Dr Eric Lambourdière Dr Eric Lambourdière Assistant Professor University of French West Indies
Dr Elsa Corbin Dr Elsa Corbin Temporary Assistant Professor University of French West Indies
Supply chains in Latin America and the Caribbean – Challenges Challenges and Opportunities Opportunities Transportation, Security and Logistics Forum U i University of Bayamon it f B February 20th 2009
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
World Logistics Performance Index o d og s cs e o a ce de
Source : www.worldbank.org
No data
2.14 <= LPI <=2.38
1 <= LPI <=2.14
2.38 <= LPI <=2.89
2.89 <= LPI <=5 1 is the lowest score and 5 is the maximum score
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Customs
Source : www.worldbank.org
No data
2.14 <= Customs <=2.38
1 <= Customs <=2.14
2.38 <= Customs <=2.89
2.89 <= Customs<=5 1 is the lowest score and 5 is the maximum score
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Infrastructure as uc u e
Source : www.worldbank.org
No data
2.14 <= Infrastructure <=2.38
1 <= Infrastructure <=2.14
2.38 <= Infrastructure <=2.89
2.89 <= Infrastructure <=5 1 is the lowest score and 5 is the maximum score
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
International Shipment e a o a S p e
Source : www.worldbank.org
No data
2.14 <= International shipment <=2.38
1 <= International shipment <=2.14
2.38 <= International shipment <=2.89
2.89 <= International shipment <=5 1 is the lowest score and 5 is the maximum score
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Tracking and Tracing
Source : www.worldbank.org
No data
2.14 <= Tracking & Tracing <=2.38
1 <= Tracking & Tracing <=2.14
2.38 <= Tracking & Tracing <=2.89
2.89 <= Tracking & Tracing <=5 1 is the lowest score and 5 is the maximum score
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Timeless
Source : www.worldbank.org
No data
2.14 <= Timeless <=2.38
1 <= Timeless <=2.14
2.38 <= Timeless <=2.89
2.89 <= Timeless <=5 1 is the lowest score and 5 is the maximum score
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Logistics Competences og s cs o pe e ces
Source : www.worldbank.org
No data
2.14 <= Logistics competence s <=2.38
1 <= Logistics competences <=2.14
2.38 <= Logistics competences <=2.89
2.89 <= Logistics competences <=5 1 is the lowest score and 5 is the maximum score
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Characteristics of LAC supply chains
Diversity exists in :
•Culture, •Langages, •Currency, y, •Regulations, •Organizational forms and stages of economic development
•Long distances L di t •Several borderlines (paperwork) •Low volumes per SKU •Low volumes per SKU (Stock Keeping Unit) •High distribution cost (High inventories) (High inventories) •Corruption in borderlines •Hijacks
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
LAC Supply chain networks are very complex
The logistics market is very fragmented
Little consolidation due to fragmentation and gouvernmental regulations
Domestic freight movement is primarely by truck and secondly by rail
Small and mid‐size players in the market players in the market
Most import and export flux is using maritime channels (exept mexico)
Shortfall of truly national logistics carriers because of : because of : ‐up‐front investment ‐ high financing charges
Local and subregional players leaders on their market through : ‐ corruption corruption ‐ basic monopolistic practices
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Cultural mindset in LAC supply chain
A lack of trust in the supply chain pp y Strong « win‐lose » way of thinking in the supply chain Can have a negative impact on supply chain management Can be major sources of resistance to change
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
A Region with High Logistics Cost
Logistics cost as percentage of product value, g p g p , 2004.
35 30
20 15 10
Perceenta ge
25
5 0
Source : Guasch and Kogan (2006)
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Opportunities and Challenges Oppo tu t es a d C a e ges – Recipes Recipes for competitiveness titi
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Several reasons explain this idea :
The increase of labor cost of labor cost in Asia
The rising cost of cost of transport
Inefficient Inefficient supply chain operations
The risk generated by the inconvenience of the time difference
Poor logistics Poor logistics service performance
The development of US near‐ shoring
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 1 – Strategy and optimize the supply chain network ¾Availability of materials ¾Availability of materials ¾On‐time fulfillment of demand
¾Service objective ¾Service objective ¾Stock‐out Cost
Service
Variability
Time
LAC Stock Levels
Cost
¾Raw materials ¾Work‐in‐Process (WIP) ¾Finished goods ¾Sourcing
Economics Source : adapted from Gattorna (2003)
¾Manufacturing costs ¾Sourcing materials costs ¾Transportation costs ¾Materials handling costs ¾Materials handling costs ¾Process execution costs
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 2 – Achieve functional excellence functional excellence Improving the supply chain integration of Latin America and the Caribbean corporations From traditional supply chains …
Raw Materials
Storage
Make Process
Manufacturing
Storage
Deliver Process
Local National Regional Retailers Distribution Distribution Storage
Customers
Source Process
… to integrated supply chains g pp y
Raw Materials
Manufacturing
Distribution Center
Retailers
Custome ers
Supply Chain Management
Material flow (delivery) Information flow (order)
Source : adapted from Rodrigue, J.P. (2006)
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 3 – Integrate demand and supply Implement an effective demand and supply planning process Business direction & intent
3‐year strategic plan Annual business plan Monthly planning process •Medium sales plans •Cost/service tradeoff ‐ Inventory control ‐ Service level ‐ Sales plan ‐ Production plan •Promotion planning •Production planning and scheduling •Placement, promotion adjustment •Distribution Di t ib ti planning l i •Competitive response •Latest forecast vs business plan
Monthly planning process Weekly planning process ee y p a g p ocess
Demand & Supply operations planning process
Daily planning process
•Short term sales plan •Rates of sale & production (product availability & distribution readiness) •Maintenance adjustments •Production scheduling
•Business goals and objectives by business (category in future) •Portfolio & brand planning •Capacity planning •Promotion calendars •Network Network strategy •Competitive positioning •New product introduction
•Event management •Line failure •Delists •Rejections Source : adapted from Parekh (2008)
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 4 – a e ge Organize and O ga e a d measure for supply chain efficiency
Migrate from a functional or sub‐process logistics orientation ….
