Harry DrajpuchExecutive Vice President & General Manager
USCO Logistics
Logistics: 21st Century Competitive Advantage
How good are you?
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USCO Logistics OverviewUSCO Logistics Overview
Business unit of Kuehne & Nagel International AG Leading provider of supply-chain solutions 35 years’ experience Manage 15M sf in 70+ facilities Process 1.9M lines monthly Integration with 75+ client enterprise systems Partner to 36 of top 100 global companies*
USCO CorporateHamden, CT
Distribution CenterReno, NV
KN CorporateSchindellegi, Switzerland
KN Global ReachPacific Rim
*BusinessWeek Global 1000, 7/9/01
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Locations: 70Logistics Space: 15 M sq ftEmployees: 3,000
Locations: 70Logistics Space: 15 M sq ftEmployees: 3,000
Locations: 150Logistics Space: 15 M sq ftEmployees: 3,600
Locations: 150Logistics Space: 15 M sq ftEmployees: 3,600
Locations: 100Logistics Space: 10 M sq ftEmployees: 3,100
Locations: 100Logistics Space: 10 M sq ftEmployees: 3,100
Locations: 320
Logistics Space: 40 M sq ft
Employees: 9,700
Locations: 320
Logistics Space: 40 M sq ft
Employees: 9,700
Global reach & local know-how
KN Global Contract Logistics ReachKN Global Contract Logistics Reach
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USCO Core ServicesUSCO Core Services
Integrated Supply Chain Management SolutionsIntegrated Supply Chain Management Solutions
GlobalLogistics
OrderManagement
TransportationManagement
WarehousingSolutions
Information Logistics
010010110011100
• Dedicated & shared
• Flexible & scalable
• Largest NA network of distribution centers
• Delivery solutions
• Non-asset based
• Optimized service& savings
• Online order placement
• Fulfillment & call-center services
• Supply chain visibility
• Kuehne & Nagel
• 180 multi-client DCsin 90 countries
• Lead logistics service provider
• Information driven
• Collaboration & visibility
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North American NetworkNorth American Network
Shared Distribution Centers
Dedicated Distribution Centers
Ontario CA
Cerritos CA
Reno NV
Hayward CA
Portland OR
Denver CO
Lenexa KS
Dallas TX
Lewisville TX
Shakopee MN
Chicago IL
Memphis TN
Nashville TN
Lakeland FL
Miami FL
Dorval, Quebec
Port Clinton OH
Sheffield OH
Franklin MA
GuadalajaraMexico City
Louisville KY
Charlotte NC
Durham NCZebulon NC
Jersey City NJ
Bridgeport NJJoppa MD Gaithersburg MD
Atlanta GA
Ventura CA
Calgary, Alberta
Monterrey
Baltimore MD
Ottawa, Ontario
Montreal, Quebec
Allentown
Independence, MO
Edmonton
Winnipeg
Toronto
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Integrated Supply Chain Management SolutionsIntegrated Supply Chain Management Solutions
Industries & CustomersIndustries & Customers
RetailConsumer /Industrial
Healthcare / Pharmaceuticals
High Tech
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Link world’s businesses & people through globalization
Connect North America Reduce economy-wide inventory Lower business-cycle risks
While information technology makes global & national linkages virtually possible -- companies
like USCO make them physically possible.
Impact of Companies Like USCO
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Brush-Fire ManagementBrush-Fire Management
Typical focus is on daily operating problems, sales & marketing promotions, & service issues, etc.
How often do you review logistics functions?
• What’s overall impact & interaction with rest of business? Does logistics function:
• Respond directly to present & future needs?
• Support primary business mission?
• Drive most cost-effective & customer-service support? How can you find out?
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RecommendationRecommendation
Conduct a self analysis of your logistics strategy
• Focus on what your logistics activities should be doing to support your business
• Consider the following 7 key areas
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Logistics Strategy – Self-AnalysisLogistics Strategy – Self-Analysis
Company Markets
• Have you moved into new markets?
• Has there been shift in customer shipments? (I.e., wholesalers, distributors, retailers, etc.)
