Reverse Supply Chain – Aditya Kavi Raaj Chennuru
Economic Order Quantity (EOQ) is the scientifically drawn formula to balance the ordering cost and inventory holding cost to arrive at the optimal quantity for which reordering must be done.
Q* = Economic Order Quantity
C = Fixed Cost of Ordering
D = Annual Demand of the product
H = Holding cost of inventory
EOQ is believed to be so sacrosanct that more often than not B-School grads tend to swear by EOQ in the long run. But end of the day, what has to be observed is that things in real world are not as hunky dory as shown in the text books and the assumptions behind the derivation of EOQ must not be forgotten while applying EOQ in real life.
The derivation of the above formula is based on some frequently overlooked presumptions. Based on my learning/ experience in last one year at RIL, I would like to attack some of these presumptions in this article.
Demand or consumption pattern must be steady
EOQ model assumes a steady or uniform consumption pattern, where there is a variance; we need to pad up the EOQ with some safety stock. Wherever the coefficient of variance (standard deviation / mean) of demand is very high, there is very little benefit drawn out of EOQ. This is due to the reason that EOQ would be very much negligible compared to the safety stock.
Note: Further read up on the topic of “long tails” would help which talks about categories of products where coefficients of variability are very high
Vendor does not always sell a single product
EOQ assumes a ‘single vendor – single product’ scenario. In real life a vendor doesn’t supply one single item to a customer. In such a situation, you always find ways to order for quantity well below your EOQ, as the ordering cost is offset by combining orders for more than one item together.
Vendor is not necessarily a friend
Some Original Equipment Manufacturers who enjoy a monopoly or a technology advantage have the upper hand and do not supply to orders which are valued below a certain value. If your EOQ happens to be valued below the limit imposed by the vendor, you are in trouble. There are a number of consolidation strategies to resort to in such conditions which require thrashing of EOQ.
Logistical implications on procurement lot size
Sometimes it is logistics that recommends a larger lot size of procurement for simple reasons of convenience. This lot size again could be larger than the EOQ.
Consumption does not always happen in factors or multiples of EOQ
Some materials always get consumed in lots. For instance, the activity of replacing tires of a car requires replacing all 4. Here the consumption lot size is 4. In such cases it is not right to procure in numbers that are not multiples of four. In such cases the right approach is to revise the EOQ to the immediate next multiple of the lot size.
Vendor might be happy to stagger the deliveries
Some vendors would be more than willing to deliver the order quantity in small lots in a periodic basis rather than in a single delivery. This is very advantageous as it reduces inventory at vendors place as well. The implication being that, since our average inventory has gone down, we can order for more than EOQ.
Some products come with an expiry date
Some items have a shelf life (expiry date in other words). In such cases if EOQ results in inventory to satisfy demand for longer than the shelf life, we would always face a loss due to expiry of the product. In such cases, the order quantity must be lower than EOQ to avoid such loss.
Volume discounts may encourage larger order quantities
By going a little above EOQ if we become eligible for volume discounts that give us more benefits compared to the loss due to inventory holding, then it is logically better to go for the same.
Product Life Cycle shouldn’t be forgotten
A strategic implication comes into picture when dealing with products that have a life-cycle. Again here, the demand has a variation of rapid increase in the beginning, followed by a plateau of demand and ending with a drastic decline and obsolescence of the product. In such cases, application of EOQ gets complicated and may endanger us into having a stock of obsolete products at the end.
Therefore, the assumptions behind EOQ should not be forgotten before applying it. Based on the nature of material, its consumption pattern, vendor association and product life cycle, EOQ may not be applicable or it might require adjustment.
Aditya Kavi Raaj Chennuru, Batch of ’07 is working as a Manager – Special Projects, Reliance Industries Ltd. And can be reached at aditya.chennuru@ril.com
Monday, June 30, 2008
Jobs @ Ops – Summer’s Experience
Asian Paints – Supply Chain Profile
The perception about Asian Paints is that its one of the very few companies which takes so much pride in its supply chain practices and well on reaching there this perception just got validated.
The supply chain department is categorized into three main divisions : PLANNING, PURCHASE, DISTRIBUTION. For the plants MANUFACTURING OPERATIONS would be an additional division. I was assigned a project, pertinent to the purchase division.
