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Trends & Developments in

Logistics

Agaton Teodoro O. Uvero

MARLAWPortCalls Conference
The Bayleaf Intramuros
Manila, Philippines
24 February 2017, Friday
Presentation Outline
Introduction Logistics Now

Drivers to Change

How Logistics will Change

Conclusion
Logistics Now
Synergies in Mergers and Acquisitions

Integrated Supply Chain (including reverse


logistics)

Vendor-Managed Inventory (VMI) / Distributor-


Managed Inventory

Door-to-Door / DAP and DDP terms of trade

Supply Chain Alliances

Value Added Services


Integrated Inbound Logistics

Intermediate &
Working Stores
Operations
Local suppliers
Main Stores
Operations

Cus
toms

Imports
Inbound Inter-stores
transport transport

Source: IPSM, International Trade Centre (UNCTAD/WTO)


Value Added Services
Consolidation centers

Warehousing and inventory management

Vendor hubs /supplier parks

Customs and trade advisory services

Transport management

Kitting, packaging and bundling


Drivers to
Change
Drivers to Change
Shift in Big Business Mindset (paradigm shift in
deriving profit)

Evolution of Supply Chain Model (just-in-time, order


first before manufacture, etc.)

Related Party Transactions (approx. 60% of global


trade)

Regionalization of MNCs

Developments in ICT / Bilateral and Regional Free


Trade Agreements (FTAs)
Shift in Big Business Mindset
Paradigm Shift in Deriving Profit

Logistics costs make up about 20 30% of


total purchase cost of an item

Management of logistics will require change in


cost accounting system
Shift in Big Business Mindset

Traditional View New View

Selling Price = Cost + Profit Profit = Selling Price - Cost

Pass higher costs on to clients by Address inefficiencies to reduce costs


increasing prices, because of tied to keep up profit levels in the context
markets & limits to customers of internationally set market prices $$
ability to switch $

You believe customers will pay for Preserve and grow your market
your inefficiency!? share

Source: IPSM, International Trade Centre (UNCTAD/WTO)


Shift in Big Business Mindset

TOTAL UNIT = Unit purchase price


COST + Logistics costs (transportation,
storage and handling)
+ Deterioration and write-offs
+ Cost of capital (% interest x amount)
from date of supply invoice payment
until date of sales cash receipt
Evolution of Supply Chain Model

Sample of a Simple Supply Chain


Logistics: transport, storage,
packing and handling

Raw
Final
materials
consumer
supplier

Component Assembler Retailer


manufacturer

Source: IPSM, International Trade Centre (UNCTAD/WTO)


Evolution of Supply Chain Model

From the BHMHS model to the S3 Model

Buy Hold Make Hold Sell

forecast title
based on title
based on companys
custody design custody
historical
demand risk or previous risk
pay supplies requirements
upon receipt full capacity

Source: IPSM, International Trade Centre (UNCTAD/WTO)


Evolution of Supply Chain Model

From the BHMHS model to the S3 Model

Sell Source Ship

delivery date forecast demand direct shipment


promise vendor managed pay on shipment
E-commerce and distributor
managed
supplier
collaboration & competitiveness
inventories
supply chain
integration automatic order
minimum
inventory
placement on sales
order

Source: IPSM, International Trade Centre (UNCTAD/WTO)


Related Party Transactions
80-20 rule (80% of collection coming from
approximately 20% of all importers)

Related party transactions (estimated at more


than 60% of global trade)

MNCs are driving global trade


Regionalization of MNCs
Old Structure

Company operate within national geographic limitations

Company responsible for all aspect of business (manufacturing,


sales, distribution, marketing and others)

New Structure

Regional office decides on major aspects of business

Local office acts as branch office; usually as sales and


distribution arm

Regional pooling of requirements (services/materials)


Regionalization of MNCs
From autonomous and self-sufficient national
organization to regional organization

Centralization of manufacturing facilities at a regional


level

Reduction of facilities (economies of scale, market


access, incentives, labor costs, etc.)

