Managing a Global Transportation Network

Chuck OdomChuck Odom Rose CmelakRose Cmelak AverittAveritt Oracle OracleVP Global DevelopmentVP Global Development Principal Product Strategy Principal Product Strategy ManagerManager

10-17-200610-17-2006

• ““Extremely powerful bombs of a Extremely powerful bombs of a new type may thus be constructed. new type may thus be constructed. A single bomb of this type, carried A single bomb of this type, carried by boat and exploded in a port, by boat and exploded in a port, might very well destroy the whole might very well destroy the whole port together with some of the port together with some of the surrounding territory.”surrounding territory.”

• Letter to the President of the United StatesLetter to the President of the United States

• ““Extremely powerful bombs of a new Extremely powerful bombs of a new type may thus be constructed. A type may thus be constructed. A single bomb of this type, carried by single bomb of this type, carried by boat and exploded in a port, might boat and exploded in a port, might very well destroy the whole port very well destroy the whole port together with some of the together with some of the surrounding territory.”surrounding territory.”

•Albert EinsteinAlbert Einstein -August 2, -August 2, 19391939

Letter to Franklin D. Letter to Franklin D. RooseveltRoosevelt

Managing a Global Transportation Managing a Global Transportation NetworkNetwork

International supply chains require a seamless, International supply chains require a seamless, flexible transportation network capable of flexible transportation network capable of

tracking shipments from origin to destination tracking shipments from origin to destination while providing the flexibility to meet changing while providing the flexibility to meet changing

customer requirements.customer requirements.

Why?Why?

Managing a Global Transportation Managing a Global Transportation NetworkNetwork

This session provides several case studies that This session provides several case studies that illustrate the challenges of transporting illustrate the challenges of transporting

international freight, including the Mexico-US international freight, including the Mexico-US Border, and approaches for reducing cycle time Border, and approaches for reducing cycle time

and international clearance.and international clearance.

How? How?

Managing a Global Transportation Managing a Global Transportation NetworkNetwork

Gain insight into the working knowledge of Gain insight into the working knowledge of global supply chain and client required global supply chain and client required

visibility visibility Learn about the strategic approach for Learn about the strategic approach for

global “speed-to-market” solutionsglobal “speed-to-market” solutions

How? Detailed? How? Detailed?

Top North American Railways

Domestic Manufacturer Global Marketer

Domestic Manufacturing/Global Domestic Manufacturing/Global MarketingMarketing (general Strategy)(general Strategy)

• Take advantage of existing and future trade Take advantage of existing and future trade regulations.regulations.

– NAFTANAFTA– CAFTA (CBI)CAFTA (CBI)– AGOAAGOA– Jordan QIZJordan QIZ– Thailand FTAThailand FTA

AGOAAGOA

• The African Growth and The African Growth and Opportunity Act (AGOA) was Opportunity Act (AGOA) was signed into law on May 18, 2000 as signed into law on May 18, 2000 as Title 1 of The Trade and Title 1 of The Trade and Development Act of 2000. The Act Development Act of 2000. The Act offers tangible incentives for offers tangible incentives for African countries to continue their African countries to continue their efforts to open their economies efforts to open their economies and build free markets.and build free markets.

JORDAN QIZJORDAN QIZ

• Qualified Industrial Zones (QIZ) is a unilateral Qualified Industrial Zones (QIZ) is a unilateral act by the USA in an innovation designed to act by the USA in an innovation designed to encourage Jordanian exports to the U.S encourage Jordanian exports to the U.S market, thus inviting National and market, thus inviting National and International Companies to take advantage of International Companies to take advantage of this unprecedented initiative enabling Jordan this unprecedented initiative enabling Jordan to offer a unique opportunity to all to offer a unique opportunity to all Manufacturers.Manufacturers.

This concept allows goods manufactured in This concept allows goods manufactured in these Zones to enter the USA these Zones to enter the USA Duty free & Duty free & Quota freeQuota free thus offering a unique opportunity thus offering a unique opportunity to all International Manufacturers to move to all International Manufacturers to move their Industries to these Zones.their Industries to these Zones.

GENERAL STRATEGYGENERAL STRATEGY

• Minimize risk by diversification and Minimize risk by diversification and prudent country selection.prudent country selection.

• Build a base of large, vertical, full Build a base of large, vertical, full service manufacturers.service manufacturers.

• Use a mix of dedicated agents and Use a mix of dedicated agents and factory direct relationships.factory direct relationships.

