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					                                                                 Quarterly 03 / 2011




I The Core Elements of Cost-Cutting Programmes in the Financial Services Sector

I Cost Reduction in the Back Office Using Industrial Tools

I Project Example: Procurement Optimisation in a Leading Manufacturer of Medical Products

I ,Quo Vadis Transport Market?’ Strategies to Ensure Optimum Transport Costs
                       Dear Readers,

                       The focus of our latest edition of Emporias Quarterly Q3 / 2011 is on “approaches and mea-
                       sures to reduce costs”. The articles look at the topic of cost reduction from two angles: the
                       reduction of product and service acquisition costs and the optimisation of processes and
                       organisational structures.

                       The first contribution examines the different approaches and challenges involved in cost-cut-
                       ting programmes in the banking sector. The article “Cost-cutting in the back office using indu-
                       strial tools” introduces selected methods of cost reduction and highlights the reasons that
                       prevent their implementation in practice.

                       An example of a project from industry shows how price and process aspects of cost reducti-
                       on in the area of procurement can be successfully linked in order to sustainably strengthen
                       competitive position. The final article discusses strategies that allow companies to contain
                       transport costs and optimise them in the long term despite rising market prices.

                       We hope that you enjoy reading this edition. If you need any more information about the arti-
                       cles, please do not hesitate to contact us.


