logistics industry and economic zone analysis of...

© 2013 IBM Corporation

Logistics Industry and Economic Zone analysis of the Jamaica Hub Concept Mark Bedeman Global Freight Logistics & Cargo SME, IBM Business Consulting

© 2013 IBM Corporation 2

The vision to provide a complete SUPPLY CHAIN service support capability fro GLOBAL MANUFACTURERS and RETAILERS


IBM has a full breadth of product and service capabilities that can support complex systems integration (SI) and business transformation programmes

Ginni Rometty

Chairman, President and

Chief Executive Officer

Business Process Outsourcing (Contact Centre, Content, Finance, Payments)

Infrastructure Operations (Cloud Delivery , Data Centre Operation, Desk Top)

Business Consulting Services (Strategy & Transformation, Application Innovation)

Application Management (Maintenance and Enhancements)

Systems and Technology (Storage & Servers)

Software (Commerce, Collaboration, Information, Marketing)

$ 4

0.9

$

19

.3

$ 2

4.9

$

18

.9

© 2013 IBM Corporation 4 4

IBM Travel and Transportation Industry Center of Competence includes subject matter experts and experience in Ports and Terminals Container Shipping Lines Customs Logistics and Supply Chain Operations

Global Business Services GBS is one of the SBU’s

Of IBM

Other CoCs

IBM Research and Labs Pioneer in providing path breaking

technological solution & asset

which involves complex

algorithm , HW interfaces etc

Software The software product arm of

IBM that owns powerful

brands like Websphere,

Rational, iLOG, SPSS etc

Global Delivery Global delivery centre spread

across the globe is essentially

cost recovery business

units and form part GBS/GTS

Solution Centres Mandated to create reusable assets

leveraging the

whole IBM eco-system

Institute of

Business Value The Institute for Business Value

provides Thought Leadership on

Key Industry Topics

Software Providers Independent Software vendors

are partner vendors of IBM.

For instance, SAP,ORACLE,IBS etc

Markets/Countries Practices

Local market practices spread

across various

market segments' of IBM


The Agenda

Smarter where it needs to be

This session will cover

understanding logistics

role of a logistics hub

Supply Chain manufacturing principles

overview of economic benefits, and sector analysis

potential scope and competitive positioning of the Jamaica hub

implications for jobs and growth in Jamaica


Like most industries, there are specialised terms and names here are some of them

These are the most common types of Freight Logistics Companies:

Transport

FL, LTL

Normally small, local vehicle owning, employing drivers. Carrying full

loads, or consolidating less than truck loads 5 -15t. Groupage 1- 5t.

May have a network, through alliances.

Warehousing Companies owning space for rent, charging for storage and handling

services

Distribution First level of sophistication, combined transport and warehousing for

local, closed loop distribution, normally for retailers

(Contract)

Logistics

Company, or division providing distribution, and added value services,

such as packing, sub assembly, either with dedicated client contract

operations, or from multi user warehouses and vehicles. Owns or leases

Lead Logistics

Provider LLP A logistics company charged with managing other logistics companies in

the provision of logistics services


Like most industries, there are specialised terms and names here are some of them

Freight

Forwarding

Effectively “buys and sells”. Moves goods normally internationally, by

transacting with a client, and sourcing asset providers to execute the

movements. Owns no assets. In the US known as brokers.

3pl A major company providing all the previous capabilities, transport,

warehousing, distribution, and logistics

4pl

A virtual” company aimed at managing information not assets, and

providing Supply Chain Services, such as inventory disposition,

forecasting, demand planning

AirCargo, Container

Shipping, Railfreight

Operates Aircraft, Container Ships and Trains, may offer “door to

door”, and warehousing and logistics

Express

Parcel

In Europe and US, Door to door, express time specific under 30kilo

parcels. In Asia would include larger, even LTL consignments, not

time specific

These are the most common types of Freight Logistics Companies:


Government, Regulatory, Standards Organizations

Rail Roadways Ports &

Terminals Airports

Railroads Trucking Ocean Carriers Airlines

(Lead Logistics Providers LLP managing multiple 3pls & 4pl)

3pl

Contract Logistics Freight Forwarders Express & Parcel

Air

Cargo

Rail

Freigh

t

Freight and Logistics industry is really an ecosystem of providers. IBM works with shippers and across all these logistics sectors.