• Capitalize on owned facilities.Capitalize on owned facilities.

• * 2.3M Sq. ft.* 2.3M Sq. ft.• * Disposable income* Disposable income

CURRENT SOURCING MIXCURRENT SOURCING MIX

• Owned facilitiesOwned facilities• ContractorsContractors• AgentsAgents• Factory Direct RelationshipsFactory Direct Relationships• Vertical factoriesVertical factories• Portable factoriesPortable factories

VERTICAL VERSUS VERTICAL VERSUS PORTABLEPORTABLE

• Vertical refers to a company that owns or Vertical refers to a company that owns or controls both raw materials and manufacturing controls both raw materials and manufacturing facilities/factories. Typically these companies facilities/factories. Typically these companies require the use of their raw materials if you require the use of their raw materials if you manufacture in their facilities/factories. There manufacture in their facilities/factories. There are price and lead time advantages to using are price and lead time advantages to using vertical suppliers.vertical suppliers.

• Portable refers to raw material producers that Portable refers to raw material producers that are willing to ship to any manufacturing are willing to ship to any manufacturing contractor. A vertical supplier can be portable contractor. A vertical supplier can be portable if they ship some of their raw materials to if they ship some of their raw materials to other companies.other companies.

SOURCING REGIONSSOURCING REGIONS

• Western Hemisphere – Mexico, Western Hemisphere – Mexico, Guatemala, Honduras, and El Salvador.Guatemala, Honduras, and El Salvador.

• Asia – China, Philippines, Malaysia, Asia – China, Philippines, Malaysia, Vietnam, Cambodia, Thailand, Brunei, Vietnam, Cambodia, Thailand, Brunei, Singapore, Hong Kong, Taiwan.Singapore, Hong Kong, Taiwan.

• Indian Sub-continent – India, Sri Lanka, Indian Sub-continent – India, Sri Lanka, Nepal.Nepal.

• Middle East – UAE, Egypt, Jordan.Middle East – UAE, Egypt, Jordan.• Africa – South Africa, Mauritius, Africa – South Africa, Mauritius,

Namibia.Namibia.• Europe – Turkey, Bulgaria, Russia.Europe – Turkey, Bulgaria, Russia.

REGIONS AVOIDEDREGIONS AVOIDED

• Western Hemisphere – Haiti, Belize, Western Hemisphere – Haiti, Belize, ColombiaColombia

• Asia – Indonesia, MyanmarAsia – Indonesia, Myanmar• India Subcontinent – Bangladesh, India Subcontinent – Bangladesh,

PakistanPakistan• Middle East – IsraelMiddle East – Israel• Africa – Kenya, Lesotho, MadagascarAfrica – Kenya, Lesotho, Madagascar• North KoreaNorth Korea• * Cuba* Cuba

Manufacturers/Marketers Manufacturers/Marketers FutureFuture

• Take advantage of existing and future Take advantage of existing and future trade regulations.trade regulations.

• Low-Cost Country sourcingLow-Cost Country sourcing• Partner with Countries providing quality Partner with Countries providing quality

manufacturing expertisemanufacturing expertise• Long-term Infrastructure InvestmentsLong-term Infrastructure Investments• Provide Efficient Provide Efficient

Management/production standardsManagement/production standards

FUTURE CONCERNSFUTURE CONCERNS

• Quota or no-quotaQuota or no-quota• Another outbreak of SARS or similar Another outbreak of SARS or similar

contagious disease.contagious disease.• Continued and increasing violence in Continued and increasing violence in

the Middle East.the Middle East.• Increased delays in US Customs due to Increased delays in US Customs due to

security concerns.security concerns.• Port StrikesPort Strikes• Natural DisastersNatural Disasters• TerroristTerrorist• Political “unrest”Political “unrest”

““Our Partnership with Averitt, in which true Our Partnership with Averitt, in which true information-sharing allows for information-sharing allows for collaborative solutions, has helped us collaborative solutions, has helped us improve our service and reduce our improve our service and reduce our costs.”costs.”

The Operational Risk The Operational Risk EnvironmentEnvironment

ŸŸ

Ÿ

ŸŸŸ

ŸŸŸ

EmergencyResponse

CrisisManagement

BusinessContinuity

Threat to lives, brand, stock

price, company reputation.

Threat to systems, data,

processes, supply chain.

Threat to life, safety, physical

assets, infrastructure.

