DHL GLOBAL CUSTOMER LOGISTICS Brussels, October 19, 2002 Sacha Van Hoever, Senior Logistics Consultant, DHL Global Customer Logistics Contents Introduction to GCL – DHL Global Customer Logistics – Vision & Strategy DHL & Partners Service Parts Logistics Reverse Logistics Service Parts Logistics Survey 2002 Case Study 3 The business environment is changing Globalisation E-commerce Focus on core Customer Service competencies Explosion Time to market Organisational compression Integration Creation of virtual PLC Reduction enterprises One stop shopping 4 Global Customer Logistics DHL International Global Customer DHL Airways Logistics 5 Global Customer Logistics Created in 2001 for addressing the needs and requirements of DHL‟s global customers GCL developing GAC National Advantage implementing Large National Regular proactively managing integrated express distribution and logistics solutions on a regional and truly global level 6 DHL Global Customer Logistics Vision long term preferred “To enable DHL to become the long term preferred partner of choice for global express partner of choice for distribution and express supply chain solutions for the leading global companies within DHL‟s the leading global target industries” companies 7 Global Logistics Organization Structure Global Virtual Teams Global Logistics Logistics Logistics Logistics EMEA AP NA Geographical Logistics Organization Global Partner Partner Alliance Alliance Business Global Business Acquisition Support Acquisition Support Global “Virtual” Functional Team Pricing & Global Pricing & Profitability Profitability Analysis Analysis Logistics Global Logistics Infrastructure Infrastructure Quality Global Quality After Sales Global After Sales Program Program Management Management DHL GLOBAL CUSTOMER LOGISTICS Global Logistics Vision and Strategy DHL Global Logistics Vision DHL Global Logistics will be the Global Leader in (time-sensitive) parts distribution with real-time information technologies supporting consistent global offerings. DHL will develop integrated solutions targeted at high value, high impact goods. 10 DHL Global Logistics Our approach ‘Brain’ Consultative Services Customer Relationship Build How will DHL tap Management expertise ourselves into the total SC market..? IT Capability Consultancy Manage Partners Use partners and Special reporting Build e.g. DPWN DHL expertise ourselves joint bidding and Others Call Center Management Heavy Weights Door-to-Airport Sameday NFO ‘Muscle’ Def’d. services Airport-Airport transportation Warehousing IT systems Domestic Physical <250 kg Repairs Core Services 11 DHL GLOBAL CUSTOMER LOGISTICS DHL and Partners Our Partner Relationships START Global/Regional No. of shared Services Larger Investments Longer Duration Shareholder Enhanced Process Selection Integration Partners Protocol Geographical scope Importance Strategic Number of Partners Projects Third Party (3PL) Local Service Providers Number of Partners 13 DHL Shareholders 1% 76% Two Investment Trusts = remaining 23% 14 Deutsche Post World Net 33 bln EUR turnover, 318 k people Germany Europe Worldwide Germany 69 Mio Pan-European Danzas, AEI 130 bill. Euro on letter items parcel network 150 countries balance sheet per day 38,000 people 10 Mio clients High speed Worldwide 13,500 branches DHL in 228 countries & 15 territories 3 Types of Logistics Service Offering Single DHL Partner 4PL 3PL Joint Bid Solution Solution Solution Customer Customer Customer Division/ Division/ Division/ Account Account Account LSP expertise (CRM) DP Bus. Unit Logistics Consultant 4PL Service Provider Joint Bidding Service Platform IT Capability DPWN DPWN DPWN DPWN DPWN Partner Partner Bus. Unit Bus. Unit Bus. Unit Bus. Unit Bus. Unit Single CRM Management DPWN Managed Tender coordination amongst members 4PL service platform DPWN 4PL Platform A Joint Venture between: 17 DHL GLOBAL CUSTOMER LOGISTICS Service Parts Logistics The importance of supply chain management As we are moving from competing brands to competing supply chains, logistics has become one of the key drivers of competitive advantage. Some companies have recognised this, however they have been focussing on the supply chain driving the production and sales of finished goods (e.g. Dell). Yet there is another supply chain within these companies, also heavily affecting customers and business results, which is often largely