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PERFORMANCE MEASUREMENT OF A 3PL COMPANY Dissertation submitted to College of Management & Economic Studies for the partial fulfillment

of the degree of BBA (Logistics & Supply Chain Management) Guided by: Dr. Saurabh Tiwari Faculty: Dr. Saurabh Tiwari Associate Professor College of Management and Economic Studies University of Petroleum & Energy Studies Dehradun 248 006

Submitted by: Shreya B. Mukherjee Enrollment No: R380211034 SAP ID: 50015806 College of Management and Economic Studies University of Petroleum and Energy Studies, Dehradun, Uttarakhand, India April, 2014


This is to certify that this project work titled, Performance Measurement of a 3PL Company is a bonafide work done by Shreya Bharti Mukherjee, under my guidance. This report has not been submitted earlier to University of Petroleum and Energy Studies or any Institute for the fulfillment of the requirement of course of study. This report is an original piece of work.


Signature Dr. -----------------------Associate Professor UPES


I take this opportunity to thank everyone who has helped me during the course of this project. At the very outset, I would like to express my gratitude to my mentor, Prof. SaurabhTewari for his invaluable guidance and support throughout the project. His expertise, knowledge and critical feedback helped me to develop my project in the most appropriate way.


Signature Shreya Bharti Mukherjee

Executive Summary
Third party logistics (3PL) is a business dynamic of growing importance all over the world. However, it is at a very nascent stage in India, though some domestic and multinational companies are trying to establish themselves in this sector. This report is an attempt to provide a 3PL perspective in India. The report focuses on three major issues present extent of usage of third party logistics services, reasons for outsourcing and impact of usage of third party logistics services on business results. The paper reveals that most 3PL users are satisfied with the current level of services provided by 3PL service providers as it has led to a positive impact on business results. As a result, the usage of third party logistics services is likely to increase substantially (40 percent) in the future. There are three major reasons why firms measure their logistics performance. They are: (1) reduce their operating costs (2) drive their revenue growth (3) enhance their shareholder value. Measuring operating costs helps to identify whether and where to make operational changes to control expenses and to discover areas for improved asset management. To attract and retain valuable customers, the price/value of products offered can be enhanced through cost reductions and service improvements in logistics activities. The returns on stockholder investments and the market value of the firm are impacted by the performance of firm logistics. These seem to be obvious reasons why companies should want to be competent in performance measurement. Third party providers with sophisticated data base management systems and competency in activity-based costing can secure long-term alliances with their customers and their trading partners. Firms value timely, accurate, comprehensive, and actionable data about the activities that constitute their sourcing and fulfillment processes, whether it is used for planning, scheduling, measurement, costing, or pricing purposes. Successful third-party providers supply this knowledge. Under gain sharing arrangements, the firm and its 3PL partner can implement improvements that result in lower costs and share the benefits on an equitable basis. There remains a great opportunity for this alliance to involve the firms trading partners in the gain sharing program. Changes by suppliers and customers in how and where the work gets done can produce additional logistics savings that can be shared by all. The selection and integration of a capable 3PL requires managerial skill in establishing and maintaining trusting, long-term relationships. It also requires a continued investment in the success of each party, based on a strategic and systemic perspective of the interdependencies and potential of the alliance. In todays competitive market place what distinguishes winners from losers is the ability to differentiate themselves through their service and product offerings. For many firms, the service differentiation is accomplished by how well the logistics process is managed.

Certificate of Originality Acknowledgement Executive Summary Chapter 1: Introduction.1 Chapter 2:3PL.2 2.1. 3PL Companies3-4 2.2. History..4 2.3. Outsourcing4-5 2.4. Reasons for outsourcing logistics .5 2.5. Business Models.5-7 Chapter 3: How to evaluate a 3PL Partner8 3.1. Getting to the C.O.R.E. 8-9 Chapter 4: 3PL Profitability10 4.1. Global 3PL Market.11-13 4.2 Distribution of the 3PL industry by turnover13 Chapter 5: The 3PL Value Proposition14 5.1 Expanding the 3PL Value Proposition..14 5.2 Performance Measurement and 3PL Value Proposition.15 Chapter 6: Performance Measurement of NYK16 6.1 About NYK..16 6.2 History..16-17 6.3 TATA NYK..17 6.4 Business Operations.18

6.4 DENSO18 6.5 DENSO and NYK19 6.6 Performance Measurement of NYK.19 Chapter 7: Procurement20 7.1 ASMO Japan21 7.2 DENSO and ASMO21 Chapter 8:DENSO and Indian 3PL providers 22 8.1 About GATI-KWE23 8.2 DENSO and GATI-KWE..23 Chapter 9 News on 3PL.24 Chapter 10 Conclusion.25 Chapter 11 Bibliography26



Global 3PL Market Size Estimates

Pg. no.