Policy

Infrastructure

Carriers

Service

Providers

SHIPPERS

Customs


Each freight and logistics company should adopt the imperative best suited to their role in the ecosystem.

Lead

Logistics

Providers

Express

& Parcel

Freight

Forwarder

Contract

Logistics

Ocean

Carriers Trucking

Ports &

Terminals

Core

Competency

Sharing Risk

& Reward

Time-Definite

Delivery

Buying

Transport

Services

Customer

Intimacy

Value-Based

Transport

Last Mile

Transport

Vessel /

Container

Efficiency

Relative

Asset Profile Low High Low Medium High High High

Geographic

Profile Global

Global /

Regional

Global /

Local

Global /

Regional

Trade Lane

Based

Country

Based

Global /

Regional

Exposure to

Global

Economic

Pressures

Medium High Medium High High High Low

Therefore…

Primary

Imperative

Dramatically

improve the

end to end

customer and

partner

experience

Enhance

services to

increase

revenue and

manage

capacity

Enhance

services to

increase

revenue and

manage

capacity

Dramatically

improve the

end to end

customer and

partner

experience

Predict

demand and

optimize

capacity and

assets

Predict

demand and

optimize

capacity and

assets

Improve

operational

efficiency

while

reducing

environmenta

l impact


Global Issues are forcing change and innovation;

each industry has its unique supply chain challenges:

• Operational

transformation to reduce

cost & fund innovation

required by market (new

services & bus’ns, VOIP,

broadband, data services)

• Industry structural

rationalization driving

business process and SC

analysis

Telecom Energy & Utility

• Operational

transformation is the norm

with many SC implications

• Very sharp focus on ops

efficiencies (driven by high

energy costs) causing co’s

to re-examine all of SC

• M&A activity on the rise

Media &

Entertainment

• Rise of digital supply chain to serve digital consumer

• Multi-channel SC optimization with rise of new business models

• Ops efficiency as media networks face more competition

T&T

• Change the business

model

• Differentiate the

customer’s

experience

• Align IT related SCM

assets to business

strategy

• Focus on visibility &

traceability

• Customer value

drivers fragment

• Retailers expanding

across geos,

channels, product

cat’s, cust segments

• Demand driven

merch. & supply

chain

• Sustainability

Retail

• Fierce competition

continues in OEM and

supplier markets

• Globalization, incl.

continued evolution of

manufacturer & supplier

business models

• OEMs migrate to global

system integrators,

delivering complete

systems

Automotive

• Pressure to reduce

ops & infrastructure

costs

• Rapid product dev &

commoditization,

need to be first to

market

• Changing global

business models

Electronics

• Evolving role of

OEMs to systems

integrators

• A&D enterprises

remain cost focused

• A&D enterprises

migrating to service

based models,

including aftermarket

Aero &

Defense

Life Sciences

• Business model

transformation:

blockbuster to nichebuster

to targeted treatment

solutions

• Increased compliance

requirements from

regulators, esp supply

chain

• Major M&A activity

CPG

• Explosion of shopper, consumer, customer data

• Globalization, consolidation and evolution of Customers

• Supply chains growing in scale and complexity

• Increased focus on sustainability, traceability, compliance

• Focus on differentiable SCM capabilities to drive growth

• Easy oil is gone, oil

supply chain being

reinvented

• Graying of the

workforce

• Globalization of oil

business

• Turning data to

action

Chemical &

Petroleum


What then is the role of a Logistics hub?

