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Best Practices in International Logistics Supply Chains

Open Posted By: highheaven1 Date: 29/04/2021 High School Homework Writing

This is my Final Research paper for my Global Supply Chain Capstone. It is a really important paper that must be detailed and follow a certain format. I have already created an analysis with several websites and gathered the most common best practices (see attached document with table). I have two other PDFS with great information that would I like them to be the basis of the paper. Nonetheless, other articles and resources are more than welcomed. 

The paper must be 8 pages and must include peer reviewed articles. I will include my professor guidelines for further understanding. 

Category: Mathematics & Physics Subjects: Physics Deadline: 24 Hours Budget: $80 - $120 Pages: 2-3 Pages (Short Assignment)

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Best Practices in Logistics and Supply Chain Management in the Context of

the Global Research. Embracing Global Supply Chain Complexity to drive

Strategic Advantage.

Article · June 2020

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Uluslararası Afro-Avrasya Araştırmaları Dergisi / Cilt: 5 Sayı: 9 /Ocak 2020 International Journal of Afro-Eurasian Research (IJAR) / Volume: 5 Issue: 9 /January 2020

e-ISSN 2602-215X

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KÜRESEL ARAŞTIRMALAR BAĞLAMINDA LOJİSTİK VE TEDARİK ZİNCİRİ YÖNETİMİNDE EN İYİ UYGULAMALAR: STRATEJİK AVANTAJI ARTIRMAK İÇİN GLOBAL TEDARİK ZİNCİRİ KARMAŞIKLIĞINI KUCAKLAMAK

ÖZ Lojistik ve Tedarik Zinciri Yönetimi'nin “En İyi Uygulama” kavramının ileri iş uygulamaları perspektifinden gözden geçirildiği önemli bir çalışma alanı olduğu belirlenmiştir. Bu makalede Gartner Research, Massachusetts Institute of Technology tarafından hazırlanan MIT 2020 Council Project ve Avrupa Lojistik Birliği'nin En İyi Log Şirketi çalışmasını en iyi uygulamalar bağlamında incelenmiştir. Bu makale, ilgili literatürü dikkate alarak ve gelecekteki araştırmalar için bu yönde içgörüler yaratarak mevcut araştırmadaki sorunları azaltmayı hedeflemektedir. Çalışmada uyarlanan metedoloji, ortaya çıkan tedarik zinciri yönetimi kavramları ve mevcut literatürün gözden geçirilmesine dayanan uygulamaların bir çalışmasının yanı sıra, MIT'nin Yalın Girişimi tarafından tedarik zinciri yönetimi konularında yapılan bir araştırmayı da içerir. Sonuçlar, Gartner Research'ün üç ana eğilimi vurguladığını ortaya koymuştur. Bunlar; müşteri deneyimine odaklanmak, dijital tedarik zinciri yeteneklerini ölçeklendirmek ve dairesel tedarik zinciri tasarımlarına geçmek. En İyi Log projesinin analizi, en iyi lojistik uygulamasının, sadece çevre ve toplumun durumunu değil, aynı zamanda uzun vadede ekonomik verimliliği de etkileyen, sosyal, çevresel ve ekonomik prensiplerin eşzamanlı kayıt ve entegrasyonuna odaklandığının test edilmesidir. MIT 2020 Konseyi'ne göre, en iyi tedarik zincirini belirleme kriterleri SCM stratejisi tarafından desteklenen açık bir iş stratejisidir. Bu sayede “en iyi uygulamalara” odaklanmanın, lojistik çözümlerini optimize ederek tedarik zincirlerinin sürdürülebilir gelişimini, pazar payını arttırmayı, güven ilişkileri kurmayı ve pozitif bir marka kimliğini teşvik etmeyi sağladığı kanıtlanmıştır.

Anahtar Kelimeler: En iyi uygulamalar,Lojistik,Tedarik Zinciri Yönetimi

Kaynak Göster (APA): SANDYBAYEV, A. (2019). BEST PRACTICES IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT IN THE CONTEXT OF GLOBAL RESEARCH. EMBRACING GLOBAL SUPPLY CHAIN COMPLEXITY TO DRIVE STRATEGIC ADVANTAGE. Uluslararası Afro-Avrasya Araştırmaları Dergisi, 5 (9) , 74-87.

Almaz SANDYBAYEV [email protected]

Orcid: 0000-0003-2310-194X

Araştırma Makalesi

Başvuru Tarihi: 03.10.2019 Kabul Tarihi: 27.12. 2019

Uluslararası Afro-Avrasya Araştırmaları Dergisi / Cilt: 5 Sayı: 9 /Ocak 2020 International Journal of Afro-Eurasian Research (IJAR) / Volume: 5 Issue: 9 /January 2020

e-ISSN 2602-215X

75

BEST PRACTICES IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT IN THE CONTEXT OF GLOBAL RESEARCH. EMBRACING GLOBAL SUPPLY CHAIN COMPLEXITY TO DRIVE STRATEGIC ADVANTAGE

ABSTRACT It has been defined that Logistics and Supply Chain Management are an essential fields of study where the concept of “Best Practice” has been reviewed from advanced business practices perspective. This paper examines the review provided by the following companies: Gartner Research, MIT 2020 Council project by the Massachusetts Institute of Technology and Best Log Company of the European Logistics Association within the context of the best practices. The paper tries to mitigate the issues in the current research by observing related literature and generating insights for the future research in this direction. The methodology adapted includes a study of emerging supply chain management concepts and practices based on a review of the existing literature, as well as a research performed on supply chain management issues by MIT's Lean Initiative. The results revealed that Gartner Research highlighted three key trends: focus on customer experience, scaling digital supply chain capabilities and moving to circular supply chain designs. The analysis of the Best Log project tested that best logistics practice is focused on the simultaneous recording and integration of social, environmental and economic principles which positively affect not only the state of the environment and society but also has an impact on economic efficiency in the long term. According to the MIT 2020 Council, the criteria for determining the best supply chain is a clear business strategy supported by the SCM strategy. Thus, it has been proven that focusing on “best practices” allows to realize sustainable development of supply chains, increasing market share, building trust relationships and promoting a positive brand identity through optimizing logistics solutions.