Distribution of 3PL Industry by Turnover

Pg. no.

According to the Council of Supply Chain Management Professionals, 3PL is defined as "a firm that provides multiple logistics services for use by customers. Preferably, these services are integrated, or bundled together, by the provider. Among the services 3PLs provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding." Typically, a core company providing services or products is considered the first party; the customer, the second party. A third-party, then, is a firm hired to do that which neither the first or second party desires to do. A third-party logistics firm is a firm that provides outsourced or third party logistics services to companies for some portion or all of their supply chain management functions. 3PL typically specializes in custom clearance, Freight Forwarding, Warehousing, transportation services that can be customized to customer needs and demand. The 3PL market in India was under-developed and highly fragmented. However, recent trends show that the Indian market has come of age with small family-run businesses giving way/progressing to professional-run corporate enterprises. This refreshing change is indeed a welcome sign for the growth, as professionalism can go a long way in building efficiencies and reducing costs.

Third Party Logistics is the activity of outsourcing activities related to Logistics and Distribution. The 3PL industry includes Logistics Solution Providers (LSPs) and the shippers whose business processes they support. A 3PL is an outsourced provider that manages all or a significant part of an organizations logistics requirements and performs transportation, locating and sometimes product consolidation activities. A 3PL (third-party logistics) is a provider of outsourced logistics services. Logistic services encompass anything that involves management of the way resources are moved to the areas where they are required. The term comes from the military. In business, 3PL has a broad meaning that can be applied to any service contract that involves storing or shipping things. A 3PL service may be a single service such as transportation or warehouse storage or it can be a system-wide bundle of services capable of managing the entire supply chain. The term 3PL was originally coined to differentiate logistic providers who used the Internet to enhance their services from those that did not.

3PL Companies
Top 25 3PL companies in India: 1. 2. 3. 4. 5. Exelplc Berkshire, UK, London: EXL Kuehne& Nagel Logistics, Inc. SchenkerAssen, Germany DHL Danzas Air & Ocean Basel, Switzerland, Deutsche Post World Net P&O Nedlloyd Rotterdam, Netherlands Euronext: Nedlloyd (Royal P&O Nedlloyd N.V.) 6. TPG/TNT Hoolddorp, Netherlands, TPG NV 7. Panalpina Basel, Switzerland; (U.S.) Foster City 8. UPS Supply Chain Solutions Atlanta, GA, NYSE 9. Nippon Express Tokyo, Japan, Tokyo 10. C.H. Robinson Worldwide Eden Prairie 11. Menlo Worldwide Redwood City, CA 12. NYK Logistics Tokyo, Japan; Tokyo 13. Expeditors International of Washington Seattle, WA 14. Penske Logistics Reading, PA

15. Eagle Global Logistics Houston, TX 16. BAX Global Irvine, CA 17. Ryder Miami, FL 18. Schneider Logistics Green Bay, WI 19. UTi Worldwide Rancho Dominguez, CA 20. Caterpillar Logistics Morton, IL 21. APL Logistics Oakland, CA 22. Wilson Logistics Group Goteborg, Sweden 23. FedEx Supply Chain Services Hudson, OH 24. Maersk Logistics Copenhagen, Denmark 25. SembCorp Logistics Singapore

While it isnt immediately clear exactly who coined the term 3pl, its beginnings can be traced to the 70s and 80s as companies outsourced more and more logistics services to 3rd parties. Over time these 3rd party logistics service providers (3PLs) expanded their services to cover specific geographies, commodities, modes of transport and integrated their existing warehousing and transportation services, becoming what we now know today as a 3PL. Then, in 1996, the term 3PL was registered by Accenture as a trademark and defined as A supply chain integrator that assembles and manages the resources, capabilities, and technology of its own organization with those of complementary service providers to deliver a comprehensive supply chain solution. The term is no longer registered. The official CSCMP Definition up until HR 4040 was: A firm which provides multiple logistics services for use by customers. Preferably, these services are integrated, or bundled together by the provider. These firms facilitate the movement of parts and materials from suppliers to manufacturers, and finished products from manufacturers to distributors and retailers. Among the services which they provide are transportation, warehousing, cross-docking, inventory management, packaging, and freight forwarding.

