developing a logistics strategy paul price spatial logistics

Developing a Logistics StrategyDeveloping a Logistics Strategy

Paul PricePaul Price

Spatial LogisticsSpatial Logistics

THE PROCESS AND IT’S EFFECT ON COSTSTHE PROCESS AND IT’S EFFECT ON COSTS

PROGRAMMEPROGRAMME

TIME LINES AND METHODSTIME LINES AND METHODS

CHOOSING A LOGISTICS PARTNERCHOOSING A LOGISTICS PARTNER

IN-HOUSE VS. OUTSOURCINGIN-HOUSE VS. OUTSOURCING


ESTABLISHING CONSUMER NEEDS – Sales & Marketing ESTABLISHING CONSUMER NEEDS – Sales & Marketing

DESIGN – R&DDESIGN – R&D(Why involve your logistics supplier at this stage?)(Why involve your logistics supplier at this stage?)

• Suitability of product for transportationSuitability of product for transportation

• Size and shape – ability to PKD or FKD in Size and shape – ability to PKD or FKD in order to reduce transport costsorder to reduce transport costs

• Hazardous – increased packing costs, Hazardous – increased packing costs, limited transport options,limited transport options, increased transport costsincreased transport costs

• Composition of the product –Composition of the product – effects on duty payments - for exampleeffects on duty payments - for example

60% Textile 60% Textile

40% Leather upper40% Leather upper

Tariff Heading 6404 1100 10 @ 16.9 % DutyTariff Heading 6404 1100 10 @ 16.9 % Duty

The initial designThe initial design

40% Textile40% Textile

60% Leather upper60% Leather upperThe revised designThe revised design

Tariff Heading 6403 9996 11 @ 8 % DutyTariff Heading 6403 9996 11 @ 8 % Duty


What it meant in real terms – increased profitWhat it meant in real terms – increased profit

• 20’ FCL Containing x shoes @ $2.0020’ FCL Containing x shoes @ $2.00• 4800 pairs of shoes = $9,600 total value4800 pairs of shoes = $9,600 total value• Duty at 16.9% = $1,622.40Duty at 16.9% = $1,622.40• Duty at 8% = $768.00Duty at 8% = $768.00• Saving = $854.40Saving = $854.40

Courtesy of Paul ThompsonCourtesy of Paul Thompson

THE RESULT !THE RESULT !


If overseas you need to consider –If overseas you need to consider –

• Quality Quality

• ControlsControls

• Supplier – sole or duel-sourcingSupplier – sole or duel-sourcing

• Increase in lead timesIncrease in lead times

• Effect on transport costsEffect on transport costs

• Peak season surchargesPeak season surcharges

• Customs clearance and licencing issuesCustoms clearance and licencing issues


Consider Your Manufacturing location -Consider Your Manufacturing location -

UK or Overseas?UK or Overseas?

Time lines and methodsTime lines and methods

Delivery MethodsDelivery Methods

UK and International MailUK and International Mail

UK next day timed to 10 daysUK next day timed to 10 days

International 3-5 days priority air up to 13 weeks by surface to Australia!International 3-5 days priority air up to 13 weeks by surface to Australia!

Very cost effective for low value non time-sensitive products but Very cost effective for low value non time-sensitive products but difficult to track if client claims non-delivery.difficult to track if client claims non-delivery. Compensation levels are low unless extra premium is paid at time of Compensation levels are low unless extra premium is paid at time of posting.posting.

Reliability to certain areas of the world is questionable.Reliability to certain areas of the world is questionable.


UK & International Courier deliveriesUK & International Courier deliveries

• UK – Next day timed deliveries to 2-3 daysUK – Next day timed deliveries to 2-3 days

• On the whole very reliable and deliveries are trackable.On the whole very reliable and deliveries are trackable.

• Establish clients delivery needs & don’t assume always next day!Establish clients delivery needs & don’t assume always next day!

