October 2013
CONNECTIONS
News for our clients
IN THIS ISSUE
The Future of Procurement Collaboration 1
Country Focus: Australia
1
Industry Trends: Regulation
Inpact of the U.S. Affordable Care Act
4
Join Us at These Events
5
Vertical Report: Automotive
Keeping Up with Tesias
6
UTi IN THE NEWS
The Future of Procurement Collaboration
Leading procurement functions must shift their focus to support near-shoring,
shrinking product lifecycles and more demanding customers
6
Press Clippings
6
MEET OUR PEOPLE
We are pleased to announce new
roles for these team members:
Most companies are under intense pressure to find the next generation of
cost savings given the commoditization of their products and mandates from
their customers to deliver more. This is particularly true for manufacturers,
many of which have wrung out costs for the past decade.
If the supply chains and procurement functions that support these businesses fail to find additional savings and efficiencies over the next five to
10 years, they will become less strategic to their businesses, be partially
outsourced, or both.
Michael Andersen
Vice President, North
America Area Sales
Dallas, TX USA
Andrew Dinnie
The counterintuitive insight that many firms will miss is this: as the business
becomes more commoditized, more (not less) internal and external collaboration is needed to sustain and expand efficiencies.
read more
Multi-Client Warehousing Options Grow
»
Country Focus: Australia
Regional Vertical Lead,
Consumer & Retail
Cape Town, South Africa
Danusha Gunawardena
General Manager,
Bangladesh and Sri Lanka
Colombo, Sri Lanka
Mehmet Talanay
With strong consumer purchasing power and abundant natural resources,
the vast southern realm that explorer James Cook claimed for Britain in 1770
continues to offer oversized trading opportunities.
Australia has been able to weather recent economic downturns thanks to
a vital export market based on its agriculture, mining and manufacturing.
Natural resources include copper, gold, iron ore, natural gas and uranium.
Besides wheat, wool, minerals and energy, Australia exports passenger vehicles and engines, and medical and scientific equipment.
read more
Director, Contract Logistics
and Distribution
Istanbul, Turkey
Yaniv Vakneen
Director, USA-Israel
Trade Lane
New York, NY USA
»
1
The Future of Procurement Collaboration
» continued from page 1
The current state of procurement and
operations
As production was pushed overseas in
the 1990s and 2000s, years of consolidating spend resulted in a narrow band
of suppliers, exposed firms to supplier
risk, inflexible contracts and higher
switching costs. As a result, companies
are seeking new models that mitigate
the increasing fuel, inventory and labor
costs originally cited as opportunities
(and risks) for producing in low-cost
countries.
Along with direct cost savings, many
companies also seek shortened lead
times, more innovation from increased
cultural alignment and customer proximity. Many supply chain executives are
being asked to support a manufacturing
base closer to their end markets.
Regardless of production location,
leading supply chains and procurement
functions will enable this less extended,
but more dependent, business model by
changing the nature of spend optimization projects they invest in. The very
reasons supply chains are adapting—
condensing product lifecycles, new service level expectations from customer
proximity, greater visibility—will render
the consolidation and standardization
projects of the past less effective.
The implication for logistics
procurement
Previously, to improve supply chains
constructed to work within long product lifecycles, logistics and procurement organizations drove cost savings
through “buy impact” projects, focusing
on multi-year contracts, spend leverage
or auctions.
These procurement techniques enabled
supply chains to deliver healthy and
sustainable contribution margins back
to the business and elevated procurement’s organizational profile. However,
these procurement techniques resulted
in longer contracts and larger volumes,
leading to increased supplier risk and
less appetite for collaboration.
Today, the broader organization is
asking for different forms of value from
procurement. In fact, the importance of
value creation in procurement is growing twice as fast as the importance of
cost reduction.
tive and lagging logistics procurement
functions will be the ability to engage
providers, and then convince internal
stakeholders to change, thus allowing
procurement greater leverage over their
business.
The importance of procurement in
select company efforts
There are many spend management
and sourcing techniques procurement
can deploy to deliver longer-term packages of value back to the business:
centralizing spend under a category
umbrella or embedding more deeply into
a business line.
