Supply Chain Strategy Tool

Logistics Outsourcing Assessment for ceva

Date: 29-Jun-2015

This analysis of logistics outsourcing strategies has been created for Enescu Irina , who has a Supply Chain function
in the Healthcare industry. The report has been specifically generated for the Pharmaceutical sector and specifically
covers the outsourcing of Warehousing in Europe only.
 1. ceva's perceived vs. actual approach

You are currently a Price Buyer

Cost containment in the logistics chain is your main objective. You have limited or no
need for highly specialized logistics competences of the 3PL. This makes it easy for you
to select a provider. You make sure you know the cost leaders among the Logistics
Service Providers and develop relations with them in each geographical market.
Minimising the logistics cost as part of the final selling price of your product represents
an important source of competitive advantage. It can lower the price for which you can
offer your product to the end user or alternatively improve your margin. The logistics
operation should contribute to these objectives but does not, in itself, impact the
perceived value of your products.

You indicated that you perceive yourself as being an Expertise Buyer. That approach,
however, relies on in-depth process knowledge as to where logistics outsourcing is
most beneficial. The major difference between the two strategies is the Expertise
Buyer's selective outsourcing approach focusing on process and service levels, and the
Price Buyer's focus on tariffs and contractual terms. Your supply chain seems to be less
complex than you thought. However, is this approach the right one for your specific
situation?

Your perceived approach Your actual approach

 2. ceva's perceived vs. actual supply chain

Your Supply Chain seems most suitable for

strategic partnerships with a limited number of
logistics service providers.
The processes in your supply chain are highly complex. They are very customized for
your requirements and therefore adds significant value to your products. Not every
logistics service provider can serve your needs.

Your perceived supply chain Your actual supply chain

 3. ceva's As-is outsourcing approach versus the benchmark
To-be approach and benchmark approach

Potential problems in your situation

You are currently a Price Buyer but a Strategic Partner approach would seem
more appropriate for your supply chain model. Your current approach is the
exactt opposite of the ideal sourcing approach for your supply chain.
The current transactional relationships you have with Logistics Service Providers
are limiting your supply chain's potential to add value. Your product could be
more competitive.

Strategic questions you should be asking yourself

Which logistics processes are continuously causing complaints from the

commercial organisation?
What would 'delight' our customers in terms of the logistics process?
Given more commitment and eased pressure on cost, could a Logistics Service
Provider be able to help us develop the above capabilities?

Considerations

On-time delivery, lead times and delivery flexibility add significant value to your
product.
A strategic partnership with a Logistics Service Provider gives you full and flexible
access to a highly capital-intensive logistics infrastructure. You should maximally
leverage the services this infrastructure has to offer as it will improve the
competitiveness of your products.
Key requirements for selecting Logistics Service Providers should be their
expertise in your industry and willingness to invest in developing a partnership.
The ability to innovate and a strategic as well as cultural fit weigh above average
Your current approach Your ideal approach Your Benchmark's approach
when selecting a Logistics Service Provider.
Focusing on IT system integration in the Logistics Service Provider's Warehouse
Management and Freight Management Systems enables you to further Minimum n = 5
differentiate your products.
Your chances of becoming or remaining a market leader are based largely on the
ability to establish high levels of trust and cooperation with a very select group of
Logistics Service Providers.
4. ceva's benchmark

6 AND Respondents in a Supply Chain role

14 AND Respondents company size between € 35.000.000-

€1.000.000.000

14 AND Respondents located in Europe

16 AND Respondents in the Pharmaceutical subsegment

27 AND Respondents active in Healthcare

27 AND Respondents assessed in Freight Management, Parcel

distribution and Warehousing

219 Strategy assessments

Your benchmark approach Minimum n = 5

 Your Answers
As is

Now Future
1 How much time/effort does your Supply Chain team currently
spend on the below activities? How do you expect this to develop
long-term?
Freight Management Relatively high Less
Value Added Logistics Average The same
Air and Sea Freight Average Less
Warehousing Average Less
Road Transport Relatively high The same

2. What is your priority when outsourcing?

Freight Management Lower cost, same service Better service, same cost
Value Added Logistics Lower cost, same service Better service, same cost
Air and Sea Freight Maintain or N/A Better service, same cost
Warehousing Maintain or N/A Better service, same cost
Road Transport Lower cost, same service Better service, same cost

3. Your company is currently outsourcing...
4. Quality Management, Service Level Agreements and KPI
performance of suppliers in your company are…
5. What is the importance of cost compared to your other logistics
KPI’s?
6. In what setting do you discuss the future of your supply chain?
currently tactical and operational processes but we are investigating the possibility to outsource
more strategic processes.
regularly used - important data that form part of supplier negotiations but could be used more
structurally for daily operations
Considerable - we will explore any possibility to adjust the KPIs to align with our optimal cost
level
Departmental - mainly in the supply chain function/department

7. What is the status of the Supply Chain function compared to the Moderately influential - a service provider for the commercial organization. The Supply Chain
other departments? organization should facilitate the commercial process
8. To what extent do you share supply chain data with providers and None but willing - it would be possible to share information but we are currently not doing this
customers?
 Your Answers
To Be

1. The costs of Freight Management, Parcel distribution and Warehousing as a higher than 8%
percentage of your revenue in Europe is...

2. The size of the organization of your customers varies… considerably - the size of the organizations of our customers varies a lot

3. In terms of industry diversity, your customers are active in... Some industries - our customers are mostly active in the same industry

4. How international is your customer base? A few customers are international - less than 10%

5. In terms of delivery time, the majority of your customers require… next-day

6. Supply chain issues are on the agenda of the board of directors… regularly

7. Reducing logistics costs and divesting logistics assets is strategically… important

8. Our pool of raw material/semi-finished and/or finished goods suppliers is… highly diverse - more than 10 suppliers

9. Is having variable logistics cost is important for the pricing and profitability of your Considerably
products?

10. To what extent do your supplies require customs clearance? Often - more than half of our raw materials, semi-finished and/or finished
products require customs clearance
 Your Answers
To Be

11. Seasonal order volume fluctuation (seasonality) is… significant - seasonal highs and lows up to 25%

12. The volatility of demand for your product is… somewhat volatile

13. The number of SKUs in your product portfolio is… low - between 100 and 1000

14. Time to market for new product introductions is usually … average - between a year and 18 months

15. Does the reliability of your logistics operation have a direct impact on your customers’ core Considerably
processes?

16. Does the service quality and flexibility of your logistics operation have a direct impact on the Considerably
perceived value of your products?

17. The influence of innovation and continuously improving logistics processes on your average
competitiveness is…

18. What level of visibility do your clients require during the order and delivery process? Average - high-level status updates e.g. shipment confirmation and
delivery information

19. Your choice of suitable logistics providers is… limited - there are max 3 Logistics Service Providers that we know
are able to serve our needs

20. When hiring new senior logistics professionals, experience with your industry/products is… somewhat important - basic experience within our industry is valuable