From the point of view of a logistics company, it is a strategic node in the

transportation network. One can consider an air passenger analogy, using Miami

Airport as an example. If a person wants to travel from Jamaica to many global

locations, they typically fly through the passenger hub in Miami, where it is

possible to make transfers to numerous global destinations. The airport hub

provides a wide variety of ancillary services to passengers in transit, such as

merchandise, food, accommodation and services.

Global courier companies such as DHL and ,UPS have very large complex hubs,

where hundreds of aircraft and potentially thousands of vehicle movements are

coordinated and parcels, like passengers, are transferred to complete their

journey to the delivery point by different modes.

In the major shipping hubs, like Singapore, or Rotterdam, the world’s largest

ships deliver containers intended for local distribution, or are re-routed on feeder

ships to other regional ports or international destinations. These Global Logistics

Hubs are massive operations that stimulate and require considerable local

resources and human capital, forming a diverse and high velocity commercial

and economic ecosystem necessary to support the daily operations of the Hub


Supply Chain Principles

Major manufactures serving global markets must manage extremely complex supply chains and will often draw upon the capabilities of a Logistics Hub in order to optimize their flow of goods. Postponement is an often-used technique that leverages local services and human resources in order to finish (customize, package, label) goods. This process allows for more competitive and efficient deliver of product to final destination, while stimulating economic activity in the Hub region.

With the imminent widening of the Panama Canal, Jamaica is strategically positioned to increase shipment volume to regional and near country markets. An increase in shipment volume can amplify the need for current all professional services, the local Jamaican manufacturing and encourage larger multi nationals to invest. This will create the need for increased Port operations staff and services, and more specialized services related to a more sophisticated, more global Jamaican Logistics Hub.

Increased need for ancillary services such as storage, repairing, sub assembly and co manufacturing, as well as all the supporting call centers, order management, order processing and related customs activity can be anticipated. The creation of a tax effective economic zone for industries to flourish, particularly in transit operation, would further support these activities.


There exists Singapore Port for Asia, Dubai Port for the Middle East, and Rotterdam for Europe. Jamaica could become the Gateway for the Americas!

Dubai

Singapore

Jamaica

Rotterdam

Jamaica Logistics Hub and Container Port

The “Next in Class” a world leading offering!


Introduce "Postponement" Concepts

The Council of Logistics Management defines postponement

as “the delay of final activities (i.e. assembly, production,

packaging, tagging, etc.) until the latest possible time. A

strategy used to eliminate excess inventory in the form of

finished goods, which may be packaged in a variety of

configurations”.

The first example is Benetton, a world leader in knitwear (clothing). The

strategy to delay dyeing the fabric until closer to the customer decision

point allowed them to ship fabric without regard to color specification

and dye the fabric after demand could be observed

One more example is in the paint industry. Previously companies would

produce each color of paint, put it in a can, and then ship the cans of

paint to the store The strategy which changed the industry was produce

and ship a smaller number of colors and to mix the colors onsite


A

B Cartridge

Handles

#2

Packaging

#1

C

E

Cartridges

Decoupling points

D

= 12 SKUs

Gillette

Gillett

e

Gillett

e

Gillett

e

Gillett

e

Gillett

e

Gillett

e

= 7 SKUs


Inventory and Product Flow

What are the key drivers of inventory in the entire supply chain?

Which facilities should be make to order or make to stock?

How should shipments and policies be coordinated?

How should I take advantage of centralization to reduce inventory?

How often should I re-optimize inventory?

What is the best “flow-path” for each product or product group?

What should service levels be?

Procurement Logistics

Hub

Manufacturing Customer

Service

Inventory Questions: 1. How much per SKU? 2. Where?

Objective 1. Maximize Service Level 2. Minimize Inventory Cost

Across all Assets


Regional hubs can help companies standardize global processes, yet localize the customer experience

There can be significant business benefits for organizations that are able to “think

globally and act locally”

Raw Material

Supplier

Raw Material

Supplier

Customer

Distribution

Center

Distribution

Center

Logistics

Hub

In-Transit

Truck

Manufacturing

Packaging

In-Transit

Rail

In-Transit

Truck

In-Transit

Rail

In-Transit

Rail

In-Transit

Rail

In-Transit

Truck

A recent study with respect to the adoption of advanced supply chain solutions in Latin America

highlights that retailers and manufactures in the region seem to hold inventories twice as long as their

US counterpart. These longer inventory periods translate into costs and lower competitiveness.