My project title was:
“Identifying Opportunities & Generating options of Vendor Managed Inventory for Raw Materials with Cost Benefit Analysis”
This company’s purchase volumes across all the raw materials was expected to grow by more than 40% next year and with a new production plant ready to come up in another couple of years time. Asian Paints procures raw materials worth almost 900 Crores annually across its 5 production plants. The supplier count was in excess of 800 but it was soon to be increased with the new production plant coming up at a new location. What really was mind boggling was the raw material – supplier combination and it was really challenging to set up Vendor Managed Inventory (VMI) system for some of these combinations as some of the vendors who had a greater raw material assortment had some of their supply share for raw materials too low due to some availability and delivery issues.
The main aspects where I was expected to work upon were: Options to be generated for implementing Vendor Managed inventory, the raw material vendor combinations where there is a scope for implementation, a comprehensive cost benefit analysis of those combinations as per the formulated model so as to assist decision making and finally benchmarking this model with what other companies follow across the FMCG sector.
Since the benchmarking exercise could provide me with inputs on how to go about implementing VMI, this was taken up first. I managed to contact persons working in Nestle, Johnson & Johnson (Consumer), Castrol, Cadbury’s, Colgate Palmolive, Marico and P&G. Only Colgate Palmolive and J&J had implemented VMI setups while Nestle had burnt their fingers trying to implement VMI. The rest of the companies followed a strict policy of not sharing any kind of consumption or stock information with the vendors over the portal and thus the model followed was either as good as the model followed by Asian Paints or inferior to it based on other considerations. The inputs were really helpful and the basic principles of their models were adapted during the formulation of our model.
Once the options of how to implement a VMI model were in place, it was time to look into the raw material data and identify their suitability to VMI. For this first the criteria for selecting raw materials and their suppliers were laid down, some of them being reliability, quality, transit lead times etc for the suppliers & average monthly consumption quantity, consumption value, annual purchase value etc for the raw materials. A detailed analysis of inventory data for FY 2007-08 and forecasts for 2008-09 was done for this purpose. Huge consumption variances or root mean squared errors of forecasting (understandable due to seasonality nature of the industry) and lead time variance were found out, latter revelations being really alarming reinforcing the need for VMI system to be set up.
The basic point of implementing VMI was to have a sole supplier for a particular raw material as there are serious issues of implementation with multiple vendors. I followed it with a cost benefit analysis as those issues would be taken care off during the negotiation stages. Some of the qualitative pros and cons were:
• Whether the suppliers are dedicated to Asian Paints (so it makes sense to put up a facility near the end customer)
• Would the supplier forego some portion of the stocking cost & admin costs (administrative inefficiency in case of daily invoicing) in exchange for a significant increment in volumes of purchase
Are the supplier-customer relations strong enough so that the supplier is ready to give a payment credit period extension for some boost in his sales volumes
The costs majorly were the transportation freight and infrastructure costs if we wanted the supplier to stock inventories at his stock point located at the point of use i.e plant site. At this point the raw materials were further categorized as powdered and liquid because irrespective of their applications the transportation modes were entirely based on their textures. The benefits were the tax implications (saving the CST in case of interstate purchases) and inventory carrying costs savings as well as savings due to credit period extension.
The results of this project were really promising given the vendor performance metric which was 98% in the areas of quality and flexibility and 95% in delivery. So setting up VMI would definitely ensure better deliveries and thus better servicing to the plants and enhance their productivity. Also the prospect of reduction in inventory levels in the whole system was bright given the fact that Asian Paints would share the daily consumption and closing stock info with the vendor enabling better planning from their side and thus reducing overall buffer stocks in the system. Also the transportation costs which played a major part in the cost benefit analysis, were likely to come down given the enormous increase in the number of trips leading to much better negotiations with them and thus increase the savings. Finally the savings were substantial enough (around 2-3% of annual purchase value) to justify the implementation of VMI. As far as tax benefits were concerned , the CST is likely to be revoked in a couple of years time thus nullifying a major chunk of savings. So its better to implement it for powdered raw materials rather than the liquid ones as they take up less storage space , are much easier to handle & do not require a warehouse to be put up which calls for some serious investment as in the case of tanked or barreled raw materials.