                       Yours,




                       Dr. Carsten Jacobi           Dr. Oliver Ohlen




The Core Elements of Cost-Cutting Programmes
in the Financial Services Sector
Sacha Baustian
Initial situation                                other blocks of costs have already been       by the companies are usually the same. In
                                                 rifled through over the past few years and    a lot of cases, a certain cost reduction
The business news over the past few              staff cuts in high-knowledge areas are vie-   percentage will be specified and more or
months lead us to suspect that the finan-        wed critically. Which areas should the        less evenly distributed across the organi-
cial industry is about to face another wave      focus be on and, more importantly, how        sation. Quite often, the different areas of
of cost savings. Whatever the reasons            can cost-cutting programmes lead to cost      responsibilities will then be left to their
behind it, one thing seems certain: in addi-     reduction in the long term?                   own devices when it comes to realising
tion to individual areas of business, the                                                      the savings targets. And since it is issues
entire cost structure of many companies          The challenges of implementation              of capacity that are discussed first of all,
will be put to the test. There is little scope                                                 middle and lower management employees
for major cost-cutting in core banking           Even if the reasons for the cost-cutting      are usually confronted with the question:
systems and settlement IT systems, many          programmes differ, the challenges faced       how can day-to-day business continue
and quality maintained in spite of the           mance analysis. This also ensures that the       This approach only works if the right con-
savings and how can overall cost effects         cost-cutting measures thus derived can           ditions and the necessary tools are put
be achieved. Moreover, for many of them          be brought into relation with the processes      into place. First, the extent to which exi-
it will not be apparent how expected,            and tied-up capacities.                          sting structures are still suitable and / or
hoped for or forecast volume increases in                                                         react to the planned capacity reduction
the individual divisions can be managed.         This is the only way to differentiate and        must be checked. Quite often, structural
And this all happens given that staff cuts       assess the effect of the measure. In order       adjustments will take place as a result of
may result in staff shortages, which in the      to be able to prioritise, it is important know   cost reductions. Second, it is absolutely
short term cannot be absorbed by availa-         which measures have an effect on the             essential to set up a capacity manage-
ble or yet to be recruited temporary staff.      balance sheet in the short term (and cost        ment system and to support operational
                                                 neutral) and which over a longer period of       capacity utilisation through a productivity
The most important elements of a cost-           time. Without this knowledge, the one-size-      management system. Regular productivity
cutting programme and how to implement           fits-all style of cost reduction thus ignores    measurements on team and department
it will be explained below based on the          the different contributions to value creation    level do not only form the basis for control-
knowledge and experience gained in               and varying cost structure of the individual     led capacity utilisation depending on the
several cost reduction projects in the           organisational units. On the other hand,         actual volumes, they are also a motivatio-
financial services industry.                     knowing about processes and capacity             nal tool. The necessary information, volu-
                                                 results in a description of potential and        me and time structure can be gathered
Creating a starting point – gaining an           measures that leads to great commitment in       from the functional and performance ana-
overview                                         the company through being transparent and        lyses.
                                                 easy to follow.
To begin with, many companies will show                                                           Material cost reduction
a significant lack of transparency regar-        Cost reduction does not equal staff
ding their own services and associated           reduction                                        In the context of cost-cutting program-
costs. Process and product cost calculati-                                                        mes, the topic of material cost reduction is
ons will usually not be available. It is pre-    Alongside IT costs, personnel costs are          often underestimated. As mentioned
cisely such information, however, that is        the largest cost factor in the financial ser-    above, there is little scope for reducing IT
needed in order to say anything useful           vices industry. It therefore goes without        and system licensing costs. Besides,
about which range of services in the com-        saying that the topic of cost reduction also     people usually associate this with the infa-
pany should be reduced, which levers can         touches upon personnel cost structure.           mous copying paper savings, a more or
be applied, where these may be effective         Experience shows, however, that a signifi-       less symbolic act that does not have much
and what the resulting potential is for cost     cant contribution to cost optimisation can       effect. But if you take a closer look at the
reduction.                                       be absorbed through controlled capacity          institutions’ expenses, you will find signifi-
                                                 utilisation and increasing efficiency. This is   cant costs among the material costs. To
If no process and product cost calculati-        because generally a combination of active        name just a few examples: print products
ons are available in the institution, then the   personnel reduction and increase in pro-         (brochures, advertising material), compa-
first and very important step of the cost-       ductivity is successful. This is especially      ny cars and business trips, facility ser-
cutting programme is to create cost trans-       true in areas where given constant or even       vices, data and research services, subsi-
parency. This does not mean that months          rising volumes unit costs are high and can       dies and sports events. Although some of
should be spent doing these calculations,        be reduced. In several cases, 70 % of the        these things may be considered sacro-
or that this is even possible. It is impor-      savings target was met in the area of per-       sanct, it is important to include these
tant, however, to use process and product        sonnel cost structure through increase in        costs in the overall considerations.
descriptions that are usually already avai-      productivity, and approx. 30 % through
lable to create a rough overview of the          actively reducing staff. This has huge           As previously described in the context of
volume and time drivers and therefore            advantages because usually knowledge             processes and their costs, transparency is
labour capacities of the processes and           stays in the company and active capacity         also important and a priority when it
make it available for further steps. A quan-     reductions can be carried out through            comes to material costs. As part of the
titative and qualitative analysis of proces-     contractual arrangements such as early           cost reduction project, questions must be
ses and capacity used can be derived             retirement.                                      asked and answered about the current
from the results of a functional and perfor-                                                      organisation of procurement (responsibili-




