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Palestra AMCHAM “Ciclo de Eficiência na Cadeia Logística”
Marcelo Frias, Avon Latam Logistics Director
October, 01st 2014.
About Avon
• For more than 125 years, Avon Representatives have brought beauty into the lives of women
• Avon, the company for women, is a leading global beauty company, with $10 billion in annual revenue
• More than 6 million active independent Avon Sales Representatives
• Products are available in over 100 countries
• Color cosmetics, Skincare, Fragrance, and Fashion and Home products
The "three pillars" of Avon's corporate mission and the focus of the company's corporate responsibility efforts and
achievements:
Social Reponsability
Operation Network LATAM
Peru Site
MANUFACTURING
Guatemala Site
Chile Site
Argentina Site Moreno
Brazil Site Interlagos
Colombia Site Medellin
Mexico Site Celaya
Vezla Site Guatire
Source Points Site
NOLA - Mexico
Guatemala
D.Republic
Nicaragua* Honduras* Panamá* El Salvador*
SMG – Argentina Chile
Uruguay
Paraguay
CPE - Colombia
Venezuela
Brazil
Ecuador
Peru
Stand alone
Stand Alone
*Supplied by Guatemala
Main Logistics Indicators 2014 YTD+Profit Plan
More than 26.000 shipments
Over 1000 lanes
3200 FEUs
100.000 Ton of volume
Spend of $110M
More than $420M of product cost
Over 30 Customs Units
18%
59%
4%
19%
How Avon Logistics can support strategic procurement, reduce in transit inventory?
How can we have minimal/economic stocks in inventory building?
Incoterm Review Project - EXW to FOB
Main Objective: Complexity Reduction
Seller Named Place Buyer
EXW
(Ex Works)
Seller
Buyer
Responsability
FOB
Carrier Border Port Ship Port
(Free On Board)
FOB
Logistics Complexity +
Compliance/Customs Risk ++
Cargo Handling Risk +
Cargo Delivery Date +
Flexibility on shipment =
Responsibility ++
Air Freight =
Lead Time +
Inventory in Transit +
Inventory Management +
Partial Nationalization/Call Off =
Cash flow +
Main Expected Benefits
Strong Improvement
++
Moderate Improvement
+
No Change =
Moderate Decrease
-
Strong Decrease
- -
FOB INCOTERM allows Avon taking the full responsibility over risk and cost
implied by EXW term;
Share with supplier the portion of responsibility over which he can have better
control: the local operations at origin;
8
Operational Scenario – Previous to project • 25 % of volume imported by LATAM; • 2600 processes/year; • High LCL shipments volume (70%); • 21 ports at origin x 7 destinations = 147 Lanes; • Pick up coordination at 115 supplier’s sites.
ASIA Consolidation Project – Overview
Identified Opportunity: Development of a 3PL (supplier) at China to coordinate consolidation; process and orders managements to LATAM (7 markets).
Delivered Results: • Logistics complexity reduction: 3PL order management; • Major control and processes standardization; • Logistics Costs reduction through consolidation, containers;
optimization, processes flow mapping and adequacy; • Reduction of CO2 emission.
9 9
Operational Simplification: • # of origin ports from 21 to 5 ports; • Pick up at supplier’s sites elimination; • # of lanes to be negotiated on BID from 147 to 35.
ASIA Consolidation Project – Results
Savings / Benefits: • $600K– Savings • Container Occupation (avg): 15% higher vs. PY; • Cargo availabity improvement throught higher
logistics efficiency; • Control and visibility improvement; • Data accuracy.
Previous
Current
International Multimodal Implementation (Air, Ocean, Truck)
• Allow companies to manage their supply chains more cost-effectively and quickly
• Alternative to conventional sailings and flight schedules
• Flexibility and more frequency to attend LATAM schedule
• Timely and economical option to keep transport on track
• Create direct transits under a single rate, which can translate into a cost savings compared to Air Freight
• Multimodal could potentially decrease Lead Time from 40 to 50 percent, compared to Ocean Freight
AIR OCEAN Intl Multimodal
Total Logistics LT: 10-15 days
Total Logistics LT: 60-65 days
Total Logistics LT: 30-35 days
11 11
Scenario Previus to Project 21 suppliers locatted at São Paulo area; High complexity to pick up coordination; No consolidation utilized, High LTL volume; Customs process at URUGUAIANA border; higher LTime and risk.
BR Consolidation to SMG Project – Overview
Identified Opportunity: A 3PL development to coordinate consolidation from BR to ARG Lanes and International Freight.
Delivered Results: Substantial reduction on OTR freight spend; Operational complexity reduction; FTL Vehicle occupation Optimization; Export Clearance process at “Customs warehouse – MIC/DTA”
reducing Customs LTime and risk.
2
1
The radius of the circles is approximately 60km.
Brazilian Suppliers
attending ARG market
385 Ops. 650.996
KG
3.331
M3
U$S 534.561
Savings :
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Incoterm Review – Supplier 1 Pilot DAT Bonded (Bra and Arg volume)
# Items Scenario Volume
Units (SKUs) Current Spend
USD (EXW) Main Benefits Description
12 EXW to DAT(Bonded) 61.952.575 9.182.484 (2,8MM)/ 1,5 Days Inventory reduction
11 EXW to FOB 20.091.281 4.670.044 2 days Operational Ltime Reduction
FOB CFR BONDED
Logistics Complexity + + +
Compliance/Customs Risk ++ ++ ++
Cargo Handling Risk + - - -
Cargo Delivery Date + - - ++
Flexibility on shipment = - - - -
Responsibility ++ - - +
Air Freight = = ++
Lead Time + - ++
Inventory in Transit + + ++ Inventory Management + - - +
Cargo Disposal + ++ ++
Partial Nationalization/Call Off = = ++
Cash flow + = ++
Financial and Operational Analysis That was analysed different scenarios as: EXW to FOB and EXW to DAT(Bonded)
Operational Benefits
Strong Improvement
++
Moderate Improvement
+
No Change =
Moderate Decrease
-
Strong Decrease
- -
Final Recomendation:
To convert high unit movers (12 items) to DAT/Bonded Warehouse
model, driven by benefits previously detailed;
low unit movers (11 items) to FOB incoterm, driven by operational
lead time reduction.
US RI logistics network review - Overview
Scenario Previous to Project +500 RI vendors via two Brokers (US companies);
+700 Skus
20% of total mark up cost is related to US domestic freight: Inland from vendor locations to the consolidation Hub in
MIAMI; Currently LATAM utilizes mainly AF to move cargo for destination
countries, due to small volumes and planning strategy 80% of shipments to LATAM destinations are < 200Kgs with
no consolidation opportunity
Identified Opportunity: Review Logistics Network utilizing the best geography to support US
domestic consolidation; Consolidate cargo in the north east USA. JFK/EWR or PHL This initiative will be completely aligned with Regional Sourcing
strategy: “Broker Nationalization Strategy project” already initiated
FREIGHT and MARK UP cost reduction will be achieved
Low Volume
Medium white
High volume
Suppliers Location
Quality Assurance for key suppliers
Quality Assurance for Imported Items (China origin)
Local Sourcing
Coordination
Supplier
Purchase
Contact
TS / Sourcing
Send Report
Inspection
Send Report
Send STD
SGS Local and Origin teams coordinate the inspection.
Inform to: Local
Local
•Shipping Autorization – Supplier / Logistics •Request new operation •Reject
• SGS is responsible for the technical evaluation at origin China to guarantee that our Fashion&Home products
are in accordance with Avon’s requirements, before shipping to LATAM countries.