The experience while carrying out the project was a little painful in terms of putting in extra hours at work (even full working days on Saturdays) but extremely satisfying as far as freedom of decision making at work, helpfulness of employees in data collection, candid feedback and proper guidance from my guide (even though the purchase people are the ones who are the busiest in the department) and his superiors & richness of the work assigned (culminating in permanent learning) , were concerned.
Finally, my opinion is it’s a great company to work for if somebody is interested in the field of Supply chain because the kind of exposure that one gets here is incomparable across the whole industry. The company also follows a non firing policy unless there are very strong circumstances. The whole summer internship program is very well structured with the HR intervening for feedbacks just at the right time. Full freedom is provided for taking decisions regarding the work that is assigned and the way to go about managing it. Work content is very rich and compensation packages are competitive now.
Swarnadeep Bandyopadhyay, Batch of ’09 can be reached at pgp23179@iiml.ac.in
The perception about Asian Paints is that its one of the very few companies which takes so much pride in its supply chain practices and well on reaching there this perception just got validated.
The supply chain department is categorized into three main divisions : PLANNING, PURCHASE, DISTRIBUTION. For the plants MANUFACTURING OPERATIONS would be an additional division. I was assigned a project, pertinent to the purchase division.
My project title was:
“Identifying Opportunities & Generating options of Vendor Managed Inventory for Raw Materials with Cost Benefit Analysis”
This company’s purchase volumes across all the raw materials was expected to grow by more than 40% next year and with a new production plant ready to come up in another couple of years time. Asian Paints procures raw materials worth almost 900 Crores annually across its 5 production plants. The supplier count was in excess of 800 but it was soon to be increased with the new production plant coming up at a new location. What really was mind boggling was the raw material – supplier combination and it was really challenging to set up Vendor Managed Inventory (VMI) system for some of these combinations as some of the vendors who had a greater raw material assortment had some of their supply share for raw materials too low due to some availability and delivery issues.
The main aspects where I was expected to work upon were: Options to be generated for implementing Vendor Managed inventory, the raw material vendor combinations where there is a scope for implementation, a comprehensive cost benefit analysis of those combinations as per the formulated model so as to assist decision making and finally benchmarking this model with what other companies follow across the FMCG sector.
Since the benchmarking exercise could provide me with inputs on how to go about implementing VMI, this was taken up first. I managed to contact persons working in Nestle, Johnson & Johnson (Consumer), Castrol, Cadbury’s, Colgate Palmolive, Marico and P&G. Only Colgate Palmolive and J&J had implemented VMI setups while Nestle had burnt their fingers trying to implement VMI. The rest of the companies followed a strict policy of not sharing any kind of consumption or stock information with the vendors over the portal and thus the model followed was either as good as the model followed by Asian Paints or inferior to it based on other considerations. The inputs were really helpful and the basic principles of their models were adapted during the formulation of our model.
Once the options of how to implement a VMI model were in place, it was time to look into the raw material data and identify their suitability to VMI. For this first the criteria for selecting raw materials and their suppliers were laid down, some of them being reliability, quality, transit lead times etc for the suppliers & average monthly consumption quantity, consumption value, annual purchase value etc for the raw materials. A detailed analysis of inventory data for FY 2007-08 and forecasts for 2008-09 was done for this purpose. Huge consumption variances or root mean squared errors of forecasting (understandable due to seasonality nature of the industry) and lead time variance were found out, latter revelations being really alarming reinforcing the need for VMI system to be set up.
The basic point of implementing VMI was to have a sole supplier for a particular raw material as there are serious issues of implementation with multiple vendors. I followed it with a cost benefit analysis as those issues would be taken care off during the negotiation stages. Some of the qualitative pros and cons were:
• Whether the suppliers are dedicated to Asian Paints (so it makes sense to put up a facility near the end customer)
• Would the supplier forego some portion of the stocking cost & admin costs (administrative inefficiency in case of daily invoicing) in exchange for a significant increment in volumes of purchase
Are the supplier-customer relations strong enough so that the supplier is ready to give a payment credit period extension for some boost in his sales volumes
The costs majorly were the transportation freight and infrastructure costs if we wanted the supplier to stock inventories at his stock point located at the point of use i.e plant site. At this point the raw materials were further categorized as powdered and liquid because irrespective of their applications the transportation modes were entirely based on their textures. The benefits were the tax implications (saving the CST in case of interstate purchases) and inventory carrying costs savings as well as savings due to credit period extension.
