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„Industrialization ““““ ofthe Chemical Supply Chain:
Current Status andFuture Trends
Annual MeetingDüsseldorf, Nov. 28, 2013
Prof. Peter Klaus, D.B.A./Boston Univ.Friedrich-Alexander-Universität Erlangen-Nürnberg
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 2
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
Agenda:
• Background: The „Industrialization of Services ““““:
• A focus on „Chemical“ and the „ChemicalSupply Chain“: Facts from a recent study
• Into some detail: Industrialization developmentsin the European Land Transport Industry
• Beyond transport: Is there such a thingas „Supply Chain Industrialization“?
• What does this all mean: To Chemical IndustryShippers? To Logistics Service Providers?
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 3
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
I-1. The pioneers of Service Industrialization – in aca demia:Ted Levitt „Production Line Approach to Service ““““ 1972 and „The Industrialization of Service ““““ 1976
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 4
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
I-2. ... and the pioneers from the „real“ business world …
Clearly definedProducts
Economies of Scale„Mass Production ““““
Systems &Technology
Brand Marketing
Economies of Scale„Mass-Production“
Standardized„No Touch“Processes
• first Supermarkets 1950‘s
• McDonald ‘‘‘‘s
• American Express
now:
• Amazon
brought to transportand logistics by
• UPS (Parcels)
• McLean/SeaLand(Ocean Containers)
• many others:
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 5
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
Startindustrialisierung Konzentration Ologopolisierung
time
FTL -Industrializing
now
Intl. Air/OceanForwardingStart 90-er
Paket/ Global ExpressStart: Mid 70s
LTLNetworks
since late 80s
FMCG-DistributionStart 90-er
Ocean-ContainerNetworks
Indu
stria
lit´́́́za
tion
and
indu
stry
con
cert
ratio
n
I-3. ... followed by consecutive waves of „Industrializa tion“ in othersegments of the logistics industry
SCMContract Logistics?
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 6
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
Agenda:• Background: The „Industrialization of Services ““““:
• A focus on „Chemical“ and the „ChemicalSupply Chain“: Facts from a recent study
• Into some detail: Industrialization developmentsin the Europea Land Transport Industry
• Beyond transport: Is there such a thingas „Supply Chain Industrialization“?
• What does this all mean: To Chemical IndustryShippers? To Logistics Service Providers?
Page 2
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 7
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
II-1. The recent BVL-Fraunhofer study*) on Chemical Industry Logistics
• Chemical industry logistics (incl. mineral oil data)-> market overview
• Stages in the chemical industry value chainand related LSP business models
• State of supply chain optimization effortsand areas for future improvement
• Lessons learned*) available only in German © Prof. Peter Klaus:
Industrialization Chemical Supply ChainDüsseldorf, Nov. 28, 2013, Seite 8
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
II-2. Selected data on the chemical industry (Germany 2 012 data) *)
Total chemical industry sales„manufactured bulk and special chemicals“
€ 158 bill.+ pharmaceuticals ca. € 42 bill.+ mineral oil products ca. € 180 bill.
Share chemical exports in € ca. 51 %
Chemical goods wholesale revenues € 45 bill.
Value density manufct. goods €/ton ca. 1. 800
Sources: Destatis VAT –statistics 2011 = € 158 billVCI „Chemiewirtschaft in Zahlen“ 2013:36f -> lower at € 144 bill.
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 9
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
II-3. Global chemical industry sales (2012 incl. Pharm a – ca. 20%)
Sources: :VCI: Chemiewirtschaft in Zahlen 2013
Relationship „Germany vs. EU (30)“
-> the „Factor *4“ rule!
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 10
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
II-4. Current tonnage volume: some „roughcut“ estimate s
Est. total „outbound tonnage equivalent“of manufactured chemicals from German - est. Log-Cost
as % of sales-> est. producer sales (€ 158 bill./8% logcost) = 90 m ill. tons @ logcost/ton € 140 -> € 12,6 bill.-> + est. „multiple moves“ w/i prod. stage = 90 mill. tons-> est. wholesaler sales (€ 45 bill./5% logcost) = 30 mill. tons @ logcost/ton € 75 -> € 2,3 bill.-> + est import->export „transit volumes“ = 20 mill. tons
total ca. 230 mill. tons*)
Sources: „Top 100 Logistics 2012:451“ for Log-Cost percentages (Top 100 definition!).*) Tonnage-volume roughly reconciled with transport statistics BMVBS (2011:256);
of 230 mill carried, ca. 145 mill. tons moved via road.
Domestic (D)
applying the „Factor +4 rule“ for EC(30) volumes: ca. 800 mill. tons /€ 60 bill.
