2010 November 10 Shinichi Ishii, Dr. of Eng. Strategy Group Member in GS1/T ＆ L IUG Expert in ISO/TC8, ISO/TC104, ISO/TC122 and ISO/TC204 Expert in UN/CEFACT/TBG3

2010 November 10

Shinichi Ishii, Dr. of Eng.

Strategy Group Member in GS1/T ＆ L IUGExpert in ISO/TC8, ISO/TC104, ISO/TC122 and ISO/TC204

Expert in UN/CEFACT/TBG3

Senior Manager for Business Strategy Consulting departmentNomura Research Institute, Ltd.

Case Study of Supply Chain Integration

APEC e-Trade and Supply Chain Management Training Course(Phase III: Logistics Management)

Copyright （ C ） 2010 Nomura Research Institute, Ltd. All rights reserved.

CONTENTS

2

1. Issue in Supply Chain Logistics

2. SCM Theory based on real life

3. Case 　 Study

4. New Initiatives


1. Issue in Supply Chain Logistics


4

Logistics Chain

Logisticscenter

ContainerYard

suppliersupplier tradertrader

Vender

Depo

tradertrader retailretail

Retail

Depo

Flow of Products ( Goods)

Flow of information

End to end (door to door) transportation system

Logisticscenter

ContainerYard


5

Parties on Logistics Chain – Many and Diverse

－ Shippers (Consignor), exporters, importers, Consignee

－ Cargo Agents

－ Forwarders

－ Shipping agents, shipping lines

－ Terminal operators

－ Customs brokers

－ Drayage companies, land transport

－ Warehouses

－ Insurance

－ Bank: International Bank for L/C, B/L

－ Authorities ( CIQ)


6

Problem in Each Logistics PartyLack of Sharing informationDiscontinuity of information flow because of behind computerization for small and medium

sizes business, Re-entry system of Data on cargo

NOx

CO2

Low Occupancy Rate of FleetsMany Frequent Delivery

absence at home

A Parcel A Home Delivery service

Data Re-entryMis-match for Demand Different formats of invoice, packing listMultiples barcodes must be attached

Data Re-entryMis-match for Demand Different formats of invoice, packing listMultiples barcodes must be attached

Parts Supplier

AssemblerLogistics Center

Distribution Center

Truck Companies Retailers Individual Home

Re-delivery

overstock overstock

DEAD STOCK&

OVERSTOCK

Environment,Road Traffic Congestion

Declining Papa ama Stores Congested Mega Stores

WrongDelivery!

Ordering from same individual causes different deliveries with internet shopping Re-delivery is usual because of absence at home when delivery

Ordering from same individual causes different deliveries with internet shopping Re-delivery is usual because of absence at home when delivery

Individual Home

Individual Home


7

Requirements for Supply Chain Management

・ Changes happen every day from demand side

・ Quick Response for Demand

・ Minimizing both opportunity loss and inventory volume　 (trade-off)

・ Management not based on intuition and experience but on scientific and logical analysis


8

Logistics Exploiting ITDelivery system for Electronic CommerceInventory reduction through whole supply chainEnhancing Logistics ManagementIncreasing security for cargo deliveryImproving environment and cost reduction based on improving

fleets management Increasing efficiency for interfaces with governmental regulatory

requirement for approval

End User

Assemble Factories

Maritime TransportForwarder

TruckForwarderParts Factories

Truck

12345 78910

Wharehouses


9

One more issue for Global Logistics

○Impact of the Event of September 11 Enhancing Security Counter measurements for security in the US （ CSI ： Container Security

Initiative,C-TPAT:the Customs and Trade Partnership Against Terrorism,SST:Smart&Secure Tradelane)

○Cargo Movement Transparency for Security Visibility Tracking and Tracing Device →RFID （ Radio Frequency Identification, IC Tag etc ）


10

Multi-Organizational Approach to Standards Development

Technical Committee 8 - Ships and Marine TechnologyTechnical Committee 104 - Freight Containers Subcommittee 10 - Computer Applications