Keywords: Best practices,Logistic,Supply Chain Management

Cite (APA): SANDYBAYEV, A. (2019). BEST PRACTICES IN LOGISTICS AND SUPPLY CHAIN MANAGEMENT IN THE CONTEXT OF GLOBAL RESEARCH. EMBRACING GLOBAL SUPPLY CHAIN COMPLEXITY TO DRIVE STRATEGIC ADVANTAGE. Uluslararası Afro-Avrasya Araştırmaları Dergisi, 5 (9) , 74-87.

Almaz SANDYBAYEV [email protected]

Orcid: 0000-0003-2310-194X

Research Article

Date Received: 03.10.2019 Date Accepted: 27.12.2019

Uluslararası Afro-Avrasya Araştırmaları Dergisi / Cilt: 5 Sayı: 9 /Ocak 2020 International Journal of Afro-Eurasian Research (IJAR) / Volume: 5 Issue: 9 /January 2020

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INTRODUCTION

In the modern economy, using the concept of integrated logistics and Supply Chain Management (SCM) is one of the basic sources of sustainable competitive advantage for companies. It is perceptible that the concept of integration lies at the center of SCM philosophy (Christopher, 1992; New, 1996; Lambert, 2004). Advanced business organizations are adjusting significant efforts to improve the efficiency of supply chains, focusing on actively attracting logistics providers, globalizing the placement of production and logistics capacities as well as introducing lean manufacturing principles in building processes throughout the chain. The methodology of integrated logistics and SCM involves the optimization of the resources used by the logistics system (supply chain). As noted by Pagell (2004) declares the essence of the entire concept of SCM is really predicated on integration. With the development of business, the level of integration of logistics activities in supply chains is continuously increasing. The essence of the integrated approach to logistics is to consider the logistics process as a whole in the supply chain to more effectively achieve business goals. Mentzer et al. (2001) suggested, SCM can be regarded as a management philosophy then this philosophy is concerned first and foremost with integration. This concept reflects the latest understanding of business, where individual firms and organizations are considered as parts of a common supply chain, directly or indirectly connected in a single integrated process of managing material and information flows for the most complete and high-quality customer satisfaction. Holistic consideration and optimization of supply chains (value chains) in practice lead to better results than isolated optimization of such functional areas as supply, production / operations or distribution. Integration in supply chains contributes to a more transparent exchange of information and as a consequence, eliminating wasteful use of resources, optimizing inventory levels, eliminating bottlenecks and consistently focusing on optimizing the cost / service balance in the supply chain. As noted, there is now a tremendous demand from multinational businesses for the services of logistics providers capable of integrating their global supply chains (Data monitor, 1999).

In the framework of the “Fourth Stage of the Digital Revolution”, digital logistics and supply chain management plays an important role. According to a PwC study on the rise of Industry 4.0, a third of the more than 2,000 respondents started to digitize their supply chains and fully 72 percent expect to have done so five years from now (2016 Global Industry). The transition to digital production and online commerce forces companies to take a fresh look at logistics as a tool for managing value chains and determine the focus of changes that should occur in logistics and Supply Chain Management under the influence of the transition to cyber production. The technology needed to cover this new requirements, is already available and all encompassed in the concept, with the main issue of the high cost (Schelechtendal, et al, 2015). Radio tag identification (RFID) and other digital technologies take the industry to a new level of transparency and automation processes. Therefore, software-based systems and service platforms will play a major role in tomorrow’s manufacturing, since they are the only way to bring connectivity, including data analysis, to machines and work pieces in production (Bosch, 2016). But even with such innovations accessible for efficiency, supply chain managers still facing major challenges. This review adapts and uses the experience of advanced companies - leaders in their own business from the point of sharing best practices.

In management, the concept of “best practices” is widely used, the introduction of which is often viewed as a guarantee of building enterprise efficiency but to achieve success it requires a complex combination of conditions that are not always objectively feasible. So is there any benefit from the "best practices"? In part, this practice is a response to the recent economic downturn, which drew the attention of companies to the question of improving the efficiency of business processes and the competitiveness of products. Skillful application of best practices allows to solve both of these problems over the years, as companies developed their own best practices methods and published

Uluslararası Afro-Avrasya Araştırmaları Dergisi / Cilt: 5 Sayı: 9 /Ocak 2020 International Journal of Afro-Eurasian Research (IJAR) / Volume: 5 Issue: 9 /January 2020

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its theoretical foundations. In general, best practices is a systematic method for identifying the highest standards of products, services and processes by comparing such products, services and processes in various companies. Moreover, the most important part of benchmarking is to use the information obtained as a guide to action or, in other words, to introduce changes and improve the situation in order to achieve the highest standards that are commonly referred to as advanced working methods. As specific examples, the paper analyzes best practices in the field of logistics and SCM of the companies Gartner Research, MIT 2020 Council projects of the Massachusetts Institute of Technology and Best Log of the European Logistics Association.