In business, outsourcing is the contracting out of a business process to a third-party. The term "outsourcing" became popular in the United States near the turn of the 21st century. Outsourcing sometimes involves transferring employees and assets from one firm to another, but not

always. Outsourcing is also used to describe the practice of handing over control of public services to for-profit corporations. Outsourcing includes both foreign and domestic contracting, and sometimes includes offshoring or relocating a business function to another country.Financial savings from lower international labor rates is a big motivation for outsourcing/offshoring. The opposite of outsourcing is called insourcing, which entails bringing processes handled by third-party firms in-house, and is sometimes accomplished via vertical integration. However, a business can provide a contract service to another business without necessarily insourcing that business process.

The principle reasons for firms using 3PL services can be attributed as under:
Globalization of sourcing, manufacturing and distribution leading to an increase in the complexity of material movement. Competition that has forced companies towards more responsiveness and a reduction in inventories. There is an increased need for small but frequent shipments with 100 percent reliability, requiring core competence in logistics management. Resource constraints that require companies to concentrate only on their core manufacturing or new product development activities. In the 3PL industry, some service providers have high standardized service offerings. This enables the provider to benefit from increased economies of scale, risk sharing, and volatility smoothing. However, providing standardized services in a cheaper way is no longer sufficient for 3PL firms. Second, with the constant shift in client business, more customized and value-added services are required. Therefore, it is argued that 3PL firms need to provide more than standardized services. Innovation and new service development are vital for 3PL firms. Because different clients have different needs, differentiating logistics services is essential for a 3PL provider's business.

Business Models:

The 3PLs can be divided into two categories: those that own transportation, and warehousing assets , typically referred to as asset-based 3PLs ; and those that do not ; and those that do not -non-asset based 3PLs. The advantage of asset-based 3PLs over non-asset based 3PLs lies in their ability to achieve economies of scale by utilizing their capacities over many clients volumes and in some cases, to provide better availability of services. Problems with this type of model are related to the inherent nature of asset based companies. Asset-based 3PLs are likely to be more concerned about the utilization of their capacity than serving a customer in the most effective and efficient way. They might favor the use of their capacity and network, which may not be the cheapest or most beneficial option in terms of lead time. This can lead to sub-optimal logistics solutions and can limit the ability to adapt to the changing supply chain requirements of the customer. Asset-based 3PLs obviously have higher portions of fixed costs in their total cost structures. From a financial stand point, profits of firms with high operating leverage are more sensitive to changes in sales and small percentage changes in net cash flows. Therefore such firms have higher variability in cash flows and greater risk than firms with a lower ratio of fixed costs to total costs. In other words, such companies are more sensitive to fluctuations in demand for their services, while they get substantial benefits during high utilization of their capacity. Generally, in times of economic slow-down or for other reasons, when asset based companies can not achieve high utilization, higher costs for all participants or losses for the asset based 3PL will result. In such times, if exiting a relationship with an asset based 3PL is easy and there are other less costly options, a death spiral can be created. This is a continuous process where triggered by higher costs, clients will start leaving a 3PL making average costs for remaining participants even higher. The opposite process is when with every new customer, the system gains scale and appeal. However some large asset-based logistics companies try to give contract logistics departments a high degree of autonomy and flexibility in choosing service solutions for their customers. The goal is to organize the subsidiary so that it is not bound to the assets of the parent company and to use cost effective solutions and the transportation service providers available in the market, based on the individual needs of a customer. Non-asset-based providers are usually not bound to physical assets like transportation fleet and distribution facilities. This allows them to better focus on a clients requirements and objectives and gives more flexibility in providing effective and efficient solutions, by choosing carriers that are strong in specific areas and can provide best service/price packages. Sometimes potential clients consider such 3PLs simply as middle men and try to outsource separate functions to different carriers. First in our opinion, 3PLs are better positioned to negotiate for better terms from carriers if they are able to consolidate shipments, and create larger aggregate volumes coming out of a location and assist in economies of utilization for a carrier. Secondly, by utilizing their knowledge base in several areas of logistics and achieving synergies from broad

service offerings, they create capabilities to manage bigger parts of or whole supply chains, unlike asset-based 3PLs whose main focus is around their core business, thus achieving lower overall costs and greater efficiencies. The line between asset-based and non-asset-based sometimes become blurry as the industry increasingly consolidates. Companies merge and acquire other companies to broaden their service offerings, geographic reach, ad customer base. It is often the case that primarily assetbased companies merge with non-asset-based companies and vice versa. The general trend is that the non-asset-based model is favored over the asset-based model by customers, investors and 3PL companies for the reasons discussed earlier. Non-asset-based 3PLS receive higher financial valuations.