Subcommittee 4 - Identification and Communication Subcommittee 11 - Intermodal and Short-Sea ShippingWorking Group 2 - RFID

Technical Committee 204 - Intelligent Transport Systems Working Group 1 - System Architecture

Technical Committee 154 - Processes, Data Elements and Working Group 4 - Automatic Vehicle and Equipment Identification (AVI/AEI)Documents in Commerce, Industry and Administration Working Group 7 - General Fleet Management and Commercial/Freight

Working Group 7.2 - Road Transport Interfaces/ Freight and Fleet Systems

Acronyms KEY and Summarized Descriptions for Freight Standards Organizations follows.

TC 8

TC 104

TC 154

TC 204

WG 1

WG 4

WG 7

JTC 1

SC 31

SC 32

JMA

TC 9 RAIL

SG 16

ITU-T

International Telecommunications

Union (ITU)

Institute of Electrical

and Electronic

SCC 32(ITS)

IEEE 1512HAZMAT

American National Standards Institute

(ANSI)

ASC X12EDI

Comite Europeende

Normalisation (CEN)

CEN 278

American Association of Port Authorities

(AAPA)

Terminal Operators & Port Authority

(TOPAS)

UN/CEFACT

TBG

CEN/BT/WG/41

DISA

ASC X12I

BEST

International Maritime Organization (IMO)

United Nations Economic Commission

for Europe (UNECE)

International Electrotechnical

Commission (IEC)

World Customs Organization

(WCO)

International Standards

Organization (ISO)e-Business MOUe-Business MOU e-Business MOU

SC 10

SC 4

Organization for the Advancement of Structured Information Standards (OASIS)

ebXML MOU

REGIONAL/COUNTRY SPECIFIC ORGANIZATIONS

INTERNATIONAL ORGANIZATIONS

Facilitation Directorate

Trade Facilitation MOU

Category A Liason

UBL TC

SC 11RFID MOU

MSWG

LIAISON

TBG 3 PTC

DMWG

IMSC


2. SCM Theory based on real life


12

Transport vs Logistics

(Transport Business)・ Facility based industory, Network Industry ( For instance: Logistics center and delivery network) ・ Scale of Economy, Load Factor, Improved efficiency with avoiding demand concentration to the facilities・ High Rate of Operation is achieved by Efficient use of Land, Facilities, Equipment, Buildings, Time, Human Resources

(Logistics)・ Delivery of Appropriate commodities for appropriate place, timing within the constraints of cost and fleet management depending on market demand.・ Timing for market Demand is Appropriate・ Mathematical Planning and Optimization Theory, Mot manual but computer!


13

Logistics is infrastructure for Supply Chain Management

Important elements for Supply Chain management

・ Timing( Appropriate time for delivery)

・ Quick response with Speed

・ Control for logistics

・ Traceability


14

Gaps between Plan and Actual Sales with Bull Whip Effect

0

10

20

30

40

50

60

1 3 5 7 9 11

13

15

17

19

21

23

25

27

29

31

33

35

37

39

41

43

Time

Quantity

Plan for Purchasing Order

Actual Sales

The case of sales with Personal Computer

Bull Whip Effect


15

Example of information sharing between companies to meet customer demands

Purchasing Activities

Production Activities

Sales Activities

Sup

plie

r

Cus

tom

er

Procurement Plan

Production Plan

Sales Plan Customer needs

information / Plan information

① Improved forecasting accuracy

Emergency orders / order changes, others

Delivery commitment

(ATP)

Materials Procurement

④ Planning information shared with supplier

⑤ Provide instructions for carrying out the ever-changing plan

② Planned short-cycle rolling

③ Plan readjustments by each order

⑥ Understand and warn gaps between plan and actual operations

Purchasing order / Purchasing plan

information


3. Case Study


17

Land Transport 1 Land Transport 2

Asia U.S.