LITERATURE REVIEW

Best Practices

The term “Best Practice” has become widespread, using logistics concepts or technologies that have already been tested in practice, it is possible to avoid colliding with problems that other organizations have passed through. The concept of advanced business practices is not fundamentally new. The phenomenon of this term for a long time was perceived as successful "discoveries" in the business of individual companies and was popular in the 60s - 80s of the last century. In the field of logistics in this regard, it’s notable to recall at least the experience of Wal- Mart, the first to open the world to such advanced logistics systems and technologies as Hub & Spoke, bar coding and Cross-docking in distribution channels of goods by retail chains. In the early 21st century, the interest in the field of best practices increased as a response to the challenges of the economic crisis and the desire of companies to retain and increase the loyalty of their customers. Advanced practices are quite diverse. In logistics and SCM, there are the most effective methods of work in the field of strategy, technology, operating activities, business processes, organizational design, controlling, etc. Together, best practices create the most complete base for strategic and tactical logistics planning in supply chains, benchmarking and controlling logistics activities with the goal of optimal use of resources. The ability to adopt the successful experience of one company so that it benefits in the logistics of another, creates the basis for the effective integration of best practices in the context of the SCM ideology. With the development of integration of counterparties in the supply chains and the overall globalization of the global economy, companies increasingly have to optimize their operations using best practices. Their search and adaptation to the working conditions of a particular company (supply chain) are becoming more and more relevant and important for top management every year.

Best Practices Definitions

A comparative analysis of Internet glossary sources (Table 1) indicates that the term “Best Practice”, with rare exceptions does not have a precise definition, and in most cases is perceived differently. According to Technopedia, best practices mean that some technologies, methods, processes, actions, incentives, or promotions allow for greater effectiveness in achieving a specific result than others. Also, best practices can be identified as the most effective (with minimal effort) and productive (with the best results) method of achieving the goal, based on repetitive actions that have proven their reliability for quite a long time.

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Table 1: A comparative analysis of Internet glossary sources

Definition Source

A best practice is an industry-wide agreement that standardizes the most efficient and effective way to accomplish a desired outcome. A best practice generally consists of a technique, method, or process. The concept implies that if an organization follows best practices, a delivered outcome with minimal problems or complications will be ensured. Best practices are often used for benchmarking and represent an outcome of repeated and contextual user actions.

https://www.techopedia.com/definition/14269/best- practice

A method or technique that is recognized by experts as superior to alternatives in its effectiveness and efficiency. Experiences that contribute to success support but are not in themselves best practices.

http://www.usabilityfirst.com/glossary/best- practices/

Defined by Gartner as a group of tasks that optimizes the efficiency (cost and risk) or effectiveness (service level) of the business discipline or process to which it contributes. It must be implementable, replicable, transferable and adaptable across industries.

https://www.gartner.com/it-glossary/best-practice

Procedures and guidelines that are widely accepted because experience and research has demonstrated that they are optimal and efficient means to produce a desired result.

https://www2.archivists.org/glossary/terms/b/best- practices

In fact, there is no universal concept of "best practices" and the term "best" cannot be used for all organizations in a particular field of activity, on the basis of which the word "advanced" means such practices that contributed to improving the business performance of companies. Usually they are selected in the process of systematization and benchmarking, have a good reputation and are adapted to the needs of a particular company or supply chain. No practice is good or bad in and of itself; therefore, “best practice” is best only in the specific context within which it exists.

Obviously, a systematic takeover of the experience of leading companies in combination with an integrated process of continuous improvement of their activities is the best source and method for identifying best practices. Therefore, best practice never means a complete practice. Among the vast range of possible approaches to best practices, it is possible to find from emerging topics of best practices by Prologis to challenging topics of global importance of humanitarian supply chains by understanding and improving the supply chain systems behind public services and private markets (MIT 2020 Council). Best practices that openly recognize the primacy of the economic criterion (AMR) or take into account all the criteria in conducting assessments of economic, environmental and social factors by project Best Log.

METHODOLOGY AND ANALYSIS

The research analysis involved searching for common practices adapted by different organizational contexts. The main purpose is to mitigate the issues in the current research by examining related literature and generating insights. (Lewis, 1998) recommends to use this approach called iterative triangulation where the research topic is underdeveloped but includes a study of emerging concepts

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and practices based on the existing literature. The research has used the method as a guide for case collection and data analysis. The resulting collection of reviews from Gartner Research, Best Log and MIT 2020 Council provided views from different industries and sectors, as well as different points of the supply chain.

(Johnson, 2015) claims that regardless of what your supply chain model is, best practices should be an integral part of it. There are five practices that the author has proven to produce positive results in a supply chain; strategy, organization, culture, logistics management, and performance management. These practices have been advocated by numerous organizations.

FINDINGS

Gartner Research's Top 25 Ranking of the World's Best Supply Chains

Gartner, Inc. is the largest leading research and advisory company and a member of the S&P 500. In 2018, Gartner Research compiled the 14th annual rating “Supply Chain Top 25”. Top 25 in supply chains reflects leadership in applying the concept of SCM. Every year, Gartner identifies companies that push innovation in supply chains. The purpose of this is to increase attention to the ideology of the SCM, as it strongly influences the business performance of the counterparty chain (Table 2).

Table 2: Supply Chain Top 10

Rank Company Gartner Opinion Composite Score1

1 Unilever 667 6.36

2 Inditex 345 4.85

3 Cisco Systems 541 4.41

4 Colgate-Palmolive 324 4.40

5 Intel 499 4.36

6 Nike 270 4.25

7 Nestlé 426 4.21

8 PepsiCo 391 3.99

9 H&M 193 3.96

10 Starbucks 186 3.85

The increased uncertainty demand and the increasing complexity of global supply chains linked to high-risk geopolitical zones have increased the pressure on the ability of supply chains to work with predictable results. These disruptions have created a problem because the supply chains are becoming more “flatter”, requiring fundamental changes in the approach to the problem of network configuration and horizontal coordination.