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 11
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
II-5. Revenues of „top 20“ chemical logistics service pr oviders(Germany, data as of 2011)
Sources: BVL/SCS report p. 20 © Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 12
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
II-6. The chemical industry Supply Network
Sources: BVL/SCS report p. 22
Agr
icul
t.In
dust
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Bui
ldin
g/C
onst
ruct
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Gen
eral
In
dust
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FM
CG
/H
ouse
hold
Pha
rmac
.
Raw Mat‘s
BulkChemicals
B2B Chem.Wholesale
FinishedChem. Prod.
OtherIndustries
B2C Wholes/Retail
FinalConsumers
WholesalersHelm, Brenntag etc.
Spec.Chem.
Spec.Chem.
Pharm.
Bulk Chemical ProducersBASF, Ineos, Dow etc.
Page 3
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 13
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
Agenda
• Background: The „Industrialization of Services ““““:
• A focus on „Chemical“ and the „ChemicalSupply Chain“: Facts from a recent study
• Into some detail: Industrialization developmentsin the European Land Transport Industry
• Beyond transport: Is there such a thingas „Supply Chain Industrialization“?
• What does this all mean: To Chemical IndustryShippers? To Logistics Service Providers?
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 14
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-1. Transport Industrialization widely accomplishe d:
For further details see: Klaus „Industrialization of Transport“ (2011)
Container transport
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 15
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-2. Transport Industrialization (widely) accompli shed: the EuropeanCEP and LTL network service providers
HUB
EOL
Pick upcycle
Line-haul
move
Line-haul
moveSorting
Deliver ycycle
Sorting
SortingEOL
Company
EU ca.
rev M€
2011/2012
DB Schenker2900Dachser
2500DHL
2300Kühne & Nagel1700SNCF-Geodis Group1650DSV
1375TNT
1000System Alliance910CargoLine
700Mory/Ducros700"Top 10" total:
15735Source: „Top 100 Logistics 2013:71“ © Prof. Peter Klaus:
Industrialization Chemical Supply ChainDüsseldorf, Nov. 28, 2013, Seite 16
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-3. ... moving forward now: The European truckloa d („FTL“) serviceprovider industry on its path from the traditional „craft ““““ operationsmode to Industrialization ...
• Competitive Pressures:• Eastern European Low Cost Providers• Moves by diversified large LSPs to
build specialized „Asset Based“ operations• Competition for drivers
• Shifting Demands:• Shipper industry concentration and• Network consolidation• Consolidation and Direct Load („Milkrun“)
trends in logistical systems designs• Long haul growth due to EC integration
• New Regulatory Pressures• New EC driver hours restrictions• Road tolls and ecological concerns• ...
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 17
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-4. ... adopting some characteristics from US „Advan ced Truck LoadFirms (ATLF) ““““ usiness Modell means:
• Geographically distributed customer base• Geographically distributed fleet and ops bases• yet: „Single-Point ““““ customer contact• computer assisted dispatch, satellite based
localization, driver (and trailer) control• Standardized equipment
• also: intelligent pricing• Option of cross-selling „Packages ““““ with
„Dedicated ““““ Fleets, Contract Logistics,Administrative Services (Freight Payment )
Economies of Scale through „Network effects ““““:
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 18
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-5. ... especially: leveraging „scale“ effects fro m focus on regularizedfreight flows along „power-lanes“ and evolving networks
• Making trade-lanes „origin-destination pairs“ the basic unit for managing thebusiness and profitability
• Offering single point responsibily fortransport moves on given trade-lanes
• Eliminating settlement issues betweenterminals/profit-centers involved
• getting to full dispatcher concentrationon balanced „rotations“ of equimentand trade-lane loop efficiencies
Page 4
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 19
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-6. ... developing and professionally maintaining l arge subcontractorresource bases ...