                                                                                                                                        3
ties / competencies) and about tasks and          and given a target budget. These key figu-      Cost-cutting programmes must not be
processes. This means that the current pur-       res, just like the productivity figures,        equated with personnel reductions, be-
chasing budget (if there is one) must             should be gathered in a management re-          cause companies have many other levers
be analysed and the actual article and sup-       port in order to ensure that they are com-      at their disposal that influence cost. In
plier structure must be clarified. Only once      plied with and / or that the target is met.     addition to personnel cuts, the effects of
this information is available is it possible to   The figures can also form the basis for         increasing productivity must also be taken
talk about who in the company buys what           further ongoing considerations as part of a     into consideration; increased productivity
where, from whom, and at what price.              continuous process of optimisation.             may, for instance, make up for perceived
                                                                                                  rising staff requirements with rising volu-
The introduction of clear responsibilities,       Conclusion                                      mes. Another aspect that is frequently
that is, procurement management, has                                                              underrated is that there are significant
become established in the projects as an          Successful cost reduction projects have         saving potentials in the area of material
effective cost reduction lever. Procure-          lasting effects. Lasting in this context        costs, for instance through establishing a
ment management draws up a sourcing               means that the measures that are taken          structured procurement organisation.
strategy and monitors existing supplier           have a measurable effect on income state-
relationships. Procurement management             ment and that the effects of the savings do     Once the different levers have been utili-
also defines which products and services          not cause additional expenses elsewhere,        sed and the measures for putting the
are purchased centrally and / or which ser-       for instance by merely shifting responsibi-     potential into practice have been imple-
vices can be purchased by a local agency          lities and staff. This requires that the main   mented, the results can be safeguarded in
with budget responsibility. According to          levers of structure and processes can be        the long term only if, early on in the pro-
this model, suppliers are still selected cen-     recognised and made visible in advance.         ject, a performance measurement system
trally to pool expertise and to draw up           This is the only way to assess the effects      has been put into place. Projects are not
possible framework agreements. There is           of cost reductions on day-to-day busi-          successful just because supposed mea-
evidence, however, that small and medi-           ness. Let’s also not forget a factor that is    sures have been defined, but only once
um-sized companies in particular rarely           often underrated: cost reduction program-       the results are reflected in the figures and
negotiate purchasing prices, or that, over        mes must be communicated within the             once an awareness of costs has become
many years, they increase agreed-on pri-          company and must be accepted at least           established in the organisation and com-
ces only at the instigation of the supplier.      by the managers in order to have an             pany members are always on the look-out
The costs saved by an active procurement          effect. It is all the more important to make    for new cost cutting opportunities.
management directly affect the income             the decisions transparent and present the
statement 1:1.                                    effects of cost-cutting in a clear and com-
                                                  prehensible way.
Optimising material costs does not, of
course, only mean price reduction. Per-
formance reduction, i.e. the famous axe, is
as effective. In this area in particular, old
habits and situations should be scrutini-
sed. Care must be taken, however, when
weighing up cost pressure on the one
hand and company culture on the other;
as mentioned earlier, some things are
sacrosanct and the overall effect of the
saving in this area may not be beneficial.

As in the case of productivity and capaci-
ty utilisation, the definition and implemen-
tation of key figures is a precondition for
sustainable cost control. Based on histori-
cal cost elements, suitable cost areas             Figure1: Success factors and effects of purchasing and procurement optimisation
                                                   in the financial services industry
must now be defined at the different levels