being ignored: The Service Parts Supply Chain 19 The Service Parts Supply Chain “Traditional bases of competitive advantage no longer suffice; the search is on for new opportunities for differentiation” Competitive advantage is sought in parts of the value chain that thus far have been overlooked or under-addressed. After sales is one of those areas: – Traditionally too fragmented – Poorly linked with other parts of the organisation – Received little management attention However, by reengineering the service parts supply chain companies can: – Create competitive differentiation – Improve customer retention – Increase earnings from after sales support – Reduced cost of after sales support – Customer satisfaction 20 Do you leave money on the table? Excess service Poor utilization parts inventory of physical and people assest High service Unnecessary logistics scrap and costs obsolescence Poor coordination with suppliers, Penalties for customers and missing service other companies level agreements 21 Strategic importance Initial equipment sales High sales costs No relationship Poor customer info Low profitability Operational after market service Relatively low sales cost Ongoing relationship Good margins High support costs „Back to square 1‟ Repeat equipment sales Missed opportunity for Low sales costs customer loyalty Established relationship Repeat sales will be just like In-depth customer info the initial sale Poor AMS Good AMS Increased profitability Lost after market service performance performance High switch costs account 22 Revenue and Profit life cycle Finished Goods Relationship Service Time Revenue Finished Goods Profit $ Service Time 23 SC impact on shareholder value Service logistics has a significant impact on shareholder value • High margins Revenue • Customer retention Profitability • Obsolescence Costs • First time fix Shareholder value • Inventory pooling • Speed instead of inventory Working capital • Virtual warehousing • Information instead of inventory Invested capital • Outsourcing Fixed capital • Centralization 24 The significance of Service Parts cannot be neglected ,,Spare parts represent $700 billion in spending and 8% of GDP in the United States alone’’ Piper Jaffray, U.S. Bancorp 25 Service Logistics in after market service Service logistics is an important enabler to improve after market service Customer Call center The goal: Is to get the right person with the right skills at the right place at the right time with the right parts for a first time fix at the LOWEST COST Field service Service control Logistics based activities can account for more than 90% of the total costs of delivering after market service - source: Accenture. 26 Building blocks for service logistics Several building blocks are added to build service logistics related supply chain configurations: Operations Transport Inventory Handling Others Vendors Modes Plant Handling in Duties Plants Inbound DC Handling out Info. substitute DC Inter DC In transit VAL Platform Outbound Consignment Repair VAL Strat. Inv. Depl. Recycle Call centers Parts replen. Upgrade Field engineers Re manufacture Repair centers De manufacture Disposal centers Refurbish 27 SL typical process description Call management Field service operation Call reception Diagnostic Job assignment Job acceptence by fieldservice Match field engineer & part Repair on site Return part Call closed Part request Return part received at warehouse Part delivery in repair center 28 Service Parts Supply Chain strategy Demand/Supply characteristics Long Plan & Hedge & lead-time: +3 days execute deploy Supply (lean) (hold inventory) characteristics: 24-48 hrs Service level agreement SERVICE React & Continuous PARTS execute Short replenishment lead-time: LOGISTICS (agile) 2-4 hours Predictable Unpredictable Demand characteristics 29 Drivers / characteristics of a service parts supply chain Large number of sku‟s (DC - optimization) High percentage of slow or non-movers (forecastability, obsolescence) Large variation in form / size / weight (handling) Relation with finished product serial number (information) Long term service obligation (end of life decisions) High standards for: – product availability – responsiveness / speed (cost of downtime) Service Level Agreements (SLA) common Consumables versus spare parts 30 Key customer support Primary logistics logistics area challenge