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Enterprise Logistics and Integration into Global
Supply Networks

Nimish Jhaveri CARANA Corporation
Consultant World Bank Knowledge Economy
Forum April 2007
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Overview

• The Relevance of Transport Logistics
• Challenges
• Successes
• Considerations

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Trade liberalization increases the need for
improved transport logistics performance
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Transportation is just one element of logistics
efficiency
69
Warehousing
100
156
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Inventory Carrying
TRANSPORT COSTS
OTHER COSTS
Order Processing
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10
Administrative
MANAGE TIME, INFORMATION PROCESS
MANAGE MOVE
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and logistics efficiency has a direct impact on
trade
A 10 reduction in Shipping costs Trade related
processing costs Trade related processing
time Variation in processing time
Results in a 14.2 increase in trade 2.5
increase in trade 1.4 increase in trade 3.1
increase in trade
Adapted from Study of 80 countries by Hausman,
Lee and Subramanian, World Bank and Stanford
University, 2005
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Example Nicaraguan CoffeeManagua to Miami via
Puerto Cortes
TRANSPORTATION UTILIZATION
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Result Logistics costs for Nicaraguan exports
are competitive regionally, but not
internationally
Logistics Costs as Percentage Of Market Value
REGIONAL MARKETS
International averages for developed and
developing countries
INTERNATIONAL MARKETS
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Impact Low logistics efficiency curtails SME
access to global supply networks and higher value
markets
REGIONAL
GLOBAL
Ad hoc transactions with intermediaries Compete
on price, labor Independent operators
Long term relationships with end-customers,
transportation providers and value chain
partners Compete on higher service and
value Efficient supply chain
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The constraints imposed by the logistics
environment varies widely by country and industry
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Moving up the value chain requires business
innovation
SUPPLIER
More demanding business environment
Limitations of logistics environment

• Efficient Transportation Networks
• Logistics Infrastructure
• Customs and Border Requirements
• Banking Financial Services
• Logistics Service Intermediaries

CUSTOMER
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Case Study Bulgarian Apparel ManufacturersLogist
ics innovation captures greater value
Increasing Importance of Logistics
BRAND MANAGEMENT
SUBCONTRACT
FULL PACKAGE
CUT MAKE TRIM
DOMESTIC TRANSPORT INTER-NATIONAL TRANSPORT SERV
ICES
None None QC, Packaging
Subcontractors Domestic suppliers Buyer
International supplier QC, Packaging Consolidat
ion Warehousing Customs
Subcontractors Domestic suppliers International
suppliers Distribution centers International
retailers QC, Packaging Consolidation Warehousing
Customs Distribution
Subcontractors Buyer QC, Packaging Consolidat
ion Customs
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Exporters increase value through better logistics
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Transferring Knowledge and Technology for
ChangeChallenges

• Enterprise culture
• High dependence on few senior managers
• Tactical, conservative mindset
• Confident, entrepreneurial
• Available Resources
• Limited investment in plant, equipment, IT
• Human resources
• Dont know what you dont know
• Limited exposure to leading management solutions
• Limited demand for new knowledge

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Transferring Knowledge and Technology for
ChangeApproaches we have successfully applied
Awareness Building Publications 1-day, industry
specific seminars Seminars for educators
Case for Change Supply chain benchmarking Operat
ions modeling simulations Value chain analysis
Education Engagement Supply Chain Leadership
Programs for executives Guided implementation of
change projects Practitioner network
Industry Resources Customer partnerships Logistic
s intermediaries Supplier integration IT vendors
Funding EU Funds PPP Venture Capital
Local Proof Points Industry specific success
stories Quantification of benefits Local
champions
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Case Value Chain ImprovementBulgarian exporter
of industrial equipment
SUB ASSEMBLY
SUPPLIERS
ASSEMBLY
DISTRIBUTION
CUSTOMERS

• Value Chain
• 25 million in 49 countries
• Seasonal products, 1000s models

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Case Value Chain ImprovementBulgarian exporter
of industrial equipment
SUB ASSEMBLY
SUPPLIERS
ASSEMBLY
DISTRIBUTION
CUSTOMERS
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Case OutsourcingArgentinean fruit producers

• SITUATION
• 1997 fruit producers in Rio Negro Valley need
  to lower prices, increase delivered quality
• Transportation infrastructure not adequate both
  in terms of cold chain, and land transport
  services

• IMPLICATION / CHALLENGES
• Individual producers not able to negotiate on
  volume
• High loss rates in produce during land transport
  (16yr fleet age avg.)
• Unable to meet increasingly rigorous quality
  demands by market

• SOLUTION SELECTED
• 24 producers (75 of Exports) - Logistics
  Management Company
• 65 ownership of Port Terminal with Port Operator
  Partner
• Joint negotiations on land and maritime transport
  costs, rigorous infrastructure improvement

• RESULTS
• Price negotiations with trucking companies
  profitable service, reduced damage
• Consolidated shipping freight rates
• Efficient TL costs, compete on supply and
  quality, traceability

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Final Thoughts

• Supply chain innovations expand opportunities
• Innovators take a risk
• Identify successful innovations adapt the
  system to reduce risks for followers

• Knowledge know-how
• Supply chain partnerships
• Laws Regulations
• Performance Standards

• Industry structure
• Logistics Infrastructure
• Access to capital
• Information availability

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Questions?