Company Products
• Have you added or deleted product lines? Customer Service
• Has representative customer survey indicated service problems?
• Have there been any systems or order processing changes that have affected order cycles?
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Logistics Strategy – Self-Analysis Logistics Strategy – Self-Analysis
Logistics Operations
• Have labor or facility costs resulted in changes to location or operations?
• Have type, quality or size of product packaging changed?
• Have you reached capacity in existing distribution facilities?
Transportation Operations
• Has the profile of product shipments changed? (i.e., UPS, full truckload, less-than-truckload)
• Do you move inbound & outbound products across common shipping lanes?
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Logistics Strategy – Self-AnalysisLogistics Strategy – Self-Analysis
Product Operations
• Have you changed or introduced new source points for products?
• Has product capacity changed at existing production locations?
Other
• Have distribution & transportation costs increased as percent of sales?
• Have there been internal structural changes?
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Supply chain collaboration
Transportation planning& management
ASP
Internet
All freight – All modes – All over the world
e-Logistics Portals + TMS
Single command &control center
Merge-in-transit,diversions
Globalin-transitvisibility
Order ManagementCustomer relationshipmanagement
Warehouse management
Int’l trade & compliance
Event managementLLP
3PL
Private vs. public exchanges
EAI
ERP
e-Fulfillment
Assembling the Jigsaw PuzzleAssembling the Jigsaw Puzzle
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Develop In-house? Outsource? Develop In-house? Outsource?
Real-time logistics Real-time logistics management management capabilitiescapabilities
Predictable, Predictable, reliable & rapid reliable & rapid
transporttransport
Scaleable, Scaleable, Variable-cost Variable-cost infrastructureinfrastructure
Common (global) Common (global) processesprocesses
Integrated logistics Integrated logistics networknetwork
Significant investment & development required to support evolving supply chain. Best source of your $?
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Why Outsource?Why Outsource?
Manufacturers are now embracing third-party logistics providers (3PLs)
• Alternative to running their own distribution operations 3PLs have been providing distribution operations to
companies for years
• Most have roots in transportation, warehousing or freight forwarding
Providing 3PL logistics services a $56B industry*
• Increasingly seen as distribution option by companies in range of industries
* Armstrong & Associates “Logistics Management & Distribution Report” 7/02
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3PL Benefits3PL Benefits
Although not right answer for every company, where it’s “right” it can provide cost, service & strategic benefits
Cost
•Lower cost warehousing (scale economies)
•Lower cost transportation
•Flexibility — pay for what you use
•Network optimization — wring costs out of all supply-chain links
•Specialized services at lower cost
Service
•Quicker delivery
•Increased geographic reach — closer to customer or manufacturing site
•Access to leading-edge information technology
•Customization to specific needs
Strategic
•Allows management to focus on core business
•Rapid ramp-up (and ramp-down) capability
•Minimizes company assets tied up in non-core operations
•“Best of Breed” applications can provide competitive advantages
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3PL Usage Rates Growing3PL Usage Rates Growing
68.8% 70.4%80.0%
84.3%
60.7%67.9%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
Auto Chemical Computer Consumer Medical Retail
Percent Using or Considering 3PLs
“What’s ahead for 3PLs?” Modern Materials Handling, 4/01
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• Greater Functional Integration• Boarder Operational Autonomy
Evolutionary Cycles ContinuingEvolutionary Cycles Continuing
ClientIn-
sourcing 1970s-1980s
Internal LogisticsOperations
Internal LogisticsOperations
3PLProvider
3PLProvider
ClientClientOutsourcing 1980s-
1990s
Business ProcessManagement
Business ProcessManagement
3PLProvider
3PLProviderLLP
ClientClient
ClientClient
ClientClient
IT ServiceProvider
IT ServiceProvider
LLP 1990s-2000s
Source: Adapted from John Gattorna 1998
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Example: “Designed In” FlexibilityExample: “Designed In” Flexibility
Sampling of Wal-Mart’s own distribution centers
3PL
3PL
3PL
3PL
Seasonal Overflow
Disaster Relief
Forward Buys
Seasonal Overflow