      4
Cost Reduction in the Back Office Using Industrial Tools
Florian Hartmann

Initial situation                               Industrialisation approaches                    In addition to the quantitative approaches
                                                                                                of industrialisation, another major cost-cut-
The financial services industry (banks and      Below, we will look at which specific cost-     ting lever is the establishment of the struc-
insurances) is undergoing a radical structu-    cutting approaches are necessary from a         tural conditions for efficient processing.
ral change. Further exacerbated by the          Lean point of view and which of them are
ongoing financial crisis, companies in the      commonly used or standard in the financial      As a rule, the structures in financial services
financial sector are confronted with falling    services companies.                             companies have grown organically over
margins, more stringent regulatory imposi-                                                      time. Many employees have worked for the
tions and more demanding clients. The           An important lever for the targeted cost        company for many years and have taken
need for better processes and more effi-        reductions is the adjustment of capacities      on an increasing number or different re-
cient procedures and structures has never       to the actual volume. In order to achieve       sponsibilities. The principle of “everybody
been greater.                                   this, it is essential to assess how many time   works on everything” that sometimes be-
                                                units on average are needed to work on          comes established is fundamentally worth-
Over the past few years, many of the re-        one process. This is the only way to objec-     while. It does, however, increasingly break
sources in the back office units have been      tively determine which resources are in fact    down because ever more complex proces-
cut drastically without, however, adjusting     required. Across-the-board cost-cutting         ses place excessive demands on employe-
structures and processes. So far, this most-    and the associated staff cuts, which many       es. The reverse is total specialisation, which
ly worked because many units were desi-         financial services implemented in order to      can make sense for processes with con-
gned for peaks, which means that the los-       generate positive cost effects, usually only    stant and large volumes. Quite often, volu-
ses could be compensated for without a          works in the short-term. It must in any case    mes fluctuate considerably within individual
problem.                                        be avoided that units with rising volumes       projects (see above), which can undo the
                                                suffer too many cuts, which could lead to       advantage in terms of efficiency through
If capacities are now reduced – without         loss of quality and greater error rates.        specialisation. There is also a danger that
adjusting procedures and processes –                                                            employees are not sufficiently challenged,
many companies will soon be confronted          Financial service providers, just like indu-    which, like placing excessive demands on
with operational risks.                         stry, also experience fluctuating volumes.      employees, has a negative effect on effi-
                                                In order for the companies to counter these     ciency and quality. Instead, the industrial
Efficiency can be further increased only by     fluctuations through capacities that co-        approach should be aimed for: the right
rearranging existing processes, not func-       fluctuate, so to speak, they need the           staff member for the right tasks – employe-
tionally, but from an organisational point of   necessary control tools that allow employe-     es’ qualifications depend on what is nee-
view. The methods and tools of industry         es and managers to utilise the resources        ded for the processes; the processes are of
(keyword “industrialisation of the financial    adequately. Another cost-cutting lever in       varying complexities.
services industry”) can make a considera-       the financial services sector is proper staff
ble contribution towards improving efficien-    deployment.                                     Moreover, the responsibilities are often not
cy and lowering costs. The introduction of                                                      clearly delimited or dependent on the
a continuous process of improvement (CPI)       These tools are often not available and         member of staff in question. But a clear and
ensures that the optimisations are sustai-      instead managers deal with it subjectively.     structural accountability for results is an
nable and lasting.                              Control tools as employed by the industrial     essential element for maximising efficiency.
                                                manufacturing industry, however, relieve        Following the approach described above,
The back office units of banks and insuran-     managers of this task (and give them the        processes are now optimised and then
ces are ideal for implementing and using        chance to put more energy into developing       standardised. The focus is not on optimi-
industrial tools. This in turn offers the       the units and their processes and allow         sing each and every process, but rather on
opportunity to significantly lower costs wit-   employees to control the use of resources       avoiding activities that do not add value
hout losing sight of the associated risks       independently).                                 according to the approach employed by
and legal requirements.                                                                         industry (how much capacity is tied up in




                                                                                                                                       5
which process parts and what is its contri-
bution to value creation?)

Often, the optimisation efforts are targeted
at all processes and are implemented wit-
hout a quantitative basis and do not bring
about the desired effects.

In order to lend the various optimisation
approaches of industrialisation a continu-
ous and sustainable framework, the intro-
duction of an institutionalised process ma-
nagement is the next cost-cutting lever.
Such process management can bring
                                                   Figure 2: Specific approaches to industrialisation in practice
about a real (positive cost) effect only if the
above points are addressed and implemen-          vely. Possible weak points can then be           It usually emerges that no meaningful basis
ted.                                              quantified and rectified. One tried-and-         of figures and data is in place in order to
                                                  tested tool in this regard is functional and     objectively discuss the ideas and measures
Figure 2 illustrates, in summary, that many       performance analysis, which can be used          in question. The trained lean managers
companies are aware of the industrialisati-       to present the various aspects and data in       focus on individual measures whose bene-
on approaches but that their implementati-        a structured way.                                fits and effects (and thus their acceptance
on in practice often fails or is very slow                                                         among the employees concerned) cannot
because of a lack of the necessary quanti-        Without managers and employees having            be quantified. Because there is no basis of
tative basis.                                     an understanding of the approaches of            figures, true deficits and problem areas
                                                  industrialisation and accepting its tools, a     cannot be identified or rectified.
Success factors                                   sustainable reduction of costs is difficult to
                                                  achieve.                                         With our help, the necessary basis of figu-
The key success factors for cost reduction                                                         res can be put into place quickly and the
using industrial tools are:                       Practical experience                             key indicators based on it can be defined.
                                                                                                   Then, the tools of industrialisation can be
I A meaningful basis of figures and data          Something we often encounter in our pro-         introduced, which generally bring about a
I An understanding and an acceptance              jects is that although employees know            rise in efficiency or cost reductions of more
   among managers and employees of the            about the industrialisation approaches in        than 20 %.
   concepts of industrialisation                  theory (through training courses and semi-
                                                  nars), the introduction and implementation
Only once a solid basis of figures is in place    of its tools is less successful.
is it possible to discuss the issues objecti-