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 20
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-7. Synchronization between shipper-process-, load -, vehicle-, andcrew planning
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 21
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-8. ... with quite a few options for further Industria lization developmentswhich have not been fully explored yet
(Equipment, Personal, Rechte)
„Private Fleet ““““
(Werksverkehr)
„Dedicated Contract Carriage ““““
(Kontrakt -Flotten)
„Specialized Truckload ““““
(Spezialisierter Ladungsverkehr)
„Brokerage ““““
(Agenturgesch äft mit Owner -Operator und kleineren Transportunternehmen)
Walmart,Coca Cola
Schneider Logistics/P&G ,Hunt/Conagra
Sirva/Allied Van,ATS, Unigroup ,
Schneider Nat.Swift, Werner
CH Robinson
„SC
M/T
rans
port
M
anag
emen
t Ser
vice
s““ ““
(Kon
trak
t-T
rans
port
man
agem
ent)
„Asset Light General Truckload ““““
(““““Abfertigungsspedition ““““)Landstar
Ryd
er,
Tran
spla
ce „Asset Based Dry Van Truckload ““““
(Nicht -spezialisierter Ladungsverkehr)
Asset intensity and length of amortization periods
(Equipment, Personnel, Rights)
„Private Fleet ““““
(Werksverkehr)
„Dedicated Contract Carriage ““““
(Kontrakt -Flotten)
„Specialized Truckload ““““
(Spezialisierter Ladungsverkehr)
„Brokerage ““““
(Agenturgesch äft mit Owner -Operator und kleineren Transportunternehmen)
Num
ber
and
„tig
hnes
s of
cus
tom
er r
elat
ions
hips
low
high
Walmart,Coca Cola
Schneider Logistics/P&G ,Hunt/Conagra
Sirva/Allied Van,ATS, Unigroup ,
Schneider Nat.Swift, Werner
CH Robinson
„SC
M/T
rans
port
M
anag
emen
t Ser
vice
s““ ““
(Kon
trak
t-T
rans
port
man
agem
ent)
„Asset Light General Truckload ““““
(““““Abfertigungsspedition ““““)Landstar
Ryd
er,
Tran
spla
ce „Asset Based Dry Van Truckload ““““
(Nicht -spezialisierter Ladungsverkehr)
high
low
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 22
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
III-9. and more innovative, proactive, precisely targ eted„revenue“ (or „yield“) pricing policies and support ...
• systems supported price differentiation for ...
- Regularity of loads/shipments offered- Bonus for extended pick-up and deliv.ery time-windows- Bonus for eextende time-windows for loading-/
unloading operations(espec. with „Vendor Managed Inventory“)
- ... for preloaded trailer/swop-body operations
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 23
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
Agenda:
• Background: The „Industrialization of Services ““““:
• A focus on „Chemical“ and the „ChemicalSupply Chain“: Facts from a recent study
• Into some detail: Industrialization developmentsin the European Land Transport Industry
• Beyond transport: Is there such a thingas „Supply Chain Industrialization“?
• What does this all mean: To Chemical IndustryShippers? To Logistics Service Providers?
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 24
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
IV-1. Stages and elements of „Supply Chain Thinking“ .. ..
Ven
dors
/Sup
plie
rs
ProductionEnd-of-LineInventory
CentralPick/Pack
Outbound Transport
RegionalPick/Pack
DeliveryTransport
RetailStock
Con
sum
ers/
End
-Use
rs
The Physical Fulfilment Flow
Order Flow
The Payment-Flow
InboundTransport
Order-Processing
Order-Entry@POS
MaterialsInventory
CentralWarehse.
RegionalWarehse.
Order-Assignment
Payment
ReceivablesInvoicing
Forecasting
DRPMRP Master-Prod.Schedule
The Supply-Chain Control-Information-Flow
After SalesServices
ReverseLogistics
O rder-
St i mul at i on
from the„order-to-payment S ““““
Cus
tom
ers
Pri
mar
y S
uppl
iers
Cus
tom
ers
= C
ompo
nent
M
an.
Czu
stom
er
= O
EM
Man
uf.
= Fi
nal
Use
rs
= R
etai
l
Information
Product/Service
Money
PrimaryProd./ Parts, OEM-Produc ts Distribution Final Use
Raw Materials Components Consumtion
To the „extended ““““
supply chain
““““Supply chain management encompasses the planning and manag ementof all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordinationand collaboration with channel partners, which can be supp liers, intermediaries, third party service providers, and cust omers. In essence, supply chain management integrates supply and demand manag ementwithin and across companies. ””””
Source: CSCMP, see <www.cscmp.org> 1
Page 5
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 25
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
IV-2. .. some „standard“ approaches and tools to SC Indu strialization ....
Sources: BVL/SCS report p. 38
Ven
dors
/Sup
plie
rs
ProductionEnd-of-LineInventory
CentralPick/Pack
Outbound Transport
RegionalPick/Pack
DeliveryTransport
RetailStock
Con
sum
ers/
End
-Use
rsThe Physical Fulfilment Flow
Order Flow
The Payment-Flow
InboundTransport
Order-Processing
Order-Entry@POS
MaterialsInventory
CentralWarehse.
RegionalWarehse.