SituationSituation: Pandemic Outbreak in : Pandemic Outbreak in ShanghaiShanghai

SituationSituation: Pandemic Outbreak in : Pandemic Outbreak in ShanghaiShanghai

CrisisCrisis:: 50% labor outage for 3 days, followed by government and quarantine of 50% labor outage for 3 days, followed by government and quarantine of

regional perimeter around Port of Shanghai.regional perimeter around Port of Shanghai.

EffectEffect: : 68 containers of toys for Holiday (Mattel, Hasbro) are frozen in China, 68 containers of toys for Holiday (Mattel, Hasbro) are frozen in China,

with no chance for re-routing.with no chance for re-routing.

ImpactImpact: : Toys miss Christmas completely - $40 million hit to top line revenueToys miss Christmas completely - $40 million hit to top line revenue Negative trade and consumer pressNegative trade and consumer press Permanent loss of market sharePermanent loss of market share

SituationSituation: Port Strike in Los : Port Strike in Los AngelesAngeles

SituationSituation: Port Strike in Los : Port Strike in Los AngelesAngeles

CrisisCrisis: : 100% of dock workers support strike; unloading abruptly ceases for 12 100% of dock workers support strike; unloading abruptly ceases for 12

days; days; Dock workers at Ports of Long Beach, San Diego, San Francisco and Dock workers at Ports of Long Beach, San Diego, San Francisco and

Oakland stage sympathy slow-downs. (reported)Oakland stage sympathy slow-downs. (reported)

EffectEffect: : Cumulatively, 162 cargo ships are lined up twenty miles out to sea, Cumulatively, 162 cargo ships are lined up twenty miles out to sea,

awaiting for dockage; awaiting for dockage; Major shipments of white goods, brown goods, lumber, household goods, Major shipments of white goods, brown goods, lumber, household goods,

home furnishings are delayed; home furnishings are delayed; Other ports handle only 5% of the traffic.Other ports handle only 5% of the traffic.

ImpactImpact: : ‘‘Spring’ season is severely impacted - $79 million hit to top line revenueSpring’ season is severely impacted - $79 million hit to top line revenue Negative trade and consumer pressNegative trade and consumer press Permanent loss of market sharePermanent loss of market share

SituationSituation: ‘Katrina’ Destroys : ‘Katrina’ Destroys US PortsUS Ports

CrisisCrisis: : Ports from Ft. Lauderdale and Miami/Everglades to New Orleans, LA are Ports from Ft. Lauderdale and Miami/Everglades to New Orleans, LA are

unusable during 2 day storm (Port Bienville); unusable during 2 day storm (Port Bienville); Damage to port physical plant is extensive, rendering ports only 20% Damage to port physical plant is extensive, rendering ports only 20%

capable for 8 weeks; capable for 8 weeks; Port work force down 45%; 14 cargo ships are lost or incapacitated in Port work force down 45%; 14 cargo ships are lost or incapacitated in

Gulf.Gulf.

EffectEffect: : Thousands of containers of back-to-school apparel from Mexico (denim Thousands of containers of back-to-school apparel from Mexico (denim

jeans), Peru (woven shirts) and other southern source countries are lost jeans), Peru (woven shirts) and other southern source countries are lost at sea or cannot make other ports for offloading for 5 weeks.at sea or cannot make other ports for offloading for 5 weeks.

Move Port Panama CityMove Port Panama City

ImpactImpact: : Back-to-school season is lost - $112 million hit to top line revenueBack-to-school season is lost - $112 million hit to top line revenue Negative trade and consumer pressNegative trade and consumer press Permanent loss of market sharePermanent loss of market share

SituationSituation: ‘Katrina’ Destroys US : ‘Katrina’ Destroys US PortsPorts

Inventory is largest Inventory is largest assetasset – at factory, in transit, on – at factory, in transit, on shelf.shelf.

Few Few supplierssuppliers have “best practices” plans for have “best practices” plans for operational resilience around predictable disasters. operational resilience around predictable disasters.

Few Few retailersretailers have have visibilityvisibility into vendor complete into vendor complete supply chain.supply chain.

Biggest asset is in the hands of vendors with a high Biggest asset is in the hands of vendors with a high risk of supply chain breakage; We do not risk of supply chain breakage; We do not controlcontrol this risk!this risk!

What’s at stake? (Back-to-school, Holiday, financial What’s at stake? (Back-to-school, Holiday, financial performance, company reputation).performance, company reputation).