Regional centralization of functions (e.g. research and


development, advertising and marketing, finance and
administration)

Toll/Contract Manufacturing
How Logistics
will Change
How Logistics will Change
The Modern Consumer

instant need to receive goods and services; shorter lead times

phone as shopping device

pressure to deliver goods fast and cheap (e.g. drones)

Visibility of order status, tracking and delivery

Omnichannel / Last Mile Delivery

price of automated labor has fallen by up to 50% since 1991

multimodal options for delivering goods from distribution centers to retail shops

Technology and online shopping are creating complexity


How Logistics will Change
Digital Commerce (Internet of Things - IoT)

From 9%, online shopping is now 30% of retail (US)

Uber and Amazon has entered logistics

Logistics means service plus automation (e.g. FLEXE, Convoy)

E-commerce is replacing the retail mid-market

Brick+mortar retail shops closing due to growing online shopping

3PLs and 4PLs continue to leverage on IT platforms

Unilever partnering with Convoy


How Logistics will Change
Product clockspeed / On demand Supply Chain

Product life span getting shorter


Production and delivery based on demand

Automated Delivery / Warehouse Robotics

Otto by Uber
Amazon is using robots for warehouse and inventory handling

Hyper-Local Supply Chain

Locally-produced/designed/sourced products for the local market


Exclusive merchandise for retailers / customs rewards
How Logistics will Change

Direction towards SCM certification

Supply Chain Externalities

understanding the impact of supply chain transactions on jobs created,


carbon footprint reduction, sustainable procurement processes, types
of labor used, modes of transportation, etc.

Thinking global, acting local -- adopting to global trading trends using


the local flavor
Conclusion
Conclusion
Digital commerce (and logistics) is here

Crowd-sourcing / ubering

Technology allows customization, results in


complexity

Innovate or die
Adopting to the Changing Times
Preparing for Better Times
Create Innovation Strategy (Eliminate-Reduce-
Improve-Create)

Partner with IT-driven value-added services

Use TCO tools to optimize supply chain planning

Understand the trading environment (e.g. FTAs)

Comply with evolving government regulations


Thank you
About the Speaker
Agaton Teodoro O. Uvero is an international trade, indirect tax, and supply chain expert. He is
currently the Editorial Board Chairman of Asia Customs and Trade (ACT), an online portal on customs
and trade developments affecting international trade compliance in Asia. Since 2002, he has worked
on technical assistance programs funded by Asian Development Bank (ADB), United States Agency
for International Development (USAID) and Japan International Cooperation Agency (JICA). In 2008,
he was part of the consultant team that drafted the proposed Customs Modernization and Tariff Act
(CMTA), which, among others, implements the Revised Kyoto Convention (RKC) and the WTO Trade
Facilitation Agreement (TFA).

He previously worked with PricewaterhouseCoopers (PwC) Consulting and provided consulting work
for multinational companies in the Philippines and occasionally, across the Southeast Asia region. He
lectured at Ateneo Graduate School of Business-CCE and BayanTrade Academy on International
Supply Chain Management. He was an advisor of various industry associations in the shipping,
transport, warehousing, forwarding, customs brokerage, electronics/semi-conductors and other
industries.

A lawyer and a licensed customs broker, he has degrees in Philosophy and Law from UP Diliman and
is an alumnus of East West Center (Hawaii). He took a course on Transfer Pricing at World Trade
Institute, Pace University (New York) and has an Advance Certificate in International Purchasing and
Supply Chain Management (Adv.Cert.IPSCM) from International Trade Centre (UNCTAD/WTO). He
previously worked as Deputy Commissioner at the Bureau of Customs from October 2013 to January
2016 and at the Department of Finance from January to June 2016. In 2015, he served as Chairman
of the APEC Sub-Committee on Customs Procedures (SCCP).

Mr. Uvero has provided advisory services and trainings for the Top 1000 corporations and industry
associations, and is a regular speaker in local and international conferences. He is currently doing
consulting work for the Department of Finance on the implementation of the CMTA and is a regular
lecturer of the UP Law MCLE Program.