Case Example: IBM’s X Series server supply chain uses global postponement to stay close to customers

Main PCB assembly is

done in South Asia

High value items shipped by air to

minimize cost of inventory

Three global postponement

centers do final configuration

near the customer

Final assembly locations are

operated for IBM by contract

manufacturers

Global

Monitoring

IBM monitors the whole customer experience from order

to delivery across multiple regions & contract

manufacturers through our supply chain command center

Low value items are sourced

locally or globally by IBM

contract manufacturers


IBM Global Sourcing and Import Logistics

Global Business Services is a leader in providing Global Sourcing and Import Logistics software

package selection and implementation services that can take your company…

IBM does this successfully by:

…From: To:

Functional alignment & information Cross-functional alignment & common visibility

Departments task & productivity focused Business & process performance focus

Manual and reactive scheduling Collaborative planning and forecasting

Margin correction within months Margin improvement within days

Management by inspection Management by exception

Process execution dependent on experts System-based decision support

Compliance auditing focus Compliance planning focus


Investment Attraction Strategy and Action

Plan – Jamaica Logistics Hub Highlights from an interim IBM Plant Location International (PLI)

study

January 2014


Attractiveness of business environments is determined by many factors considered by corporate executives

21

Regulatory

framework

Workforce Infrastructure

Real

estate

Natural

disaster

Knowledge &

innovation

Taxation

Incentives

Business

costs Living

environment

Business

Environment

Attractiveness

© 2013 IBM Corporation 22 22 WWW.IBM.COM/GBS/PLI

IBM-PLI approach in Location Benchmarking / Competitive Positioning follows the investors’ location decision making process which is both qualitative and financial

1a. Define Project Assumptions and

Long List of Location Options

1b. Analyze Long-list of Candidate Locations

Identify Shortlist

2b. Site Search & Negotiations

Select Preferred sites and start negotiations

Implementation

2a. Evaluate Short-listed Locations

Select Preferred Location

De-select less attractive locations:

- Many location options

- High level, quick analysis

- Based on desk research

- Focus on key cost & quality drivers

- Confidential

- High level business case

Select best location solution:

Detailed analysis of many factors

Forward looking

Field work to understand dynamics and identify pitfalls

Assess implementation risks

Interviews and negotiations

Full business case

Few locations only (short list)


Sector and competitor location selection as the basis for the competitive positioning analysis so far on 3 sectors

23

Subsector Competitor locations

Automotive components

manufacturing

Shanghai, Bangkok, Sao Paulo, San

Jose, Santo Domingo, Queretaro,

Budapest, Port Elisabeth, Mumbai,

Nassau, Panama City

Pharmaceutical production San Jose, Singapore, San Juan, Sao

Paulo, Santo Domingo, Cork, Mumbai,

Shanghai, Budapest, Nassau,

Panama City

Business Process Outsourcing Singapore, Mumbai, San Jose, Santo

Domingo, Cork, Sao Paulo, Bogota,

Budapest, San Juan, Nassau,

Panama City


Automotive components manufacturing Operating cost comparison for all locations, in million USD Y1 real data model 10yrs

Operating costs in JLH (Kingston) are relatively high, mainly driven by high electricity prices.