Order-Assignment
Payment
ReceivablesInvoicing
Forecasting
DRPMRP Master-Prod.Schedule
The Supply-Chain Control-Information-Flow
After SalesServices
ReverseLogistics
O rder-
St i mul at i on
from the„order-to-payment S ““““
Cus
tom
ers
Pri
mar
y S
uppl
iers
Cus
tom
ers
= C
ompo
nent
M
an.
Czu
stom
er
= O
EM
Man
uf.
= Fi
nal
Use
rs
= R
etai
l
Information
Product/Service
Money
PrimaryProd./ Parts, OEM-Produc ts Distribution Final Use
Raw Materials Components Consumtion
To the „extended ““““
supply chain
““““Supply chain management encompasses the planning an d management of all activities involved in sourcing and procurem ent, conversion, and all logistics management activities. Importantly, it al so includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third party service providers, and customers. In essence, supply chain management integrates supply and deman d management within and across companies. ””””
Source: CSCMP, see <www.cscmp.org> 1
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 26
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
Agenda:
• Background: The „Industrialization of Services ““““:
• A focus on „Chemical“ and the „ChemicalSupply Chain“: Facts from a recent study
• Into some detail: Industrialization developmentsin the European Land Transport Industry
• Beyond transport: Is there such a thingas „Supply Chain Industrialization“?
• What does this all mean: To Chemical IndustryShippers? To Logistics Service Providers?
„ Industrialization““““ of
the Chemical Supply Chain:
Current Status and
Future Trends
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 27
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
V-1. Precondition for successful shipper-sideSupply Chain Industrialization: Viewing the entire netw ork ...
to improve Supply Chain segmentation and focus by ...
• production volumes• product handling
characteristics• demand patterns/
cyclicality• distribution network
characteristics• value density• security/
regulatoryrequirements
• ...
for perfectanalysis, re-engineering andintegration of
• information flows• goods flows• money flows
Agr
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onst
ruct
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Gen
eral
In
dust
ry
FM
CG
/H
ouse
hold
Pha
rmac
.
Raw Mat‘s
BulkChemicals
B2B Chem.Wholesale
FinishedChem. Prod.
OtherIndustries
B2C Wholes/Retail
FinalConsumers
Wholesalers
Spec.Chem.
Spec.Chem.
Pharm.
Bulk Chemicals Producers
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 28
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
to leverage opportunities for
• upstream/downstreamservice expansion/integration
• specialization and closermatch with specificsupply chain demands
• achieving scale/network effectsin critical logististical functions(efficiency pricing)
• Exploring informationand money flow opportunities
V-2. Precondition for successful LSP business developme nt:Viewing the entire network ... ...
Agr
icul
t.In
dust
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Bui
ldin
g/C
onst
ruct
.
Gen
eral
In
dust
ry
FM
CG
/H
ouse
hold
Pha
rmac
.Raw Mat‘s
BulkChemicals
B2B Chem.Wholesale
FinishedChem. Prod.
OtherIndustries
B2C Wholes/Retail
FinalConsumers
Wholesalers
Spec.Chem.
Spec.Chem.
Pharm.
Bulk Chemicals Producers
Thank you! FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
© Prof. Peter Klaus:Industrialization Chemical Supply Chain
Düsseldorf, Nov. 28, 2013, Seite 30
FRIEDRICH-ALEXANDERUNIVERSITÄTERLANGEN-NÜRNBERG
Selected Sources and Readings:
BVL Bundesvereinigung Logistik e.V. (2011): Studie Chemielogistik. Bedeutung, Strukturen, Dynamik. DVV Media Group, Hamburg.
Kille/Schwemmer (2013): Top 100 in European Transport and Logistics Services.DVV Media, Hamburg (also previous editions 2012, 2011)
Klaus, Peter (2011), “"The Industrialization Process in the Transport Industry”. Unpublished Paper EU-MARATHON Project, available on request from [email protected]>.
Levitt, Theodore (1972), „Production-line approach to Service“ in: Harvard Business Review, October-November, Vol. 50, pp. 41-52.
Levitt, Theodore (1976), “The Industrialization of Service” in: Harvard Business Review, September-October, Vol. 54, pp. 63-71.
Müller, Stefanie und Peter Klaus (2009): Die Zukunft des Ladungsverkehrs in Europa. Ein Markt an der Schwelle zur Industrialisierung? Schriftenreihe DVZ Praxis. DVV Media Group, Hamburg
VCI (2013)Verband der Chemischen Industrie e.V. : Chemiewirtschaft in Zahlen. VCI Frankfurt.
BMVBS (2011)Bundesministerium Verkehr : Verkehr in Zahlen. DVV-Verlag, Hamburg