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How to Cut Cost and Reduce Risk in Transportation and Global TradepDominic Regan – Senior Director, Oracle Transportation Management

Integrated Logistics PlatformOracle Supply Chain ExecutionOracle Supply Chain Execution

Distributed Warehouse

Management

Oracle Transportation Management

Global Trade Management

Landed Cost Management

Labour and Space UtilisationI t C t l

Cost ControlProcess

Regulatory ComplianceS C

Accounting Accuracy

Inventory ControlCustomer Service

AutomationVisibility

Shorten Cycle TimeVisibility

Financial VisibilitySourcing

Supply Chain Execution Market ShareBased on Total Software Revenue*

* Gartner defines total software revenue as revenue generated from new licences, updates, upgrades, subscriptions and hosting, technical support, and maintenance. Professional services training and certification and hardware revenue is not included in total software revenue

Gartner, Inc., “Market Share, All Software Markets Worldwide 2010,” March 30, 2011, By Colleen Graham, Joanne Correia, Fabrizio Biscotti, Matthew Cheung, Ruggero Contu, Alan Dayley, Yanna Dharmasthira, Tom Eid, Chad Eschinger, Bianca Granetto, Hai Hong Swinehart, Teresa Jones, Sharon Mertz, Rene Millman, Chris Pang, Asheesh Raina, Dan Sommer, Bhavish Sood and Laurie Wurster.

Professional services, training and certification, and hardware revenue is not included in total software revenue.

The Challenges We’re HearingControl the Costs of Increasingly Complex Supply Chains:How do I set up my extended supply chain to support high volumes given the many, geographically dispersed, suppliers and partners?

!

“Companies that manage their global ecosystems most effectively are as much as 73% more profitable than companies with less capable value chains.” – Deloitte Consulting

Aligning with Corporate Sustainability Objectives:How can I balance my extended supply chain with my corporate goal of reducing carbon usage?

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“Sustainability should be automatically and fully integrated into supply chain management, used both as a standard performance measure and a means of driving performance improvement throughout the value chain. ” – Gartner

Regulatory Compliance:How do I ensure my products meet compliance guidelines to avoid any impact on my supply chain?

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impact on my supply chain?“The EU has adopted several Directives which restrict the use of certain substances and specifies collection, recycling and disposal requirements. Compliance could create shortages or impact the continuity of our supply.” – Lexmark Annual Report

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Reducing Supply Chain Costg pp y

Why Logistics Costs are Important– Logistics Cost Components

– Logistics Cost By Industry

Source: Capgemini 2005 Third-Party Logistics Study, A T Kearney

Transportation Management Opportunity

42.1%

40%

50%he

d Transportation Mgmt

28.9%30%

40%

s R

esea

rch

Solutions can Save Most Companies 5%-25%

13.2% 13.2%20%

Com

pani

es

Source: The Logistics Institute at Georgia Tech (companies with annual transportation spend > $10M)

2.6%

0%

10%

% o

f C

0%1-5% 6-10% 11-20% 21-30% x > 30% Savings Opportunity

Company with € 500,000,000 in annual salesSpends on average € 37,500,000 on logisticsOf which € 20,625,000 is spent on transportation

At 8% savings € 1,650,000 saved annually by investing in a TMS

What is a Transport Management System?

Source: “The Forrester Wave™: Transportation Management Solutions Q1 2008” January 2008Source: “The Forrester Wave™: Transportation Management Solutions, Q1 2008”, January 2008

Oracle Transport ManagementCustomer Advisory Board

Logistics Service Providers Manufacturing Retail

Customer Advisory Board

Top Areas of Cost Concern in TransportL L i ti C tLower Logistics Costs

ChallengeChallenge BenefitBenefit

Cost of ‘rush’ or expedited transport

• Reduced cost through better planning and exception managementp p

Cost of poorly

management

• Reduced cost through i d t tili ti

Cost of resolving

consolidated loads

• Reduced cost / improved

increased asset utilisation

freight invoice disputes

Cost of manual

cashflow via automated audit and invoice reconciliation

Cost of manual planning, execution escalation & analysis

• Improved productivity via automated tendering, planning and event mngmt

Top Areas of Cost Concern in TransportL L i ti C tLower Logistics Costs

ChallengeChallenge BenefitBenefit

Inefficient mode, carrier and/or rate selection

• Lower costs through single point of logistics data and best in class optimisationselection

Inefficient rate negotiation with

best-in-class optimisation

• Accurate analysis of actual freight volumes and rates

Inability to measure

negotiation with carriers

• Accurate transportation

freight volumes and rates, improving rate negotiation

Inability to measure ‘cost to serve’ and contract profitability

costs allowing identification of profitable business

Opportunity cost of unrealised new business models

• Flexible and configurable solution enabling deployment of new supply chain modelschain models

Achieving Benefits Quickly and IncrementallyF th M t I t t P bl Fi tFocus on the Most Important Problem First