RiskRisk

Case StudiesCase Studies

Rose CmelakRose Cmelak

*Currently re-implementing analytic capabilities using Oracle technology

Oracle Transportation Oracle Transportation ManagementManagement

• Forwarding & Brokerage Operations

• Logistics Inventory Visibility

• Freight Payment, Billing & Claims

• Transportation Management

• Transportation Operational Planning

• Transportation Sourcing

Transportation Management

Continuous Planning

Event Management

CarrierAnalysis

On-TimePerformance

CustomerSatisfaction

Consolidate Loads / Moves

SelectModes & Carriers

Book /Tende

r

Track &Trace

Audit / Settle

Procurement Collaboration & Optimization

Performance & Financial Analysis*

Logistics Order Management

Shipment Planning & Optimization

Service Provider & Asset Management

Shipment Execution

Freight Payment, Billing, Claims

Global Logistics Visibility

Supply Chain Event Management

Operational Reporting & Document Generation

Forwarding & Brokerage Operations

*Currently re-implementing analytic capabilities using Oracle technology

Oracle Transportation Oracle Transportation ManagementManagement

Best-In-Class Shipment Lifecycle CoverageBest-In-Class Shipment Lifecycle Coverage

Why Customers Deploy Why Customers Deploy OTMOTM

• Establish Best Practice & Drive Continuous Establish Best Practice & Drive Continuous ImprovementImprovement

• Reduce Costs and Deliver Detailed Cost Reduce Costs and Deliver Detailed Cost AccountingAccounting

• Increase Operations Efficiency through Increase Operations Efficiency through AutomationAutomation

• Integrate Logistics Throughout the EnterpriseIntegrate Logistics Throughout the Enterprise• Provide Logistics Collaboration across all Provide Logistics Collaboration across all

Trading PartnersTrading Partners• Improve Visibility of Inventory GloballyImprove Visibility of Inventory Globally• A Single Source of Information & Process A Single Source of Information & Process

ControlControl

Project AchievementsProject Achievements• Inventory reduction of 3 days due to “visibility” of Inventory reduction of 3 days due to “visibility” of

international freight across entire operationinternational freight across entire operation• 2% improvement in leveraging of freight spend due to 2% improvement in leveraging of freight spend due to

accuracy and visibility of global dataaccuracy and visibility of global data• 1% reduction in freight spend from optimisation, equivalent 1% reduction in freight spend from optimisation, equivalent

to approximately $8 million per yearto approximately $8 million per year• 1500 Orders Per Week in Europe, doubling in 20051500 Orders Per Week in Europe, doubling in 2005• One LLP in Europe, 150 Carriers, volume consol of 80%One LLP in Europe, 150 Carriers, volume consol of 80%

• Road live in F, Au, CH, SE, N, DE, B, NL, L, D, UK, Road live in F, Au, CH, SE, N, DE, B, NL, L, D, UK, CEECEE

Corporate DetailsCorporate Details• 80,00080,000 EmployeesEmployees

• €€20Bn20Bn Turnover (2003)Turnover (2003)

• 18,00018,000 Direct CustomersDirect Customers

• 135135 Manufacture & Process PlantsManufacture & Process Plants

• 7070 CountriesCountries

• 1515 ERP/OM systems. Multiple SAP’sERP/OM systems. Multiple SAP’s

• $800M$800M Annual Freight SpendAnnual Freight Spend

• 1.2M1.2M Shipments per year, parcel to Shipments per year, parcel to

FTL, multiple modesFTL, multiple modes

Solution RequirementsSolution Requirements• VisibilityVisibility

– Logistics information was spread across many Logistics information was spread across many systemssystems

– There was poor visibility & no possibility of There was poor visibility & no possibility of cross business unit/service provider product cross business unit/service provider product trackingtracking

• EfficiencyEfficiency– Need to leverage global freight spend Need to leverage global freight spend – Use visibility to reduce inventory - each day of Use visibility to reduce inventory - each day of

inventory reflects a cost of $15minventory reflects a cost of $15m• Flexibility Flexibility

– Need to be able to adapt to future changes, Need to be able to adapt to future changes, acquisitions, divestituresacquisitions, divestitures

• Web-native TechnologyWeb-native Technology– Include business partners via the internetInclude business partners via the internet– Reduce cost of maintaining multiple systemsReduce cost of maintaining multiple systems

“When we started we had 115 days of inventory. Today we have 109. We wanted to build a system that, when someone wanted to know something about logistics

at DuPont, there's only one place they can go.”