9.0

12.1

8.49.0 9.0

8.2

9.7

9.0

5.4

8.07.7

5.8

Kingston Nassau Santo Domingo Panama City San Jose Queretaro Sao Paulo Budapest Mumbai Shanghai Port Elizabeth Bangkok

Import duties Transport costs Real estate costs Utility costs Labor costs


Automotive components manufacturing Location criteria: Sets out the key location selection criteria and their relative importance for the investment project

25

Location category Weight (%) Location factor

General business environment

12 Economic & financial stability 20 2%

Political stability 25 3%

Natural disaster risk 25 3%

Quality of support from local government & development agencies 15 2%

Availability of financial support for setting up (tax & incentives) 15 2%

Regulations 8 Flexibility of staff 20 2%

Working time regulations 20 2%

Hiring & firing flexibility 30 2%

Business permitting 30 2%

Market 5 Market presence 100 5%

Talent 25 Overall size of labor pool 10 3%

Presence of experienced Automotive related staff 45 11%

Presence of non-experienced staff 30 8%

Competition for skills 15 4%

Sector specialization 15 Presence of Automotive industry base 80 12%

Presence of specialized R&D base 20 3%

Infrastructure & Connectivity

30 Air access 10 3%

Road & rail access 30 9%

Reliability of power supply 20 6%

Waterways & seaports 20 6%

Availability of manufacturing space / industrial land 20 6%

Living environment 5 Quality of living environment 100 5%

Weight (%)


Shanghai

Sao Paulo

San Jose

Budapest

Santo Domingo

Queretaro

Mumbai

Nassau

Panama City

Kingston

Port Elizabeth

Bangkok

80 85 90 95 100 105 110 115

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

Profitability Index (100 = average)

Qua

litat

ive

socr

e

26

Automotive components manufacturing JLH’s competitive position: Cost – Quality map Global

= JLH’s competitive environment


Sao Paulo

San Jose

Santo Domingo

Queretaro

Nassau

Panama City

Kingston

84 89 94 99 104 109

3.5

4.0

4.5

5.0

5.5

6.0


Qua

litat

ive

socr

e

27

Automotive components manufacturing JLH’s competitive position: focus on serving Americas market


Shanghai

San Jose

Budapest

Mumbai

Cork

San Juan

Sao Paulo

Singapore

Santo Domingo

Nassau

Panama City

Kingston

77 82 87 92 97 102 107 112 117 122 127

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0


Qua

litat

ive

socr

e

28

Pharmaceutical production JLH’s competitive position: Cost – Quality map Global



San Jose

San Juan

Sao Paulo

Santo Domingo

Nassau

Panama City

Kingston

77 82 87 92 97 102 107 112 117 122 127

3.5

4.0

4.5

5.0

5.5

6.0

6.5


Qual

itativ

e so

cre

29

Pharmaceutical production JLH’s competitive position: focus on serving Americas market


Singapore

Budapest

Mumbai

Cork

San Jose

Santo Domingo

Sao Paulo

Bogota

San Juan

Nassau

Panama City

Kingston

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

20406080100120140160180200

Qua

litat

ive

scor

e

Operating cost(average = 100)

30

Business Process Outsourcing JLH’s competitive position: Cost – Quality map Global



Some Interim Observations

Need to improve the Qualitative Score

Focus on Talent

Focus on Physical Infrastructure

Focus on Information, Communications and Technology

Image!

Be realistic

Gradual

Services

Configuration, Customisation Manufacturing in key sectors

Role model perhaps Malta as well as Singapore long term objective

31


Implications for SME´s, jobs and growth in Jamaica

The World Bank notes that thousands of jobs will be created to support the

logistics hub. Jamaican labour, can enhance the island’s comparative

advantages of having the perfect geographical location, and a strong English

speaking work force. Thousands of jobs are expected to be created in areas such

as

marine engineering, (mechanical, electrical and informatics)

various ship board professions such as electromechanical engineering

port operations management

heavy duty equipment operations

logistics and supply chain management.

In addition we would see opportunities in

Construction

Sub assembly, packaging

Customs administration

Technology, systems support, portals

Communications


End


Merci

Grazie

Gracias

Obrigado

Danke

Japanese

French

Russian

German

Italian

Spanish

Brazilian Portuguese

Arabic

Traditional Chinese

Simplified Chinese

Thai

logistics industry and economic zone analysis of...

Documents