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A Dissertation Project report entitled as,
TITLE: RISKS AND SUCCESS FACTORS OF LOGISTICS OUTSOURCING
Author-
Ganesh Pathare
SR NO CONTENTSCOVER PAGE ACKNOWLEDGEMENTLIST OF TABLES AND FIGURES
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ABSTRACTKEY WORDS
1 INTRODUCTION/BACKGROUND1.1 OBJECTIVES OF THE RESEARCH1.2 RESEARCH SIGNIFICANCE
1.3 RESEARCH LIMITATIONS1.4 RESEARCH OUTLINE2 LITERATURE REVIEW
2.1 LITERATURE REVIEW STRATEGY2.2 THEORETICAL FRAMEWORK OF THE RESEARCH2.3 INTRODUCTION TO LOGISTICS2.3.1 ORIGIN OF LOGISTICS2.3.2 LOGISTIC OUTSOURCING2.3.3 BENEFITS OF LOGISTIC OUTSOURCING2.3.4 TYPES OF LOGISTIC OUTSOURCING (3PL4PL!PL"2.3.# FUTURE OF LOGISTIC OUTSOURCING
2.3.$ LOGISTIC OUTSOURCING MANAGEMENT2.3.! KEY SUCCESS AND RISK FACTOR IN LOGISTIC
OUTSOURCING2.3.% LOGISTIC OUTSOURCING ACTIVITIES2.3.& TRANSPORTATION' LOGISTIC ACTIVITY2.3.&.1 TRANSPORTATION SERVICE MODES
A"ROAD B" RAILWAY C"SAE/PORT D" AIR3 RESEARCH METHODOLOGY
3.1 INTRODUCTION OF RESEARCH METHODOLOGY
3.2 RESEARCH PATHWAY3.3 METHODOLOGY OF SURVEY3.3.1 SURVEY AS RESEARCH APPROACH3.3.2 METHODOLOGY OF WORKSHOP3.4 STRATEGY OF RESEARCH3.# ETHICAL ISSUES OF RESEARCH4 EMPIRICAL DATA ANALYSIS AND FINDINGS
4.1 PARTICIPANTS IN THE SURVEY
4.2 FINDINGS OF SURVEY
4.3 SUB'CATEGORIES OF TRANSPORT RISKS
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4.3.1 FIRST WORKSHOP
4.3.2 SECOND WORKSHOP
4.4 DISCUSSION
4.# FINDINGS
4.$ MANAGEMENT OF TRANSPORTATION RISK
4.! INTERIM CONCLUSION OF THE DATA ANALYSIS
4.% RISK MITIGATION
# #.1 RESEARCH CONTRIBUTION
#.2 RESEARCH CONCLUSION
$ BIBLIOGRAPHY/REFERENCES
! APPENDI
LIST OF TABLES
1. MOTIVES FOR LOGISTIC OUTSOURCING
2. TRANSPORT GROWTH IN DIFFERENT REGIONS OF INDIA
3. PREFERENCE MODE OF CARGO MOVEMENT IN INDIA
4. GROWTH OF CONTAINER VOLUME IN INDIA
5. ROAD FRIGHT IN INDIA
6. RAIL FRIGHT IN INDIA
7. SEA/PORT FRIGHT IN INDIA
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8. AIR FRIGHT IN INDIA
9. PARTICIPANTS IN THE SURVE
1!. RESULTS OF FIRST WOR"SHOP
11. RESULTS OF SECOND WOR"SHOP
12. WOR"SHOP RESULTS
13. CLASSIFICATION OF GENERAL RIS"
14. RIS" MITIGATION
LIST OF FIGURES
1. RELEVANCE OF LOGISTIC OUTSOURCING
2. COST RATIO OF LOGISTIC ACTIVITIES
3. # TOTAL CARGO MOVEMENT
4. CONTAINER VOLUME GROWTH
5. ROAD FRIGHT INDIA
6. RAIL FRIGHT IN INDIA
7. AIR FRIGHT IN INDIA
8. WOR"SHOP $UESTION
9. WOR"SHOP $UESTION
1!. RELEVANCE OF TRANSPORT RIS"S
11. WOR"SHOP $UESTION
12. WOR"SHOP $UESTION
13. WOR"SHOP $UESTION
ABSTRACT)
Various sections are involved in the project to confirm the accomplishment of the decent
research. Overview of dissertation in accordance to the culture of organization,
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framework of the research, detailed awakening of the principles of logistics and
transport, scrutiny of the research problem and the foundation of the logistics
outsourcing with risks management involved with it in Indian subcontinent. Detailed
doctrine gained by official data of the different companies through their websites or from
newspapers, articles provided from the related industries is concentrated in the
research. opic related secondary data is also elaborated in the research.
ransportation activity which is prime economic activity of logistics business within
fre!uent"changing regions of #sia that is India is also considered. $areful determination
of various books and literature is carried out with respect to reach set research
objectives. %rimary data collected with the aid of !uestionnaire generated to carry the
survey aimed towards target market and the approaches employed to collect the data is
well e&plained in the tertiary section. his section of the study canvasses merits and
demerits of a survey conducted, of work"shops and e&pert interviews. his section of
the study canvasses merits and demerits of a survey conducted, of work"shops. o
confirm success of the project ne&t part elaborates the outlook of research,
!uestionnaire designing and selection of research approach. %rintouts and emails are
the modes used for data collection directly from clients in the !uestionnaire format.
'pon selecting methodology of research dissection of primary and secondary data will
be carried out and concentration will be on speculative results generated from the
survey, the workshops conducted within the within the project.() e&pert interviews were
carried during workshops in supplement of the survey and the workshops. Interviews
conducted with respect to get the concept behind the implementation of risk
management and e&pectation of risks incidence in transport and logistics services.
*&planation of the research !uestion in direction of the research objectives is given in
this section. +e&t part continuous with the e&tent of the research objective achieved.
ast section is constructed to e&plain overall conclusion and suggested
recommendations towards the research problem. #chievement of the personnel
development during study period, enhancement needed in interpersonal skills and
assembling of risk corrective actions are summarized in this section. -irst, an overview
of available strategies and kinds of corrective measures is provided. o troubleshoot the
transport and other logistics risks, background of probable measures are provided
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which enables company representatives to alleviate road transport risks and logistics
risks to ensure easy running of company outsourced it.
KEY WORDS) ogistic Outsourcing isks, ogistic outsourcing isk and /uccess
-actors, ransport isk in ogistic Outsourcing 0usiness.
