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CRP 3 FINAL PRESENTATION

The Study of evolving nature of relationship between Shipper and 3PL

GAURAVKUMAR MAHAJAN (MGBSEP13GLSCM063)U N D E R T H E G U I DAN C E O F

MR. NIHAR KUMTHEKAR

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Agenda• Introduction

• Research objectives

• Research methodology

• Research Framework

• Literature Review

• Primary data analyses

• Limitations & Future scope

• Recommendation

• Conclusion

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Introduction THIRD PARTY LOGISTICS(3PL)- A firm that provides multiple logistics services for the use of Customers.

Shipper- A party responsible for initiating a shipment e.g. Consignor, exporter, seller Impact of shipper-3PL relationship- Overall average logistics cost reduction of 11 % Average inventory cost reduction of 6% (2014 Third Party Logistics Study) Major 3PL Players-

Major 3PL Players in U.A.E.

(SCATA 2014)

Total 329 3PL Companies registered under National Association of Freight and Logistics (NAFL 2014)

Logistics Industry contributes 15% of GDP US$ 390 billion in U.A.E (UAE Yearbook 2013)

Kuehne+NagelDHL DB Schenker Logistics Nippon Express

Al-Futtaim Logistics CEVA Logistics DHL

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Research Objectives & Area of Interest

OBJECTIVESTo understand the factors taken into consideration by Shipper to outsource its logistics services to 3PL.

To understand the view on choosing the 3PL for the benefit of the company.

To study the Services being provided by 3PL in U.A.E.

To study the factors on which the 3PL are assessed on the service provided and current relations in the Industry

Area of InterestConsidering the growing global trends towards third party logistics, it is important to understand the basics and current trends of it as a Supplier Chain Manager and create value through relating primary and secondary knowledge.

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Research Methodology Operationalization/Drawing Conclusion

For Shipper and 3PL relationship

Relationship between the both is important for the success of the BusinessThe assessment of the shipper to outsource its logistics activitiesThe sourcing based on the assessment of the ShipperSummarise the research finding Make recommendations and future scope

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Research Framework

Shipper Assessment Sourcing 3PL provider

Operational & Repetative activities

Value Added Services

Strategic & IT intensive services

Strategic Alliance

Contracting

Performance based

Outsourcing

Shipper-3PL relationship

• Global Competition• Company policies and values• Evaluation of strategies• Selection Criteria

• Total Cost reduction• Lead time constraint• Maintain level of Quality• Minimise Risk• Long term benefits

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Literature Review The 3PL outsourcing is showing growing trend

65% in 3PL activities from last previous year 2013

47% Shipper switched or planning to shift to 3PL activities The 3PL revenue in the world has shown growth of 9.9% with revenue of US$ 676 billion. (Langley 2014)

The Foreign trade of U.A.E. has grown by 22.8% in 2011.

(UAE Interact 2013)

Re- exports of has grown by 10% 2011 and important market for Shipper and 3PL in the future. The Consequences associated with the sourcing decision of Shipper. 10 to 20% loss incurred due to logistics spend.

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Literature ReviewStrategic Assessment

To understand the current business and products or product-service systems, and information on the new system is yet available

Aligning with business strategy Shipper decides which logistics services to be outsourced.

Operational & Repetitive activities

Strategic & IT intensive serviceValue Added services

• Domestic/International Transportation

• Warehousing• Freight Forwarding• Custom Brokerage

• Transportation planning& Management

• Product labelling, packaging, assembly

• SC consultancy

• IT services• Order management &

fulfilment• Inventory management• Customer service• Green Supply Chain

Services

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Literature ReviewKANO model

The Model of Customer Satisfaction classifies product attributes based on how they are perceived by customers and their effect on customer satisfaction

• Basic Attributesattributes are the expected attributes or “musts” of a product• Performance AttributesPerformance attributes are those for which more is generally better, and will improve customer satisfaction• Excitement AttributesExcitement attributes are unspoken and unexpected by customers but can result in high levels of customer satisfaction