• 2-3 day delivery can show significant savings especially if you have2-3 day delivery can show significant savings especially if you havevolumevolume

International – Next day timed to 6 daysInternational – Next day timed to 6 days• As above, don’t choose “express” services unless you have to.As above, don’t choose “express” services unless you have to.

• We have all come to expect it but do we really need it?We have all come to expect it but do we really need it?

• Quote economy delivery and consider billing your client if they want a Quote economy delivery and consider billing your client if they want a faster service. faster service.


UK Pallet deliveries –UK Pallet deliveries –• Next day timed to 2-3 daysNext day timed to 2-3 days

• Several good quality services now available and again deliveries are Several good quality services now available and again deliveries are trackable.trackable.

• As with parcels check clients needs.As with parcels check clients needs.

• Many 2-3 day services are delivered next day in order to maximise Many 2-3 day services are delivered next day in order to maximise vehicle usage - although this cannot be guaranteedvehicle usage - although this cannot be guaranteed

European Road trailer deliveries – European Road trailer deliveries – • Again many good operators to specific areas. Again many good operators to specific areas.

• A good Logistics partner will know the “horses for courses!”A good Logistics partner will know the “horses for courses!”

• Cost effective for even “small” quantities but POD’s can still be difficult Cost effective for even “small” quantities but POD’s can still be difficult to getto get

Time lines and methodsTime lines and methodsSeafreightSeafreight Up to 7 weeksUp to 7 weeks

Cost effective if delivery time allowsCost effective if delivery time allows

Established routes around the globe offering scheduled departures and Established routes around the globe offering scheduled departures and arrivalsarrivals

Dependent upon the size of the shipment and the destination check what Dependent upon the size of the shipment and the destination check what packing is needed. Don’t over/under pack. packing is needed. Don’t over/under pack.

AirfreightAirfreight Direct flights, deferred flights and consolidations 2- 7 daysDirect flights, deferred flights and consolidations 2- 7 days

Direct flights are quick but expensive – consider “spot rates” and Direct flights are quick but expensive – consider “spot rates” and auctions.auctions.

Deferred flights take advantage of space availability and can offer Deferred flights take advantage of space availability and can offer considerable savings.considerable savings.

Consols are usually on set days and your cargo moves with others for the Consols are usually on set days and your cargo moves with others for the same destination. You cargo benefits from economies of scale.same destination. You cargo benefits from economies of scale.


Air/Sea – Sea/AirAir/Sea – Sea/Air

Faster than seafreight more economical than airfreightFaster than seafreight more economical than airfreight

Recognised specialist and “hubs” world wide Recognised specialist and “hubs” world wide

Increasingly common and again, a good logistics service provider Increasingly common and again, a good logistics service provider can ensure that you get the best dealcan ensure that you get the best deal

Time lines and effects Time lines and effects

Manufacturing time for MOQ (1x20’ Container) is 5 weeksManufacturing time for MOQ (1x20’ Container) is 5 weeks

Loading, shipping,clearance and delivery time is a further 5 weeksLoading, shipping,clearance and delivery time is a further 5 weeks

ExampleExample

Yawn Limited – (Thanks to Dave Pearson!)Yawn Limited – (Thanks to Dave Pearson!)

Manufacture bespoke valves and fittings in ChinaManufacture bespoke valves and fittings in China

Yawn quote UK clients 10 week delivery Yawn quote UK clients 10 week delivery

Problem at manufacturing plant causes 3 week delay in productionProblem at manufacturing plant causes 3 week delay in production

Customer threatens to cancel orderCustomer threatens to cancel order

Yawn Limited have to order sufficient quantity by air to appease Yawn Limited have to order sufficient quantity by air to appease customer or risk loosing this and future orderscustomer or risk loosing this and future orders

