Microsoft PowerPoint - Your Client's Global Supply Chain (SIOR)

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Your Client’s Global Supply ChainFrom their supplier’s supplier to their customer’s customer

Pete QuinnCushman & Wakefield

It’s All About the Flow of Goods & Services

EU-25 and China-India Pac Rivals US Economy

GDP Purchasing Power Parity

China (2)US (1) India (3) EU-25Japan (4)

$14,1 tr Autres

Germany(5)

(7)

France (6)

UK

$4,2 tr$4,7 tr$9,8 tr

$14.5 tr

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The Flow of Goods

New Global Strategies - Triangulation Investment triangulation patters driven by cost play, market opportunity & global hedge.

Low-Cost Platform– Labor arbitrage– Leading engineering skills

Market Opportunity– Western Europe– 10 New EU Entrants– Beachhead for CIS market

Supply Chain Optimization– World class infrastructure– Direct access to Europe

Global Hedge– Hedge against Asia– Protection of IPR

Central & Eastern Europe Platform

China

CEEEU

US

Mexico

CIS?

Panama SeaBridges China and the EU

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Rapid Growth in China/Asia Sourcing (Circa 1990)

Stage 1– Importers (Retailers/Suppliers) locate import distribution centers in proximity to ports– These DC’s replenish DC’s in the domestic network– Potential for cross docking domestic sourced product

Cushman & Wakefield Industrial Conference

Import Facility

Regional DC

Regional DC

Regional DC

Regional DC

Import Facility

Import Facility

Rapid Growth in China/Asia Sourcing (Circa 1999-2003)

Stage 2– Importers (Retailers/Suppliers) arrange for China 3PLs to consolidate some shipments direct to specific

DC’s in the domestic network, thereby bypassing their import DC’s


3PL Consolidation Center

Import Facility

Regional DCRegional DC

Regional DC

Regional DC

Import Facility

Import Facility

Rapid Growth in China/Asia Consumption (Circa 2002-2006)

Stage 3– Importers (Retailers/Suppliers) gear up to supply the China domestic market– Build DC’s for the domestic market with capability of consolidation for export to the US/Europe

Regional DC

Regional DC

Regional DC

3PL Consolidation Center and Import Facility

Import Facility


Regional DC

Regional DC

Import Facility

Import Facility

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Rapid Growth in China/Asia Outsourcing (Circa 2005-2010)

Stage 4– Importers /Suppliers gear up to supply the China domestic market by outsourcing

manufacturing to Africa– Build DC’s for the domestic market with capability of consolidation for export to the

US/Europe


Regional DC

Regional DC

Regional DC

3PL Deconsolidation Center

Import Facility


Regional DC

Regional DC

Import Facility

Import Facility

3PL Consolidation Center and Import Facility

A Recent Survey Of Fortune 500 Executives Asked Each “What Are Your Company’s Biggest Supply Chain Issues?”

Source: Eyefortransport.com

WHAT ARE THE BIGGEST SUPPLY CHAIN ISSUES?

Congestion Tripled in 20 Years

The nation’s road system has been experiencing steady growth in congestion levels in recent decades, particularly in urban areas. Plans for the expansion of existing road networks often attract accelerated residential and commercial land development in the areas to be serviced by the roads.

As a result, the capacity of the new roads are heavily taxed as soon as they come on line. In a distribution environment marked by increasingly tight delivery schedules and a relatively tight market for truckers, road congestion is highly disruptive and costly

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Interstate Highway System

50 years of growth and expansion. Major metro areas are critically congested

Major Macroeconomic Trends Impacting The Transportation/ Trucking Industry

Increased demand for shipping capacity. Continued strong growth in global and domestic market economies has continued to put pressure on the transportation industry

Higher fuel costs. Fuel costs represent as much as 25% of total operating costs; a one cent increase in fuel costs has a significant impact on slim profit margins

Emphasis on quality of life. Drivers are opting for a better quality of life. Drivers’ lifestyle issues have made this profession seem less appealing. The average age of a driver is now approaching 55 years, and fewer new drivers are entering the workforce.