Project Example: Procurement Optimisation
in a Leading Manufacturer of Medical Products
Dirk Menke
Initial situation                                 of its departments have almost reached           This was also the case for procurement.
                                                  their capacity limit. It was now no longer       The main criterion was supply security for
The financially successful medical techno-        possible to advance important strategic          production; in day-to-day business, pur-
logy company has grown considerable               issues because operational activities            chase prices, stock situation and develop-
over the past few years. As a result, some        increasingly took over.                          ment of new suppliers were increasingly




      6
                                                                                               groups were classified using the Emporias
                                                                                               optimisation matrix (cf. Figure 3) in order
                                                                                               to derive the relevant optimisation
                                                                                               approaches. For instance, we need a dif-
                                                                                               ferent optimisation approach for a strate-
                                                                                               gic supplier who already has a high level
                                                                                               of procurement expertise than for a stan-
                                                                                               dard supplier who has so far been paid
                                                                                               little attention to. In the case of strategic
                                                                                               suppliers, logistics supplier integration or
                                                                                               supplier development are suitable me-
 Figure 3: Emporias matrix to identify optimisation approaches                                 thods for generating potential, while in the
                                                                                               case of standard suppliers, the price
put on the back burner. Because the ope-       saving potentials and to define the requi-      aspect and therefore price optimisation
rational burden was high, purchase prices      red measures. The potential was identified      methods represent the main levers.
could be optimised only occasionally, sup-     through a reliable database as a basis for
pliers were dealt with as and when needed      the initial workshops and one-to-one dis-       Once the commodity groups were positio-
and a huge amount of safety stock was          cussions with customers. These work-            ned in the optimisation matrix, the poten-
kept on hand. Nonetheless, despite high        shops provided a basic understanding of         tials for the different sectors were identi-
stocks, raw material bottlenecks were          the supplier structure and the current pro-     fied (cf. Figure 4).
experienced frequently.                        cesses and purchasing methods were
                                               taken up in order to be able to develop         The potential generated through purcha-
The significance of purchasing for a com-      approaches for improvement. Further-            sing optimisation measures was separate
pany’s competitive position is undeniable.     more, a commodity group classification          for each commodity group. Therefore, the
Poor inventory management and / or pur-        system was (further) developed during           commodity groups were assessed based
chase prices that are too high can lead to     these discussions. This is essential to         on three dimensions. First, purchasing
declining margins and, as a result of deli-    structure purchasing organisation and           organisation itself was looked at, then the
very capacity being compromised, the           thus to develop the market as best as           commodity groups were placed in the
loss of market shares. Both can jeopardi-      possible (e.g. utilising pooling potentials).   context of the market, and finally, best-
se the future development of a company.                                                        practice experiences from Emporias pro-
                                               In a next step, suppliers and commodity         ject work was taken into consideration to
The task

The aim of the project was to stabilise pur-
chasing and prepare it for future growth.
To do this, an effective purchasing organi-
sation had to be established, purchase
prices lowered and stock situation (redu-
cing surplus stock while ensuring supply
security at the same time) improved. The
increasing demands on flexibility (growing
variety of products, short-term customer
wishes etc.) had to be taken into conside-
ration as much as the need for lean and
efficient processes

Course of action

Phase1: analysis
The aim of the first phase was to identify      Figure 4: Material groups and optimisation approach




                                                                                                                                    7
define the potential. The three different
views of organisation and commodity
groups revealed a very detailed picture for
each individual commodity group. It was
thus possible to identify potential savings
of approx. 1.1 million euros (approx. 9 %
of the targeted baseline) per year for the
project and the relevant optimisation mea-
sures could be adopted.