INTRODUCTION/RESEARCH BACKGROUND)
his section is introductory topic of research. he concept and entire motive behind
issue of research and selection of the research is elaborated in this section of the study.
he Varying customer choices are coming from everywhere and anywhere increasing
the competition between organizations in world economy. his situation of huge
competition results in rapid competitive communization. Increased shareholder value
claimed with e&pected growth and portability. o sustain in competition focus diverted to
doing the right thing than doing everything. hese things forces organizations for better
concentrated approaches towards market. *valuation of each activity to wrap up its
efficacy to provide uni!ue competitive advantage in rapidly growing global market is
necessity for every organization. Increased internal investment is provided to preferable
areas while rest areas with less importance considered for outsourcing. 1ith respect to
2$orbett, 34456, outsourcing is a management tool which is used to move anorganization away from the traditional vertically integrated, self"sufficient structure7 one
that is increasingly in effective in today8s high"competitive, performance"oriented
environment. he organization draws near a business structure with the aids of
outsourcing where it is able to make more focused investments in the areas providing
its uni!ue competitive advantage. ogistics outsourcing is one of the double time
growing areas. 9igh number of outsourcing companies and logistics service providers
leads to intensive competition which puts up great troubles in their outsourcing
enterprise. o grab better advantage of the outsourcing opportunity outsourcing
companies must be aware of success and failure ingredients and the concerns involved.
/ince the decade of :48s all or some aspects of the logistic functions were outsourced
by high number of organizations and is the reason leads to research topic. Difference
between theory and practical implementation in outsourcing is audited in e&isting
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research project. $umulatively, these studies suggest that outsourcing companies
should take great care in purpose, plan and personnel they choose to outsource an
activity.
*&planation with clear aim and objective behind the studies along with elaboration of
the scope, significance and limitations is provided in this research. *&amination of
identification of key success factors along with the risk factors in logistic outsourcing
business makes this research full of information. 0rief description of outsourcing and
logistics outsourcing included in content of the study. wo logistics activities that are
fre!uently outsourced in the supply chain that is transportation and distribution are
concentrated in the research topic. ;igration of components and raw materials to the
facility and shipment of finished goods to warehouses and other customer locations arethe activities run under transportation for manufacturing plant. 1arehousing is the
storage of components, raw materials and finished goods, while distribution involves the
management of goods on the physical path between production and consumption as
stated by 2$oyle
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ogistics outsourcing with its advantages including reducing operating costs and
strengthening the core competitiveness, speeding up organization reconstruction, and
improving enterprises8 reaction speed introduced as new type of enterprises operation
strategy. 'ncertain e&ternal environment, market changes, and enterprise risks decision
and risks management ability produces harmful effects causing large number of
outsourcing risks. 9ence implementation of effective logistics outsourcing for
enterprises leads to a research subject with immediate corrective actions to identify the
success and risk factors. *valuation of logistics outsourcing risks ensures successful
completion of logistics enterprises8 outsourcing. *&amination of ways to identify key
success factors in outsourcing provided in this paper makes research full of re!uired
information. Detailed description of outsourcing and logistics outsourcing is provided in
the content of research followed by revising literature relevant to outsourcing. -or better
understanding of outsourcing relations and activities this research highlights the set of
key success factors for outsourcing with various models in support of these factors
proposed by various authors.
he significance of the theoretical models used in logistic outsourcing industries are well
e&plained with various case studies and e&les from the logistics industry. his
research also signifies with a discussion of how outsourcing companies might better
define and develop successful logistics outsourcing relationships.
LIMITATIONS OF THE RESEARCH)
his investigational e&ercise directs tentative path for increased success probability of
outsourcing projects and raises many issues for further study of the outsourcing activity.
In comparison with large logistics business sectors and organizations sizes study is
limited. ;isjudgments and common method variances are the drawbacks of the survey
methodology utilized for the purpose. esearch contributes to development of
understanding of outsourcing in identification of areas re!uiring further research though
it has certain limitations. /tudy observations suggest that the effect of outsourcing on
employee morale and performance is the primary risks to firms. /tudy re!uires more
understanding of the specific alterations made to human resources, successful
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implementation and contribution to the outsourcing effort. /econd important finding of
the study is that identification of the risk factors by the management of organizations is
necessary to ensure the highest level of success. ;ore e&planation of these factors with
their corrective measures is re!uired. 1ith time and money some other primary but
prompt limitation like project deadline, availability of the data and resources, word limit,
unavailability of primary data by companies are included in this section of the research.
STUDY OUTLINE'
C*+,-'1
$hapter one will resonates overview of the dissertation, including background of the
research, research problem analysis, background of the various logistic service provider
organizations and brief introduction of the logistic outsourcing industry.
C*,+-'2
/ection covers entire knowledge of the research problem based on secondary data,
which is obtained from the official data published on the websites, in daily news papers,
articles of the various organizations providing logistic outsourcing services and authors.
o reach the conclusion of the topic with respect to the objectives set in for the research
various literatures and books was critically analyzed.
C*+,-'3
%rimary data collected by carrying the survey in target market with help of !uestionnaire
is summarized in this section. he !uestionnaire designing, choice of research
approach, philosophy of the research with respect to confirm the success of the project
is e&plained in the section. %rintouts and emails are sources used for the data collection
from the customers directly.
C*+,-'4
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%rimary and secondary data collected is scrutinized in this section. esearch !uestions
with respect to the objective of the research are well elaborated.
C*+,-'#
*&tent of achievements of research objectives are e&plained in this topic.
ecommendations provided for research problem along with the overall project
conclusion forms the part of same topic.
LITERATURE REVIEW
INTRODUCTION
his section involves revision of various literatures with respect to the resources of
information with noticing identification of the success and risk factors towards logistic
outsourcing services with various academic references, books, official publications of
organizations official websites or newspapers and articles. he abbreviations and
theories which further e&plained in direction of data to be collect related with the current
affair of the research are enclosed in the primary part. 2/aunders hornill ;, 344:6
STRATEGY FOR THE LITERATURE REVIEW
he literature search strategy is designed with reference of various libraries literature
and internet data obtained by browsing. he data is collected from the internet or from
various library materials in order to generate any finding of the research topic according
to the set subject standards. he data or information gained from internet and
vocabulary is distilled for its efficacy for the absolution of the topic. *ffectiveness of the
material is verified by checking the applicability material collected to the research topic.
-or current information awareness various logistic business outsourcing literature and
journals are reviewed from 344("34(=. ;anual searching of the latest database
available is carried to confirm further detail solidification of related material including
internet and academic data. >oogle search engine is utilized to access data from
internet. In accordance with /aunders et al 2344:6 the 0oolean ogic applied to search
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the internet by generating the key words and linking them by using three logical
operators O, #+D, +O . 2/aunders hornill ;, 344:6
THEORETICAL FRAMEWORK OF THE RESEARCH)
Different fragments of reviewed literature subjected to critical analysis and e&traction of
information on the $ritical #nalysis of the effectiveness of logistic outsourcing business
in Indian continent are as follows.
INTRODUCTION TO LOGISTIC OUTSOURCING'
ORIGIN OF LOGISTICS
he >reek logos, meaning ?speech, reason, ratio, rationality, language, phrase?, and
>reek word logistiki, meaning accounting and financial organization derives the term
@logisticsA. he militaryBs need to assemble themselves with arms, ammunition and
rations during their forward movement from their base originates ogistics. ;ilitary
officers looking after financial and supply distribution matters are known as logistics in
ancient >reek, 0yzantine and oman empires. ?he branch of military science relating
to procuring, maintaining and transporting materiel, personnel and facilitiesA Is the
definition for the logistics by he O&ford *nglish Dictionary. 1ith respect to another
dictionary definition, logistics is ?the time"related positioning of resources.? In general
ogistics is commonly considered as a branch of engineering that creates ?people
systems? and not the ?machine systems?. #ccording to human resources management,
logistics means ?recruiting manpower8s?. $ouncil of ogistics ;anagement suggests
logistics as backbone including integrated planning, control, realization and monitoring
and the necessary information flow with in industrial and trading companies along the
complete value"added chain 2and product life cycle6 for the purpose of conforming to
customer re!uirements. ;anagement flow of goods from origin to destination point in
direction to fulfill the re!uirements of customers or corporations considered in logistic.