How logistics procurement functions
are evolving
A world-class procurement function aims
to shift the cost equation across product
lifecycles and supply chains, using suppliers and its own competency to change
business partner behavior. The ability to
leverage one’s enterprise view to change
business partners’ mindsets means acting as a change agent, using data and
creating shared incentives. Generally,
procurement’s collaboration maturity can
be segmented into 4 levels.
In either case, the key challenge for
procurement will not be selecting spend
analysis methods, but convincing multiple levels of the organization to buy
the long term vision. Supply chain and
procurement professionals must be able
to create sound, quantitative business
cases to evaluate and recommend new
spend models at all levels and across
functions. Engaging internal stakeholders will not only empower procurement
to build a long term pipeline of opportunity, but achieve a faster project speed
to value.
Leading supply chain and procurement
functions must also source innovation ideas from external suppliers. The
key differentiator between transforma-
Level 1—Tactical: Most logistics functions are tactical in nature and have
goals that center around a baseline of
spend. The activities that these purchasing organizations undertake are largely
“buy impact” projects, or those that
impact the buying or spend activity of the
business. These tend to be “low-hanging
fruit” such as volume negotiation, multiyear contracts or competitive bidding.
The time horizon for buy impact projects
to pay off is typically less than 6 months
and frequently must be undertaken annually or more often.
continued »
2
» continued from page 2
When such wins become standard process, procurement departments typically
advance to more complex and resourceintensive optimization projects such as
benchmarking against peers, auctions or
complex supplier analysis.
Level 2—Emerging Strategic: More
centralized procurement functions have
the mandate to deliver higher-impact,
longer-term value back to the enterprise. These functions focus not only on
projects that affect the total price paid for
a good or service, but on “consumption
impact” opportunities. Success for Level
2 procurement functions depends on
having competency in cross-functional
collaboration.
In this stage of organizational maturity,
procurement is expected to identify opportunities for standardization or consolidation that reduce the company’s overall
demand for a product or service, such as
reducing shipments, warehouse space
or inventory; for example, standardizing
secure freight classification across businesses or increasing full container or full
truck loads through flow consolidation.
Level 3—Aligned Strategic: More
advanced procurement functions begin
to create value beyond their traditional
span of control, evaluating total cost of
ownership and driving change in organizational “procurement” behavior.
Impacting total spend beyond buy and
consumption requires the procurement
practitioner to collaborate with partners
and source ideas that impact product
cost structure. These strategic projects
are aligned with business-level strategy
and can involve groups of suppliers or
customers. Level 3 is where procurement functions build competency in creating quantitative business cases, deploy
change management techniques, and
create stakeholder discussion guides to
use as tools to drive change.
This project landscape is uncomfortable
for many procurement professionals,
and many business line owners initially
decline proposed procurement projects.
Further, demonstrating ROI can take
well beyond 12 months. Aligned Strate-
gic buyers understand the total cost of
ownership of their products and services
from source to delivery, including the
cost of inventory, poor quality and brand
impact. Level 3 is characterized by
procurement creating long-term category
plans with business owners, and building
the strategic sourcing pipeline with business owners.
Level 4—Extended Strategic: If Aligned
Strategic is creating shared value with
internal stakeholders, Extended Strategic
is delivering more than service and cost
back to the business through external
providers. The most progressive and
strategically aligned indirect procurement
departments will expect and incentivize
behavior that adds long-term value to
both businesses.
The projects that materialize in Level 4
procurement functions tend to pay off
in 12 to 24 months. Examples include
mutual investment in technology such
as EDI and shared databases, vendormanaged inventory arrangements, and
product-development assistance and
knowledge-transfer relationships that
facilitate industry evolution and bestpractice sharing.
What can procurement do now?
Procurement functions can accelerate
their evolution to internal and external
change agents.
1. Build a pipeline of longer-term demand impact and cost structure projects
that span products and locations. Take
these ideas to business partners and
begin internal collaboration with one to
two businesses.