In times of uncertainty and in the face of growing difficulties and risks, leading companies need stable, flexible supply chains that will support profitability and lead to leadership in the industry. This requires SC managers to review their supply chain patterns to make them more resilient to

1 Composite Score: (Peer Opinion*25%) + (Gartner Research Opinion*25%) + (ROA*20%) + (Inventory Turns*10%) + (Revenue Growth*10%) + (CSR Component Score*10%). 2017 data used where available. Where unavailable, latest available full-year data used. All raw data normalized to a 10-point scale prior to composite calculation. "Ranks" for tied composite scores are determined using next decimal point comparison. Source: Gartner (May 2018)

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possible risks. Ways to eliminate risks can include developing products that provide greater supply and production flexibility, increasing the number of long-term alternative sources of raw materials, as well as reserving logistics and production capacity. Leading companies such as P&G and Unilever have increased the transparency of multi-level supply chains and expanded the ability to manage network supply structures to be flexible in the face of disruptions. In general, leaders are focused on increasing flexibility and this continues to be an extremely important characteristic of their supply chains. This is accomplished primarily by focusing on the overall SCM process to deliver the right products or services, in the right quantity, to the right place, at the right time, and with the maximum benefits.

Supply chain segmentation has become an essential tool for simplifying the chain, offering each type of customer only the necessary and sufficient level of service. On the contrary, moving away from universalism towards fulfilling individual requirements within the supply chain entails an increase in complexity and inefficiency. The analysis showed that the concept of segmentation of the complete supply chain for solving customer orientation problems, such as cost effectiveness, personalization and speed of entry into the market, has been consistently manifested for several years. As indicated by Wilding and Humphries (2006), close long-term relationships between customers and suppliers have a beneficial impact on performance. Shift towards "multi-local" operations. Product manufacturers and retailers have long looked for ways to balance their supply chain between global economy and local response. Leading companies are redefining their supply chain “at the entrance” (supply and production - Upstream) and changing the balance of the chain’s strategy in favor of multi-local design, supply and logistics support. In particular, they are moving from a fully centralized model, where these functions supported global markets, to a zoned approach, in which the capacities of the supply chain are located locally but globally structured. As mentioned by the authors, the ability of an organisation to connect external links through its internal organisation determines the effectiveness of its total supply chain (Leenders, et al 2006). As a result of the ranking of market leaders and the analysis of the best practices of SCM, Gartner Research developed the following recommendations:

- Focus on Customer Experience

Gartner specifies customer experience relating issues as predominant while interacting with the supplier’s employees. Data and methods of this use are the key to the better quality customer service. Diversification of communication methods, additional services and the readiness of the system to fulfil any new requirements are the factors that ultimately are decisive. As a matter of fact, the ability to achieve superior customer satisfaction is considered as a key element of many firms’ business strategies. Customer satisfaction is a degree of how the products and services provided by a company meet or exceed customer expectations (Fornell, 1992; Olsen and Johnson, 2003).

- Scaling Digital Supply Chain Capabilities

Artificial intelligence, 3D printing, the Internet of things can complement and even completely replace factory production. These trends may provide more flexible and cost-effective delivery of goods. If additive …

Attachment 2

Best Practices in International Logistics

How Top Companies Use Technology and Logistics Partners to Improve Performance

January 2006

Best Practices in International Logistics Report

All print and electronic rights are the property of AberdeenGroup © 2006. AberdeenGroup • i

Executive Summary

usiness success is increasingly linked to effectively managing international logis- tics. Growing low-cost country sourcing and rising sales to international custom- ers are triggering companies to seek new ways to manage the costs, complexities,

and uncertainties of moving goods across borders. B In November and December 2005, Aberdeen researched companies that are transforming their international logistics operations to find out how they are achieving improvements. Eight companies were selected as best practice winners, two in each logistics manage- ment category: global inventory control, transportation spend management, import/export process management, and international logistics outsourcing (Table A). These companies are able to invest less capital in international logistics yet provide better service to cus- tomers.

Table A: International Logistics Best Practice Winners

Enterprise Winner Featured Best Practice Solution Provider Key Benefit Global Inventory Control

Liz Claiborne Avoiding Delays and Cutting Inventory Through Visibility

TradeBeam Removed 7-10 days of inventory

Black & Decker Reducing Inventory Through Multi-Echelon Optimization

Optiant Multi-million dollar inventory savings

Transportation Spend Management

Williams-Sonoma Closed-Loop Transportation Spend Management

GT Nexus Multi-million dollar ocean freight savings

Multinational Manufacturer

Using Bid Optimization to Cut Freight Costs

CombineNet 25% reduction in air and ocean rates

Import/Export Process Management

Haworth Maximizing NAFTA Benefits via Automation

Management Dynamics

Avoids $1.2 million in duties

IBM Re-engineering the Import Process with Brokers

IBM $400 million logistics connectivity savings

International Logistics Outsourcing

Redback Networks Cutting Costs via Outsourcing D.W. Morgan 30% logistics savings

Royal Philips Electronics

Collapsing Order Cycle Times via Outsourcing

UPS 50% reduction in order cycles

Source: AberdeenGroup, January 2006

Candidates were evaluated on: (1) the impact the logistics transformation had on corpo- rate competitiveness; (2) the degree of improvement in logistics flexibility, cycle times,

Best Practices in International Logistics Report

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and total landed cost; (3) the impact of the initiative beyond the logistics department (e.g., sales, purchasing, manufacturing, or finance); (4) the effectiveness of internal change management strategies; and (5) the degree of collaboration with suppliers and logistics providers. The eight winners demonstrated excellence across multiple evaluation categories.

