Creating a Sustainable Supply Chain

Creating a Sustainable Supply Chain

The Cargo Show MENA 2015Dr. Igor Egorov

by Dr. Igor Egorov

To Be Covered:

• Automotive parts SC – intro

• Challenges’ ranking

• Ways to SC sustainability

• Sustainability by SC professionals

• Ways to SC sustainability

The Cargo Show MENA 2015Dr. Igor Egorov

• Highly complex logistics– Thousands suppliers

– Dozens thousand customers

– Millions of SKUs

– Global yet localized

• Parts - profitable business

– 20-30% of the revenue

– 30% net profit (capital good industry)

– US automotive aftermarket = $318.2 billion (2013)

• Right part, right time, right place at lowest cost

• Full speed while looking at rear mirror

Automotive Parts SC

The Cargo Show MENA 2015Dr. Igor Egorov

Triad markets – Central Logistics CentersSecondary: Mixed 2PL and 3PLLarge markers, partially with own production: 3PLLogistics hubs: 3PL

Dubai’s automotive spare parts trade: AED 37 billion

Automotive Parts SC

The Cargo Show MENA 2015Dr. Igor Egorov

1. SC visibility 2. Risk management 3. Cost containment 4. Customer demands 5. Globalization

Challenges Ranking*

* Reference: IBM Automotive SCM Study The Cargo Show MENA 2015Dr. Igor Egorov

Sustainability for SC Professionals

• 43% - cost reduction

• 35% - environmental impact

• 25 % - customer satisfaction

PwC, PwC’s Global SC Survey

Cost

Enviroment

Customer

The Cargo Show MENA 2015Dr. Igor Egorov

Elements of SC Sustainability

• Redesigned logistics

• Warehouse management

• Obsolescence management

• Product compliance

• Customer’s protection

• IT

• People

The Cargo Show MENA 2015Dr. Igor Egorov

Redesigned SC

• Transport management– Reduce air shipments

– Consolidation

– Avoid unnecessary transshipments

• Reverse logistics

• Partners with sustainable policies

• Localization:– Oil – move manufacturing from US to

Oman

– Batteries – to UAE

The Cargo Show MENA 2015Dr. Igor Egorov

Warehouse Management

• Reduce energy cost:– AC schedule, day-light, solar power

• Smart packaging, not “shipping air by air”• Packaging re-use• World Class Logistics policies reduce waste• Automation and Productivity• Interconnected inventory management

The Cargo Show MENA 2015Dr. Igor Egorov

Obsolescence Management

• Supply chain visibility

• End-to-end inventory planning

• Strict shelf life monitoring at each SC point

• Scrapping – environment certificate

The Cargo Show MENA 2015Dr. Igor Egorov

Product Compliance

• Automotive parts - high risk

(as per customs authority):

• SASO

• KUCAS

• EGYPT ECE – Brake pads (asbestos free)

– Chemicals

– Oils

– Batteries

• etc.The Cargo Show MENA 2015

Dr. Igor Egorov

Customers’ Protection

• Government agencies request wider inventory

• Heavy fines

• Additional costs - airfreight & inventory

• Disruptions in SC

• High customer expectations

The Cargo Show MENA 2015Dr. Igor Egorov

ICT: great servant, bad master

• Global networks impossible without IT-support:

ERP, WMS (Warehouse), TPS (Transport), SCM

• 50%+ of logistics systems outdated

• 3 of 4 companies’ systems “weak”

• Significant investments

* Reference: Study of Aachener Institut für Operations Research und Management GmbH (Inform)

The Cargo Show MENA 2015Dr. Igor Egorov

People

• Support educational needs

• Motive staff, incentivize improvements & environment initiatives

• Measure managers not only on

cost savings, but on sustainable factors

The Cargo Show MENA 2015Dr. Igor Egorov

THANK YOU

The Cargo Show MENA 2015Dr. Igor Egorov