$onsolidation of information, inventory, warehousing, transportation, material utility,
packaging, and often security constitutes logistic. $hannel of the supply chain
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contributes to ogistics and it adds the value of time and place e&pediency. 2D9 ,
34(=6
LOGISTICS OUTSOURCING
'prising 9igh competition in the world economy forces manufacturing and retail firms to
outsourcing of their logistics functions. Outsourcing directs the noncore activities to
e&ternal supplier and makes companies able to grease company8s resources, spread
risks and survival and future growth concern. 0y means of hird party supplier, or
contract logistics services companies are e&tending the logistics organization across the
boundaries. @he process of planning, implementing, and controlling procedures for the
efficient and effective transport and storage of goods including services and related
information from the point of origin to the point of consumption for the purpose of
conforming to customer re!uirement. his definition includes inbound, outbound,
internal, and e&ternal movementsA is the term coined by he $ouncil of /upply $hain
;anagement %rofessionals 2$/$;%6 in 34(3. 2$ouncil of /upply $hain ;anagement
%rofessionals,, 34(=6
he urgency to eliminate the number of warehouses, vehicles and e&cess inventories
and to run down shortage, and labor costs favors organizations to outsource theirlogistic functions. his brings down capital investment and $ompanies able to
concentrate on their vital business activities and contribution of the risks.
BENEFITS OF LOGISTICS OUTSOURCING
• # strategic solution to improve the !uality of service and reduce the cost of
important non"core processes.
•
he firms are able to focus on their core competencies.
• 9elps the firms to overcome resource constraints.
• %rovides for cost saving resulting from better management of the supply chain.
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• # platform for cross pollination of better available practices. It provides wider
geographical coverage.
TYPES OF LOGISTIC OUTSOURCING SERVICES PROVIDERS'
T*0 P+- L05-065 (3PL"
#ll or part of the company8s logistics functions are carried out by e&ternal supplier
known as # third"party logistics 2=%6 firm. %roviders of services such as transportation,
warehousing, distribution, financial services and so on are defined in =%. hird party
logistics have become useful to reduce costs and spread risks for routine, vertically
integrated firms favoring =% provider8s growth.
T* 67806 +9+7-+5 : ;507 3PL 5;,,
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• %ick and pack
• ;arking, tagging, and labeling
• %roduct returns and reverse distribution
• %ackaging and repackaging
• /alvage and scrap disposal
• elemarketing
=% is central provision of products like trucking, warehousing, and distribution, targeted
to take over some of the related functions as stock keeping and documentation. =%
holds physical activities such as transportation, warehousing, line haul and the rental of
material handling e!uipment.2/angam VC, 344)6
4PL S906 P905
he ne&t stage of development of logistics service providers is the 5% services. his
includes, one =% handling rooted activities of warehousing, inventory management and
transportation, and other =% does processes like 9D, security and product
development. his shifts the work of internal departments to the set of =%s.
Organizations now have to transact with a whole set of =%s and each needs to be
correlated with and associated via personnel and I. he advantage is that the number
of transactions and costs are reduced to greater e&tent with the help of this process.
Important characteristics that show uni!ueness and set apart the concept of 5%
compared to supply chain outsourcing options available in the market today are as
follows.
• # 5% delivers a comprehensive supply chain solution
• # 5% delivers value through the ability to have an impact on the entire supply
chain.
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e!uired results are generated through 5% operators by carrying out the client8s entire
logistics function. his activity involves reduction in cost of physical activities and
manages logistics functions and achieving hikes. #nalysis of certain areas advisory
solutions where processes can be utilized are provided by 5%s. Direct involvement in
the business processes and strategies of 5% services providers makes them long"term
partners. 2%atric 0urnson, 34((6
3PL ? 4PL @ !PL
he Value ogistics >roup with concept describing the advanced trend of =% and 5%
combined is termed as %. *ntire logistics chain of the client comes under one service
provider through this service.
T* !PL 676,-
$ombination of =% and 5% into one is the % 2=% E 5% F %6. % provides
central services of =% and 5% and can commence correctional projects of all services
and activities to the clients. GOne contract, one bill8 concept is utilized by % as central
provision in which on behalf of dealing with several people for different services like
outbound, inbound and warehousing, clients now are re!uired to transact with one
individual and becomes turnkey solution. 2H$9 >roup,, 34436
THE FUTURE OF LOGISTICS OUTSOURCING
C0-0+ 06-07 -* L05-065 O;-5;607 07 I70+ + +5 :
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providers. $hanging nature of these alliances allows companies to construct
alliances and discontinue when not re!uired.
• I795-87-) ;oney is essential for infrastructure, I, people, to fulfill liabilities
comes out from failure, to repute commitments and insurance claims by
sustainable %. today, financial institutions and banks are available for that
purpose. , (J"34K returns offered by supply chain which among few
investments7 result in welcoming of -oreign Institutional Investors and banks.
• R;
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F $oenenberg # > Crapp ;, 344M6. ;easurable uncertainty, known as risk,
is already differentiated from non"measurable uncertainty.
here are different ways between the regiments to recognize risk in direction of its
effect. -ield of mathematics defines @outsourcing riskA as value"free, and business
economics field recognized it as opposite of a @chanceA, thus a potential loss or harm
e&plained by 29olzbaur, 34446
T* 05 8+7+87- ,655
Implementation of risk management is unavoidable to wrestle with risks and to achieve
corporate goals. Due to several corporate disputes, specific declarations along with
regulatory re!uirements e&ist in almost all countries with respect to the analysis,
communication and monitoring of risks e&plained by 2Cajuter %, 34((6. he generic
management process forms the base for typical risk management process and encloses
risk identification, assessment, mitigation and control as follows.
R05 07-0:06+-07
isk identification step is prime important as risks can be managed after its
identification only. Detection of all hidden risks is not possible. #t the same time,
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benefits and costs have to be balanced as collecting risks leads to costs. 9azardous
effects can be occur if several risks bundles together and are not identified previously.