PAIN POINTS LOW HANGING FRUIT STRATEGIC SOLUTIONPAIN POINTS LOW HANGING FRUIT STRATEGIC SOLUTION

Reducing MaverickSpend

Reduced TransportCosts

Identifying Best

Strategic Transportation‘Control Tower’

Effective Modal/CarrierSelection

S i h h bi i i d l i ddi i l l i i ll

Carrier Rate Effective CarrierRate/Bid Management

• Start with the biggest opportunities and plug-in additional solutions incrementally • Try to make the project self-funding by realising the value from each phase• ‘Good enough’ is often good enough, so replace legacy systems only where justified

13

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Reducing Supply Chain Riskg pp y

What is Supply Chain Risk?

Environmental Risk Sources (Earthquake, Flood, Disease, etc.)

Network Risk Sources ( Border Closures, Embargo, War, etc.)

Organisational Risk Sources (Strikes, Fire, Regulatory Violations, etc.)Organisational Risk Sources (Strikes, Fire, Regulatory Violations, etc.)

Source: Uta Jüttner, Helen Peck, Martin Christopher, 2003

What is Supply Chain Risk?

Air Freight: 2% by volume, 35% by value10 000 tons of goods airfreighted daily between Asia and Europe10,000 tons of goods airfreighted daily between Asia and EuropeIndustries affected most: High-Tech, Retail, AutomotiveUS$ 8m worth of perishable blooms destroyedUS$ 8m worth of perishable blooms destroyed

Source: Economist & NPR, 2010

What is Supply Chain Risk?

Ports handling as much as 7% of the country’s industrial output damaged,ti $3 4b i l t b t d dcosting $3.4bn in lost seaborne trade per day

Industries affected most: Consumer Electronics, AutomotiveTechnology supply chain likely to be disrupted for 1-3 monthsTechnology supply chain likely to be disrupted for 1 3 months

Source: Economist, Citi, Lloyds List, BBC, NPR, 2011

The Supply Chain Risk Spiral

LACK OF LACK OF VISIBILITYVISIBILITY

LACK OF LACK OF LONG LONG CONFIDENCECONFIDENCEPIPELINESPIPELINES

INCREASE INCREASE BUFFER BUFFER STOCKSTOCK

Source: Lee & Christopher, IJPDLM, 2004

The Impact of Supply Chain Risk

PhysicalPhysical

Informational

Financial

Risk through Globalisation

DistributionFinal

AssemblySuppliers

Customers

Component Manufacturing

TransportationThe “Manufacturing” Corporation

Then Supply Chain Planning & Execution

Now Value Chain Planning & Execution

DistributorsFinal

Assembly

CustomersComponent

ManufacturingThe Manufacturing

Corporation

3PL’s

Assembly

Suppliers

Manufacturing

R t il StSuppliers

Corporation

3PL’s

3PL s Suppliers Retail Store

Visibility and Risk – Automotive

Moving a vehicle from plant to dealer involves the coordination of several service providers, systems and transportation modes

Assembly Pl t

Order – 1 VIN

Plant Dealer

Loading Compound

Hand OverPlant

Ex-Gate

German Staging Dealer

VSC Port of Exitp Staging

Area

Body-Builder

Visibility and Risk – Industrial Mfg

Visibility and Risk – Oil & Gas

23

Visibility and Risk – FMCG

Origin Destination

Visibility and Risk – Retail

40’ standard container $ 1,800 968.43

- Ready To Ship- Packing

Zhejiang Supplier

BAF – per TEU at Aug ‘06 $ 296 318.25

CAF at Aug ‘06 7.80% 100.36

Terminal handling £ 69 69.00

D t ti £ 20 20 00

- Container stuffing- Stevedoring

TL

Port of

Documentation £ 20 20.00

Clearance £ 35 35.00

Port Authority security fee £ 10.50 10.50

Demurrage ( * * ) £ 16 00 0 00

INCOTERMS: FOB

NingboDemurrage (WK 2; 3-4 *2 ; 5-1 *4) £ 16.00 0.00

Inland delivery £ 265 265.00

£ 1,788.54

Port of

Ocean29 days

PO to Receipt6-12 weeks

TL

Port of Felixstowe

UK DC

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Reducing Supply Chain CO2g pp y 2

Sustainability in Grocery – Collaboration

Source: IGD, Feb 2001

Sustainability in Grocery – Collaboration

Source: TDG, Kellogg’s, Kimberley-Clark, 2008

Sustainability in FMCGT t O ti i ti

By using optimization technology to minimize empty

Transport Optimisation

By using optimization technology to minimize emptymiles, Kraft eliminated more than 500,000 miles(800,000 km) last year.

The company also removed the equivalent of 1 500The company also removed the equivalent of 1,500trucks off the road and more than a million miles (1.6million km) off the highway system by maximizingproduct per truckload.