Inventory status for Item No.69A7(Meg Hard Drive) are as follows;Waiting Dispatch Advice 25,551/ Just Completed loading 20,000/ On board 875/ Processing Customs Clearance 1,000/ Land Transport for Distribution Center(L.T.1) 125/ Distribution Center 500/ Land Transport for Customers(L.T.2) 1,000

Dispatch Loading On Board C.P L.T.1 D.C. L.T.2

25,551 20,000 875 1,000 125 500 1,000

Item No.69A7,Description;400 Meg Hard Drive

Source) Professor S.J.Won Stanford University

CustomsLogistics Center Consignee

Consignor

Providing inventory information through intermodal transport between Asia and North America

Tracking and Tracing System with Global Logistics

AsianCountries


18

No Inventory – Assembling and Delivery system based upon Orders

No Inventory – Assembling and Delivery system based upon Orders

Extreme Reduction of Lead time with Direct logistics model Extreme Reduction of Lead time with Direct logistics model

or

FedEｘ佐川急便

中国東方航空

リードタイムの大幅な縮小リードタイムの大幅な縮小最短最短 44日で納品可能に日で納品可能に

厦門工場から日本の物流拠点まで 29のチェックポイントで製品をトレーシング

＝「オーダーステータス」システム「オーダーステータス」システム

Xiamen Factory Xiamen Airport

Chubu Airport

or KansaiAirport

Kansai Distribution Center

Customers

AirTransport

CustomsClearance

Airlines

l provided the Government with one year production plan and Transportation plan. Dell requested to increase frequency of direct air transport Service to Japan. Since March 2001, 6 flights( to 3 kansai and 3 Chubu )a week transport the cargoes To Japan.

Large　Lead　time　reduction

Minimum　case　is　only　4　days　for　delivery

Tracking and Tracing with 29 Check points between Xiamen Factory and Distribution Center in Japan

Order Status System

Realizing low cost and short lead time logistics operation with direct flight between Xiamen and Japan

CustomsClearance


0

10

20

30

40

50

60

70

80

90

100

0% 10% 20% 30% 40% 50% 60%

Extremely high performance of inventory turnoverMajor Electronics Manufactures performance Comparison in

2005

Extremely high performance of inventory turnoverMajor Electronics Manufactures performance Comparison in

2005

Dell

Gross Profit

Inventory Turnover= Cost of Sales/Inventory per Year

ROAReturn on Asset

Operating ProfitAnnual Turnover

Annual TurnoverTotal Asset

Gross Profit 　Annual Turnover

　 Annual Turnover　 Inventory

　 CostInventory

(Inventory Turnover

Ratio: 在庫回転率 )

（ Gross Profit Ratio: 粗利率）

Dell　established　advanced　Global　Supply　Chain　system

Pana Sony Sharp CANON DELL NOKIA

Average Inventory 57 48 69 115 4 26(Day)

Cash cycle ( Day) -63 -37 -32 -143 45 -26= Deferred Payment Duty – Accounts Receivable – Average Inventory


Global Supply Chain Management of Automotive Industry

Global Supply Chain Management of Automotive Industry

Fiscal Business Plan for manufacturingOn Every October, review and create next three years business plan

By December, Detail business plan by categories, regions, markets (individual product for regions)

Review every six month

Monthly Business Plan for manufacturingThe first week of every month, purchase orders from local dealers to local sales companies

Dealer’s Order is for next three months

On 15th every month, Local sales companies decide an order to headquarter ( Regarding this order, sales companies have to buy from headquarter) and new order for next three month

Confirming suppliers’ Capacities and Inventory, 14 days prior to next month manufacturing

Final product allocation to domestic and foregin(export), 11 days prior to next month manufacturing