Orderplaced

onfactory

Goods ready

loaded and shipped

5 weeks

10 weeks

Delivery

5 weeks

Client places order on Yawn Limited for 20’

container valves and fittings

Arrive, customs cleared

and delivered

Usual Costs

1 x 20’ container by sea

Cost of manufacture £ 17500.00

Cost of shipping & delivery £ 1300.00

VAT £ 3062.50

Duty £ 1235.00

Total £ 23097.50

Invoice value to client £ 30795.00

Profit £ 7697.50

Yawn Limited - Normal Time lineYawn Limited - Normal Time line

Yawn Limited – Problem Time lineYawn Limited – Problem Time line

Orderplaced

onfactory

8 weeks

10 weeks

Delivery

Client places order on Yawn Limited for 20’

container valves and fittings

Recovery Costs

Emergency stock (3 weeks)– 8000 kilos by air

Cost of manufacture £10750.00

Cost of shipping & delivery £16100.00

VAT £ 1880.00

Duty £ 2660.00

Total £31390.00

Invoice value to client £ 18477.00

Profit/Loss (£12913.00)

Enough late goods ready and shipped

by air

“Emergency stock” arrives,

clears and delivered

5 weeks

Unforeseen delay at factory

13 weeks – TOO

LATE!

Time lines and effects Time lines and effects

Be realisticBe realistic

Build in time for unforeseen issuesBuild in time for unforeseen issues

Consider “emergency” stock holding – either you or Consider “emergency” stock holding – either you or manufacturer – consignment stock is commonmanufacturer – consignment stock is common

Always have a contingency planAlways have a contingency plan

Consider duel-sourcing if practical Consider duel-sourcing if practical

Consider use of bonded warehousing to take Consider use of bonded warehousing to take advantage of bulk purchasing or seasonal discountsadvantage of bulk purchasing or seasonal discounts

Involve your logistics provider at the outsetInvolve your logistics provider at the outset

Choosing a logistics partnerChoosing a logistics partner

Look at your existing arrangements on a regular basis– Look at your existing arrangements on a regular basis– Are they adequate? Are you getting what you want?Are they adequate? Are you getting what you want?Don’t get complacent.Don’t get complacent.

Check your chosen partner is fully accredited –Check your chosen partner is fully accredited –ISO, IATA,FIATA,BIFA,RHA,UKWA………………….ISO, IATA,FIATA,BIFA,RHA,UKWA………………….

Ask for references and examples of similar operations to yoursAsk for references and examples of similar operations to yours

Big isn’t always best – “big fish small pond” or “small fish big pond”Big isn’t always best – “big fish small pond” or “small fish big pond”

Look for flexibility – be sure Look for flexibility – be sure you you get what get what youyou want want

Don’t always choose the cheapest option – always consider serviceDon’t always choose the cheapest option – always consider service

Draw up a proper service agreement – set down KPI’s Draw up a proper service agreement – set down KPI’s

Hold regular review meetingsHold regular review meetings

Have they the ability to grow with you?Have they the ability to grow with you?

In-House vs. outsourcingIn-House vs. outsourcing

With continual pressure to improve the efficiency and reliability of With continual pressure to improve the efficiency and reliability of transportation and logistics operations without sending overheads transportation and logistics operations without sending overheads through the roof, shippers are realising the potential economic through the roof, shippers are realising the potential economic advantage of outsourcing their logistics activities.advantage of outsourcing their logistics activities.

Outsourcing opens the door to resources not necessarily available in Outsourcing opens the door to resources not necessarily available in one’s own organisation –without the need to invest in specialist one’s own organisation –without the need to invest in specialist personnel, capital equipment or expensive infrastructures.personnel, capital equipment or expensive infrastructures.

In a recent survey, a third of the respondents outsourced their logistics In a recent survey, a third of the respondents outsourced their logistics activities to avoid the costs of expanding their own organisation, activities to avoid the costs of expanding their own organisation, while a third said that the need to coordinate warehousing, manufacturingwhile a third said that the need to coordinate warehousing, manufacturingand inventory management was the primary reason for outsourcing.and inventory management was the primary reason for outsourcing.

Logistics outsourcing is a dynamic, shifting and growing Logistics outsourcing is a dynamic, shifting and growing business environment, and shipper-3PLs relationships are business environment, and shipper-3PLs relationships are evolving into proactive and cohesive partnershipsevolving into proactive and cohesive partnerships ..