Optimisation potentials in the area of sup-
plier integration or development was deri-
ved through a coverage analysis in con-
junction with (target) service levels. It was
found that actual supplies were some-            Figure 5: Select approaches and savings
times twice as high as theoretical re-
sults. Saving potentials of approx. 25 %        order to be able to pool suppliers and        steering strategy. To do this, the Emporias
(conservative scenario) were identified         volumes. Furthermore, through product         e-Kanban tool was implemented. This
based on customer satisfaction and pro-         cost analyses, product specifications were    Internet-based VMI platform gives sup-
cess stability. In absolute terms, this         improved. Once these measures were in         pliers access to the customer’s stock
corresponded to a reduction of approx.          place, national and international tenders     situation. In joint workshops with custo-
2.5 million euros.                              were sent out and final negotiations          mer and suppliers, Kanban rules and
                                                were held together with the customer          stock limits were defined within which the
Important information for the set-up of the     (cf. Figure 5). With savings of approx. 1.2   supplier controls supplies independently.
new purchasing organisation was also            million euros, the result was ahead of the    This transformation not only meant that
gleaned from the workshops. So far, ope-        potential identified in the analysis with a   stock was reduced, it also significantly
rational and strategic tasks were carried       target achievement of 114 %.                  stabilized operational processes and led
out by the same person. The significant                                                       to supply security for the customer. Fur-
operational burden meant that strategic         Supplier integration and development:         thermore, in coordination with the sup-
issues had to be neglected. Purchasing          An important aspect of supplier integrati-    plier, raw material replacement times
was not seen in the company as some-            on and development was a fundamental          could be reduced this way and stocks
thing that creates value. In addition to the    change of the supply concept away from a      lowered even further (cf. Figure 6).
purchasing department itself, there was         Push control strategy and towards a Pull
also a sourcing department that dealt with
international supplier research. This led to
a duplication of efforts and loss of infor-
mation. The aim should be to clearly sepa-
rate operational and strategic tasks and
the sourcing department should be inte-
grated in the existing purchasing organi-
sation in order to become a department
that creates value.

Phase 2: implementation
Purchasing optimisation:
In the implementation phase, the identified
levers were successfully used together
with the customers. During the tender pre-
parations, product variety was reduced
                                                 Figure 6: Savings through logistics supplier integration
and product groups were developed in




      8
 Figure 7: Purchasing organisation in the target state


Purchasing organisation:                       knowledge of the market and products).           for future tasks. First, purchasing costs
In order to be able to always apply the        The new organisation now clearly distin-         were reduced by approx. 1.2 million euros
(strategic) methods established during the     guishes between operational and strategic        per year and stocks were lowered by
project, purchasing organisation had to be     purchasing tasks. Tasks are now no longer        approx. 3 million euros. Process stability
changed or added to. As mentioned              diluted. Purchasing is therefore now able        and supply security were also massively
above, purchasing had focused on opera-        to absorb rising demands and make a              increased. By restructuring purchasing
tional activities in the past and strategic    sustainable contribution to the success of       organisation, the basis was laid for conti-
issues were ignored to an extent. This had     the company.                                     nuing this development independently to
to be taken into consideration in the new                                                       ensure continuous growth as well as rising
organisation (cf. Figure 5). It was also       Summary                                          product diversity and customer needs.
necessary to integrate the thus far inde-
pendent sourcing department in order to        During the six-month project, purchasing
be able to use any resulting synergies (e.g.   was sustainably stabilised and prepared