Decide detail specification for individual car excluding coloring

It is possible for domestic market user to decide and change coloring

Source) World Business Review


21

Buyer’s ConsolidationBuyer’s Consolidation

EDIほかシステムプラットフォーム

【【青島・上海センターの拡充】青島・上海センターの拡充】青島センター 300万枚→ 600 万枚上海センター 180万枚→ 400 万枚

在庫流通加工

（検針、検査、アソート）バンニング

通関など

中国日本

B港

通関在庫

仕分け流通加工など

Customer’s DistributionCenter

荷主ごとにコンテナ化荷主ごとにコンテナ化最大最大 30%30% ～～ 40%40% のの

大幅な物流コストの削減大幅な物流コストの削減

【アパレル業者のニーズ】リードタイムの短縮化ロジスティクスコスト低減良品のみの決済

EDI Platform

ConsolidationService

Qingdao Center 3million→6millionShanghai Center 1.8million→4million

Processing and Distribution CenterQingdao, Shanghai

Apparel FactoryLogistics

Center

InventoryVanning

Customs clearance

China JapanPort

B港

Customs ClearanceInventoryDividingProcessing

Containerizing by ShippersMaximum Cost Reduction by 30%-40%

【 Requirement from Customer 】 Reduction of lead time Reduction of cost Payment for only inspected items Tracking for cargo

Enhancing apparel department in China for mega-retailers Starting Buyers Consolidation Business with use of licenses with total logistics business in China

Enhancing apparel department in China for mega-retailers Starting Buyers Consolidation Business with use of licenses with total logistics business in China

ConsolidationService

Capacity Expansion with Qintao and Shanhai Distribution Centers

Port


22

VMI LogisticsVMI Logistics Expanding its logistics system by using specialty with logistics for only electronic part, that request

specific knowledge and know-how Providing High Quality of Vender Managed Inventory depending customer requirement enable their

customers to decide to continue using Alpus

Expanding its logistics system by using specialty with logistics for only electronic part, that request specific knowledge and know-how

Providing High Quality of Vender Managed Inventory depending customer requirement enable their customers to decide to continue using Alpus

【【VMIVMI倉庫の機能】倉庫の機能】部品ベンダーに代わって部品在庫を管理し、組立て

メーカーから指定された場所に JITで配送ユーザーである組み立てメーカーから出荷指示を受

けた後、 48時間以内に中国各地の生産拠点に納品

システムプラットフォーム

VMI Warehouse

在庫通関

ピッキング払出

日本

中国

Function of VMI warehouse - controls inventory and delivery of parts for designated places by assemblers on behalf of suppliers- 48 hours delivery system to customers with instruction of assemblers

System Platform

（ Tianjin 、 Dalian 、 Shanghai etc. ）

Parts suppliers

InventoryCustoms clearance

PickingPackaging

JapanAssemblers

【 Requirement of Electronic parts suppliers 】

Cost reduction of investment for logistics centerCost reduction for logistics operation

Out sourcing

Lead time reduction

China

China

China

Developed system by herself, providing customers with both system itself and logistics operationIt is not easy for Customers to change Alpus logistics to other logistics provider


23

Just In Time logistics with end to endJust In Time logistics with end to end Just In Time(JIT) Transport to Total Logistics service provider through Intermodal Transport Diversifying customer with obtaining management ability of Total Value Chain

Just In Time(JIT) Transport to Total Logistics service provider through Intermodal Transport Diversifying customer with obtaining management ability of Total Value Chain

Previous profit generator but now facing heavy competition

日本郵船の強みの集大成

内陸輸配送

内陸輸配送

外航海運（定期航路、小型船 3～４隻）

内航海運（対日本・タイ、小型船 1隻）ング

トータルな顧客価値の実現トータルな顧客価値の実現

郵船航空サービス（航空貨物サービス）

COSCOの持つ経営資源

New Profit Source

Collecting and providing competitiveness

High Value addedLogistics Service

Land Transport

Domestic Shipping line : 1 Small vessel

Terminal Operation

Realizing total value for customers

Air Transport for air cargo

Alliance with Other Ocean Carrier

- Just in Time delivery service for automotive manufacturers in Guangzhou and Shanghai- New profit sources with Customs clearance service and terminal operating- Providing Modal diversity with International, Domestic, Air etc… for consumers- Promoting as a Provider of total logistics solution for automotive manufacturers

International Shipping line( liner service) : 3-4 Small vesselsTerminal

OperationLand

Transport

New Profit Source

Customer involvement


4. New Initiatives


Manufacturers are trying to reduce lead time and inventory. Manufacturing automation ( Transparent) + Logistics to delivery (Black box) If in case of recall, VISIBILITY into supply chains is necessary

In order to have VISIBILITY, it is essential to have……

The main issue is enhancing Global Supply Chain Visibility 　　　　　　　　　　

Sorting

Aggregation

Re-sorting

Sorting by Store

Consumer

Recycling


■SPEED : Wishing to reduce processing lead-time while complying requirements.