2. Narrow down a list of just a few external partners to collaborate with based
on KPIs/performance and also likelihood
to sustain collaboration efforts.
3. Assemble a list of enablers that allow
indirect procurement to move farther upstream into design, contract or configure.
A general rule of thumb is that 80 percent of costs are locked in at the design
phase. With product lifecycles shrinking
it is increasingly vital to influence major
indirect costs such as logistics early, as
lifecycles are shorter.
4. Consider total cost of ownership
when costing out heavy inventory risk
product families. The best way to reduce
logistics costs is to ship less, and to ship
with more lead time.
Today’s low-cost software enables such
fully optimized inventory management.
Only the supply chain with order and purchase data can truly provide the information necessary to “optimize” inventory.
About the authors
Casey Mork
Senior Consultant, Supply Chain
Design & Innovation
UTi Worldwide (Long Beach, CA USA)
Richard Delseni
Director, Supply Chain Design &
Innovation
UTi Worldwide (Long Beach, CA USA)
Contact Casey or Richard for the full version
of this article, which recently was published
in Supply Business as noted in the Press
Clippings section of this newsletter.
3
Corporate Responsibility
UTi Charitable Foundation Supports
Those in Need
Here are updates on some projects that our charitable foundation, Delivering Better Lives, is supporting around the world to
help those in need:
Argentina
The San Jorge Children’s Centre
provides mentoring, counseling,
before- and after-school programs,
and healthy mind and body
activities. DBL is renovating and
enlarging the facility, including new
kitchen and lavatory facilities.
Indonesia
SDN Sunter Jaya School is a public elementary school in Jakarta. Due to dramatic population growth, facilities such as the
library have been converted to class-rooms. DBL is building a
new library and resource center at the school.
Philippines
DBL’s first 11 scholarship students in the Philippines received
certificates in hotel and restaurant management, automotive
mechanics, and computer sciences. The screening process is
underway for applicants of the next round of scholarships.
Spain
Building on the success of community center in Campinas, DBL
is constructing a library and resource facility to provide expanded counseling, educational and recreational programs.
Egypt
DBL will improve the lives of children at five orphanages in Cairo. The focus will be on providing basic facilities and equipment
including cooking equipment, refrigerators, air conditioners,
washing machines, mattresses, blankets, and floor coverings.
Hungary
Based in Budapest, Guide Dogs for the
Blind provides canine companions to help
visually impaired people navigate daily
activities. DBL funded the acquisition and
training of five assistance dogs in 2013 and
has extended its support of the program
through 2014.
Industry Trends: Regulation
Impact of the U.S. Affordable Care Act
By Joel Anderson,
Most logistics
President and CEO,
International Warehouse
companies and
Logistics Association
their
clients must take these
issues into account.
Companies of all sizes
and kinds are wondering
about the impact the U.S. Patient Protection and Affordable Care
Act will have on them. Companies with more than 50 employees
who work at least 30 hours per week must offer a health care
package that is affordable, limits an employee’s cost sharing,
and provides essential benefits.
While penalties will be put on hold for a year, the law has
significant impact to contract logistics providers and their clients.
Our industry faces a particular challenge because of the
contingent nature of a significant portion of our workforce
and the seasonal characteristics of our businesses.
Vietnam
Thien My B School in My Loi
Village, is in desperate need
of attention. DBL is building a
new four-room school building
with lavatory facilities, which the
existing school lacks.
Zimbabwe
Continuing its support of a
medical center it constructed last year in Nyaure, DBL this year
shipped a container of donated goods to the community, including medical and dental equipment, blankets, clothing, shoes,
sporting goods, toys and books.