Service parts inventory management Maximising parts availability with minimum inventory and costs Service parts warehousing Maximising order fulfilment effectiveness while minimising costs Service parts transportation Providing rapid parts delivery while minimising costs Services parts order processing and fulfilment Maximising order entry and processing while minimising costs Service parts sourcing Finding and developing low-costs/high-quality sources of supply Service parts procurement Ensuring timely delivery of high-quality parts at minimum costs Service technician capacity planning Maintaining the appropriate number of technicians to support demand Service technician scheduling Ensuring service technician capacity is effectively utilised Service technician dispatch Managing deployment of service technicians on an hour-to-hour basis End-user service requirements determination Accurately identifying customer satisfaction needs and expectations End-user customer service management Managing appropriate response to customer service issues 31 Characteristics - trade off required Business profit Cost to Service service Customer quality satisfaction Cost elements: Quality elements: Inventory costs First time right (diagnosis and repair Downtime costs Minimum downtime (response & repair) Repair costs Simple communication (hassle free, 24/7) DC operating costs Parts availability Transport costs Job planning (part, engineer, site) (Second) call costs Right tools and skills utilized Human resources costs Right parts Distribution costs What drives my ability to.. How do I deliver quality - compete on price service? - meet profit margin targets? 32 Trends Increasing customer demands Dramatic expansion in range and sophistication of service offerings Increasing complexity in service techniques requirements Global service requirements due to globalization Integrated service chain planning and operations (parts, repair, DC, transport, engineer, installed base) Ability to turn logistics errors into marketing and sales opportunities Increasing differentiation of similar products Remote diagnosis / pre- alerts (self diagnostic capabilities) Inventory pooling Design consistency across product offerings Full parts inventory visibility (network-wide) 33 Example: remote diagnosis Real time transmission of data analysis Service centre Scheduling of service and part requirements of next maintenance stop Spare parts Aircraft engineers Next maintenance stop Big reduction of unplanned stops and aircraft downtime 34 Example: Inventory pooling Cycle stock Cycle stock Safety stock Safety stock Company x Company y Pooling Cycle stock • Lower safety stock and • lower average inventory With same service level! Safety stock Company x & y 35 DHL GLOBAL CUSTOMER LOGISTICS Reverse Logistics Service Parts Supply Chains Engineers Service Event Parts & Materials Repair Returns 37 Network Design Multi-level decoupling points High Replenishment Replenish 2-4 hrs service Service level level: 2-4 hrs Replenishment Direct delivery (24-48 hrs) ‘Lower’ service level Direct shipment Suppliers Production Regional Strategic parts Service distribution centre event Repair Centre Return Cycle 38 Different models within service parts logistics Distribution Models Ways to Influence TAT Repair and Return Early delivery – Retrieve defective unit – Before 9:00 – Repair defective unit – Before 12:00 – Send back repaired unit Delivery the same day Inbound and outbound item are – Bullet van identical – On board courier/NFO Exchange / Replacement – Private jet renting – Retrieve defective part Repair at the central hub – Send spare part – End of runway Inbound and outbound item are different Stocking Locations – Regional storage location Consumable – Strategic parts centers – No Return only outbound 39 Different DHL products Transportation & Real Time Info – 3 Leg Repair and Return (No packaging available) – 2 Leg Repair and Return (Packaging available) – End of Runway (12 h repair window) Transportation, Warehousing & Real Time Info – Return Repair Inventory (4 leg RMA from central stock) – Direct Express Inventory (Consumable from central stock) – Strategic Inventory Management (Consumable from strategic stock) Variations of the above 40 Effect on the Total Turn around time by combining models and infrastructure 5 4 3 1 Transit hours days days days day Time 3 Leg Repair