‘Quo Vadis, Transport Market?’
Strategies to Ensure Optimum Transport Costs
Axel Jungbluth
Over the years and decades, the national       Following significant reductions in de-          possible to halt the process completely.
and international transport market has wit-    mand in 2008 / 2009 caused by the financi-
nessed fluctuating costs striking a balance    al and economic crisis, truck traffic volume     We have observed such cycles since the
with shipping space and demand. This           in 2010 has increased considerably and           1970s, when companies increasingly out-
relationship between transport capacities,     reached the 2006 level. Sever overcapacity       sourced their internal logistics to specialist
economic and political developments, oil       in the first quarter of 2009 was followed by a   service providers (shipping companies).
prices and the interaction of thousands of     shortage of shipping space in the second         For buyers of logistics services, such fluc-
shipping companies including their proces-     quarter of 2010. Although the shipping com-      tuations are of course a problem and requi-
ses, portfolios and interests can also be      panies increased their capacities and thus       re continuous adjustment and tenders. But
observed today:                                price increases slowed down, it has not been     how is the transport market and how are




                                                                                                                                       9
transport prices developing in the long         hed shipping companies). This was the           1. Identifying the right partners
term? What constants are there and what         origin of the so-called 3 PL (third-party       One of the ways of achieving this is to pro-
recommendations for action can be deri-         logistics service providers) and, despite       mote an awareness within the company of
ved from that? Answers are difficult to         considerable cost reductions, they came         the fact that the basic cost structures of
come by without making certain assumpti-        to be one of the biggest creditors of the       shipping companies (given the same qua-
ons about future developments, although         outsourcing companies. Many shipping            lity standards) are similar: costs for trucks,
there are foundations on which to base          companies that came to be 3 PL during           trailers, drivers and diesel. A logistics ser-
well-grounded prognoses.                        the wave in the 90s had to ask themselves       vice provider can stand out from the com-
Most companies only began to outsource          what their core competence is: transport        petition by setting up his own network and
transport once they became increasingly         logistics or contract logistics? Quite often,   his own fleet, through efficient administra-
internationalised, when they became             these companies reduced the routes they         tion and in particular through optimising
aware that their own cost structures regar-     covered and limited themselves to part-         his business processes. Does he employ
ding the procurement and running of             nerships with other shipping companies.         Lean Management methods? Does he
means of transport on a national level was                                                      optimise utilisation of capacity through
no longer able to keep up with specialist       The differentiation of the logistics service    intelligent yield management (and can he
service providers. A lack of economies of       providers was increasingly noticed and          also decrease his empty runs by 3 – 7 %)?
scale in the procurement of trucks and          questioned by the industrial companies.         Does he improve shipping space utilisati-
trailers, a high number of empty runs           The slogan “everything from one source”         on using supporting software (can be
(often approx. 40 %), shipping space not        now even has a negative effect when             equivalent to up to 8 % more shipping
used to capacity, drivers being bound to        choosing a logistics partner. Bad experi-       space)? Does he regularly train his drivers
the company’s wage agreements and the           ences with sub-contractors of logistics         in low fuel consumption? An objective
problem of not being able to achieve an         partners have directed the clients’ attenti-    assessment is needed here. Only a logi-
acceptable level of service with limited        on to the equipment used by the contrac-        stics service provider whose cost situati-
equipment; all this creates space for a fast    tual partners. Links between logistics          on, given his network and processes, is
growing and profitable shipping company         companies that replace a lack of transport      better than the competition is able to pass
market. Within a very short space of time       equipment is now viewed critically and is       on his price advantage to his customers in
(during the 1980s) the networks for single      less likely to be accepted.                     the long term (provided the customer
dispatch items were so well developed                                                           negotiates prices well).
that 24-hour delivery times could be            Shipping companies that have spotted
achieved within Europe while working to         this trend and want to strengthen their         2. Becoming attractive to shipping com-
capacity. Trucks owned by industrial com-       route area, however, face a shortage of         panies
panies was increasingly becoming an             skilled workers which makes it more diffi-      Active participation of customers in the
exception. Under certain very specific          cult to increase capacity. Furthermore, the     shipping process is likely to play an impor-
conditions, running your own trucks can         Federal Ministry of Transport is expecting      tant role in the future. Important price
still be worthwhile today however, for          an increase in freight traffic of 70 % by       components for shipping companies
instance in the case of high-frequency,         2025, which requires more and more              include assessed risks for possible empty
regular rotary systems with a high degree       capacity. Increasingly, you therefore find      runs, poor capacity utilisation and waiting
of capacity utilisation of trailers and not     part-time workers and pensioners behind         times. In order to reach a good price level,
too much administrative overhead or for         the wheel. In order to maintain safety stan-    these risks must be reduced by both par-
special transports in outbound areas.           dards, professional drivers now have to be      ties. For instance, the shipping company
                                                qualified, in Germany at least. Do increa-      can use space efficiently only if the custo-
As a result of a significant drop in marginal   sing capacity shortages by themselves           mer provides him with the right data (type
profit in the optimisation of production        mean that prices for overland transport of      of packaging, stackability, dimensions,
processes in particular, people’s aware-        goods will continue to rise? Answer: it pro-    weights etc.). Short waiting times on cus-
ness of the costs of logistics processes        bably does in the long term.                    tomer and on supplier side have a direct
grew in the 1990s and often this led to                                                         influence on the operational costs of the
extensive outsourcing of logistics services     What strategies can industrial companies        logistics company.
such as warehousing, sequencing for pro-        employ in order to keep transport costs
duction supply, preliminary assembly work       under control and optimise them in the          By using larger trailers, a better cost / load
etc. to external companies (often establis-     long term?                                      volume / CO2 emissions ratio can be