The results of this project were really promising given the vendor performance metric which was 98% in the areas of quality and flexibility and 95% in delivery. So setting up VMI would definitely ensure better deliveries and thus better servicing to the plants and enhance their productivity. Also the prospect of reduction in inventory levels in the whole system was bright given the fact that Asian Paints would share the daily consumption and closing stock info with the vendor enabling better planning from their side and thus reducing overall buffer stocks in the system. Also the transportation costs which played a major part in the cost benefit analysis, were likely to come down given the enormous increase in the number of trips leading to much better negotiations with them and thus increase the savings. Finally the savings were substantial enough (around 2-3% of annual purchase value) to justify the implementation of VMI. As far as tax benefits were concerned , the CST is likely to be revoked in a couple of years time thus nullifying a major chunk of savings. So its better to implement it for powdered raw materials rather than the liquid ones as they take up less storage space , are much easier to handle & do not require a warehouse to be put up which calls for some serious investment as in the case of tanked or barreled raw materials.
The experience while carrying out the project was a little painful in terms of putting in extra hours at work (even full working days on Saturdays) but extremely satisfying as far as freedom of decision making at work, helpfulness of employees in data collection, candid feedback and proper guidance from my guide (even though the purchase people are the ones who are the busiest in the department) and his superiors & richness of the work assigned (culminating in permanent learning) , were concerned.
Finally, my opinion is it’s a great company to work for if somebody is interested in the field of Supply chain because the kind of exposure that one gets here is incomparable across the whole industry. The company also follows a non firing policy unless there are very strong circumstances. The whole summer internship program is very well structured with the HR intervening for feedbacks just at the right time. Full freedom is provided for taking decisions regarding the work that is assigned and the way to go about managing it. Work content is very rich and compensation packages are competitive now.
Swarnadeep Bandyopadhyay, Batch of ’09 can be reached at pgp23179@iiml.ac.in
Ops-News
Logistics Sector hit hard by Oil Price hike
The beleaguered logistics sector has not had much to rejoice about over the past two years. However, the current scenario of rising crude prices, steep interest rates may just see their cup of woes run over, with final blow being intense competition from railways, as an upcoming low-cost option. Post the market fall in January, logistics stocks have retreated more or less to their all-time lows, squarely underperforming even the broader market. In fact, with the exception of Blue Dart and Allcargo Global, key players in this sector have given negative returns, ranging from 20% to 70%, over the past six months.
The impact of crude price hike would be severe with respect to logistic companies. The entire business is heavily dependent on the movement of vehicles. Fuel costs constitute 60% of net expenditure incurred by logistic companies. The diesel price hike alone has hit the bottom-lines of logistic companies by at least 6%. A surging inflation and increasing real estate costs will have strong collective impact on logistics companies, believe industry experts. Freight charges are expected to see a rise though it would be difficult to quantify the hike, given that freight rates are fixed as per the nature of contracts. Analysts say freight charges could be hiked to the extent of 10-15% by logistics companies.
If one sees logistics sector as a whole, express companies (cargo and parcel companies) have already raised charges by over 3%. Companies operating in the air-freight segment too may follow suit as they are bleeding profusely as a result of rising ATF costs. The end-sufferers of the price hike would surely be the consumers.
http://economictimes.indiatimes.com/Analysis/Rising_crude_prices_spell_doom_for_logistics_sector/articleshow/3165808.cms
Essar Shipping enters 3rd-party logistics
With plans to become an integrated logistics provider, Essar Shipping Ports and Logistics (ESPLL), the Indian subsidiary of Cyprus-based Essar Shipping, plans to venture into third-party logistics services. The company is adding capacity and assets to scale up operations in all its verticals, namely shipping, ports, terminals and logistics. The ports, terminals and logistics divisions of ESPLL are currently used for captive requirements of group companies -- Essar Steel, Essar Oil and Essar Power.