End of Advanced Exchange and Return Runway from strategic stock 2 Leg Repair Advanced Exchange and Return from central stock 41 Parameters influencing the model choice Customer organisation – The service mindedness of the organisation Do you see service as a means to gain a competitive advantage? – Availability of local field engineers – Willingness to hold stock (value of the items) Item type – Consumable vs. serviceable – High end vs. low end – Installable by customer – High value vs. low value – Impact of the product Customer‟s customer – Physical aspects – What does the enduser expect (management of the expectations) – High value vs low value 42 DHL GLOBAL CUSTOMER LOGISTICS Spare Parts Logistics Survey 44 45 46 Most of the companies interviewed have ambitious goals for the future Most of the companies interviewed have ambitious goals for the future Preliminary results of: "Spare Parts Survey 2002" (3) Stock turn rate Stock turn rate Costs1) Costs1) Service level Service level Return lead time2) Repair lead time Return lead time2) Repair lead time - - -%- - Days - - Days - +58% -14% +2% -61% -49% 2.30 22,5 100 94 96 15,1 86 1.46 11,5 5,8 Ø Today Ø Target Ø Today Ø Target Ø Today Ø Target Ø Today Ø Target Ø Today Ø Target 47 1) Inventory reduction target: 17%, cost reduction target: 14% 2) Average for the EU Interlog2002 15-16.05.2002 - 4 Outsourcing will be extended to value added activities such as planning, Outsourcing will be extended to value added activities such as planning, procurement and inventory ownership procurement and inventory ownership Scope of Outsourcing by Function -%- 100 100 67 69 64 60 56 38 23 13 13 0 Transportation Warehousing 1) Repair Planning Procurement Inventory ownership Percentage share of companies which outsource this function today Percentage share of companies which believe that this function could be outsourced in the future 48 1) Central warehousing, 57%/ 61%, local warehousing and depots 62%/ 73% Interlog2002 15-16.05.2002 - 5 DHL GLOBAL CUSTOMER LOGISTICS Solution Components DHL Global Logistics Solution Elements Total Quality System State of the art Warehouse IT systems Network (ELC/SPC) Logistics Call Centers Skills/ Transportation People Services Total Quality System 50 DHL Global Logistics Solution Elements DHL‟s logistics solutions consist of: Strategically positioned storage locations – Express Logistics Centers – Strategic Parts Centers Logistics Customer Service Center DHL Worldwide Express Transportation network Same day dedicated transportation Group of dedicated people offering support on day-to-day operations Comprehensive IT solution 51 Logistics Capabilities DHL‟s logistics solutions consist of: Strategically positioned storage locations – Express Logistics Centers – Strategic Parts Centers Logistics Customer Service Center DHL Worldwide Express Transportation network Same day dedicated transportation Group of dedicated people offering support on day-to-day operations Comprehensive IT solution 52 ELC vs SPC Products Speed of Main Coverage Stored Transport Function Regional (Semi) finished Overnight Value added Express (International) services Center Repair parts Logistics Spare parts Distribution Center High product Repair (EOR) (ELC) value or high Bonded stock opportunity cost Strategic Local/Area Spare parts (domestic) Distribution Parts WH Very high same day Center product value or very high (SPC) opportunity cost 53 Global Network SPCs & ELCs 9 Express Logistics Centers 273 Strategic Parts Centers United States Europe, Africa 45 Middle East Asia Pacific 109 93 Latin America 35 54 Developments subject to change August 2002 SPC Network Europe - ME - Africa 106 SPC locations as at 01/08/2002 3 ELC locations as at 01/08/2002 Skelleftea (Brussels, Johannesburg, Bahrain) BGO OSL HEL SVG STO BFS GLA Livingston (NOT INDICATED ON MAP): GOT MOW DUB Middlesbrough KLL MAN Existing SPC Locations: Leicester CPH Tel Aviv Israel ORK BRS AMS HAM GDN Cairo Egypt Plymouth LHR (3) BER WAW Dubai Dubai HAJ BRU DUS LEJ POZ Dahrain Saudi Arabia LIL Rennes FRA DRE KTW Jeddah Saudi Arabia CDG (3)MZM WRO Tours NUE PRG Riyadh Saudi Arabia NTE SXB STR BRQ Kuwait Kuwait BT Dijon BSL MUC S Larnaca Cyprus La Coruna BOD VIE LYS GVA ZRH LJU BUD Las Palmas Canary OVD Bilbao TLS Padova Grenoble ZAG BUH Islands OPO MIL Lausanne Switzerland LIS TRN BLQ MAD BCN MRS NCE BEG AOI Indicative SPC