2*berle # O, 344J6 suggests that as fre!uent variations occur in the company, supply
chain and environment the risk management process, risk identification should be
carried out continuously. Different methods for risk identifications are suggested by
omeike in 344=. *&le e&plains that interviews, checklists, and /1O analysis for
identification of ongoing and obvious outsourcing risks, with failure mode and effects
analysis 2-;*#6 targets detection of future and unknown outsourcing risks. herefore,
preference is to use a combination of methods as suggested by 2*berle # O, 344J6
o identify risks, risk classification may helpful in the risk identification depending on the
applied method. 9owever, risks can be classified in different ways. 1hile disastrous,detracting, marginal and negligible risks depending upon hazard severity are
distinguished. /trategic, tactical and operational risks are separated on the planning
level by 2/ahasraman +arasimha, 3446. Depending upon the business type or
operational area, $hristopher and %eck in 3445 refers supply, demand, process, control
and environmental risks while ogler in 3443 describes supply, production, distribution,
financial and personnel risks. ransport risks are introduced into both supply and
distribution risks is then specified as default due to loss of the entire cargo, !uantitative
representing partial destruction during transport, costs including increase in transport
costs, !uality elaborating damage during transport, and time risks 2delayNearliness of
delivery6. 2ogler /, 34436
During risk analysis, at first by indicating the similarity of occurrence and the possible
outcomes of risks these are grouped. he estimation can either be done !uantitatively
or !ualitatively.
uantitative methods to assess risks are used if data availability is enough. hough
!ualitative methods lowers time and efforts may leads to subjective results. -or risk
assessment several methods used for risk identification can be utilized, for e&le
brainstorming or -;*#. #gain, it is 5( sensible to utilize a combination of methods from
the suggestions of 2omeike -, 344=a6.
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R05 80-0+-07
his third step of the risk management process is strategy selection and implementation
stage. $ompany representatives select strategies and measures and assign priorities to
meet the risks depending on the nature of risk, the enterprise, supply chain, and their
objectives. $osts of implementation and chances of rebound risks also considered while
selecting moderation strategies and measures.
#s per the citation of 2%orter, 3446 a strategy to characterize @the creation of a uni!ue
and valuable position, involving a different set of activitiesA, strategy is designed by
application of various measures. #vailable strategies and measures to handle risks are
concentrated in chapter J.
R05 67-<
It is the final assessment of the measures applied for their effectiveness during risk
control. o patch"up, further measures prescribed especially with respect to changing
environment. 0alanced scorecard is the well"known e&le of application of method
respect to risk control step as e&plained by 2Cajuter %, 34((6
2*berle # O, 344J6 /uggests continuance in risk management process because
individual risks or the entire risk situation may change with time
KEY SUCCESS FACTORS AND RISK FACTORS IN LOGISTIC OUTSOURCING
BUSINESS)
K S;6655 :+6-5)
•
uality manpowerL >rowth of =% and 5% services in India forces manytrucking and warehousing companies engaged with particular segment to work
as overall logistics service providers. Inade!uate skilled manpower available
with these companies to operate the entire supply chain. raining of personnel
will be essential to the success of these players.
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• Ceeping pace with technologyL In substructure of the ransportation, ogistics,
1arehousing and %ackaging /ector use of Information echnology 2I6 is very
effective. #ssistance of I in 1;/, ransportation ;anagement /ystem, rack
and race, *nterprise esource %lanning, etc is vital and catalytic. %roduct
movement 2-ID tags for tracking, >%/6, warehousing 21;/6, etc are the areas
of logistics becoming strong with use of technology. Organized logistics
companies become superior to the unorganized ones with the adoption of
technology, and will be crucial to their operations with increased competition.
• *nhanced operational efficiencyL o survive under constant pressure and the
growing competition, improving operational efficiency will be work key to the
success of logistics firms.
K R05 F+6-5)
• H0*
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alliances and charges too much to customers as there is no suitable regulations
resulted in increased overall logistics costs.
• L+6 : 50aining fle&ibility
Cnow"how transferNusageabor considerations
$apacity improvementNhandling peaksNcustomer demand
Decrease in capital employed
#ccess to new I
Increase in speed
$ompany restructuringNdevelopment of supply chain
partnership
$entralized facilitiesNdistribution systems
;anagement and political considerations
>lobal capabilities*conomies of scale 2realized by service provider6
>aining more cost transparency
$hange implementation
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S;6' (DUHAMEL F 1&&3"
# fundamental factor in logistics outsourcing contributes $ost reduction and cost related
aspects. /econd most mentioned influence for logistics services are core businessNon
core competencies and at third the improvement of service level and service !uality.
>aining fle&ibility, the transfer of provider8s capability, applications associated with labor
or the ability to troubleshoot barriers are the other influences mentioned by fewer
authors and also provided by 2Cajuter %, 34((6
Observations from survey conducted suggest that transport, reverse logistics and freight
forwarding are the functions fre!uently outsourced in the surveyed companies.
Overview of the outsourcing of different logistics functions by manufacturing and trading
companies in the various regions of India shown below. #s per available information
more than JK of the local and international transports are carried out by an e&ternal
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service provider for every J organizations out of (44 in India. /urvey observation
suggest that about 34K of these companies outsourced (K"JK of their household
transport 2(JK of the companies for international =4 transport respectively6 from the
e&planation of . #s transport does not belong to the main proficiency of manufacturing
companies transport is outsourced very fre!uently from the organizations. ransport,
freight forwarding, and reverse logistics like areas have a long history of proficiency in
the world of logistics service providers. hese functions are outsourced to third parties
due to the cost factor criteria suggested by 2Cersten 1 /chrPder ; /inger $ -eser ;,
34((6.
F;'1' RELEVANCE OF LOGISTIC OUTSOURCING SERVICES'
S;6' (K5-7 W S6* M S07 C F5 M 211"
In terms of investment, in third party ware"housing and inventory management
investments are negligible or lesser by companies as preference is to regulate prime
operations like product customizationNfinalization and logistics I systems. It is the same
for invoicing and order processing. $ompanies are often afraid to operate these fields
through service providers because these activities mean direct customer contact.
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T>
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seng, 344J and modified $hang, (::M puts some components of logistics costs as
follows. -inding of this analysis is, with charging to 3:.5K of logistics costs, and
inventory costs 2(.5K6, warehousing costs 2(,4K6, packaging costs 2((.:K6,
management costs 2((.4K6, movement costs 2.MK6 and ordering costs 2J.JK6
transport shows ma&imum costs. he transport costs is almost one"third to total logistics
costs. he means of transport, corridors, containers, pallets, terminals, labors, and time
are contributed under transport. his figure represents the cost structure of logistics
systems and order of importance in improvement processing. 2Caliprasad ;, 344)6
(K+
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T+=raph figures shows that ma&imum growth is shown by therailway and sea modes among the increase in all modes of transportation along with
annual increase in all modes of transportation.
T+=
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M : T+75,-+-07 P67-+ : --+< 6+
8987-A0 2.#
S+ 2
R+0+ 23
R+ #4.#
F0;.3
S;6' 2%rabir D, 34(36
I7-,-+-07) >raph shows that for cargo movement in India by oads is more
favorable mode as compare to the ail, #ir and /ea modes of transportation. eason
behind is that the roads almost cover all the areas in India than the other mode of
transportation. 0est mode of transportation is road because of poor development and
services of other modes. One more reason that favors road in India as first choice is
that road covers almost all the urban, rural and hilly area in contrast to railway and
cargo movement by air is least preferred due to high cost involved.