This makes the logistics division confident of scaling up its operations to meet the demands of other clients, which would mainly be oil and power companies looking at similar transport facilities for their raw and finished materials. The company has lined up a Rs 10,000-crore expansion plan for the next 3-5 years. The ports and terminals division will raise capacity from 10.50 million metric tonnes per annum (mmtpa) to 34 mmtpa with an investment of Rs 4,354 crore. Besides, the company will invest $965 million to add bulk and tanker fleet. For inland transportation of steel and petroleum products, the company currently charters equipments. It now plans to add its own.
http://sify.com/finance/equity/fullstory.php?id=14701939
The beleaguered logistics sector has not had much to rejoice about over the past two years. However, the current scenario of rising crude prices, steep interest rates may just see their cup of woes run over, with final blow being intense competition from railways, as an upcoming low-cost option. Post the market fall in January, logistics stocks have retreated more or less to their all-time lows, squarely underperforming even the broader market. In fact, with the exception of Blue Dart and Allcargo Global, key players in this sector have given negative returns, ranging from 20% to 70%, over the past six months.
The impact of crude price hike would be severe with respect to logistic companies. The entire business is heavily dependent on the movement of vehicles. Fuel costs constitute 60% of net expenditure incurred by logistic companies. The diesel price hike alone has hit the bottom-lines of logistic companies by at least 6%. A surging inflation and increasing real estate costs will have strong collective impact on logistics companies, believe industry experts. Freight charges are expected to see a rise though it would be difficult to quantify the hike, given that freight rates are fixed as per the nature of contracts. Analysts say freight charges could be hiked to the extent of 10-15% by logistics companies.
If one sees logistics sector as a whole, express companies (cargo and parcel companies) have already raised charges by over 3%. Companies operating in the air-freight segment too may follow suit as they are bleeding profusely as a result of rising ATF costs. The end-sufferers of the price hike would surely be the consumers.
http://economictimes.indiatimes.com/Analysis/Rising_crude_prices_spell_doom_for_logistics_sector/articleshow/3165808.cms
Essar Shipping enters 3rd-party logistics
With plans to become an integrated logistics provider, Essar Shipping Ports and Logistics (ESPLL), the Indian subsidiary of Cyprus-based Essar Shipping, plans to venture into third-party logistics services. The company is adding capacity and assets to scale up operations in all its verticals, namely shipping, ports, terminals and logistics. The ports, terminals and logistics divisions of ESPLL are currently used for captive requirements of group companies -- Essar Steel, Essar Oil and Essar Power.
This makes the logistics division confident of scaling up its operations to meet the demands of other clients, which would mainly be oil and power companies looking at similar transport facilities for their raw and finished materials. The company has lined up a Rs 10,000-crore expansion plan for the next 3-5 years. The ports and terminals division will raise capacity from 10.50 million metric tonnes per annum (mmtpa) to 34 mmtpa with an investment of Rs 4,354 crore. Besides, the company will invest $965 million to add bulk and tanker fleet. For inland transportation of steel and petroleum products, the company currently charters equipments. It now plans to add its own.
http://sify.com/finance/equity/fullstory.php?id=14701939
Tuesday, February 5, 2008
Kindly mail your entries to Saturday, February 2, 2008
Breakthrough Process Improvements in Watch Component Industry: A Case Study
Hierarchical model for Breakthrough process Improvement
Breakthrough process improvement projects, which are undertaken to tackle operations management problems, pose significant challenges to development teams. In such settings, existing approaches are limited or inappropriate and objectives are ambiguous. A clear gap in literature still exists between engineering oriented tools (such as TRIZ, QC, Six Sigma) and business process redesign (BPR) oriented models when it comes to marrying process ideas with the enabling technology while ensuring maximum impact for the innovation. The problem gets further compounded for industries where major technological and process development is traditionally carried out by equipment manufactures and hence limited control over the process innovation efforts of equipment suppliers and designers. One such industry is watch component manufacturing which is quite unusual in comparison to traditional manufacturing industries in terms of technology and systems.
