Transcript Name of presentation here - Health & Personal Care

March 2009
Inventory Visibility -- A Provider’s Perspective
John Brockwell
Global Supply Chain Practice Lead
Trade Management Consulting
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Topics
 Why is J.P.Morgan in this space?
 The business problem we’re trying to solve
 Industry Statistics
 Adoption
 Scope
 Ranges of savings
 Why is this good business for a service provider?
 What do we see happening in this area over the next
couple of years
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J P M O R G A N
G L O B A L
T R A D E
S E R V I C E S
JPMorganChase Bank N.A. Corporate Structure
Treasury and
Securities
Services
Investment
Bank
Asset and
Wealth
Management
 Treasury Services
 Credit and Rate
 JPMorgan Private
Markets
 Global Trade
Services
 Worldwide
Securities
Services
 Investment
Banking (Mergers
and Acquisitions)
 Institutional
Equities
 Proprietary
Positioning
Bank
 Private Client
Services
 BrownCo (online
trading)
 JPMorgan
Fleming Asset
Management
Commercial
Banking
 Chase Middle
Market
 Asset-Based
Lending
 Commercial Real
Estate
Card Services
 Credit Cards
 Merchant
Processing
Retail
Financial
Services
 Consumer
Banking
 Auto and
Education
Finance
 Home Finance
 Insurance
 Equipment
Leasing
 Small Business
Banking
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1
Flexible Global Trade Management Offerings
TRADE MANAGEMENT
CONSULTING
• Customs, export, and
supply chain
management
• SCM Process design
and optimization
• Trade compliance
assessments,
compliance
improvement plans,
implementations and
audits
• Sourcing and
Fulfillment landed
cost analysis
GLOBAL TRADE
MANAGED SERVICES
• Outsourced import
and export trade
operations support
• Product
classification
• Trade compliance
resolution
• Special trade
program
management
• Brokerage and
broker management
STATE-OF-THE-ART
TECHNOLOGY
• Trade documents
• Duty calculation
and Customs
clearance
• Regulatory
screening and
automated license
decision
• Government
reporting and
agency/bureau
interfaces
• Consistently
updated with the
most recent trade
regulations
TRADE FINANCE
• Letters of Credit and
Open Account
initiation
• Electronic
notification of
Purchase Order
requirements to
suppliers
• Exception resolution
• Government
Documentary
compliance review
• Settlement
• Supply chain
financing
REAL-TIME FINANCIAL & PHYSICAL SUPPLY CHAIN SERVICES FOR THE WORLD
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We’re integrating systems and platforms to leverage the financial
and trade information from export to import and on to final delivery
Exporter/Seller
Export
Processes
Export
Processes
Classification
Classify ECCN #’s
Jurisdiction Determination
Screen Orders
EAR/ITAR
Determine
Screen
Orders Licensing
Apply for
Licenses
Determine
Licensing
Apply
for Licenses
Generate
Documents
Generate Documents
Submit SED
Submit Export Dec
Track/Trace Shipment
Education & Training
Education
Training
Deemed
Export&
Mgmt
Deemed
Mgmt
Landed
Cost Export
Calc.
Metrics
Landed Cost Modeling
Import Data review - 10+2
Trade Logistics Mgt
Supply Chain Security and
Safety- CTPAT/AEO
Forwarder
Track Shipments
Forwarder Processes
Select Carriers
Book Carriers
Consolidate Freight
Track Shipments
International
Carrier
Resolve Issues
Carrier Processes
Transport Goods
Track Shipments
On-time arrivals
Bulk Breaking
Export Declaration
Broker
Manage Brokers
Broker Processes
Pre-Entry
Submit Entry
Clear Customs
Import Declaration
Government
Supporting
Importer/Buyer
Import
Processes
Import
Processes
Classify HS #’s
Classify
HS #’s
Import Data Mgmt
Submit
Pre-Entry
Manage Doc Creation
Generate
Documents
Binding Rulings
(BTI)
Binding
Rulings
Manage FTAs
Manage
Recovery
File
DutyDuty
Drawback
Manage CoO
Minimize
Duties
Declare Goods Value
Perform
Liquidation
Education & Training
Assist
Tracking
Post Entry
Processing
Education
& Training
Supplier Management
MetricsAdjustments
Invoice
Trade Logistics Mgt
Post
Entry Info
Supply Chain Security and
Inbound
Landed Cost
Safety – CTPAT/AEO
Technology
Trade Management Professionals
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Global trade management costs are small as a percentage of the value of
the goods traded but the activity is critical
Trade Management Affects
Trade Management
Costs
•People
•Processes
•Technology
•Revenue, Cost of Goods Sold, Inventory,
Development Expense, Sales and General
Administration (SG&A), Days Purchases
Outstanding, Days Sales Outstanding
• Operational staffing
• Supply Chain Flow - Defects in the Trade
Management process can and do stop the
supply chain
Typically for large
companies < .1% of
goods value traded
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Supply Chains have become more global, more extended, and riskier
Supplier
Components
Manufacturing
Distribution
Consumers
Customer
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Future trends demand flexible “smart” global supply
chains that support operations
Supply chain security programs
 Failure to plan and develop secure supply chains will result in significant