Key Findings and Recommendations Analysis of the best practice winners found that greater process automation, improved technologies, and increased reliance on logistics partners were instrumental in driving their successes. Although winners focused on different areas of international logistics improvement, they shared common views on how to achieve success. Companies seeking to improve their international logistics performance should consider these best practice tenets as they construct their transformation roadmap.

• Envision the future, act on the foundation. Best practice winners set the strategy for international logistics in the context of how their companies compete as busi- nesses. However, they realize logistics excellence is a journey. As a result, they focus their actions on transforming specific, foundational components on which they can drive future improvements. Visibility, trade compliance, and transportation contract management are some of the most common cornerstones.

• Partner for success. Unlike in domestic logistics, it’s impossible to “go it alone” in the international arena. To drive their success, best practice winners are creating bet- ter ways to leverage the skills (and technology) of partners. They are figuring out new ways to synchronize activities and increase process visibility and control with customs brokers, freight forwarders, ocean carriers, logistics service providers, and others. Best practice winners stress that it is vital to choose partners that provide the best value, not the lowest contract cost.

• Automate with Internet-based technology. Without exception, best practice win- ners’ logistics strategies revolve around decreasing manual processes and increasing automation. Internet-based technology is enabling a new level of transaction automa- tion and partner synchronization previously not practical or possible. On-demand global trade management platforms and data gateways are driving more electronic collaboration for significantly reduced IT costs.

• Create visibility to create control. International logistics is all about managing a network of third-party providers. The foundation for controlling this process is visi- bility. For a number of best practice winners, visibility does not stop at identifying a shipment delay or inventory issue. Rather, an alert is the first step in a structured no- tification, resolution, and root cause analysis process. In particular, those companies with strong Six Sigma heritage are using that discipline to create improved interna- tional logistics reliability.

• Use inventory more effectively. A number of international logistics leaders are fo- cusing on extracting more value from their inventory. In some cases, this means cre- ating better in-transit visibility so they can redirect inventory around port congestion or other bottlenecks or to higher points of demand. In other instances, the focus is on optimizing where and how much inventory to hold in the first place. Better leverag-

Best Practices in International Logistics Report

All print and electronic rights are the property of AberdeenGroup © 2006. AberdeenGroup • iii

ing the networks of logistics partners and using multi-echelon inventory optimization tools are some of the success tactics being applied.

• Implement transportation spend management. Although companies have focused on spend management discipline in areas like office suppliers, travel expenses, and telecom costs, they have mostly ignored ocean and air freight costs. Two of the best practice winners focused specifically on aspects of transportation spend management to jump-start their improvement initiatives.

• Streamline customs processes and maximize trade agreements. Without a solid foundation of trade compliance and documentation, purchasing will make the wrong sourcing decisions, goods will be delayed clearing customs, and the business will be put at risk of regulatory infractions. Trade agreement management and integration with broker partners to avoid data keying errors and costs are among the key trade compliance initiatives for best practice winners.

• Obsess about organizational buy-in. Best practice winners are intensely focused on gaining and maintaining organizational buy-in for their logistics transformation ini- tiatives. This includes gaining the CFO and finance organization’s support by focus- ing not just on logistics-related savings but also translating the initiatives to tangible, direct benefits for them.

Best Practices in International Logistics Report

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Table of Contents

Executive Summary .............................................................................................. i Key Findings and Recommendations .............................................................ii

Chapter One: International Logistics Best Practices ............................................ 1 The Challenges of International Logistics ...................................................... 1

Physical Distribution Challenges ............................................................. 1 Cost Challenges...................................................................................... 2

Learning from the Top Performers ................................................................. 3 Envision the Future, Act on the Foundation............................................. 3 Partner for Success................................................................................. 4 Automate with Internet-Based Technology .............................................. 5 Lay the Foundation for Visibility and Control ........................................... 5 Use Inventory More Effectively................................................................ 6 Implement Transportation Spend Management ...................................... 6 Streamline Customs Processes and Maximize Trade Agreements ......... 6 Obsess about Organizational Buy-In....................................................... 7

Chapter Two: Best Practice Case Studies........................................................... 8 Liz Claiborne: Avoiding Delays and Cutting Inventory Through Visibility....... 9 Black & Decker: Removing Global Inventory ............................................... 12 Williams-Sonoma: Closed-Loop Transportation Spend Management.......... 16 Multinational Manufacturer: Using Bid Optimization to Cut Freight Costs.... 20 Haworth: Maximizing NAFTA Benefits via Automation .................................... 24 IBM: Re-engineering the Import Process with Brokers.................................... 27 Redback Networks: Cutting Costs via Outsourcing ..................................... 30 Royal Philips Electronics: Collapsing Order Cycle Times via Outsourcing... 33

Author Profile ..................................................................................................... 36

Appendix A: Related Aberdeen Research & Tools.............................................. 37

About AberdeenGroup ...................................................................................... 38

Best Practices in International Logistics Report

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Figures

Figure 1: Top Pressures Driving Companies to Improve International Logistics... 2

Figure 2: Top Areas for Global Trade Budget Discrepancies ................................ 2

Figure 3: International Logistics Framework......................................................... 4

Tables

Table A: International Logistics Best Practice Winners.......................................... i

Table B: International Logistics Best Practice Winners......................................... 8

Best Practices in International Logistics Report

All print and electronic rights are the property of AberdeenGroup © 2006. AberdeenGroup • 1

Chapter One: International Logistics Best Practices

Ke y

Ta ke

aw ay

s • Internet-based technology is instrumental to better performance. • Outsourcing to logistics service providers can drive leaps in performance when paired

with visibility and control technology. • Spend management in international logistics is an emerging area of focus. • Creating organizational buy-in is the most important factor for success.

he heat is turning up on logistics processes as sourcing and manufacturing activi- ties are increasingly being done internationally. Companies going global are ex- periencing unexpected transportation costs, higher inventory investment, and

longer and more unpredictable cycle times, while at the same time their local customers are demanding lower prices, more unique execution, and improved responsiveness. As a result, companies are seeking ways to make their international logistics processes more reliable, more flexible, and less expensive.