Jerry Reynolds, Global Manager Logistics Technology & Processes

Project AchievementsProject Achievements• Enabled Factory Gate Pricing initiativeEnabled Factory Gate Pricing initiative• Currently over 66% of inbound freight, equating Currently over 66% of inbound freight, equating

to 4,500 shipments a day, is on FGP through to 4,500 shipments a day, is on FGP through Oracle OTMOracle OTM

• 14% improvement in “delivered on time”, 14% improvement in “delivered on time”, leading to enhanced availability and reduced leading to enhanced availability and reduced stockholdingstockholding

• Increased vehicle and trip utilizationIncreased vehicle and trip utilization• 95% automated – 3 people manage all inbound 95% automated – 3 people manage all inbound

scheduling across each of 3 shiftsscheduling across each of 3 shifts• Rolling out across Europe & International Rolling out across Europe & International

InboundInbound

Corporate DetailsCorporate Details• 296,000296,000 EmployeesEmployees

• €€37bn37bn Turnover (2003)Turnover (2003)

• 2,2912,291 Stores worldwideStores worldwide

• > 50,000> 50,000 Product linesProduct lines

• > 800> 800 Convenience StoresConvenience Stores

• Largest Largest UK retailerUK retailer

• LargestLargest UK private employerUK private employer

Solution RequirementsSolution Requirements• Flexibility – complete solution requirements not Flexibility – complete solution requirements not

known when project initiatedknown when project initiated• Scalability – a solution that could expand & Scalability – a solution that could expand &

develop in line with Tesco businessdevelop in line with Tesco business• Web-native technology – ability to incorporate all Web-native technology – ability to incorporate all

supply chain partners with no financial or supply chain partners with no financial or technological barriertechnological barrier

• Business solution more important than technology Business solution more important than technology – “make it happen”– “make it happen”

• Start simple – practicality rather than gracefulness, Start simple – practicality rather than gracefulness, using email and “non-invasive” integration to using email and “non-invasive” integration to minimise internal/external resource requirements minimise internal/external resource requirements

• Rapid implementation – phase 1 live in 6 weeksRapid implementation – phase 1 live in 6 weeks

“We’re always looking at ways to improve our shelf availability and minimise waste and unnecessary costs. We look forward to a successful future with

Oracle (G-Log) delivering those benefits.”

Alex Laffey, Primary Operations Director

““THIS LITTLE PIGGY WENT TO MARKET”THIS LITTLE PIGGY WENT TO MARKET”

•3 days3 days•9 days9 days•30 days30 days•TomorrowTomorrow ????

““THIS LITTLE PIGGY WENT TO MARKET”THIS LITTLE PIGGY WENT TO MARKET”

•Inventory carrying costsInventory carrying costs–““Trading inventory for Trading inventory for information”information”

Thank YouThank You

• Speed-to-marketSpeed-to-market– Direct-to-storeDirect-to-store– DC by-passDC by-pass– Sort/segSort/seg– Consolidate/deconsolidateConsolidate/deconsolidate– Rapid-fire-fulfillmentRapid-fire-fulfillment– Allocate to order vs forecastAllocate to order vs forecast

• Dock-SurgeDock-Surge• DockDirectDockDirect• PortSide™PortSide™• Origin Country consolidationOrigin Country consolidation• Sequencing CentersSequencing Centers• VMIVMI

““Don’t buy it till it’s Don’t buy it till it’s Built!”Built!”

Don’t Build it till it’s Don’t Build it till it’s Sold!”Sold!”

““Release it as you bill Release it as you bill it!”it!”

““Catch a man a fish, and Catch a man a fish, and you can sell it to him.you can sell it to him.

Teach a man to fish, and Teach a man to fish, and you ruin a wonderful you ruin a wonderful business opportunity.” business opportunity.”

Karl MarxKarl Marx

Thomas Edison:Thomas Edison:

““Rules! Heck! There are Rules! Heck! There are no rules! no rules!

We are trying to We are trying to accomplish something!”accomplish something!”

Managing a Global Transportation Network

Thank You!Chuck OdomChuck Odom Rosalie CmelakRosalie Cmelak AverittAveritt Oracle OracleVP Global DevelopmentVP Global Development Principal Product Strategy Principal Product Strategy ManagerManager

10-17-200610-17-2006