logistics strategies for a new china - the best business ... · shanghai pres.ppt 3 supply chain...

Supply Chain Management Conference 2004

Logistics Strategies for a

New China

Richard Zhu

UPS Supply Chain Solutions

April 14, 2004

2Shanghai pres.pptSupply Chain Management Conference 2004

UPS |

UPS_PPT_template_scrn_0327

03_empUPS Supply Chain

Solutions

Agenda

• China transportation and

logistics market overview

• Four logistics strategies


UPS |



Solutions

Compared to the U.S., China transportation and logistics

spend is small, but a relatively large percentage of GDP

US Japan China

$10,082

$1,008

10%$5,976

$657

11%

$1,150

$214

19%

GDP

Transportation and

Logistics Spend

Source: BEA National Economic Accounts; CSFB; Chinainfobank; European Commission; Securities

Market Size – 2001

($ U.S. Billion)


UPS |



Solutions

China’s transportation and logistics market exhibits low efficiency

and poor service quality — attributable to four major factors

Low Efficiency and

Poor Quality

Under-developed

Infrastructure

Lack of Expertise

and TechnologyFragmented/

Segmented Market

Regulatory History

and Constraints


UPS |



Solutions

Hurdles are being addressed

Low Efficiency and

Poor Quality

Under-developed

Infrastructure

Lack of Expertise

and TechnologyFragmented/

Segmented Market

Regulatory History

and Constraints• WT reforms

• Competition

• Multinationals and

integrated services

• National road and rail network

• Triple container port capacity

• 10,000 logistics

specialists

graduating

each year


UPS |



Solutions

Growth of 3PL outsourcing

• From in-house to third party

• 25-30% 3PL growth rate

• More foreign-owned 3PLs establishing networks

• Domestic providers to play a role


UPS |



Solutions

UPS Supply Chain Solutions in China

• 3PL air and ocean forwarding

• 1,000 people, 24 locations, 1.5 million sq. ft. of

warehouse space

• 6 weekly direct flights


UPS |



Solutions

Four strategies for efficient logistics management

• Integrate everything

• Share the pain

• By-pass the DCs

• Make sure you can see


UPS |



Solutions

Integrate everything

• Fragmented suppliers hinder visibility,

increase hand-off problems

• 3PLs handle suppliers, for one point of contact


UPS |



Solutions

A High-tech Manufacturer

• World’s largest manufacturer of

hard disk drives

• Vertically integrated manufacturer –

heads, media, PCB, final assembly

• Technology leadership and

leverage

• Very competitive industry with

steep year-over-year reductions

in price

• Strategic focus on R&D, marketing

and sales

• VMI hubs for inbound

component parts

• Airfreight (2,000+ tons/month)

• Ocean freight

• Customs Brokerage

• LTL/TL transportation

• Global finished goods distribution

• Reverse logistics for

warranty/repair

• Supply chain visibility –

in-transit and in-site

About the Company Scope of UPS Solution


UPS |



Solutions

UPS manages the Company’s China pre-manufacturing VMI

logistics, finished goods fulfillment and returns consolidation

Beijing

VMI

60+ Global

Suppliers

Wuxi EPZ


UPS |



Solutions



Beijing

Wuxi EPZ

North America

Asia Pacific

DC

VMI

60+ Global

Suppliers


UPS |



Solutions



Global Repair

Mexico

Dallas, TX

Singapore

Beijing

DC

VMI

60+ Global

Suppliers


UPS |



Solutions

The Client has reduced costs, improved performance

and simplified their supply chain

Program Results

Economics

• Logistics cost per drive reduced by 25% over 2 years

• Improved asset utilization and lower capital expense

• 5% US transportation expense reduction

Simplification

• Air freight providers reduced from 6 to 2

• US carriers reduced from 62 to 7

• Materials reduction via site consolidation

• Lower capital expense

Service Levels and Optimization

• Direct fulfillment improved from 20% to 83%

• Utilization of ocean for selected products

• Customer error reduction

Visibility and Integration

• Elimination of redundancy and wastedcommunication time

2001 2002 2003

-10%-15%

Freight Cost: $ per drive

2001 2002 2003E

-64%

-50%

Loss Management: $ per drive


UPS |



Solutions

Share the pain

• Sharing regional distribution facilities with

other companies

• Share costs, minimize delivery times


UPS |



Solutions

By-pass the DCs

Speed to market

• UPS Trade DirectSM Ocean – An integrated solution combining ocean freight and

customs clearance with final UPS package, TL or LTL delivery.

• UPS Trade DirectSM Air – An integrated solution for moving time-sensitive shipments

from your international origins direct to customers or stores. Combines air freight and

customs clearance with final UPS package or LTL delivery.


UPS |



Solutions

DC By-pass video clip


UPS |



Solutions

Make sure you can see

• Customers demand visibility

• Track products, track costs,

speed delivery

• Using 4PL is one way to

achieve visibility


UPS |



Solutions

Lucent Technologies

• Increased complexity in logistics coordination

• Over 40 regional and 2nd tier warehouses

• Over 14 transportation LSPs

• Global industry slowdown led to organization

downsizing and cost reduction pressure

• Increased competition led to lower margin

and higher service levels

• Project-based deployment practice requires

greater flexibility in resources

• Global realignment to the virtual

manufacturing model requires the SCN

organization to outsource

• Freight forwarding

• Inland Transportation

• Customs Brokerage

• Express Package

• Freight payables

• Visibility Systems

• Warehousing

• Transportation Management

• Order Fulfillment

• Inbound Process Management

• Outbound Process Management

China Logistics Activities Challenges


UPS |



Solutions

Lucent Technologies

China Lead Logistics Provider

• Logistics network

management and

execution

• Total supply chain

visibility solutions

• Management of

logistics service

providers

Lucent China


UPS |



Solutions

Logistics in China:

From a question mark to an exclamation mark!


logistics strategies for a new china - the best business ... · shanghai pres.ppt 3 supply chain...

Documents