Source: ARC Advisory Group, Logistics Viewpoint, 1 Dec 2009

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Controlling Global Tradeg

Typical Global Trade TransactionExport U.S. to EU

Product ClassificationEmbargo Check/ SPL Screening Export License Management

3 Import EU from U.S.Product ClassificationEmbargo CheckSPL Screening

4Import Mexico to USA

Product ClassificationEmbargo CheckSPL S i

2

Export License ManagementPrinting of Export DocumentsElectronic Communication (AES)

SPL Screening Import License ManagementFree CirculationTransit Procedures

SPL Screening Import License ManagementNAFTA

34

Transit ProceduresDuty & VAT Calculations Printing of Import DocumentsElectronic Communication 51

3 (NCTS, ATLAS, etc.) Export Europe to other countries

Product ClassificationImport China to USA1

25

Embargo CheckSPL Screening Export License ManagementPrinting of Export Documents

Import China to USA

Product ClassificationEmbargo CheckSPL Screening

1

g pElectronic Communication(NCTS, ATLAS, etc.)Trade Preference ProcessingRestitution Handling

Import License ManagementPrinting of Import Documents

GTM Impacts Many Processes

Global Trade Management

Oracle Global Trade ManagementBase Module

Key Business Benefits

Base Module

Key Features

• Master Trade Data Repository– Trade Party Master

• Centrally manage all trade related data worldwide

• Reduce redundant business– Trade Item Master

• Product Classification• Restricted Party & Sanction

• Reduce redundant business processes

• Provide visibility and collaboration to trading• Restricted Party & Sanction

Screening• Content Management

collaboration to trading partners

• Mitigate compliance risk

Oracle Trade ComplianceAdd-on Component

Key Business Benefits

Add-on Component

Key Features

• Compliance Rule & Policy Management

• Model own unique trade compliance globally

• Centralize trade compliance• Trade Transaction Management

• Trade Control Determination

• Centralize trade compliance screening on one platform

• Anticipate transactional compliance milestonesTrade Control Determination

– Licensing– Documents

compliance milestones• Mitigate compliance risk

– Other Controls

Oracle GTM Business Drivers

Trade

Trade Finance:• Post-Entry reconciliation & Audit

Compliance & Customs:• Risk mitigation & penalty avoidance

Trade Finance• Trade settlement

• Optimize use of strategic financial instruments (Letters of Credit, Open Accounts)

• Efficiency & process automation

• Achieve best practices

Global Trade Compliance Landed Management & CustomsCost

Landed Cost Management: Security:

Security

• Visibility to profitability

• Optimize margins

• Strategic sourcing decisions

• Secure supply chain strategies for Customs preferences

• Maintain compliance with Security initiatives

• Supply chain risk mitigation

Oracle GTM Value Proposition

Value propositionValue proposition– Automate and orchestrate cross-border transactions by

enabling companies to manage and control their trade compliance activities related to imports exports and othercompliance activities related to imports, exports and other types of regulatory, legal or company-mandated policies

Benefits– Accelerate supply chain and increase working capital utilization

Miti t l h i d li i k ld id b– Mitigate supply chain and compliance risk worldwide by centrally managing trade compliance

– Collaborate with trading partners g p– Maintain oversight, visibility and control of cross-border

transactions

Oracle Trade Compliance

Pain Points GTM Provides Benefits

x Lack of transaction-based visibility and control

Trade Transactions Management

Improve supply chain through proactively anticipating and executing compliance milestone requirementsmilestone requirements

x Risk exposure due to Reduce exposure to government audit finesp

lack of system controlx Inefficiency due to

manual processes

Trade Control Determination

government audit, fines, penalties, or the loss of import/export privileges.

x Lack of system control & flexibility to support global trade processes

Compliance Rule & Policy Management

Mitigate global compliance risksEasily adapt to changingglobal trade processes

worldwideManagement Easily adapt to changing

business models

SummaryB i B fit & E blBusiness Benefits & Enablers

C i ith b t i l l tfCompanies with best in class platforms…• Spend less on supply chain

• Deliver higher levels of service

• Have better information to make decisions – measure• Have better information to make decisions – measure performance on daily/weekly basis

A t t f ffi i d l bilit• Automate processes for efficiency and scalability

• Collaborate – integrate supply chain with internal processes and with trading partners

Where is the payback on our project?

Increase volumeIncreaseIncrease Increase price

Improve mixIncrease Increase

Increase Increase revenuesrevenues

Reduce production costsReduce distribution costs

&

profitprofit

Reduce Reduce tt Reduce R&D costs

Reduce marketing costs

Reduce admin costs

Increase Increase ROCEROCE

costscosts

Reduce admin costs

Reduce fixed assetsReduce Reduce capitalcapital

Reduce working capitalcapital capital employedemployed

For more about Oracle’s VCE Solutions: dominic.regan@oracle.comernst stegwee@oracle comernst.stegwee@oracle.com