Globalization. The rising levels of global sourcing and increased import customer demand are putting significant new strains on the trucking business

Environmental and Regulatory Changes.– Environmental: Over the last 10-15 years, the level of investment in the U.S. transportation

infrastructure, in our roads and bridges, has not kept pace with commercial growth. In addition, more recently, the weather has wreaked havoc

– Regulatory: Hours of Service regulations. Driver productivity has been affected by a minimum of 2 to 4%. Class 8 truck production has risen in advance of 2007 emissions requirements.

Impact On The Trucking Industry

Higher Rates Back Haul Issues

Deteriorating Service

Not Enough Drivers

Capacity Shortfall Overall

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Power of the Can

The World the Box Made

Collection of Component Parts in Boxes

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Multi Modal Delivery Throughout the World

Norfolk Southern Intermodal to the US East Coast

A local delivery truck mounts a free standing full body

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Retail in US

E-Commerce in France

The Technology Innovation

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RFID Technology

Detection – Direction ? Label or Skin?


Bar Code RFID

RFID Technology

Real Time Knowledge


Bar Code

RFID

No Signal

Signal Received

RFID Technology

Real Time Knowledge


Bar Code

RFID

No Signal

Signal Received??

?

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RFID Technology

Real Time Knowledge


Bar Code

No Signal Store of the Future - Signal Received

RFID

?? ?

This shows a completely different way to deliver goods than you are doing now.Being creative in distribution will enable a more profitable and efficient process!

Regional Drop LotsDISTRIBUTION CENTER

Consumers

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The Process Innovation

Norfolk: Portsmouth Marine Terminal

Source: Port of Virginia web site.

Virginia Inland Port

Source: Port of Virginia web site.

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Point of View: The Supply Chain is about Location Issues. Supply Chain (SC) and Real Estate (RE) therefore have a symbiotic relationship.

Supply Chain

Plan Source Make Deliver Return

Plan Find Acquire Manage Dispose

a well-thought-out decision will consider bothdisciplines in an “end-to-end” integrated

solution.

Supply Management

Network Rationalization

Inventory Optimization

Creative Financing\Capital

Markets

Location strategy and site selection

Performance Management/KPIs

Alliances / Outsourcing /

3PL

Exit Strategies

Operations Planning & Training

Facility Design

Sourcing and Port Strategies

Sales, Branding and

Merchandising

Workplace and HR Mgmt.

Designing the Platform

Distributio

n

Rea

l Est

ate

Plat

formProduction

Suppliers

Customer

Implications for SC and RE*

PASTFunctional team silos: corporate real estate and/or finance driven… Ops and HR work within the constraints of the outcome.Geographic team silos: regional team and perspectiveReal estate cost-driven: primary decision criteriaPlanning tools: basic real estate portfolio and occupancy cost analysisFacility-level planning, mid to long term leases Ultimate goal: Optimize “my” business unit, based on how management is incentivized (P&L, EVA, etc.) Focus: tactical

PRESENT - FUTURECross-functional teams (real estate, operations, finance, marketing, HR) Global teamsBusiness cost and performance driven, wherereal estate is just one part of the wholeDetailed business understanding, broad geographic screening, cost analysis, risk management approaches and decision analysisNetwork level planning, short term flexible leases Optimize the position of the company / shareholders (broader, strategic view across business units)Focus: Strategic and tactical combined in a landed solution

So where and what do you build next

Lots of heightLots of drop lotsLots of doorsIn markets with Lots of people

With Lots of flexibility in terms

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The Flow of Services

Workforce Shortage

The EPF (Employment Policy Foundation) projects a shortage of several millionworkers by the end of this decade 10 Million by 201535 Million by 2030

Its all about the Location - Target Profile Thematic Mapping

Where are the targeted employees?Target Profile Thematic Mapping identifies neighborhoods in which and the concentration of the target profile classes

– Expansion Cities Example• Minneapolis

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Minneapolis Thematic Map –Professionals

Minneapolis Thematic Map –Steady Strivers

Minneapolis Thematic Map –Augmenters

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Minneapolis Thematic Map –Stabilizers

Minneapolis Thematic Map –Interluders

“The Active Way to Recruit” and Be in the “Right Place”

Develop a list of specific households based on target profile– Based on PRIZM codes and a variety of other data sources are obtained.