3PLs need to immerse themselves in the client company’s 3PLs need to immerse themselves in the client company’s culture and adapt to their ethos and management style.culture and adapt to their ethos and management style.

In return, shippers need to see their 3PLs as an extension In return, shippers need to see their 3PLs as an extension of their business, rather than merely a supplierof their business, rather than merely a supplier

Communication and information sharing between 3PL andCommunication and information sharing between 3PL andcustomer is essential in order for a 3PL to achieve agreedcustomer is essential in order for a 3PL to achieve agreedperformance levels, performance levels,

Those who share their business visions and strategies, achieve Those who share their business visions and strategies, achieve far more in the long-term as both partiers are empowered to plan far more in the long-term as both partiers are empowered to plan ahead in terms of improving operating efficiencies whilst ahead in terms of improving operating efficiencies whilst controlling – and even reducing – operating costs.controlling – and even reducing – operating costs.


Clients who outsource their logistics activities expect their 3PLs to Clients who outsource their logistics activities expect their 3PLs to operate as an extension of their business, proactively seeking new operate as an extension of their business, proactively seeking new ways to reduce logistics costs without compromising efficiency, and ways to reduce logistics costs without compromising efficiency, and developing new and innovative logistics solutions.developing new and innovative logistics solutions.

Although the practice of outsourcing is clearly increasing, Although the practice of outsourcing is clearly increasing, there are obviously a number of reasons why shippers preferthere are obviously a number of reasons why shippers preferto retain their logistics activities in-house.to retain their logistics activities in-house.

Some of the main concerns that dissuade clients from outsourcing Some of the main concerns that dissuade clients from outsourcing their logistics activities are:their logistics activities are:


Lack of expertiseLack of expertise

In order for outsourcing to succeed, and as we have mentioned In order for outsourcing to succeed, and as we have mentioned before, it is vital that clients share their current, short and long before, it is vital that clients share their current, short and long time strategies with their chosen supplier.time strategies with their chosen supplier.

Perceived service issuesPerceived service issues Perceived higher costPerceived higher cost

Loss of controlLoss of control Reduced flexibilityReduced flexibility

BECOME A TRUE PARTNERSHIP!!BECOME A TRUE PARTNERSHIP!!


Some benefits of outsourcing logistics activitySome benefits of outsourcing logistics activity

Reduction of fixed overhead costsReduction of fixed overhead costs

Releases your organisational timeReleases your organisational time

Allows you to concentrate on core activitiesAllows you to concentrate on core activities

Removes the burden of all export and bank documentationRemoves the burden of all export and bank documentation

Provides constant year round coverProvides constant year round cover

Removes need for expensive export computer systemsRemoves need for expensive export computer systems

Reduces recruitment and training CostsReduces recruitment and training Costs

Allows you to take advantage of your logistics partners group purchasing power Allows you to take advantage of your logistics partners group purchasing power

ConclusionConclusion

Look at your existing logistics processes and check your sourcingLook at your existing logistics processes and check your sourcing

Ensure that you are in control – don’t accept someone else's Ensure that you are in control – don’t accept someone else's systems that don’t work for yousystems that don’t work for you

Consider the pros and cons of outsourcing your logistics operationConsider the pros and cons of outsourcing your logistics operation

Involve the logistics experts early in new product development Involve the logistics experts early in new product development and future plansand future plans

In consultation with your logistics partner,choose the most suitableIn consultation with your logistics partner,choose the most suitabledelivery method for your product in order to satisfy both your delivery method for your product in order to satisfy both your customers needs and your budgetcustomers needs and your budget

Adopt and embrace the partnership concept Adopt and embrace the partnership concept

Thank you for your time this Thank you for your time this eveningevening

And if you do feel you need assistance………And if you do feel you need assistance………

I know a company that might just be able to I know a company that might just be able to help!help!

developing a logistics strategy paul price spatial logistics

Documents

transport costs effect

increased transport

transport costs composition

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transport costs peak

day timed deliveries

costs programme time

days uk