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T+=
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T+=
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practice with almost JK of the single truck operators and almost :4 Kof with turnover
of less than I+ (4 million trucking companies. $ompared to the other industries worst
working conditions, weak and unstable manpower policies, unfair practices involved,
low pay"scale are the reasons for disfavoring employment in sector and are e&ploiting
sectors image. 0esides of industry persons >overnment also hasn8t concentrated on
the manpower development in this sector. here are no provisions made for driver
training, loading N unloading supervisory, proper handling practices for this sector e&cept
very few institutions.
oad transport system possesses significant advantages over other modes. oad
transport system has following advantages
• e!uires lesser capital investment for vehicles,
• $omparatively easy for new users to gain entry,
• *nsures that innovations and new technologies can diffuse !uickly through the
industry.
• elatively high speed of the vehicle.
• One of its most important attributes is the fle&ibility of route choice.
2odrigue < %, 344)6states, these multiple advantages made cars and trucks the modes
of choice for a great number of trip purposes and led to the market dominance of cars
and trucks for short"distance trips.
A9+7-+5)
•
oad network of =.= million km is the second largest globally
• JJK of total freight movement is via roadways
• oads offer wide reach and easy accessibility to even small markets
D05+9+7-+5)
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• 9igh cost of transportation
• +ational 9ighways account for only 3K of the total network but carries 54K of
total freight
K D9
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F0; $
S;6'(P+=0 D 212"
I7-,-+-07) >raph suggests that there is high movement of goods by railway, 0ut
restricted at domestic level.
RAIL)
he Indian ailways planned to develop ogistics %arks QGhubs8 in supply chain
parlanceR is a good one. o reduce the supply chain costs plan has potential to
accumulate and enlarge the supply chain. -or efficient working of the plan the service
concept, service delivery and infrastructure will be well organized for the ailways
ogistics %arks. -or the ailways ogistics %ark to count up financial worth to the
supply chain, one of the activity of transport means incoming or outgoing, has to be by
rail. -or switching the customers from road to rail the Indian ailways would have to
put"in innovative train services.
A9+7-+5)
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• /pread over M(,J44 km, railways carries 3JK of total freight movement
• ow transportation cost as compared to roads
D05+9+7-+5)
• 0ulk commodities account for :4K of total freight revenues
• Infle&ibility to reach deep interiors
K D9olden uadrilateral to be initiated in
344M"4:
SEA/PORT'
TABLE .!' SEA/ PORT FRIGHT IN INDIA
Y+ S+ F0*- ( 80
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F0; !
S;6' (P+=0 D 212"
I7-,-+-07) ;ovement of goods by the sea is e&plained through above graph.
#ccording to the graph with increased international market the movement of the goods
by sea also increased.
SEA/PORT)
(::: " 3444 prices suggest that the contribution of ;arine transport sector is over 4.3K
to the country8s >D% at constant prices. >D% has increased contribution of transport
sector as the economic activities are growing since last couple of years in India. In the
Indian economy shipping industry plays a key role. India has seacoast of around
,J(km is well adopted (3 major and (M minorNintermediate ports. Vessels having
M.53m >ross egistered onnage 2>6 is transported across ports till the end of
December 344). Increased International trade in India carried through ports. 1ith
growth of :.J(K against the same period of the previous year prime ports in India
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collectively handled 5)=.M5m tons of cargo in 344)"4. ==.=MK of the overall traffic at
major ports between #pril";arch 344, is contributed by he petroleum"oil"lubricants
2%O6 followed by iron ore contributing (.=K, coal (3.:MK, container traffic (J.M5K,
fertilizer contributes to =.45K, and others (.5:K.
#ccording to the %lanning $ommission, with predetermined investment of '/S(.
billion (Jm > 2specified in =rd target6 fleet strength is achievable by India8s shipping
at the end of 34(("(3. $#> with growth rate (4.:)K from 344"4M to 34(("(3, will
improve port throughput up to (,44Mm tones.
A9+7-+5)
• $heapest mode of transportation
D05+9+7-+5)
• %oor state of inland waterways in the country
• 9igh turnover time
K D9
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24 3!# !2# 4% %12$ #1 &
F0; %
S;6' (P+=0 D 212"
I7-,-+-07) continuous increment in movement of goods by air is due to its fast andsafe way is suggested by graph. #lso for the international market air mode of
transportation is preferred more than domestic market.
AIR)
(::: " 3444 prices suggest that the contribution of #ir transport sector is over 4.3K to
the country8s >D% at constant prices. >D% has increased contribution of transport
sector as the economic activities are growing since last couple of years in India. -rom344("43 to 344)"4 there is elevation in local air cargo traffic with $#> of (3.M4K and
for same period international air cargo traffic runs at $#> of (=K. In the year 344)"4
cargo traffic is pre"assumed to be more than(.J)m tones noticing growth rate of (5.)JK
with respect (.5 m tones during 344J"4).
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%lanning $ommission suggests that India8s air cargo movements would fly at over
$#> of ((.JK from 344"4M to 34(("(3.>ems and jewelry, special chemicals and
high"value pharmaceuticals are highly e&ported leads to increase in international air
cargo traffic at all Indian airports.
A9+7-+5)
• -astest mode of transportation
D05+9+7-+5)
• ow freight movement
• MK of total freight traffic being handled by airports in metro cities
K D9
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research with affiliation of survey techni!ue, conduction of workshops and conduction of
e&pert interviews, primary and secondary techni!ues are utilized with contempt of
!uantitative and !ualitative data as well. 2/aunders hornill ;, 344:6
R5+6* P+-*>+)
2/aunders hornill ;, 344:6suggests, the prime constituent of project research is the
pathway with which it is accompanied. #s the strategy is used of *&pert interview and
1orkshop conductance the direct source involvement is mandatory for the research
pathway to lead smoothly which created need of using inductive research pathway in
order to accomplish the research.
METHODLOGY OF SURVEY'
S;9 +5 + 5+6* +,,+6*
#s per the suggestions of 2D'# / +##/I;9#+ O #
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2D'# / +##/I;9#+ O #
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re!uired to be assured by the researcher in order to motivate respondent in favor of
providing guanine and authentic information8s.
%hrasing of $losed !uestions enables data collection, data input and computer analysis.
#ccording to 29ier < %age # /amouel %, 3446 these are fre!uently used in large"scale
surveys for !uantitative studies. uantity or information, category, listNmultiple choice,
scale, ranking and comple& grid or tables are the e&les of closed !uestion as per
20la&ter 9uges $ ight ;, 344)6
C
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initiators or pacifiers are appointed with respect to speculate the relevant data from the
group of professionals in order to discuss the insights of conte&t of the issue and gather
authentic information in order by which respondents response for the debate or
particular !uestions asked
M0-5 +7 '80-5 : >5*,5
he rationale of selecting the research pathway with the virtue of citing group of
professionals risen the following merits and de"meritsL
he workshops are beneficial in case of peoples who are not in favor of personnel
interviews. #lso in this type of survey, workers of the firm are get more involved with the
conte&t of the issue and starts providing their innovative ideas regarding research
conte&t. 'ltimately this techni!ue motivates the thinking of peoples on adroitness and
for their affirmations signifies the workshop. 2*riksson % Covalainen #, 344M6
1hile highlighting the de"merits of this techni!ue, primary highlights the undefined end
and least speculated result, while many of peoples are not in favor to disclose their
ideas in group and willing to plea in personnel interviews. he variable
accomplishments of the variable peoples may vary the outcomes.