T Aberdeen surveyed and interviewed more than 400 international logistics and trade man- agers in 2005 to find out how companies are coping. In November and December 2005, Aberdeen researched companies that are transforming their international logistics opera- tions to find out the details of how they are achieving improvements. Out of this research, eight companies were selected as best practice winners, two in each logistics manage- ment category: global inventory control, transportation spend management, import/export process management, and international logistics outsourcing.

The Challenges of International Logistics In most companies, international logistics processes mirror domestic supply chain prac- tices in the 1970s: logistics staffs keep their supply chains moving through experience- based problem solving, and insistent phoning and faxing of logistics partners. At nearly two-thirds of companies, spreadsheets, department-built Access database applications, and emails round out the technology portfolio.

Many international logistics groups have reached the breaking point, however. As global sourcing and selling increases, so do transactions, partners, and problems to be managed. But budgets don’t allow logistics departments to continue throwing people at these is- sues. The current manual-intensive process of global logistics is becoming unsustainable. Companies adopting automation are starting to experience cost and speed advantages over their competitors. These companies are using automation to tackle both physical distribution challenges and cost control challenges.

Physical Distribution Challenges Companies are seeking to improve international logistics processes because of longer lead times, greater supply chain uncertainty, and increased business risk (Figure 1). The

Best Practices in International Logistics Report

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greatest handicap to logistics performance, according to two-thirds of firms, is the lack of visibility and metrics for managing overseas vendors and logistics service providers. (See New Strategies for Global Trade Management, March 2005.)

Figure 1: Top Pressures Driving Companies to Improve International Logistics

35%

52%

62%

0% 25% 50% 75%

Compliance and documentation errors causing delays, cost overruns, and regulatory risk

Product cost savings being eroded by unanticipated global supply chain costs

Lead times inhibiting our ability to respond to local market demand

% of Respondents Citing as "Very Influential"

Source: AberdeenGroup, January 2006 Cost Challenges A parallel issue is cost control. “In our domestic supply chain, we can easily attribute freight costs and even understand the impact of truck fuel surcharges at a carton level,” says a retail international transportation director. “But on the international side, we were challenged to answer even basic questions such as, “What’s the average ocean freight spend per month, by lane?” because we lacked integrated systems and normalized data.”

Companies are finding that inadequate transportation spend visibility is leading to unan- ticipated budget discrepancies, unexpectedly low product margins, and, in some cases, higher rather than lower total costs when sourcing from low-cost countries. As Figure 2 shows, international transportation expense is the top area for budget discrepancies.

Figure 2: Top Areas for Global Trade Budget Discrepancies

25%

27%

29%

29%

38%

39%

67%

0% 25% 50% 75%

3rd-party warehousing/handling costs

Inventory costs

Broker/forwarder fees

Taxes and tariffs

Supplier charges

Raw materials

Transportation expenses

% of Respondents (asked to select top 3 areas) Source: AberdeenGroup, January 2006

Best Practices in International Logistics Report

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Learning from the Top Performers Top performers are succeeding in using international logistics transformation to drive quantifiable business benefits for their corporations, including cost and speed advantages. These companies are able to invest less capital in international logistics yet provide better service to their customers. They are arming their logistics staffs with up-to-date technol- ogy and integration-friendly logistics partners to support today’s global-intensive busi- ness environment.

Analysis of the eight best practice winners found that greater process automation, im- proved technologies, and increased reliance on logistics partners were instrumental in driving their successes. Although winners focused on different areas of international lo- gistics improvement, they shared common views on how to achieve success. Companies seeking to improve their international logistics performance should consider these best practice tenets as they construct their transformation roadmap.

Envision the Future, Act on the Foundation The strategy for international logistics has to be set in the context of how a company competes as a business. “We have a highly leveraged business model based on product leadership,” says the senior vice president of operations for a mid-size high-tech winner. “We needed a logistics strategy that supported our corporate strategy. For us, this meant outsourcing logistics to a domain expert and creating an international distribution net- work that was simple, visible, and accountable.”

The logistics strategy must envision the future but action needs to be taken on the dis- crete, foundational components. These elements include such areas as ocean contract management, trade compliance, and visibility. For instance, automating the trade compli- ance process lays the groundwork for better total landed costing and margin manage- ment, smarter sourcing and inventory management decisions, and fewer supply chain delays. Best practice winners seek rapid time to benefit on their logistics transformation projects, often achieving payback on their initiatives in less than a year.

The other aspect of a sound international logistics strategy is that it needs to be built for flexibility. “Expect and prepare a foundation for change,” says the vice president of global logistics for an apparel company. “C-TPAT, advanced manifest requirements, changing trade agreements and free trade zones, new partners and events to track, new distribution bottlenecks to avoid – change is constant.”