locations QPG ROM IST Ankara Turkey XVQ VLC BRI ESB Belgrade Yugoslavia NAP XML PAL CTA ATH 55 Sapporo Hushiro SPC Network APAC Aomori Sendai Matsumoto Tokyo Kanazawa Atsugi Shenyang Seoul Nagoya Osaka Beijing Kiheung Okayama Hiroshima Pusan Oita Urumqi Fukuoka Xian Shanghai Wuhan Taoyuan Chengdu Islamabad Futian Hsinchu Taipei Guangzhou Tainan Hong Kong Delhi Dhaka Hanoi Ahemabad Bombay Pune Calcutta Manila HyderabadBangkok Madras Ho Chi Minh Bangalore Penang Johor Bahru Kuala Lumpur Kuching Colombo Singapore Jakarta Darwin Active/live SPC Available SPC Brisbane Planned SPC Sydney ELC Perth Canberra Adelaide Auckland Melbourne Wellington Hobart Christchurch 56 -1 SPC Network US Seattle Burlington Portland Boise Minn/St. Paul Rochester Boston Detroit Hartford Chicago Philadelphia New York Cleveland Teterboro Sacramento Salt Lake City Columbus Pittsburgh Baltimore Denver Indianapolis San Francisco Washington Las Vegas Cincinnati ELC Fresno St. Louis Nashville Raleigh Durham Los Angeles Albuquerque Atlanta San Diego Phoenix Dallas/Ft. Worth Orlando El Paso Austin Miami Tampa Houston San Juan San Antonio Guam Myaguez 3 Existing/Operational Express Logistics Centers (Cincinnati, Miami and San Francisco) - DHL owned and operated regional distribution facilities offering a complete menu of value added logistics services 6 Existing/Operational Strategic Parts Centers -Local parts centers offering a selected menu of value added logistics services 36 Planned Strategic Parts Centers (2002) -Local parts centers offering a selected menu of value added logistics services 57 SPC Network Canada Toronto Planned Strategic Parts Center (2002) -Local parts centers offering a selected menu of value added logistics services 58 SPC Network Bermuda Hamilton Latin America Miami US Ciudad Juarez Mayguez PR Monterrey San Juan PR Santo Domingo DR Guadalajara Nicaragua Barbados Mexico City Jamaica Trinidad & Tobago Guatemala Valencia El Salvador Costa Rica Venezuela Panama Columbia Ecuador Quito Recife Existing/Operational Express Logistics Salvador Centers (Miami) -DHL owned and operated Peru Brasilia regional distribution facilities offering a complete Lima Belo menu of value added logistics services Bolivia Brazil, Rio De Janeiro 15 Existing/Operational Strategic Parts Centers -Local parts centers offering a selected Chile menu of value added logistics services Santiago Sao Paulo 19 Planned Strategic Parts Centers (2002) - Curitiba Local parts centers offering a selected menu of Cordoba Cordoba value added logistics services Porto Alegre Rosario Argentina Buenos Aires 59 Global ELC Network Coverage Brussels Europe Cincinnati Hong Kong Asia Pacific USA Bahrain Middle East San Francisco USA Miami Latin America Singapore Asia Pacific Johannesburg Southern Africa Sydney Asia Pacific 60 Logistics Capabilities DHL‟s logistics solutions consist of: Strategically positioned storage locations – Express Logistics Centers – Strategic Parts Centers Logistics Customer Service Center DHL Worldwide Express Transportation network Same day dedicated transportation Group of dedicated people offering support on day-to-day operations Comprehensive IT solution 61 Logistics Customer Service Centers Brussels Europe Phoenix US Singapore Asia Pacific 62 Logistics Customer Service Centers Fact file: Regional Logistics Call Center Located in Brussels, Singapore & Phoenix (AZ) Provides Multi Lingual Call Center Services 24 x7 Coverage Emergency order handling Remote Call Collection RMA Handling Single Point of Contact into multi SPC network The “heart” of many DHL Logistics Solutions 63 Logistics Customer Service Centers Languages Covered Brussels Phoenix Singapore English English English French Spanish Cantonese Dutch Korean German Japanese Spanish Italian Finnish Polish Russian 64 Logistics Capabilities DHL‟s logistics solutions consist of: Strategically positioned storage locations – Express Logistics Centers – Strategic Parts Centers Logistics Customer Service Center DHL Worldwide Express Transportation network Same day dedicated transportation Group of dedicated people offering support on day-to-day operations Comprehensive IT solution 65 DHL Global Network Fact File Region Number of Number Number of Number Number of Numbe countries/ of Employees of Owned/Leased r of Territories offices Courier Aircraft Hubs Vehicles E&A/ME 130 1,350 32,037 7,266 122 16 -Europe 70 