In my case of research the workshop is conducted in two parts, in which first group of
professional sorted was local authorities or government peoples while second work
shop group cited was company professionals. he workshops are conducted on the
basis of regular project meetings. wo different groups with two different
accomplishments were selected with accurate planning to eradicate the outcome
variations. he e&pected de"merits of the workshop are counterbalanced by using this
techni!ue of two workshops.
STRATEGY OF THE RESEARCH)
/econdary data collected forms the base for strategy of the research. *&perimental
scheme of the research is utilized instead of theoretical scheme, because *&perimental
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scheme doesn8t re!uire any collection of primary data. #s the conte&t of the research
provides inductive ideas which the theories proposed in regular manner are changed to
regular form their definitive manner.. he research is gathering of correlated views and
the data accumulated is imagined as contemplation of peoples understanding about
conte&t of the research issue, organizations, and customers related to logistic
outsourcing and services. hus inductive approach is best suitable for the project.
ETHICAL ISSUE OF THE RESEARCH)
his section of the research enables us with prime ethical issue that confidential
information obtained from the primary source of the organization. o avoid further
conspiracies with the sources of data, it is purposefully omitted in the research
presentation since the data collected includes the information that comes under the law
of company secrecy. he names of the customers as well as e&pertise, managers,
workers who had given the interview for the process of data collection also kept secrecy
with respect to law of secrecy of personnel information.
EMPIRICAL DATA ANALYSIS)
he logistical outsourcing risk management in actual logistic business scenario is
conferred with reference to imperial data obtained by using various data collection
techni!ues e&plained in previous part of the research. he survey techni!ue is used as
base to construct research with the help of conducting two workshops with company
professionals and local government bodies or unskilled workers with the virtue of
speculating the various logistic outsourcing risks and attributes of transportation
outsourcing risk as major risk speculated previously in this study and in the end of the
task, enteric conclusion is designed in accordance to survey techni!ue used.
he project is undertaken with respect to speculate the logistic outsourcing risks in #pril
34(=. he various attributes of the logistic outsourcing risk like risk prominence,
management of risks and risk mitigation are studied with the virtue of research
background drawn in earlier part of the research. he results obtained in empirical
studies of this research are depicted in following section of the research"
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PARTICIPANTS IN THE SURVEY
he target groups of the empirical study were Indian manufacturers with 33 replies and
logistics service providers with (4 replies. %rocurement 2#dministration6, supply chain
management 2administration6, logistics 2administration6, controlling 2administration6,
business management or member of the management board are the areas in which
respondents works. -igure below shows the share of small, medium, and large
companies of logistics service providers and manufacturing companies. #ccording to
2Cersten 1 /chrPder ; /inger $ -eser ;, 34((6analysis of majority of replies come
from large enterprises while middle type is less interested to respond is carried.
In order to carry empirical analysis in Indian ogistic ;arket, the market is segmented in
two categories viz. logistic service providers and manufacturers. he survey techni!ue
of workshop is followed in these two segments and data is obtained from 33
manufacturers and (4 logistic service provider organizations. he following table clearly
presents number of responses obtained during workshops when survey is actually cited
is market by subdividing above two segments in large scale, small scale and medium
scale organizations. +umber of administrative peoples, managers as well as skilled and
non"skilled workers responded with enthusiasm in contrast to the statement made by
2Cersten 1 /chrPder ; /inger $ -eser ;, 34((6as large scale industries respond
devotion while small or medium scale shows deviation towards academic research8s,
he participants in the survey workshop are mentioned in following table created by
researcher"
P+-060,+7-5 07 -* 5;9'
T+=
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M+7+
S70
D06-5
E8,
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1 DTDC O,+-07
M+7+
E8,
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I5 R05 M+7+87- I75-0-;-07+
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D ; ;5 8-*5 - +7+
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$ost risk due to increase transport costs is also the major concern as like the !uality
risk. uantitative risk by partial destruction during transport and default risk arises due
to loss of entire cargo contributes to lower e&tent compared to the other risks. ransport
risks are sorted by manufacturing companies is presented in figure below. ogistics
service providers consider time risk as most important along with the costs and !uality
risks.
#s per the opinion of 2Caluza 0 0lecker , 344J6, @costs, !uality, and timeA are counted
as strategic success factors since (:M48s and considered most important. hese three
aspects as @magic triangleA of project management. #s in all cases time, !uality and
cost risks were regarded most important, study has complete impact of these factors.
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RELEVANCE OF TRANSPORT RISKS FOR THE LOG
F0; 11
/ource" 2Caluza 0 0lecker , 344J6
In the risk management process, the assessment of risks follows the identification of
risks.
he reports of MK of the company representatives suggests that #ssessment of the
risks is not completed, two dimensions probability of occurrence and amount of damage
are !uantified accurately by 54K of the e&perts. 1hen answering this !uestion, it was
possible to agree with several statements or to reject them.
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R5; >5*,5 'E-7 +7+0-* + - -* 07-0:06+-07 :
-+75,- 05
During this research period two workshops on transport risks have been held in 5*,'
In accordance to importance of workshops categorized in previous methodology section
of the research, the more potential risk factor identified during first workshop is @ruck
DriversA in accordance to heterogeneity in outsourcing risks. he identified potential
outsourcing risk is further classified into status of driver, contemplated behavior of
drivers, and un"contemplated behavior of driver as potential outsourcing risks. 1hile in
case of outsourcing risk as truck, categories like condition of truck during time of
delivery, appended accessories of truck risks are identified under the category internal
risks under company point of view category. 1hile analyzing these risks in terms of
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company and e&ternal, added advantageous e&ternal risks like environmental risks,
behavior of local authority in delivery area, infrastructure of the area categorized are
speculated by the participants of the workshop.
RESULT OF THE FIRST WORKSHOP'
T+=
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• Vehicles
condition
$hassis
• *scape Of
-uelNOil
I7-7-07+< +-06
=*+90
• /peedingN9igh
/peed
• 'se Of %hones,
aptops OrVNInattention
• OvertakingNDangero
us Driving ;an
oeuvres
• ow Distance
• est %eriod
• ;issing
DrivingN1orking
ime Documents
• DailyN1eekly est
ime +ot -ulfilled
• $argo /ecuring
• Overweight
• $ondition Of he
T;6
O9
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• Overweight
• %oor Driving /kills
•
$ondition Of heVehicle
2$reated by researcher, 34(=6
1hile conducting the workshop it is observed that many of the workshop participant
were not providing much association awhile many of them have not attended workshop,
so in order to understand dipper concern of logistic outsourcing risks, decision of
conducting another workshop with the virtue of company prospective outsourcing risks,
is made by the researcher as follows".