“Our next core competency,” says an appliance manufacturer’s global value chain leader, “is focusing on the speed and velocity in which we can execute the results of new logis- tics strategies.” Being able to flex the international supply chain quickly to avoid cost and service issues and take advantage of new productivity advances requires technology and partners built for change.

Key areas to address in building an international logistics strategy are shown in Figure 3.

Best Practices in International Logistics Report

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Figure 3: International Logistics Framework

End-to-End Visibility

Logistics Operations

Trade Compliance

Import/Export Compliance

Inventory Optimization

Total Landed Cost

Trade Documentation

Order, Shipment & Inventory Visibility

Exception Alerting & Escalation

International Transportation Management

Network Design

Warehousing without Walls

Guided Resolution

Six Sigma and Biz Intelligence

Trade Agreement ManagementRisk & Contingency Planning

Financial Control

Freight Spend Management

Margin Management

Product Classification

Broker & Gov’t Systems Integration

End-to-End Visibility

Logistics Operations

Trade Compliance

Import/Export Compliance

Inventory Optimization

Total Landed Cost

Trade Documentation

Order, Shipment & Inventory Visibility

Exception Alerting & Escalation

International Transportation Management

Network Design

Warehousing without Walls

Guided Resolution

Six Sigma and Biz Intelligence

Trade Agreement ManagementRisk & Contingency Planning

Financial Control

Freight Spend Management

Margin Management

Product Classification

Broker & Gov’t Systems Integration

Source: AberdeenGroup, January 2006

Partner for Success Unlike domestic logistics, it’s impossible to “go it alone” in the international arena. Best practice winners are figuring out new ways to synchronize activities and increase visibil- ity and control of processes with customs brokers, freight forwarders, ocean carriers, lo- gistics service providers, and others. These companies are leveraging the skills (and tech- nology) of partners to achieve cost and lead time bene- fits. “Rather than displace our brokers, we want to automate our interactions,” says a logistics manager. “The manual process of interacting with them results in high document fees and additional errors because they are re-keying data. We want to fix that, not take over their activities.”

Two of the best practice winners embraced total logis- tics outsourcing. “Don’t do outsourcing for the sake of outsourcing,” says an executive of one of the winners. “Y account the complexity of your products and business m company, logistics outsourcing was the right strategy and logistics costs.

“If you do outsource, never go with the lowest contract “Go with the best value proposition.”

“If outsourcing is right for you, move immediately to a s vider that can provide you with flexibility, reliability, and tics executive. “But make sure you’re diligent in your eva and consider not just cost but also quality and communicat

Best practice winners that choose end-to-end logistics out- sourcing select their provider on best value, not lowest contract cost.

6.

our strategy needs to take into odel or it will fail.” For this

resulted in a 30% decrease in

cost,” continues the executive.

ingle end-to-end logistics pro- visibility,” urges another logis- luation to pick the right partner ions capabilities.”

Best Practices in International Logistics Report

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Automate with Internet-Based Technology Without exception, best practice winners’ logistics strategies revolve around decreasing manual processes and increasing automation. “Automation translates into speed,” says one best practice winner. “Manual processes translate into delays and errors.” According to another winner, “Having technology that lets you manage by exception is instrumental to boosting efficiency.”

Internet-based technology is enabling a new level of transaction automation and partner synchronization previously not practical or possible. On-demand global trade manage- ment platforms and data gateways are driving more electronic collaboration for signifi- cantly reduced IT costs. Best practice winners report very little internal resistance to us- ing on-demand technology, also known as “software as a service” or “hosted, web-based” systems. International logistics has historically been on the bottom of the corporate IT priority list, so CIOs are generally supportive of trying on-demand models in this area rather than having to reprioritize their projects and reallocate staff for traditional software installations.

Supplementing existing enterprise systems with advanced optimization is another favored strategy of best practice winners. They realize that optimizing end-to-end inventory or optimizing lane-by-lane awards to carriers or forwarders is too complex to figure out on spreadsheets. Multi-echelon inventory optimization and ocean bid optimization are two areas driving quick, multi-million dollar savings for companies.

Lay the Foundation for Visibility and Control International logistics is all about managing a network of third-party providers. The foundation for controlling this process is visibility. Some of the best practice winners have integrated their enterprise customer service and logistics systems with the visibility systems of their logistics providers to obtain automatic status and alert information.

Other winners are using on-demand visibility solu- tions that are independent of their logistics providers’ technology. This provides more control of how the technology can be used and also enables easier plug- and-play of logistics providers because technology does not have to be reinstalled when switching providers.

Companies with strong Six Sigma heritage are using that discipline to create improved international logistics reliability.

Companies that still rely on phone calls, emails, or manual web lookups to track down shipments are at a competitive disadvantage. Real-time knowledge of the location of goods throughout the supply chain makes for faster-moving inventory speeds, cash flow, and receivables, all while reducing inventory carrying costs. For a number of best prac- tice winners, visibility does not stop at identifying a shipment delay or inventory issue. Rather, an alert is the first step in a structured notification, resolution, and root cause analysis process. In particular, those companies with strong Six Sigma heritage are using that discipline to create improved international logistics reliability.

Best Practices in International Logistics Report

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Use Inventory More Effectively Best practice winners also focus on extracting more value from their inventory. In some cases, this means creating better in-transit visibility so they can redirect inventory around port congestion or other bottlenecks or to higher points of demand. In other instances, the focus is on optimizing where and how much to hold inventory in the first place.

Aberdeen research shows that traditional inventory target setting practices are insufficient for situations where there is varying demand and supply uncertainty, often resulting in a company holding 20-30% too much inventory across its supply chain. Many companies use weeks of supply and rules of thumb based on past history to set raw material and work-in-process (WIP) inventory buffers. Whenever the supply base has poor perform- ance, inventory planners ratchet up the inventory targets – but they rarely ratchet them down to account for better performance. So over time, companies can find themselves holding more and more of this just-in-case inventory.