Recommends a media campaign to target those potential employees.Coordinates and Implements:

– “Creative” collateral development based on target– The mailing of the material– Ad placement in media, on internet and other forms

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Some interesting Supply Chain data points to consider

While the market is currently unstable, the fundamentals in the trucking industry have not changed. Trucking capacity has recently been considered tighter than anytime in the last 20 years - a currently estimated 20,000 truck driver shortage in the U.S. is expected to grow to 111,000 by 2014The average price of a gallon of diesel fuel is almost two and a half times that of 24 months earlierAir freight is growing at an average rate of 6% a year – customer service premiumsContainer volume is expected to grow at a 3X rate in the next 10 years56% of CPG companies recently surveyed have diverted freight away from the ports in Southern CaliforniaLogistics costs in the U.S. typically represent 6 to 8% of COGS, while in China they can be as high as 40% of COGS – China is an answer, sometimes85% of fortune 500 companies have internal subscriptions to network modeling software applications – but how many use these, effectively?

Key supply chain trends are affecting how real estate strategies are defined and implemented

Demand for networking strategy help, plus a demand for supply chain infrastructure in Tier 2 and Tier 3 markets

For others, a need to define new ports and routes, to manage service levels and costs

Demand for larger buildings with greater potential for interior design flexibility. Also, State, County & Local jurisdictions’ policies and taxes affecting post-manufacturing logistics

Customization and Postponement: Customer requirements for more customized products combined with companies striving to reduce total finished goods inventories leading to more postponement and final product build out closer to end demand

Demand for larger buildings, or regional distribution centers, “RDCs”, higher overall, with some local, smaller, forward facilities becoming less desirable

CPG/Retail companies are making greater efforts at inbound and outbound freight consolidation as well as efforts to control the management of freight

Limited premium DC capacity available in more congested, populated areas

An increased demand for supply chain capacity, in congested supply chain “choke points” where inbound supply and outbound customer demand converge

Network design, real estate strategy and site selection are more critical points of emphasis: the new emphasis is network by design, not by accident, aligned to maximize return on investment and operating asset effectiveness

Competitive pressures, consumer demands and acquisitions – along with the recent attention from Wall Street to the value of a company’s real estate portfolio - forcing companies to look harder at their supply chain networks

Supply Chain Issue/Trend Impact on Industrial Real Estate

Key supply chain trends are affecting how real estate strategies are define and implemented (continued)

Existing buildings being retrofit, new facilities being built with modern, more expensive security systems incorporated

Intensifying attention and resources dedicated to supply chain security

24/7 zoning ordinances to permit distribution and delivery activities at all hours is higher value-add

Shippers looking to increase trucking capacity and increase productivity by performing more activities in overnite hours

Freight now needing to be made more desirable: being picked up at facilities with easy site access, good highway proximity and some potential driver amenities

Truck driver time no longer “free”, and some drivers and carriers displaying shipping commodity selectivity

Companies are seeking facilities with multiple mode capability – TL, Rail, Boxcar

Shippers are seeking more freight mode flexibility as a way to manage service levels and costs

Real Estate more frequently reporting, solid or dotted line, into Supply Chain

Generally, Supply Chain strategy and infrastructure getting more air time in the C Suite

Facilities with multi-channel flexibility, features and available square feet are in higher demand

Overlapping retail channels (e.g. web, store, catalog, club, etc.) competing for resources, inventory and distribution assets

Potential development opportunities in locations such as Sea Tac, Savannah, Charleston, Norfolk & Houston

More shippers looking to move container volume out of LA/LB, due to delays in those locations, along with the loss of capacity in New Orleans

Potential for a DC site to be considered differently for its labor supply implications – for availability of DC and driving labor

Shippers and Carriers having a harder time attaining and maintain trucking driving labor

Supply Chain Issue/Trend Impact on Industrial Real Estate

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The Flow of Goods and ServicesIn our world is Changing Yours

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Microsoft PowerPoint - Your Client's Global Supply Chain (SIOR)