Jack Ampuja Supply Chain Optimizers Niagara University June 8

Jack Ampuja
Supply Chain Optimizers
Niagara University
June 8, 2009 – Philadelphia PA
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High-profile food recalls
Roller coaster oil prices
Rising commodity costs
Diminishing consumer demand
Heavy tolls on an industry that struggles, even
in good times, with razor-thin margins
Economic turnaround may not come until ‘10
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Global Logistics & Supply Chain Strategies [2]
Refrigerated & Frozen Foods [2]
Transport Topics
DC Velocity
Modern Materials Handling
Logistics Management
Canadian Chamber of Commerce in China
Daymon Worldwide Newsletter
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Food safety
40%
Environmental sustainability 24%
Health & wellness
14%
Food labeling
12%
Food marketing
10%
GMA Survey
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Cost control
- more important than ever with rising costs
Managing uncertainty
- things are changing faster for everyone
Making the supply chain green
- either you are at the sustainability table or
some other company is eating you as lunch
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Good news: major focus on operational
efficiency & effectiveness
Bad news: executives are dissatisfied with
progress on cost reduction
- only 24% believe that cost reduction objective
is being met
- this is the lowest satisfaction of any goal
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Improving forecast accuracy
Move to Sales-Inventory-Operations-Planning
Redesigning supply chain networks
New approaches to collaboration
Integrated logistics thru improved visibilty
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Develop an optimal supply chain plan for the
next 3-12 months
- Optimize trade-offs between production,
inventory and warehousing
- Identify potential supply chain bottle-necks
early to avoid disruptions and costs
- Share supply chain plan with plants
[production plan] & warehouses [thruput]
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Freight rates do not increase linearly in all parts
of country
Reviewing facility service areas can pinpoint
savings $
Many large firms now run network
optimization on quarterly basis to achieve
lower freight cost
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Adding carbon footprint weighting to model
allows for comparing environmental impact of
various scenarios
Comparing total miles of different logistics
networks – inbound & outbound – allows for
identification of lowest miles of movement
Calculates $ of environmental improvement
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Companies that have conducted a supply
chain opportunity assessment and adhered
to a roadmap of supply chain changes
report many short- and long-term benefits,
including reduced inventory, increased
velocity, more on-time delivery, lower
supply chain and transportation costs, lower
total cost of ownership and higher sales
growth.
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Engine is most widely sold Detroit Diesel ever
Larger single tires filled with nitrogen
All aluminum wheels – including 5th wheel
Air deflectors on side & top
Carbon fiber springs
Alan Bishop electric engine fan system
Hydrogen booster for engine
Synthetic oil is changed after 100,000 miles
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Engine burns fuel more completely generating
more power & less carbon output
All technology used is available to any firm
Green Machine was conceived and assembled
by trucking industry veterans in Michigan
In test Pepsi delivery fleet fuel efficiency
increased from 5.6 to 8.2 mpg….+46%
- one big user reports 9.3 miles per gallon
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Outperform others in the major categories of
costs, speed, quality and managing risk
They measure and benchmark their
performance and have continuous
improvement programs in place
They do better in visibility and customer
satisfaction. They collaborate with trading
partners, strategic customers and suppliers
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Best of all, they are squeezing the most out of
their supply chains. And they no longer worry
about not achieving peak performance.
Investment in SCM software topped $6B in ‘07
and is expected to reach an impressive $7.4 B
by 2010 - AMR Research
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Increased collaboration with both suppliers
and customers
More contract operations in manufacturing
Investing in new systems that engender better
data accuracy + speed of execution
More focus on top line impact of SCM
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Most US firms have initiative overload:
- as many as 15 strategies supported by a series
of goals
Between 1981 & 2001 General Electric had 5
corporate initiatives
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73% of US Fortune 500 firms use 3PL services
~80%-20% split between tactical and strategic
relationships
53% of 3PLs are combating the economic crisis
by concentrating on core markets
- 47% by terminating unprofitable accounts
Shippers consider geographic expertise to be
significantly more important in choosing a 3PL
than 3PLs believe
550 Executives Surveyed
By Eye-for-Transport 2009
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23% more 3PLs believe hidden costs and
cheaper prices elsewhere to be a key issue in
the non-renewal of contracts than their
customers report
42% of Shippers have recently or are currently
planning to switch 3PL provider
- 17% because of cost
- 25% because of service
550 Executives Surveyed
By Eye-for-Transport 2009
Importance
% Most Very Total
On time & complete shipment 29
61
90
On time deliveries
28
55
83
Accurate inventory
25
64
89
Data quality
21
72
93
Real time visibility
19
62
81
Manage info electronically
14
67
81
Spring ’08
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Not much new activity…de-emphasized in
many firms such as Procter & Gamble
 Not being pushed by Wal-Mart
ROI expectations are overly rosy:
 37% expect a clear return <12 months
 An additional 25% in <18 months
Good news: Invengo of China has announced a
chip costing 5.8 cents
Prediction: will continues to grow slowly but
relentlessly as everyone figures out use &
value
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13% reduction in packing material by
2010…from ‘07 levels
Absolute reduction in level of packaging
reaching households by 2010 versus 2005
No food and packaging waste will go to
landfill from 2015
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Reduce overall costs
Enhance corp social responsibility
Improve profit
Reduce waste/improve disposal
Improve visibility of green drivers
Increase recyclables/re-useables
Be more fuel efficient
Reduce emissions
56%
54%
48%
43%
41%
37%
36%
33%
Now planning
Less than one year
1-2 years
3-5 years
5+ years
24%
34%
21%
7%
14%
* Leaders that have [4%] or are planning [11%] to redesign
entire supply chain to be green
Spring ‘08
%
Green consultant
Green certification
B-I-C
28
24
Avg
23
20
Laggard
19
18
Leaders moving to Chief Sustainability Officer
“We have a 12 member sustainability team that meets
monthly. Team is broken into 3 parts:
Environmental, Energy, Emerging Issues.”
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- North American CPG Company
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Major opportunity for cutting purchase costs
Used by firms like Coke, Pepsi, Target, Levi’s,
Best Buy, Coors, DuPont, GE, P&G
- Process managed by system expert
Minimum auction = $20 million
Several firms can roll purchases together for
better leverage
“The greatest obstacle to discovery is not
ignorance….it is the illusion of knowledge.”
- Daniel J. Boorstin:
author, historian, Librarian of Congress
“Every organization is perfectly aligned to get the
results it generates.
- W. Edwards Deming