880 28,238 6,360 94 11 -Africa 49 366 2,166 519 21 3 -Middle East 11 104 1,633 387 7 2 The AMERICAS 58 1,165 18,963 5,034 125 17 (incl. US, Canada, MEX) ASIA PACIFIC 40 3,424 17,732 4,026 7 3 TOTALS 228 5,939 68,732 16,326 254 36 66 Logistics Capabilities DHL‟s logistics solutions consist of: Strategically positioned storage locations – Express Logistics Centers – Strategic Parts Centers Logistics Customer Service Center DHL Worldwide Express Transportation network Same day dedicated transportation Group of dedicated people offering support on day-to-day operations Comprehensive IT solution 67 Network of Sprinter Couriers Same Day Service Bullet Vans Dedicated transport 24 x 7 service 365 days per year Escalation Procedures Direct contact with LCSC 68 Logistics Capabilities DHL‟s logistics solutions consist of: Strategically positioned storage locations – Express Logistics Centers – Strategic Parts Centers Logistics Customer Service Center DHL Worldwide Express Transportation network Same day dedicated transportation Group of dedicated people offering support on day-to-day operations Comprehensive IT solution 69 Day to Day Support Account Management Global Network Global Account Manager Coordination Regional Global Account Regional Global Account Regional Global Account Regional Manager EMEA Manager Americas Manager APAC Offices Countries Key Account Key Account Key Account Managers Managers Managers Responsible for all communications with Global and regional customers Ultimately responsible for resolving functional issues within its respective regions Resolve, deploy, and mobilize the individual functional areas to deliver against action 70 Day to Day Support Business Acquisition Support Group Business Acquisition Support Group André Benning Supply Chain Systems Project Implementation Consultancy Group Group Reninca Verbrugghe Thierry Veys Logistics Consultants Logistics Systems Implementation RFQ Coordinators Consultants Managers Design high-level supply-chain Roll-out of IT systems Design process models solutions Design customer IT solutions Design of detailed solution RFQ response management Develop functional IT Implementation of the solution Coordinate development of specifications proposal Coordinate implementation of IT Supply chain studies solution 71 Day to Day Support Program Management Global After Sales Program Manager Regional After Sales Regional After Sales Regional After Sales Program Manager Program Manager Program Manager EMEA Americas APAC Program Analysts Program Analysts Program Analysts To as per a set of pre-agreed service level agreements. Performance measurement will be done against Key Performances Indicators (KPI). To be the for all follow-up activities requested by global or regional customers. 72 Logistics Capabilities DHL‟s logistics solutions consist of: Strategically positioned storage locations – Express Logistics Centers – Strategic Parts Centers Logistics Customer Service Center DHL Worldwide Express Transportation network Same day dedicated transportation Group of dedicated people offering support on day-to-day operations Comprehensive IT solution 73 RMA IT System: Main features Full RMA-RTV tracking and visibility Customer Business rules embedded in software License plate technology (bar codes) Event driven Exception management through various alert mechanisms Target Stock Level management Web based Advantages Better allocation of capital expenditure Vendor consolidation Expand capability and coverage Single point of contact for total solution (LCSC) Total visibility on RMA cycles across partners Increase scalability and flexibility Increase field engineer productivity Decrease in costs – stock reduction – shorter turn around times – simplified processes Improve customer satisfaction ... 