Complex questions
Logistics companies must balance the need for the lowest possible overhead costs and their customer’s requirement for a skilled
workforce that can provide the highest level of service. With the
changes in the law, logistics companies have many questions
and significant analysis to do in the days ahead:
• Do they offer healthcare coverage or possibly pay a penalty when this provision is implemented
• Can temporary employees be insured differently than full-
time employees
• Will employees covered elsewhere be excluded from a company’s full-time headcount
• Can a company offer different premiums between office staff and field staff
• Do they limit all temporary work to less than 30 hours per week to avoid additional coverage requirements
• Can they offer coverage through state exchange programs to lessen company benefit costs
It was thought that companies operating warehouse facilities
could bundle headcount from all warehouse operations and apply
one participation level. However, the IRS has ruled that each facility must be viewed as a single entity, which makes the application of benefits more complex and may require different premiums
from one location to another.
Most logistics companies must now take these issues into account and reach out to their clients to review contracts that were
based on a known benefit cost per employee. The American
Staffing Association has estimated that the increase in costs
may range from 0.75% to as much as 10%. That’s a significant
increase for a logistics operation to absorb and remain profitable.
It is common for 3PLs to offer affordable health care plans to all
assocates, and it has been the employee’s choice whether or
not to participate in the plan. Beginning 2014, employees must
participate in a company plan or a state exchange (if applicable),
or pay a penalty.
Logistics companies and their clients will need to consult one
another, as well as their human resources professionals, contract
labor providers and insurance administrators, and include them
in operational discussions, to make the best decisions for the
uncertain times ahead.
4
Country Focus: Australia
Join Us at These Events
Country Focus: Australia
»
continued from page 1
China is Australia’s top trading partner,
accounting for 25 percent of exports;
Japan buys 19 percent, followed by
South Korea at 9 percent and India at
7 percent.
Australia purchases 20 percent of its
imports from China, with 13 percent from
the USA, nine percent from Japan, and
five percent each from Thailand, Singapore and Germany. Petroleum, motor
vehicles, telecommunications equipment,
medicines, computers and furniture are
significant imports.
Your connection ‘down under’
UTi’s offices in Adelaide, Brisbane,
Melbourne, Perth and Sydney can help
companies with their import and export
needs, offering air and ocean forwarding,
customs brokerage and contract logistics. UTi provides special expertise for
companies in the automotive, consumer
and retail, pharmaceutical and healthcare, and projects, mining and energy
fields.
Our in-house tariff consultancy services
add another dimension to the services
we offer our clients in Australia. We
work alongside our clients to ensure
compliance, reduce risk and identify
opportunities that add value. UTi’s
contract logistics facilities in Brisbane,
Melbourne, Perth and Sydney enable
us to provide end-to-end solutions. With
convenient access to major roadways
and timely recovering from airports
and ports, we help ensure our clients’
stock is available for distribution when
required.
Let’s get started
In recent years, UTi has become a
leader in Australia through innovative
services such as vendor and order management. Our solutions have delivered
value to our client’s supply chains by
reducing inventory levels and administrative costs, and enabling our clients to
grow without the need to increase costs
within their administration area.
UTi offers one-to-two-day workshops
in Australia that are conducted in
collaboration with our clients and have
resulted in applying best practices and
delivering innovative solutions. Learn
more about how we can deliver competitive advantage to your supply chain from
UTi’s Pieter Lloyd, Managing Director,
Australia and New Zealand.
We hope to see you at the following
events where UTi will be sponsoring,
exhibiting, or speaking:
CSCMP Annual Global
Conference
20-23 October 2013
Denver, CO USA
UTi’s Alec Campbell will speak on how companies
can grow relationships with their customers during
supply chain disruptions.
Automotive Logistics
South America
31 October 2013
Sao Paulo, Brazil
UTi’s Elaine Inácio will join a discussion
on how manufacturers and supply chain
management providers can work together
more effectively.
UTi Client Event
Amsterdam
05-07 November 2013
Amsterdam, Netherlands
LANGUAGE: English
CURRENCY: Australian Dollar (AUD)
TIME ZONE: UTC+10:00
TOP EXPORT PARTNERS:
China; Japan; South Korea; India; USA
TOP IMPORT PARTNERS:
China; USA; Japan; Thailand; Singapore;
Germany
MAIN EXPORTS:
Minerals such as iron ore and fuels such
as coal and liquefied natural gas
MAIN IMPORTS:
Crude and refined petroleum, passenger
motor vehicles, gold, telecommunication
equipment and parts, medicines, computers,
and furniture
FREE TRADE AGREEMENTS:
South Pacific Regional Trade and
Economic Cooperation
UTi leaders, global experts and industry professionals will explore driving dynamic decisionmaking in your supply chains.