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Literature ReviewEvolution of Service Attributes in 3PL industry

Year Up to 1920 1920-40 1940-80 1980-90 1990 -2000 2001-OnwardsMarket Entry Parameters

Capacity to Produce

HC HC+ CC HC +CC+TQM

HC +CC +TQM +Delivery

HC+CC+TQM+Delivery +Value

Market Leadership Parameters

High Capacity to Produce (HC)

HC+Cost Competency(CC)

HC+CC+Quality

HC+CC+TQM+ Delivery

HC+CC+TQM+Delivery +Value

HC+CC+TQM+Delivery +Value+ GO GREEN

TQM DRIVE ERP DRIVE CRM DRIVE GO GREENDrive

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Literature ReviewStrategic Sourcing

A disciplined and systematic process for reducing the total cost of externally purchased materials, products and our source activities by maintaining level of quality, service and technology.

• Total Cost reduction

• Lead time constraint

• Maintain level of Quality

• Minimise Risk

• Long term benefits

Strategic Alliance

Performance Based Logistics

Contract logistics

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Literature ReviewKraljic Sourcing Matrix

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Literature ReviewKraljic Sourcing Matrix

Strategic Alliance between Dragon Mart and Cosco Logistics

HIGH

Profit Impact

LEVERAGE ACTIVITIES Domestic Transportation Freight Forwarding Labelling and Packaging

STRATEGIC ACTIVITIES Inventory Management Transportation planning& Management Green Supply Chain Services

ROUTINE ACTIVITIES Reverse Logistics Cross Docking Customs Brokerage

BOTTLENECK ACTIVITIES Order Management & Fulfilments IT services

LOW Supply Risk/Criticality HIGH

Dragon Mart • Chinese Company• Chinese government

project• Joint Venture of

Chinese and Dubai Government

Cosco Logistics• Sole 3PL for Dragon

Mart• 1o years of services• Services from Ex-

works to DDP offered• IT system linked for

Order Management and fulfilment

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Literature ReviewStrategic Sourcing

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Literature ReviewCase Studies

Successful Alliances Failed Alliances

Danzas DHL and HP FedEx and Laura Ashley

Future Alliances

BDP International and Dubai Exports

Al Futtaim Group and Alliance Electronics

Auto Industry Strategic Alliances in U.A.E.-

Al Futtaim Group

Al Rostamani Group

Al Tayer Group

Al Habtoor Group

Al Jaziri Group

Toyota Nissan Ford Mistubishi LamborginiHonda Renault Ferrari Bentley Nissan Suzuki Maserati Bugatti Volvo Infiniti Spyker McLaren

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Expert Interview summary Logistics Services completely out sourced to 3PL to focus on Core competency

Business strategies aligned with 3PL by Shipper

Capacity utilization using multiple customers for 3PL

Adopt new technologies to reduce Operations time and lead time

Prior experience in the industry helps to understand the shippers requirement in better way

Experience of 3PL helps to manage People, Process and Product effectively

Increased reliance on fewer number of supplier helps to execute your Supply Chain more effectively

3PL out source it own activities to add value to logistics activities

Scaling of the processes are done to meet the clients requirement

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Limitations and Future scope Primary Research for the U.A.E. market is done

Analysing the gap between the theoretical best practices and current best practices that are employed

Primary and Secondary data interpretation and relation was limited to few Industry

Other industries should also be studied and market trends should be identified

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Recommendations Out-source the logistics activities with fewer service providers

Strategy based approach to empower the entire supply chain by including 3PL providers into the strategy

Shipper strategic its business by keeping 3PL provider in mind

Similarly, 3PL should expand the business keeping their clients in mind

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Conclusion Shipper and 3PL relations are existing in U.A.E. and gaining through alliances

Consider independent external resources to add value to the process

Adopt good processes and good proven criteria of selection

The selection process should be intense and time consuming

Worldwide Supply Chain will improve, if effective measures taken by both.

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