

R & D Production Distribution After sales

Frozen costs

Costs really spent

Costs (en %)

98 %


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 UK22,7% in Germany18% 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


Typical flow system

Push Flows

Supply chain management of the inbound process

Customers

Supply chain management of the physical distribution

Production activities

Marketing

Inbound process

Outboundprocess

Pull Flows

Order processing

Sales forces


Effect of the deployment of focused factories

B

A B C D

A

C

A B C D

A B C D

A B C D

A B C D

A B C D

A B C D

A B C D

Multi products factory Focused factory

D


Global logistics flows for Essilor

2,6 Mp

0,7 Mp 1,1 Mp

8 Mp

0,9 Mp

16 Mp

Echanges intercontinentaux: 29 Mp

Mp= Million de pièces


6 5

Europe occidentale

Mexico

United States

Spain

Tunisia

France GermanyPoland

Thaïlande

Indonésia

Singapoure

TV

TVportable et

chassis Modulesélectroniques

TVTable mono

20''/21''

TV, VidéoTable stéréo

25''/29''

TV 16/9TV

TVPortable 14''

télécommande

vidéo(fermé en 1993)

1997

1991

1993

1OO

13653

50

17

7

5

22

ThaïlandeTV

Portable 14''

1991

7

Year of the plant openingcountryproductsManpower costs (base 100 in France)

Delocalisation and focused plants


GLOBALLOGISTICS

MODULE GLOCAL

MUTUAL

Geographical integration Sectorial Integration

Functional integration

The global logistics model

local

continental

world-wide

local

continental

world-wide

ILS

Purchasing

ILS

Purchasing

ECRECR


The postponement effect on the warehouses

Production on forecasts Production by order

X

X

X

X

X

X

X

X

Smallbatches

Stock with low variety

Large batches

Plant

Customized products

Warehouse

Order


Main sectors involved in the logisticsreengineering

F The B to B sector : from a wholesaler activity to adistributor activity

4 the distributors are much more customer orientedu building of distribution regional centersu building of national or european distribution center

F The third party logistics4 recent economic activities4 a growth between 8 and 12% each year


Warehousing today is close to a plant process

F The warehousing process make use of cross-dockingorganisation

F EDI, information and telecommunication technologiesF Production operations to postpone the product as close

as possible to the customerF Increased emphasis on time reduction : processing

order daily, multiple and small orders


Historical and traditional design

branchbranch

purchasingpurchasing

inbound logisticsinbound logistics

Intra branches

emergency delivery

Intra branches

emergency delivery

outbound logisticsoutbound logisticsSales force

of the industrial

Sales force

of the industrial


The “delivery mill”The “delivery mill”

F Preparation of the customer’s orderF Replenishment of the branches stocksF Massification of the suppliers deliveryF Improvement of the quality service

4 stock-turn of an SKU in each branchtwice a year (no stocked)

4 if 40 branches connected to the deliverymil the stock-turn is 80 time a year(stocked and so available for thecustomer)

F Preparation of the customer’s orderF Replenishment of the branches stocksF Massification of the suppliers deliveryF Improvement of the quality service

4 stock-turn of an SKU in each branchtwice a year (no stocked)

4 if 40 branches connected to the deliverymil the stock-turn is 80 time a year(stocked and so available for thecustomer)


The third party logistics trends

F A new economic sector4 less sub-contractor than supplyer4 715 billions FF of logistics costs in Europe and 180 billions FF

spent with the third-party logistics4 growth between 10 and 12% per year4 a concentration in process

F The size of the contract is growing4 october 1998 : IBM in Europe decided to work with third party

logisticsu Germany, Italie, France : Geodis (5 billions FF over 5 years)u UK : Tibet & Britain


E-business is

F Changing the definition of intimacy within the supplychain to a single consumer denominator

4 small, individual orders

F Changing customer service level expectations4 a worldwide customer4 a short time order processing

F Singular boundaries have merged, collapsing cycletimes for demand development, distribution anddelivery


E-business changes the logistics environment

F TransactionalF DealersF Vertically

integratedF Make to stockF Mass productionF ProductsF Products cycles

F LifetimeF Multiple channelsF Networks

F Make to orderF Mass customizationF Products and servicesF Continuous

experimentation

Customer access

Customer relationship

Value chain

Production planning

Manufacturing capability

Basis of competition

Innovation


Why to deal with third party logistics?

F Focus on the core businessu Carrefour, Auchan…u Marrs/Unisabi, KJS…u Alcatel, Renault, Peugeot...

F Risk management4 the products line and the market are changing faster and faster

F Growing costs and investment needed by logisticsactivities

4 optimisation of the financial resources

F Building of an economical sector

what’s about logistics? - essecfaculty.essec.fr/pp.dornier/pdf/conference-model.pdf · the third...

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