Using watch component manufacturing as a case study, authors present a hierarchical model of process innovation in a multi-project environment especially involving third-party led retrospective process improvement initiatives. The model provides a framework for understanding the process of process innovation in watch dial manufacturing, as well as the possible roles of consultants, the equipment / process design suppliers, and the operating companies throughout this evolution. The applicability of this process improvement approach to other manufacturing industries has also been deductively verified although not incorporated in the current paper.
In much the similar way that a complex production planning process is progressed through hierarchies of aggregation and dis-aggregation to exploit the similarities to derive synergy and economies of scale despite high variety, the proposed process innovation/ improvement framework can be traced through plans for synergy realisation from the ideation phase down to execution level. The progression through these multiple phases is marked by changes in the relative levels of process/problem identification, consolidation and innovation planning activity.
Technological innovation traverses through three main phases: uncoordinated, segmental, and systemic. As illustrated by the case of dial manufacturing, companies operating in an industry that has reached the systemic stage will find little or no scope for innovation in the core manufacturing technologies. In such an industry, the fundamentals of the manufacturing process are almost frozen or stagnated. At this stage, the pursuit for productivity improvements focuses on cost reductions from task structuring and specialization, task integration, and automation.
However, irregular shape of components and high variety and small batch meant they were not amenable for automation. Generally, equipment manufacturers play an increasingly important role in refining existing technologies and improving equipment reliability and capabilities. To catalyze any breakthrough improvement at this stage, the suggested framework can deliver more bang for innovation effort that otherwise wouldn’t be worthwhile. Such efforts are facilitated by close cooperation with the innovation (operations) consultant and operating companies, which can contribute process ideas and expertise that the equipment manufacturers might otherwise lack.
Written by Debashish Jena, FPM Student (Operations), IIM Lucknow
Quick response in Apparel Industry
Traditionally, apparel chains work in response to the orders from distributors which are based on the forecasts. In a dynamic industry like apparel industry, it is impossible to accurately forecast the volumes and the product mix. This can result in high costs of stockout and carrying costs. Besides, forecasts in advance to the order of six months may not be able to judge exactly the customer expectations. Another important point is that the individual efficiencies in the systems don’t add up to overall efficiencies of the entire value chain. These considerations across the textile apparel industry gave rise to the concept of Quick Response system.
The adoption of QR requires major changes in the manufacturing planning and control (MPC) systems. Firstly, every player in the chain needs to have an information system. Secondly, computer based systems are to be used in an integrated manner to accelerate planning and to support manufacturing and distribution along the chain. New packages with better forecasting models, frequent re-planning, precise shop floor control and technologies like CAD and CAE, integrating design and manufacturing have to be used to build up better QR systems. The use of FMS (Flexible Manufacturing Systems) is necessary for Quick Response. Modular type production and Unitary production systems are some of the flexible production systems which can be used.
An example of such intelligent systems is a fabric measurement system that measures the genetic fingerprint (tensile, shear hysteresis, bending, thickness, compression and surface properties), tailorability prediction system modeling the interaction of fabric with machinery, intelligent sewing machines capable of making optimal adjustments depending on the fabric being stitched and self learning systems monitoring and controlling quality.
Intelligent sewing machines are an integral part of intelligent textile environment. Traditionally, mechanic uses his judgment to make sure that the thread tension and feeding pressure during stitching are optimum. Intelligent sewing machines use actuating motors driven by fuzzy-neural models. The control model based on fuzzy-neural algorithms can optimize dynamically the mechanical settings of the two most widely used sewing machines.
Levis Strauss is one of the earliest examples of application of Quick Response concepts in the apparel business. The Head Office of the organization is located in San Francisco. All major design and marketing functions are carried out from this office. The country has its sales spread across the globe with Europe contributing around 30% of the total sales. The production plants are spread across Europe and all the regional sales offices are engaged in recording the sales data. In such a widespread situation, the possibility to communicate between the various units was one of the priority requirements in the definition of the information systems. This vital need has made Levi a pioneering company in the area of Electronic Data Interface. The system helped Levi Strauss to be aware of the changes in the apparel business and incorporate changes in fabric and designs as and when required. Studies conducted by ICRIER in 1993 showed that productivity of Indian apparel industry lagged far behind that of developed nations. Analysis of the reasons affecting the productivity found that technology, workforce management, quality standards, labour relations and management involvement were prime reasons.