US-Mexico Chamber of
Commerce
07 November 2013
Chicago, IL USA
UTi’s Mike McClelland will speak at the
Chamber’s NAFTA Forum on how logistics is
helping to drive development of cross-border
trade.
Eye for Transport 3PL
Summit
12-14 November 2013
Amsterdam, Netherlands
UTi’s Sonja Nitschke will join a discussion at
this annual European conference on taking
advantage of opportunities in Turkey.
Consumer Goods Supply
Chain Officer Summit
20-21 November 2013
Shanghai, China
UTi’s Fred Gilbert will address supply chain
management in emerging markets.
5
UTi in the News
Multi-Client Warehousing Options Grow
Vertical Report:
Automotive
Responding to the demand for more flexible warehousing and distribution options, UTi has expanded and upgraded its multi-client facilities around the world.
For example, UTi now offers expanded capabilities in the Chicago area for companies requiring warehousing and distribution without the need for a dedicated facility.
“Our Chicago-area facility offers clients the benefits of a fully functional facility at a
fraction of the cost of a dedicated site,” says Gerald Perritt, UTi senior vice president for contract logistics in the Americas. “Clients can select from a full range of
options without investing in staff, equipment, or systems.”
In addition to shipping, receiving, and cross-dock operations, the site offers inventory management, order consolidation, materials handling, reverse logistics, packaging/repackaging, and kitting and quality inspection and rework. The facility has 30
dock doors, two drive-in doors and 33 trailer stalls.
The nearly 200,000-ft2 facility, located at 800 Bilter Road in Aurora, Illinois, provides easy access to I-88 at the Farnsworth Interchange. With a 32-ft ceiling height,
racking and storage space is optimized. The secure facility has 24/7 central station
alarm monitoring, CCTV monitoring and ESFR sprinklers.
A full complement of technology solutions are offered including EDI, barcode scanning and SAP supply chain solutions. Adds Gerald: “UTi’s knowledgeable staff has
expertise in managing any merchandise, from pharmaceuticals to auto parts.”
UTi Connections
We welcome your feedback. Please contact us with any comments, questions or suggestions.
You can also subscribe to receive future issues of Connections and other UTi publications.
Keeping Up with the Teslas
Increasing demand for new vehicles and
a shift to standardized manufacturing
practices are steering the automotive
supply chain in new directions – creating
new competitors and new challenges.
Since the global recession of 2008, the
automotive industry has been undergoing radical change to support the new
realities of a truly global market. Two
notable trends are driving this shift: OEMs
are finally committed to the concept of
global vehicle platforms; and the frequency and pace of new vehicle launches
around the world continues to grow.
By leveraging core components and
systems, OEMs are able to introduce
a wider variety of new models at an accelerated rate, driving more showroom
traffic. These two changes are fundamentally changing every aspect of the
automotive supply chain.
Learn more in the free UTi white paper,
“Developing a Roadmap toward Global
Vehicle Platform and Supply Chain
Harmonization.”
Press Clippings
UTi’s client-centric
Our thought leadership
UTi’s Sameer Khatri,
strategy impressed the
is on display in Supply
Regional VP Indian
editors of Tobacco
Business as Casey
Subcontinent and
International so much
Mork and Richard
Managing Director
they made it their cover
Delseni of the UTi sup-
India offers expert
story, including this
ply chain design and
analysis and insights
photograph of a UTi
innovation team explore
on ocean forwarding
Distrbution tractor and 53-foot dry van cross-
how procurement professionals can better
in a recent Cargo Connect article about the
ing from Washington into Oregon with Mount
collaborate with service providers to reduce
infrastructure and regulatory challenges
Hood in the background.
cost and deliver value.
facing the nation’s ports.
6