75 The Solutions 76 DHL Logistics Solutions STRATEGIC INVENTORY The complete control of physical and information MANAGEMEN (SIM) process flows involved in managing a time-critical service contract on behalf of our Customers DIRECT EXPRESS The management of centralised inventory, related INVENTORY (DEI) information and express distribution of products and/or component parts within a promised time window Management of the pick-up and delivery cycles: the RETURN REPAIR packaging and the documentation required to move INVENTORY (RRI) defective, repaired and replacement parts between the Customer, an Express Logistics Centre, a repair centre and a supply centre; and, the management of inventory and shipment information throughout the process 77 Direct Express Inventory (DEI) 78 D.E.I- Direct Express Inventory CUST Suppliers 13 14 7 5 LCSC 9 8 12 Event ELC Info flow 4 6 10 11 Physical flow 3 CUST 2 1 CUST Customers/Engineers 1 Breakdown occurs 8 Pick & Pack 2 Customer request spare part 9 Dispatch Confirmation 3 CUST validates order (Optional : 10 Optional (EDI only) : Dispatch Confirmation to CUST request can be direct to LCSC) 4 Transmission to DHL LCSC 11 Delivery of part to destination 5 DHL LCSC validates order 12 Stock level ELC drops below reorder level Optional 6 Order confirmation 13 Parts ordered 79 7 Order to pick and pack 14 New parts delivered to ELC DEI Key Benefits Improved consistent service levels Late cut-off times Reduced Inventory Cost Maximized Profit Window Less Capital Investment Improved Cash Flow Shorter Distribution Increased efficiency, control and transparency Rapid Customer Response Reduced Communications Cost Allow concentration on core activities 80 Strategic Inventory Management (SIM) Customer 81 S.I.M - Strategic Inventory Management : Detailed CUST Supplier 16 15 14 LCSC 5 ELC Event 13 Info flow 9 Physical fl. 4 6 10 7 8 SPC 12 SPC 11 CUST 3 2 1 CUST Customers / Engineers 1 Breakdown occurs 9 Dispatch Confirmation 10 Optional (EDI only) : Dispatch Confirmation to CUST 2 Customer request spare part 11 Delivery of part to destined person 3 CUST validates order (Optional : request can be direct to LCSC) 4 Transmission to DHL LCSC 12 Stock level SPC drops below reorder level 13 New part delivered from ELC (either automated in SELIS, 5 LCSC determines SPC & ETA either via replenishment order by customer to LCSC 6 Order confirmation & ETA 14 Stock level ELC drops below reorder level Optional 7 Order to pick and pack 15 Parts ordered at CUST manufacturing 82 8 Pick & Pack + Order Bullet Van 16 New parts delivered to ELC SIM Key Benefits Free up capital to focus on core competencies Unleash management time and in-house resources Add flexibility for changing market conditions Speed cycle times for faster market response Lower costs of inventory storage and handling Enhance customer service regionally and globally Simplified and centralised information and communication Reliable high speed delivery 24/7/52 Global coverage 83 Return and Repair Inventory (RRI) 84 R.R.I - Return Repair Inventory: Detailed CUST Supplier CUST Repair Centre 16 17 14 13 7 15 Event LCSC 5 9 ELC 8 12 Info flow 4 10 11 Physical fl. 6 CUST 3 2 1 CUST Customers/Engineers 1 Breakdown occurs 9 Dispatch Confirmation 2 Customer informs CUST 10 Delivery of part to destined person 11 Defective part sent to ELC 3 CUST validates request (Optional : Optional: defective parts request can be direct to LCSC) 12 Defective parts consolidated can be sent directly 4 Transmission to DHL LCSC to repair vendor 13 Defective parts sent to Repair Centre 5 Order Validation 14 Repaired parts sent to ELC 6 Order confirmation 15 Stock level ELC drops below reorder level Optional 7 Order to pick and pack 16 Parts ordered at CUST supplier 85 8 Pick - Pack & include Return kit 17 New parts delivered to ELC RRI Key Benefits Improved customer service levels Increased efficiency and transparency in the logistic pipeline Reduced total pipeline costs and length Allows concentration on core activities Simplified and centralized information and communication Effective and efficient returns of parts Synergy effects through central repair instead of local repair action Detailed reporting of services and failures 86 E.O.R - End OF Runway CUST Supplier Repair Centre 15 16 12 13 7 14 Event LCSC 5 9 ELC 8 Info flow 4 10 11 Physical fl. 6 CUST 3 2 1 CUST Customers/Engineers 1 Breakdown occurs 9 Dispatch Confirmation 2 Customer informs CUST 10 Delivery of part to destined person 11 Defective part sent to ELC 3 CUST validates request (Optional : request can be direct to LCSC) 12 Defective parts immediately sent to Repair Centre 4 Transmission to DHL LCSC (in or next to ELC) 5 Order Validation 13 Repaired parts sent to ELC 6 Order confirmation 14 Stock level ELC drops below reorder level Optional 7 Order to pick and pack 15 Parts ordered at CUST supplier 87 16 New parts delivered to ELC 8 Pick - Pack & include Return kit DHL GLOBAL CUSTOMER LOGISTICS Case Study