Supply Chain ContinuityHow GoPro Coped with US West Coast Ports Congestion 2014-2015
2015 NAFTZ Annual Conference – Los Angeles, CA
Jeremiah Pomerleau
Senior Manager, Transportation and Trade Compliance
Key Milestones – US WC Port Congestion
Supply Chain Overview
Business Factors & Constraints
Options & Competing Forces
Strategy, Execution & Rationale
Financial & Delivery Impact
Success Factors
Agenda
MAY DEC
Port Congestion – Key Milestones
JAN MARFEB
2015
FEB 16
JUN JUL AUG SEP OCT MAYNOV APR JUN JUL
ILWU / PMA Negotiations Begin Tentative 5-year Deal Reached
ILWU/PMW Ratify DealUS Labor Secretary Mediates
ILWU Initiates Slowdown
Contract Expiration!
End of Backlog In-Sight
JUN 30
FEB 20MAY 14
2014
OCT 31 JUN 15
Congestion Meter
MAY 15
4
2014 AMR Postponement Supply Chain – Inbound
Ocean Freight (SEA)
Transit: 40/40HC service @ 24 Days DTD
Lower-box Assemblies (LBA)
Finished Goods Accessories (ACC)
International Air Freight (IAF)
Transit: 3 Services @ 1.5 to 4 Days DTD
Bulk Cameras only (CAM)
HKG->LGB
GoPro DC (B2B)
Riverside, CA
Futian FTZ
Hong Kong X-Dock
HKG
Intra-China Logistics Flow
Key Metrics
IAF/SEA Mix @ 60% SEA
IAF Premium @ ≤ 25%
2014 AMR Postponement Supply Chain – Outbound (B2B)
In-Region Final Assembly – LBA + CAM
Domestic Air Freight (DAF)
Transit: Deferred and Expedited Trucking and
Air Services offering Same-day to 5 days DTD
Finished Good Cameras (FG CAM)
Finished Good Accessories (ACC)
Key Metrics
DAF Premium @ ≤ 20%
Future FTZ – Expected GoLive 10/2014
MPF Reduction
Inverted Tariff Benefit
Duty Avoidance (Export and Scrap)
Brokerage Fee Reduction
Business Factors & Constraints
Finished good cameras cannot be shipped via ocean freight
HERO4 product launch – 10/14
Extended production lead-times
Product quality issues
Pending FTZ Implementation – Riverside, CA Production Authority – 9/14
Activation – 10/14
Direct Delivery approval – Expecting 10/14?
Contingencies & Competing Forces
Forward deploy via SEA to GoPro
DC: LBA & ACC
Extended transit times ~ 37 to 45 days
Equipment capacity (e.g. chassis)
Terminal prioritization
Route through alternative SEA ports
of entry to GoPro DC: LBA & ACC
Leverage IAF to GoPro DC: LBA, ACC
& FG CAM
Direct ship Customer via SEA or IAF
(DC bypass): ACC & FG CAM
Forwarder or Integrator (e.g. FedEx Direct
Distribution or UPS Trade Direct)
Requires post-bid negotiations
Forfeit FTZ benefits
IAF rate differential
LBA $/unit @ 91%
ACC $/unit ~ 87% to 92%
Everyone else is doing it – capacity?
East Coast / Houston ~ 33 to 37 days
Requires post-bid negotiations
Strategy, Execution & Rationale
•Avoided rerouting due to DC’s proximity to port
•Built inventories of LBA and ACC
•Factored 45 days transit into forecast
•Shifted to a new vessel operator, Evergreen -dedicated terminal (~37 to 38 days)
Forward deploy via SEA to GoPro DC:
LBA & ACC
•Sustainable flat-rate pricing - immune to peak season
•Guaranteed capacity with hard block space agreements
•Imported primarily ACC and LBA while CAM continued to ship in bulk
Leverage IAF to GoPro DC:
LBA, ACC & FG CAM
9
Level-set customer expectations
Communicated business continuity plan
Enhanced order management focus –
inventory levels and customer forecasts
Sourced contingency IAF direct rates to key
customer DCs and Stores
Strategy, Execution & Rationale
Impact: Inbound Ocean Freight (SEA)
21%
41%
70% 69%
36% 34%
25%
14%
31%
51%
64%
25%
48%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
SEA
To
nn
age
% (
KG
)
Ton
nag
e (
KG
)
Inbound SEA vs. IAF (Delivered) - US West Coast Ports Congestion
SEA Tonnage (KG) IAF Tonnage (KG) Target (SEA) SEA %
HERO4 Launch
HERO+LCD
Launch
Congestion Meter
IAF/SEA Mix - AVG 38% SEA
MAY/JUN: SEA
Forward DeploymentSEP: Convert to IAF
DEC: Post Launch - Resume SEA
Impact: Inbound International Air Freight (IAF)
45%
28%
37%
55%58%
83%
71%
35%
12%
29%
19%
36%
51%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0
100,000
200,000
300,000
400,000
500,000
600,000
Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
IAF
Pre
miu
m %
Ton
nag
e (
KG
)
Inbound IAF Premium % (Delivered) - US West Coast Ports Congestion
Standard IAF Premium IAF Target (Premium) IB IAF Premium %
Increased utilization of premium IAF from Jun-Jan 2015 to meet FYE demand
HERO4 Launch
HERO+LCD
Launch
Congestion Meter
IAF Premium - AVG 43%
Impact: Outbound Domestic Air Freight (DAF)
7%
17%
12%
29%
16%
11%9%
6%
3%
8%
2%
25%
5%
0%
5%
10%
15%
20%
25%
30%
35%
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15
LAT/
DA
F P
rem
ium
%
Ton
nag
e (
KG
)
B2B Outbound DAF Premium (Delivered) - US West Coast Ports Congestion
Standard LTL/DAF Premium LTL/DAF Target (Premium) DAF Premium %
With exception of Sep 2014, remained below premium target driven by reshaping customer expectations and heavy-use of premium IAF
HERO4 Launch
HERO+LCD
Launch
DAF Premium - AVG 12%
Key Success Factors
Focused attention to market news and industry analysis
Communication of business continuity plan to customers
Production output and lead-time planning aligned with real-time visibility to customer demand
Close collaboration with internal functions and external supply chain partners
Sustainable pricing structure with healthy mix of hard and soft block space agreements