Direction
Production
Sourcing
Manufacturing
Marketing/Sales
Marketing
Sales
Administration
HR
Finance
Logistics
Inventory Mgt/ Inventory Mgt/ Warehousing
Distribution
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 4 – a e ge Organize and O ga e a d measure for supply chain efficiency
…. to a single cross boundary logistics process Direction
Production
Logistics
Sourcing
Manufac‐ turing
Marketing/Sales
Marketing
Sales
Administration
HR
Finance
Plan Execute Regulate
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 4 – a e ge Organize and O ga e a d measure for supply chain efficiency
Emerging markets Developing markets Developed markets companies p companies p companies p
Localize the supply chain Key characterictics f for supply chain management
•Optimize local operations •Integrate processes where possible
Regionalize the supply chain
Rationalize the supply chain
•Integrate Integrate •Collaborate •Think centrally or regionally •Act locally
Source : adapted Accenture (2003)
•Rationalize C ll b •Collaborate •Synchronize
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 4 – a e ge Organize and O ga e a d measure for supply chain efficiency Focus on performance measures and benchmarks Focus on performance measures and benchmarks
Goals The vision Market Market satisfaction Customer if i satisfaction Quality
Financial Financial measures
Flexibility
Delivery
Productivity
Process time
Operations The performance pyramid Source : adapted from Gattorna (2003)
Cost
Measures
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 5 – Integrate technology systems architecture hi Extense the use of integrated demand and supply planning and execution systems and tools Customer
•Customer demand forecast •In transit/ Deliveries •Goods receipts
IOM (Order management
ERP
Legacy
WMS
Integratio on tools
Advanced Planning and Scheduling •Supply chain planning •Constraint based master planning •Forecasting
SCP
DP
DF
•Transport optimization p p
•Customer TCP/ DC collaboration TCP/ DC
TMS
TCP/ DC
•Shipment requests •Track and trace •Track and trace 3PL
•Order processing •Demand fulfilment
•Forecast /Materials requirement •Procurement process
Source : adapted from Gattorna (2003)
•Supplier collaboration Supplier
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 6 – a e ge 6 Source Sou ce capability intelligently
People
3PLs
Logistics infrastructures
Capabilities
Support
Overcome organizational inertia
Overcome resistance to resistance to change
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 6 – Source capability intelligently bili i lli l Supply chain risks that concerned executives for their companies’ most recent strategic operational planning cycle their companies’ most recent strategic operational planning cycle 43%
Availability, cost, quality of labor R l t Regulatory concerns Reliability of suppliers Commodity shortages/ price fluctuations Fluctuations in foreign exchange rates Fluctuations in foreign exchange rates Intellectual property theft Obsolescence of product inventory/technology War terrorism other geographical concerns War, terrorism, other geographical concerns Problems with supply chain infrastructure Natural disasters / Plant breakdowns/mechanical failures Other 0
10
20
30
Percentage of respondents Source : McKinsey & Co (2008)
40
50
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 6 – Source capability intelligently bili i lli l
Develop people’s skills
1. 1 Educate
2. 2 Recruit
3a. Train
3b. Engage Engage
3c. Re‐ Train
4. Retain Framing the issues and solutions Source : Parekh (2008) Source : Parekh
3d. Engage
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 6 – Source capability intelligently bili i lli l Develop people’s skills Common foundation Supply chain analysis, tools and techniques Supply chain concepts and processes
Specialty areas Supply chain planning Product development
Procurement & e exchange e‐exchange
Manufacturing
Fulfillment
Leadership skills World class supply chain expertise W ld l l h i ti Value and creation W ld l l h i l d hi World class supply chain leadership Source : Gattorna (2003)
Service Management & Customer support
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 7 – a e ge Extand a d the supply chain … Extend the traditional supply chain pp y
Collaborative supply chain planning
Collaborative Collaborative Manufacturing
Collaborative customers’ relationships
Collaboration to virtual
Collaborative suppliers’ relationships
synchronization
Collaborative products design
3PLs Partners/ Alliances/ Partners/ Alliances/ Ventures
Manage a portfolio of supply chain relationships Source : adapted from Gattorna (2003)
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 7 – a e ge Extand a d the supply chain …
T R U S T Relationships
Transactional
Collaborative
Alliance
Supply chain relationships and trust Source : Burt & alii. (2003)
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Challenge 7 – … and become (part of) world class supply chains. f) ld l l h i National Supply Chain pp y
International Supply Chain pp y
Global Supply Chain pp y
National
Geographical network extension
‐ Factoryy Distribution center
Representative High-throughput DC
Source : adapted from Rodrigue, J.P. (2000)
Supply Chains in Latin America and the Caribbean – Challenges and Opportunities
Thank you for attention ! Thank you for attention !