By using multi-echelon inventory optimization, which more accurately accounts for sup- ply and demand variability, companies can take out redundant and unnecessary inventory while improving customer service levels. (For more information on multi-echelon inven- tory optimization approaches and vendors, see Are Your Inventory Management Prac- tices Outdated?, March 2005.)

Implement Transportation Spend Management A missing discipline in many companies is transportation spend management. Although companies have focused on spend management in areas like office suppliers, travel ex- penses, and telecom costs, they have mostly ignored ocean and air freight costs. Yet international transporta- tion costs can be two to three times higher than domestic costs and much more variable. Two of the best practice winners focused specifically on aspects of freight spend management to jump-start their improvement initiatives. “Electronic contract management is the foundation for spend management,” explains an international transporta- tion director. “We can exploit this foundation to improve management, automate freight audit processes, and take pr allocation issues.”

Streamline Customs Processes and Maximize Trad Another foundational focus for best practice winners is trade tion, which drives streamlined, cost-efficient, and low-risk esses. Best practice companies that focus on trade complia improvements in a number of areas:

• Automating import/export compliance and documentatio

• Maximizing free trade agreement program benefits and gin management with suppliers;

• Creating paperless workflows with brokers to lower d classification consistency.

A missing discipline in many companies is transportation spend management.

product costing and margin eemptive action on cost and

e Agreements compliance and documenta- international logistics proc- nce excellence are realizing

n processes;

automating certificate of ori-

ocument costs and increase

Best Practices …

Attachment 3

Format for GSCM Research Project

The following is a guideline to be used when writing your GSCM Research Project. Remember that as you develop the project you should be building upon what was already done and making the connections between sections clear to the reader. It is expected that proper citation form will be used throughout the project when referencing the research of other authors. Your research question(s) needs to be clearly stated (in bold) and all sections of the paper will relate to some aspect of the stated research question(s).

Title Page: The title page should include the title of the project along with the name of the organization that was interviewed. Also included on the title page should be the name of the author of the research project along with all pertinent information.

Table of Contents: The table of contents lists the information contained in the project in the order in which it will be found. All major topics of interest should be listed.

Executive Summary: The executive summary should be a one to two page overview of the information contained in the research project. It should give the reader an easy reference, in very brief form, to the important information contained in the project and explained in more detail in the body of the project. People attending a presentation of research or reading the project will use this section as a reference during presentations and as a synopsis of the research done.

Introduction: The introduction should contain a brief overview of the problem being addressed and the background information needed for the reader to understand the work being done and the reasoning behind it. Your research question(s) also need to be clearly stated, in bold, in this section. After reading the introduction, the reader should know exactly what the project is about, why the research was conducted, and how this research adds to the knowledge that the reader may have about the topic.

Literature Review (Academic Research): This section will contain all of the information that was collected through the review of existing information. Peer reviewed journals are the preferred (and expected) sources of information while peer reviewed “trade journals” are considered to be adequate sources of information. Books are also considered to be adequate sources of information. The importance of the literature review as it pertains to each of the research questions must be made clear to the reader. Conclusions should be drawn in a logical fashion and insight into how these conclusions will be used throughout the rest of the research agenda should be provided.

Qualitative Research (Empirical Research): This section should contain all information regarding any interviews that were conducted as part of the research project. This section should begin with an explanation of why this research is needed or beneficial. Other information provided should include:

· An overview of the issues that were included in this research

· Why these issues were salient

· How the discussion guide (interview questions list) was developed

· A description of the interviewee and the company being researched

· Discussion of the information collected (using quotes to highlight important points)

· Conclusions based on the collected information

· Clear explanation of how the conclusions are based on the research done

· How these conclusions will contribute to the rest of the research project

Findings: The findings are the actual results of your research. Your findings should consist of a detailed presentation of your interpretation of the results found when comparing the writings from the literature review to the qualitative research (How well does the real world compare to the academic world?). Figures are encouraged when it is helpful to allow the reader to more easily understand the work being presented. The findings section should include the following:

· Findings based only on results of the research, not speculation

· In-depth explanation of all major findings

· Clear presentation of support for the findings

· Clear answers to each of the research questions

Limitations: Recognize that even the best research work is not perfect and open to questioning. In this section, briefly discuss the factors that may have influenced your findings but were outside of your control. Some of the limitations may be time constraints, budget constraints, market changes, certain procedural errors, and other events. Admit that your research is not perfect but discuss the degree of accuracy with which your results can be accepted. In this section, suggestions can be offered to correct these limitations in future research.

Conclusions and Recommendations: Conclusions are broad generalizations that focus on addressing the research questions for which the project was conducted. Recommendations are your choices for strategies or tactics based on the conclusions that you have drawn. Quite often authors are tempted to speculate on outcomes that cannot be supported by the research findings. Do not draw any conclusions or make any recommendations that your research cannot clearly support.

References: This section should be a listing of all existing information sources used in the research project. It is important to allow the reader to see all of the sources used and enable the reader to further explore those sources to verify the information presented.

Appendices: This section should include all supporting information from the research project that was not included in the body of the project. The information presented in this section is important to support the work presented in the body of the project but would make it more difficult to read and understand if presented within the body of the project. Don’t simply fill this section with graphs, charts, brochures, pamphlets or any other information that was not referred to in the body of the project.

� Modified from Professor Curran’s research report format found at http://web.bryant.edu/~jcurran/Report.html