Delft University of Technology
Faculty Mechanical, Maritime and Materials Engineering
Transport Technology / Logistic Engineering

B.R.C. Herijgers Internship Hewlett Packard Barcelona
Internship, Report 2000.LT.5379, Transport Technology, Logistic Engineering.

Supply Chain Development Transport Project

The first objective of this transport project, for the supply chain development department of Hewlett Packard Division of Barcelona, was to analyze if there is a need for negotiations for new and more competitive transport rates. The second objective was to investigate if there is a need to look for new forwarders that can provide a service that fits with the needs of Hewlett Packard Barcelona. Other input of this project was to structure the information about transport rates and analyze the evolutions of costs and volumes.

First objective of this project was to clarify all the information about transport rates. For every printer a lot of parts need to be imported. The costs for the transport of these parts to Barcelona are called the inbound freight costs. Every printer needs to be transported to the customer and will normally be transported to a distribution center. The costs for the transport of the printers to the distribution center are called the outbound freight costs. Forwarders arrange the actual transport. Hewlett Packard Barcelona has negotiated special transport rates with the forwarders for the transport for Hewlett Packard Barcelona. The transport rates can be divided into inbound freight rates and outbound freight rates. The inbound freight rates can be divided into three origins. Every origin has its main forwarder. Outbound freight rates can be divided into the same regions and also has for every destination a specific forwarder. For shipments, which are more urgent and can not be planned in advance a special forwarder is used that is more specialized in urgent shipments.

Transport rates
The three main origins for inbound transport rates are: USA, ASIA and Europe. The main forwarder for USA and ASIA is Panalpina and for Europe the forwarder is Kühne&Nagel. The transport rates can be divided into different cost drivers such as inland cost, air/ocean freight costs, fuel surcharge costs, forwarder fee, handling costs and costs for documents. The evolution of transport rates shows that since this year there has been an increase in fuel surcharge for all origins. For Asia the conclusion of evolution of transport rates is that there has been an increase in ocean freight for almost every origin.
The main destination for outbound freight is to the distribution center in Germany. There are as well shipments to the USA and Asia but this is only a small amount and these are mostly shipments from the production line 30 (PL30). PL30 consists of the big plotters. The main forwarder in Europe is Kühne&Nagel and for the rest of the world AEI. The same cost drivers as for inbound freight transport rates can be found.

Evolution of volumes
An analysis of volumes and costs divided into origins/destinations and transport modes has been made. The volumes are taken in shipped kilograms. Most of the shipped kg for inbound freight is coming from the USA and Asia by Ocean. Most transport costs are paid as well in Asia and the USA but for the air shipments. This is because air shipments are far more expensive than ocean shipments.

For outbound the conclusion of this analysis is that most of the shipped kg has been in Europe by truck. This is logical with the fact that 80% of the shipments go to the distribution center in Germany.

A comparison between the evolution of the past with the forecast for the product of production line PL83 resulted in the knowledge that more costs are in air shipments instead of the preferred ocean. The regions of most volumes are similar in the study of the past and the forecast. Most of the shipments will come by Ocean from Asia and USA and from Europe by truck.

The forecast of volumes of PL83 shows as well the amount of volumes in 2001. This forecast shows that most shipments will come from the USA but most payments will be done in Asia. Therefore it is interesting to focus on both markets.

For the USA the result of better rates is higher because of the bigger volumes and in Asia it is important to get better rates because they are high compared to USA rates.

A first comparison of rates has been made with the rates of the Contract Manufacturers (CM) in Hungary. The conclusion of this comparison is that 20% could have been saved in transport costs in 1999 (only those origins were taken account from where we had the transport rates to compare) if Hewlett Packard had negotiated the best rates from the CM's.

Request for Information (RFI)
After this first comparison a Request for Information had to result in a better view of the current market situation. The purpose of this Request for information was to analyze if the current transport rates by Hewlett Packard are competitive or not. A cost calculation of the product Aladdin has been made to show the differences of the rates.

The results of the RFI are that the transport rates for inbound freight from the origins in Asia are competitive for ocean shipments. For air shipments Kühne&Nagel can offer better transport rates for the origins China, Philippines, Singapore and Taiwan. For the Less than Container Load shipments Kühne&Nagel offers for all origins better transport rates.

For inbound freight from the origins in the USA Kühne&Nagel offers better rates for air shipments and Less than Container Load shipments. Hellmann offers better transport rates for ocean shipments with 20' and 40' containers.

The cost saving calculation show that for only USA shipments 20-25% cost savings can be realized. Combining Asia and the USA would result only in a cost saving of 2-3 %.

The conclusions show that especially the transport rates in the USA are not competitive. It would be interesting to do an Request For Quotation for the USA only. The announcement of Panalpina of increasing the transport rates for shipments of Asia makes it even more interesting to explore this market as well.

Reports on Logistic Engineering (in Dutch)
Modified: 2001.01.05; , TU Delft / 3mE / TT / LT.