Who is Lucent ? Revenue $34 billion in fiscal year 2000 Employees 87,000 people worldwide as of June 30, 2001 Leading global supplier of – communications networking equipment, – Internet infrastructure for service providers, – Optical networking, – Wireless networks and – Communications networking support and services. June 16th, 2000 DHL - Lucent contract signed DHL Logistics program include: Strategic Inventory Management, Direct Express Inventory & Repair Return Inventory 89 How does the designed solution work ? Advanced Exchange Business Model Manufacturing Repair 7 New Stock 6 Defective Repair process process DHL CRC DHL ELC 3 Order attributed to SPC or ELC 5 Defective 4 Auto replenishments from Returned ELC to SPC to ELC DHL SPC 2 or 4 hour 4 4 Overnight Order delivery Order delivery from ELC from SPC Lucent Customers (FLM) 2 Lucent EMEA CRC 1 Lucent Customer triggers maintenance order suffers maintenance via DHL web failure 90 What has been the biggest impact since Lucent changed strategy ? Before After Service Logistics seen as a A source of competitive costly necessary evil advantage (& future revenue streams) Inventory scattered throughout the countries Centralized & controlled inventories Duplication & lack of structure in work efforts Professional & dedicated support structure Lack of inventory & performance visibility Immediate real time visibility on performance 91 What are the highlights of the solution ? Spares delivery anytime day or night within 2-4 hours Repair times monitored and managed Certification of deliveries immediately fed back to Lucent All daily movements visible on-line New spares placed anywhere in Europe within 2 days 92 Delivery Performance Q1 2002 Number of orders Delivery performance 500 100% 400 95% SameDay 300 90% order 200 NextDay delayed 85% orders on time 100 80% 0 Jan Feb Mar 75% Jan Jan Feb Feb Mar Mar SD ND SD ND SD ND number of parts total stock value in millions of US$ 20000 $70 15000 $60 in repair $50 10000 $40 in repair in field $30 in field good on hand 5000 good on hand $20 0 $10 Jan Feb Mar $0 93 Jan Feb Mar What are the 3 driving forces behind the success ? Centralized logistics The power of… Information Lean & flexible Technology logistics Looking at these 3 forces in detail... 94 The Power of Centralized Logistics ? Cost visibility & efficiencies End-to-end business process set to Lucent‟s Business rules Centralized logistics Customs clearance invoices automatically All Logistics information accessible on line – Inventory levels – Delivery performance – Customer entitlements Information Lean & flexible Technology logistics – Inventory turnover Significantly reduced Repair cycle times Standardized metric and management reporting 95 The Power of Lean and Flexible Logistics? Immediate access to any stocking location, anywhere in the world with a limited amount of time Centralized logistics Ability to turn on/off logistics operations anywhere in the world with a limited amount of investments by customer Ease of stock repositioning within 1 day Information Lean & flexible Customer service contracts are no Technology logistics longer dictated by logistics limitations, now lean & flexible logistics accommodates and drives the service contracts 96 The Power of Information Technology? Orders, reports & inventory can be queried via the web any time, any place Centralized logistics Shipment delivery information automatically sent to your Mobile or PDA via SMS Inventory moves automatically reflected on Customer Data repository for financials Information Lean & flexible An all bar code driven logistics Technology logistics operation ensures 100% error free process Automated material planning ensures stock level efficiencies 97 What is the key component ? Centralized logistics ? PARTNERSHIP Information Lean & flexible Technology logistics 98 After Sales Program Management enablement Navigation & evolution of shared open actions via Weekly conference calls Continuous improvements on flows through performance KPI‟s & availability of information Value added services illustrated through implanting DHL key decision maker into the Lucent organization Honest and open communication Shared objectives & goals are driving the team forwards through new challenges 99 DHL GLOBAL CUSTOMER LOGISTICS Thank you for your attention Questions?
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