Quick Response system can thus be seen as an extension of JIT philosophy where the entire value chain is involved for combined efficiency and benefits rather than the benefits for individual players. QR reduces the lead time across the value chain and hence reduces the risks as the decisions can be taken much closer to the actual sales event. The information exchange makes the forecasts better and the risks are shared across the different players in the value chain.
Ronjay Chakraborty is a PGP22 student of IIML, specializing in Marketing & Operations
Ops-News
Survey Results: Findings on Supply Chain and Partner Integration
According to a survey by E2open Inc., (www.e2open.com) at the SaaS (software-as-a-service) Pavilion during the Oracle OpenWorld 2007 event in November 2007, the highest priority supply-chain initiatives are globalization of the supply chain, lean supply-chain management, and trading partner integration.
Of the more than 350 respondents, 66% said globalization of the supply chain is the highest priority initiative to leverage economies of scale and scope across the multinational supply-chain network and operations that have grown by acquisition. E2open says multiple selections were allowed. 60% said extending lean principles across the supply chain to drive shorter and more real-time process cycles was the highest priority initiative.
Additionally, 57% selected trading partner integration in order to synchronize processes and data with suppliers by consolidating supplier portals and business-to-business gateways. While 33% selected process automation—replacing manual with technology-enabled processes to make it faster and easier to interact with suppliers in processes such as vendor-managed inventory, procure-to-pay and international procurement offices as their highest priority initiative for the supply chain.
Source:http://www.specialtypub.com/article.asp?article_id=6423&SECTION=3
Market Review: Freight Forwarding Market undergoing Consolidation
The freight forwarding market has been a major beneficiary of an increasingly globalised world economy. The development of extended supply chains, integrating manufacturers, suppliers and retailers on a worldwide basis, has led to significant year-on-year growth in international trade volumes. Freight forwarders revenues - and profits - have surged and this has resulted in structural changes to what for many years was a conservative and stable industry.
These changes have included an unprecedented level of mergers and acquisitions from which a small number of global players has emerged. Many long standing brands like MSAS, AEI, Emery, Danzas, ASG, Wilson, Circle have been subsumed with evolution of mega-carriers such as DHL Global Forwarding, Schenker, UPS Supply Chain Solutions and Kuehne + Nagel.
The levels of profitability in the market, its growth prospects and the asset light nature of freight forwarders' business models have made the sector highly attractive to investors. The industry's attribute of counter-cyclicality - that is, its ability to increase margins in times of economic downturn - gives it an advantage over other segments of the logistics market. Global Freight Forwarding 2007, a report by Research and Markets contains a comprehensive overview of all the major trends and developments affecting the industry. The report looks in detail at the structure of the industry, examining in turn each of its constituent parts.
Market Review: Freight Forwarding Market undergoing Consolidation
The freight forwarding market has been a major beneficiary of an increasingly globalised world economy. The development of extended supply chains, integrating manufacturers, suppliers and retailers on a worldwide basis, has led to significant year-on-year growth in international trade volumes. Freight forwarders revenues - and profits - have surged and this has resulted in structural changes to what for many years was a conservative and stable industry.
These changes have included an unprecedented level of mergers and acquisitions from which a small number of global players has emerged. Many long standing brands like MSAS, AEI, Emery, Danzas, ASG, Wilson, Circle have been subsumed with evolution of mega-carriers such as DHL Global Forwarding, Schenker, UPS Supply Chain Solutions and Kuehne + Nagel.
The levels of profitability in the market, its growth prospects and the asset light nature of freight forwarders' business models have made the sector highly attractive to investors. The industry's attribute of counter-cyclicality - that is, its ability to increase margins in times of economic downturn - gives it an advantage over other segments of the logistics market. Global Freight Forwarding 2007, a report by Research and Markets contains a comprehensive overview of all the major trends and developments affecting the industry. The report looks in detail at the structure of the industry, examining in turn each of its constituent parts.
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