disruptions when supply chains are threatened
Environmental and Safety regulatory concerns
 Failure to incorporate the regulations in supply chain processes can expose
companies to disruptions, seizures, significant fines and inventory write-downs
New intense competition for demanding global customers
 Highly efficient “Greenfield” competitors are entering the global markets
 Customers in all global markets are demanding high product availability and
reliability, creating intense competition and high risk of “diminished value”
Security, Environment and Customer Demands create significant risk to inventory
value, we have a choice, to let it happen or manage it with flexible supply chains
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More hand-offs in the supply chain decreases reliability
Domestic factory to the store, 3 days at 95% reliability
1 day
2 days
18 days
1 day
3 days
International factory to the store, with 5 hand-offs and each leg 95% reliable for a
total of 25 days. 0.95x0.95x0.95x0.95x0.95 = 77.4% reliability
Irregularities in goods flow like cargo cut-offs or customs delays can result in full
days added to the supply chain, causing expedited freight and increased inventory
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The purpose of the Value Chain is to deliver product at maximum profit
to the market
Selling Season
Expected Price
Service Level Requirement
For On Time Delivery
Late Shipment
Diminished Sales
Diminished Price
Manufacturing
Inbound Logistics
Raw
Materials &
Components
Forecasting
Time
Outbound Logistics and
Inventory Investment Risk
Product &
Distribution
Costs
In Season
Selling Season Start
Diminished Profit due
to Higher Product,
Storage Cost,
Inventory
Obsolescence and
Write-downs
75% reduction in
price
Out of Season
Selling Season End
Does not include lost revenue and profit from
product service and follow-on sales
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If you think “Diminished Value” is an abstract term …
…………………………………….think again!
Inventory write-off, lost sales, lost service contracts, lost tie in sales, disappointed customers, expensive restock
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Understanding the Risks
Sourcing and Fulfillment decisions are often based on assuming
an accurate Forecast and a Perfect Order
The Perfect Order
•Order Fill Rate 100%
•On-Time Delivery 100%
•Discount or mark-downs 10%
•100% Quality (no rejects)
•Accurate Paperwork 100%
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© 2006 JPMorgan Chase and Co. All rights reserved. JPMorgan Chase Bank, N.A. Member FDIC.
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Perfect Order meets the Real World
“91% of companies reported that unexpected supply chain costs were
eroding their anticipated low-cost country savings”
-- New Strategies for Global Trade Management
Aberdeen Research
Top Reasons:
Transportation (due to variability)
Raw Materials
Supplier Charges
Taxes and Tariffs
Inventory
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Value of a Perfect Order
 3% better = 1% additional Profit Margin
 5% better = 2.5% increase in Return on Assets
 10% better = $0.50 better Earnings Per Share
—AMR Research
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How are companies addressing the challenge?
 Majority of logistics departments currently monitor carriers’ websites for tracking
 Roughly one out of four companies utilizes an internally-developed tracking solution or
maintains inventory visibility through their ERP solution
 Most tracking is focused on in-transit events
 Trend for increased monitoring of order acknowledgements and/or advanced shipping notices
 54% of these firms are automatically monitoring order quantities, shipment dates and order
commitments
 Of companies that track 71% check shipment status at least once per day
-- A Study on Inventory Visibility
Logistics Management Magazine and Sterling Commerce, December 2008
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Why is this good business for a service provider to be in?
 The inventory visibility space is being attacked from many different angles
 ERP providers
 Pure inventory visibility software as a service (SaaS) companies
 4PL’s/3PL’s
 Global Trade Management companies
 Even Banks !!!
 Why?
 Leverage existing data flowing through systems
 Extend reach – become more “sticky” with the customer
 Economies of scale
 I/T infrastructure
 Software application logic
 Database formats
 Connections with carriers
 Provide better service to the client
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What is the future of inventory visibility?
 Increased integration with supplier and customer collaboration efforts
 Demand forecasting
 Supplier inventories
 Key milestones in supplier’s supply chain for raw materials and
components
 Intra-company inventories
 Vendor managed inventory
 Trend towards re-creating a vertically integrated “enterprise” through
information vs. brick-and-mortar
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