THE COMPANYS PERSPECTIVE SECOND WORKSHOP'
In accordance to decision made while conducting first workshop, the second workshop
is conducted with employees of the organization and local government authorities in
target market selected in #ugust 34(=. ;any of the professional operating in logistic
outsourcing business are attended this workshop and interim interpretation is drawn as
follows"
he variable transport outsourcing risks are speculated in this workshop. 1hile
conducting second workshop researcher cited that many of the outsourcing risk
elements speculated in first workshop are replicated in second workshop as well. In
order to conduct second workshop, the transport outsourcing risks are subcategorized
into political, environmental, organizational, truck and truck drivers by adding two e&tra
elements in the category of e&ternal risks in workshop. he prime potential elements
like unskilled truck drivers, appended accessories defects in truck, uncertain
environmental conditions and lack of infrastructure advantages like road conditions,
access to delivery locations are speculated in second workshop.
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RESULTS OF THE SECOND WORKSHOP
T+=
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• ack Of
*&perience
• In"Official
ules
• %roblems
During
ransport
2%olice
Inspection6
Due o
'nknown
egulation
s
• #bsence
Of Or 0ad
$ommunic
ation
0etween
Driver #nd
Owner
• Incorrect
Documentati
on
• ;indless N
%rofit"
Oriented
0ehavior Of
he
$ompany
Information
$ustom
/ystem
• Incorrect
ashing N
oading
oss Of
>oods
During
ransport
• %roblems
1ith
Dangerous
>oods
#nimals
• heft
2/ecurity
o abor
/trikes
• abor
estriction
• oss Of
>oods Due
o $rime
/ituation N
errorism
•
Delay Dueo Different
9andling Of
%olice
Inspection
2$reated by researcher, 34(=6
he political risk factors are speculated in the research during workshop and are cited
as corruptions, crime situations in the country which may irrupts risk of damage to
goods to be transported, handling of material as well as political scenario between two
states or nations plays vital role while crossing the borders of states or nations.
DISCUSSION IN ACCORDANE TO TWO WORKSHOPS CONDUCTED'
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1hile conducting investigation of workshops conducted researcher cited that the
outsourcing risks speculated during first workshop are cause"related viz. appended
defective accessories of trucks, time reliable delivery pressure, and impacts of
regulatory framework of local authorities in area selected, while in accordance to the
second workshop held, many of outsourcing risks identified are effect"related, viz.
default risks like environmental conditions, political scenario of the target area, access
to the delivery area, infrastructural developments etc. 1hile conducting workshop
researcher had introduced to many secondary risks which are less potential hazardous
to industry and those are identified as government changes, problems during crossing
the borders of state as well as nations, environmental conditions like rainy weather,
snow falls, heating temperatures in case of transporting frozen goods etc. he
hazardless of the predicted risks is dependent on the operating government8s political
scenario and level of developed infrastructure in demographic selected. he risks
potential in responsible for the damage to industry and it is variable element with
respect to risk occurs in different cases different intervals. hus in order to avoid
potential outsourcing risk damages to affect outsourcing business, the strategy of risk
management should be institutionalized in the organization in order to follow risk
mitigation strategy which is e&plained in further part of the research.
FINDINGS FROM WORKSHOP
he workshop results are interpreted in this part of the research in accordance to the
protocols mentioned in previous section of the research. In accordance to protocols
provided, while conducting the workshops, in initial section the general information
about the organization is conducted and then workshop initiated with asking the
employees about their knowledge on the issue of logistic outsourcing risk and logistic
outsourcing risks management is speculated. he interpretations of the results
discovered from workshop are cited in ne&t section of the research.
MANAGEMENT OF TRANSPORT RISKS WITH THE VERTUE OF WORKSHOPS'
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In accordance to work shop conducted, many of professionals during workshop, cited
outsourcing risk as hazardous entity element which company operations in pessimistic
way during base analysis of company is carried. hus outsourcing risks are speculated
as potential damaging element8s that mainly affects the growth of the organization by
deviating it from achieving its objectives of growth set. he risk also speculated as an
element which provides opportunity of improvement to the organizations, despite it
deviated the organization objective by many of professionals. 1hile few workshop
participants stated that outsourcing risk as hazardous by means of creating revenue
impacts on economic grounds, thus humiliating the financial status of the firm. -ew
participants created highlight on impact of outsourcing risk on supply chain
management systems in the firm, while many of them created focus on outsourcing
risks by e&plaining it in terms of economic, environmental and social elements that
affects the organizational operations. In all, the conte&t of the workshop, suggested
researcher that, logistic outsourcing risks are hazardous elements of the business and
they cause potential damages to the industry operations.
he professionals speculated that the risk management is mandatory phenomenon with
pursuing the firm towards success of objectives set by the organizations. he table
number 5, cited below represents the number of responses gathered during workshop
in terms of speculating the major outsourcing risks element and need of risk mitigation
major to be followed in accordance are elaborated in further part of the research.
1hile conducting workshop in various organizations, researcher came to hypothesize
that M4K of the large scale, medium scale as well as small scale industries have
institutionalized risk management function in their firm.
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F0; 12
(C+- = 5+6* 213"
Out of all workshops conducted in different organizations, 3 out of ) manufacturing
organization associates responded in the favor of institutionalizing risk management as
regular process in their organization, while all of the (3, logistic service providers have
responded in favor of institutionalizing outsourcing risk management in their
organizations. he manufacturing organizations who have responded negatively
regarding the potential of outsourcing risk have adopted the strategy of accepting
outsourcing risk as their daily process and they have developed task force in order to
mitigate this daily task of outsourcing risks.
B ,+- 67505-07 +7+
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viz. time reliable, !uality of outsourcing, default and !uantitative. he least consolidation
is given to the categories !uantitative risks, !uality of the delivery and default risks as
transport risk is identified as major logistic outsourcing risks in previous section of the
study. ogler,3443. hese risk and number of responses by the associates are
mentioned in following table"
T+=
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he categorized risks are again subgroup according to their causes which are depicted
in above figure. During workshop, total 3M, associates responded the categories of the
transport risks and out of that number of responses per category are cited in above
table viz. (4 respondents responded @timeA, category as most important risk whose
potential damage is very hazardous to their firm while : responded as @defaultA risks are
given prime concern in their organization with respect to uncertainties in their business,
out of all accordingly J respondents responded !uantitative and !uality risks as most
perceived transports risks causing potential damages in their firm.
In addition to above differentiated outsourcing risk elements, the professionals
associated with workshop responded =) more major risks factors stipulated due to
uncertain and most unusual factors, which created a doubt about categoriesdifferentiated by the researcher after workshop. he other risks like fuel shortage,
damaged infrastructure, along with other organization specific internal risks factors
broaden the risk spectrum designed by the researcher. 1hile is cases of some
manufacturers , the distinguished transport risk analysis proved as difficult task due to
huge network they use for their business around the globe. #lso the authenticity of the
information8s provided by the drivers, local authorities as well as workers is also
re!uired to be tested as logistic business is entirely majored on time, !uality, !uantity
and defaults at the end of delivery rather than what risks might have incurred during the
delivery process.
In accordance to workshops conducted, the proficiency of the outsourcing risks is
identified and it is clear that ):K of the manufacturers and logistic service providers do
institutionalize as well as classify the outsourcing risks as their routine business activity.
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F0; 13
(C+- = 5+6* 213"
he workshop conducted provided information about the classification of outsourcing
risks are done on ground of its anticipation as follows"
" #nticipated risks"
;any of the organizations participated in workshop responded that they
implicated supply chain management systems in their firm in order to cite the
predictable outsourcing risks.