     10
achieved. As part of a large-scale field trial   3. Limiting your own shipping volume            to expect transport prices to rise. Com-
starting at the end of 2011, so-called           It is likely that as a result of rising price   panies will have to make an effort to coun-
Gigaliners (25 m in length, up to 44 t) can      pressure, companies will pay closer atten-      ter these price increases.
be used in seven federal states. Large           tion to the load carriers and packaging
load space, however, also means that             they use. If transport costs are billed         Shipping companies are among the most
there is a greater risk of poor capacity uti-    based on weight, then only reducing the         important and largest suppliers of a com-
lisation. By synchronising delivery sche-        weight of packaging and / or products can       pany. A careful assessment is therefore
dules in a specific region (through opera-       lead to (usually minor) cost reductions. If     absolutely justified. The trend for logistics
tional purchasing) additional pooling            the bill is based on transport volume, then     companies to specialise in route or con-
effects can be achieved that help to utilise     improving stackability, especially for light    tract logistics will continue and must the-
large shipping space (Mega Trailers, Gi-         to medium weight goods, can bring about         refore be taken into consideration in the
galiners). A combination of various factors      significant cost reductions.                    selection and tendering processes of
based on an understanding of the busi-                                                           clients. Without a doubt, companies that
ness processes of the shipping company           The general up and down of transport pri-       take into account the logistics develop-
make a company an attractive potential           ces will continue. While there will be anot-    ment trends of overland goods transport
customer and thus helps to achieve a bet-        her economic slump that will depress the        in Europe will be among the winners of the
ter price level.                                 transport market and bring down prices in       future cargo space shortage.
                                                 the short term, in the long term, we have




                 Industry day for the financial services
                 11. November 2011. Seat production for Porsche and Audi
                 I Lean management: the programme that improves the speed of optimisation
                 I Lean management at Swiss Life Deutschland AG
                 I Lean management for inter-company processes in industry – introduction of the
                   logistics and production site Ottmarsheim
                 I Quality for the first time in the credit process – quality management at Wüstenrot Bausparkasse AG
                 I The Industrial Performance Index: measuring the degree of industrial maturity of back office processes
                 I Industrial principles in practice live: tour of production facilities – car seat production
                   Porsche 911 & Audi A4/A6




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                 Feringastraße 7 – 85774 Unterföhring – Tel.: +49 (0)89 958406-0 – Fax: +49 (0)89 958406-11
                 eMail: info@emporias.de – Internet: www.emporias.de

				
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