■QUALITY : Wishing to have logistics information systems which enable us to take agile actions by means of capturing exceptions precisely and timely within entire supply chain for better asset management.

Shipper (manufacture) ’s / Consignee (Retail) ’s expectations are more advanced and sophisticated than we thought

① Reduce man-hours and lead-time related to the entire business processes

② Manage inventory uniformly regardless of the transportation company.

③ Quickly understand inventory situations, not only for on hands but also in transit, thus attain an uniform global grasp

④ Evaluate transportation results and use them for further transportation planning..

⑤ Flexibly change delivery point, quantity, or mode of transportation.

⑥ An alarm sounds when the inventory level becomes too low or too high against standard.


Storeloading & unloading

ShipmentManu-facturing

Customsclearance

Delivery SalesLand

transport

1 day 2 ～ 4 day 5~8 day ・・・

Concept : Pipeline Inventory Control ( Manufacturing + Logistics = One Controlled Process)

9~14 day 15~21 day

Short Sea : Intra Asia within a week , But what happen in Deep Sea for North America and Europe


Phase 1 Phase 2 Phase 3 Hong Kong → Tokyo

FootwearOcean

February 2007

Handheld readersConnect EPCIS’s

in several countries

Shanghai → LA Electronic Goods

Agricultural MachineryAir, Ocean, Overland

February 2008

Handheld readersHibernating active tags

in planeConnect EPCIS’s in several countries between different

industries

Tokyo → Amsterdam Electronic Goods

Ocean February 2009

Fully automated reading of tags (fixed readers)

Use of electronic seals on container (proof of closure)

Parties involved are AEO (Authorised Economic Operator)

Involvement of Customs (use of UCR; draft of “green lane”)

GS1 EPCglobal/TLS Global Pilot Tests supported by METI, JP


Did we develop useful standards for user (Industries)?

The pilots told us about potential benefits but difficulties for implementation

Synchronization is need with not only RFID products but applications combined with RFID, Middleware and database for sharing real time data.

METI, Japan organized a committee for discussing and developing a standardized platform for cargo visibility in cooperation with MLIT

Review and new Direction


Benefit over Investment Cost, Who will invest? Visibility is just an infrastructure for efficient SCM.

Reduce Inventory, improve productivity of logistics operation,

reduce lead time, decrease opportunity loss, User must develop benefits if they believe in the robustness of RFID.

Prices for IC-tags are already coming down. However hardware can not be activate without software!! Software is still very expensive because of non-standard.

Standard development is very slow There are some international standard development organizations related to global

supply chain. Trade, Transport , Customs,

Not only Hardware but Software much more important


Accessing Application

Data BaseCapturing Application

ALE

Middleware

Reader

IC-Tag

Products with RF-tag

Communication architecture among RF, Database and User

User

Database

Internet


Next Target is Interoperability of Global ID Code and Database

PlantContainer terminal

Customsof the

exportingside

Ocean-going vessels

Containerterminal

Customs of the

importing side

Warehouse

Production system RFID Customs system AIS TOS Customs system RFID

Production management

Salesmanagement

accountingmanagement

Shipper

Operationmanagement

Accountingmanagement

Logistics trader

Internet

Customsrepository

Shipping companyrepository

Terminalrepository

Customsrepository

Terminalrepository

Logistics provider

repository

Shipperrepository

DB DB

Information to be shared

Systemized code

DatabaseStandard interface

Japanese Government(METI)’s ApproachFrom APEC to the worldwide


Thank you very much for your attention

Shinichi Ishii

Senior Manager

Nomura Research Institute, ltd.

[email protected]

Contact　　Information