" 'n"anticipated risks"
hese risks mainly categorized as per workshop responses are legality of
business, strategies used in business, data to day business activities and market
scenario. #lso the logistic outsourcing standardization nomenclature used by the
third party when logistic is outsources, also arisen as prime outsourcing risk.
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-or the workshop e&perts, road transport risks assessment was a difficult task. Only
)=K companies do the evaluation of road transport risks rest companies estimate risks
in individual cases. -or each company, supply chain and even to each individual risk
assessment varies. hese troubles occurring in assessment of road transport risks
shows need for action on both the scientific and business side.
D5 -* 05 +555587- 6;
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344)6, the reactive ;easure is mitigation measure that has followed by an organization
in order to mitigate the damage occurred due to the outsourcing risk, while %roactive
approach is implicated in outsourcing risk management, prior to the damage e&pected
due to outsourcing risks.
1hile strategy of distinguishing outsourcing risk as described in earlier paragraph with
the virtue of transferring, sharing, reducing, avoiding or accepting the outsourcing risk is
elaborated by other authors in order to implicate logistic outsourcing risk management
in business. 1hile in some cases objective of risk mitigation still not achieved in
accordance to classification and distinguishing made over risk mitigations. In such
cases risk mitigation is achieved by implicating strategy reducing the impacts due to
occurrence of such risks is implicated in order to avoid the loss of data or reluctance indata to achieve objective of outsourcing risk mitigation. 2Cersten 1 /chrPder ; /inger
$ -eser ;, 34((6
In order to set the strategies for the risk mitigation in transportation outsourcing risks,
authors further classified risk mitigation measure on the grounds of general outsourcing
risk mitigation measures and specific outsourcing risk mitigation measures. #nother
class identified by the authors, is procurement type of outsourcing risks 2Cersten 1
/chrPder ; /inger $ -eser ;, 34((6
LOGISTIC OUTSOURCING RISK MITIGATION'
M0-0+-07 8+5;5 : 7+< 055
he general mitigation outsourcing risk measures are not applicable for the specific
class of outsourcing risk mitigation. hey are applied to the general risk arises in supply
chain management process. he general risk mitigation measures are depicted in
following figure under the subcategories" >eneric Outsourcing risks, %lanning and
%revention of $risis, $ommunicationNInformation %olicy and %ersonnel mitigation risk
measures.
T+=
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MITIGATION MEASURES FOR GENERAL OUTSOURCING RISKS
G706 055
"
#d
"
-le
P577<
" -urther education
in risk
management
" $ross functional
teams
C88;706+-07 +7I7:8+-07,
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@ransferring ransport isks 2*.>.
Incoterms6A
M+ =; @Own ;anagement Of ransportsAP97-07 @0usiness $ontinuity %lanAR;607
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S
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future research, by creating a base for the research for identifying risk factors and
mitigation over it in other logistic activities like warehousing, packaging, managing
movement, ordering. esearch also contribute by provide majors for prime logistic risk
factors like timely delivery, cost of logistic outsourcing, !uality of service to be provided,
default loss due to cargo loading, and !uantitative risks in logistic outsourcing business.
CONCLUSION)
he participants in the survey conducted within this project estimated the relevance of
certain transport risks for the logistics sector in general. he results reflected that the
time risk 2delay unseemliness of delivery6 was regarded as the highest risk, followed by
!uality 2damage during transport6, cost 2increase of transport costs6, default 2loss of the
entire cargo6 and !uantitative risk 2partial destruction during transport6. he evaluation
of four logistics strategies with regard to their suitability and application showed that the
respondents rated all specified strategies in the terms of suitability higher than in their
actual application. ;oreover, the respondents regard the general importance of supply
chain risk management to be increasing considerably over the last years. he results
gained in the survey were deepened with the help of two workshops. 1hile the aim of
the first workshop was to identify transport risks from the perspective of road police
authorities, the second workshop aimed at detecting transport risks from the companies8
view. #s a result of the workshops, different kinds of risks were identified and clustered
according to the categories truck driver, company, truck, e&ternalNenvironmental and
political risks. 1hile the risks mentioned by the local authorities were mainly cause"
related, the different risks specified by company representatives were either cause"
related or effect"related. he huge number of identified risks in the field of transport
shows that due to their diversity a successful risk management must consider different
perspectives. In addition to the survey and the workshops, si&teen e&pert interviews
were conducted. In the e&pert interviews, the focus was set on the implementation of
risk management and on possible risks which may occur in transport. 1ithin the
interviews, a total of (3= transport risks 2including a large number of multiple risks6 were
identified and allocated to groups which specify the type of impact of each mentioned
risk. hese groups were time, default 2respectively !uantity6, cost, or !uality of the
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transport process. 1ith the virtue of survey techni!ue various interviews are collected
from the professionals working in logistic industry, I came to conclude that in spite of
many risk factors in logistic outsourcing business, ransportation is identified as major
risk source in logistic outsourcing business. ;any modes of logistic outsourcing were
studied in the research like #ir, $argo, road and /hip, but out of all that transportation
mode is identified as most efficient mode of logistic outsourcing in India, as in India all
the parts of the country including rural as well urban areas are accessible by the roads
and the prime objectives of logistic outsourcing times, !uality and cost factor base
delivery can be successfully achieved with use of road transportation mode. Despite of
it, I identified many uncertain logistic risks which are mainly regulatory issues with
different local as well as national governments, condition of the driver, condition of the
vehicle, conditions of the roads, environmental factors, while using road transportation
mode with. #fter collecting various interviews by conducting workshops in various
regions of India, I identified key success factors of logistic business like !uality
manpower, use of technology, operational efficiency are still lagging behind in India in
terms of use of available manpower, technology and training the same with skilled
re!uired in handling logistic outsourcing operations. I identified that the logistic industry
has facing intense competition within India, which has lowered the business margin for
them, and this ultimately affected the use of available resources for them. Due to this
intense competition many of the logistic firms are lagging behind in their revenue
generation targets and this led them use the traditionally operating tools of logistic
outsourcing rather than implement most technologically sound systems in their logistic
outsourcing operations. 1ith the conte&t of the research carried and primary and
secondary data collected I came to conclude that along with transportation many other
risks factors in logistic outsourcing business can be identified and need to be focused
intensely by logistic outsourcing solutions providers, which are mainly lack of
infrastructure, lack of skilled manpower and technology, highly fragmented and
unorganized market, lack of standards and processes within the sector, regulatory
restrictions by particular territory by local as well as national government.
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1ith the virtue of primary data collected using survey techni!ue by workshop method, I
identified transportation is the major logistic outsourcing risk factor which is re!uired to
be focused as it cost around 4K of the total logistic cost in business. he entire logistic
outsourcing business margin is dependent on transportation business, while other
activities like warehousing, packaging etc. are given secondary considerations in terms
of margins. /o in order to generate a revenue for the business and ensure success in
logistic outsourcing business the four major risk identified, like time, !uality, !uantitative,
default 2loss in cargo6, and cost are re!uired to be counteracted by using key success
factors elaborated in literature review section of the research.
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