CHAPTER 3 How to evaluate a 3PL Partner:

Shippers, carriers, and even small intermediaries increasingly rely on third-party logistics (3PL) service providers to manage non-core logistics and supply functions, access capacity, and tap technology capabilities. 3PLs create value by pushing the envelope and helping customers reduce costs through tactical improvements, and enhance overall supply chain performance with strategic business process enhancements. Making the decision to work with a 3PL is often predicated by a needtransportation capacity and costs, seasonal warehousing, or global complexity, among others. But as outsourcing partnerships mature, customers need to routinely assess performance and set new goals. Many 3PLs proactively demonstrate return on investment. It's in their best interest to expand the value proposition and grow the relationship. But it doesn't hurt for customers to ask where functional outsourcing can take their business.

Getting to the C.O.R.E.

Here are four factors companies should consider when assessing 3PL performance: 1. Control. 3PLs generally control transportation and distribution capacity, directly or as a broker. They liaise on customers' behalf when contracting with carriers, forwarders, and other intermediaries. But customers need to exert control, as well. One of the most common reasons 3PL partnerships fail is poorly defined expectations. Scope creep occurs when control is lax. Outsourcers need to assertively communicate objectives and concerns, and constantly benchmark key performance indicators (KPIs) that are most important to themnot their service provider. A 3PL may be providing world-class service, but unless a customer measures that data and compares it with contractual or industry standards, it will never know. 2. Optimization. One way 3PLs create value is by helping customers optimize existing transportation and logistics functions. They do so by collecting and distilling mass amounts of data to granular-level detail, analyzing it, and identifying anomalies and redundancies. They can then address specific process fixesfor example, steering customers toward establishing a core carrier group or enforcing inbound routing guide compliance among

suppliers. Or they may uncover strategic system wide improvements upstream and downstream in the supply chain that turn problems into new opportunities to drive greater efficiency and economy. With so much change and variability in the supply chain, optimization is a recurring process. When pre-determined goals are met, new objectives should be created. 3. Reporting. Reporting is the key to understanding and recognizing 3PL performance, good or bad. Knowing where goods are in real time is an important part of this process, and 3PLs should provide shipment visibility and process information. Customers need to dictate which status reports are most critical to their needs so they can view performance as it relates to their terms, not the service provider's. Using the right metrics may help companies determine if they are striking the right balance between service and cost. 3PLs will collect, archive, and analyze historical reports to identify improvement areas, alert customers to real-time or recurring problems, and explore opportunities where they may be able to gain further efficiencies and economies. 4. Execution. When it comes to execution, 3PLs should strive for continuous improvement and customers should expect it. If a service provider is responsive to customer priorities whether it's controlling specific KPIs, optimizing functions, or reporting dataand executes according to plan, there should be obvious gains in terms of customer service, efficiency, cost savings, and innovation. Then the evaluation process begins anew.

CHAPTER 4 3PL Profitability:

With the Logistics industry often viewed as something of a barometer for wider economic performance, it is certainly not a great revelation to report that third party logistics service providers (3PLs) have not been immune to the slowdown in growth as the global economy struggles to recover. What is insightful, however, is how the wider economic challenges have impacted upon companies of different sizes, in different geographies and across service sectors, such as freight forwarding or contract logistics- and the different actions and strategies 3PLs have put in place to overcome these obstacles. For some, merely maintaining both revenues and/or profitability has been challenging. 3PLs have had to adjust their targets, business models and allocation of resources to adapt to what is commonly accepted as the new normal across service sectors, industry verticals and diverse international markets. However, the very broad and diverse nature of supply chains means that logistics market are performing with different degrees of success, challenges and opportunity, dependent upon geography, service sector and vertical industry.

Global 3PL Market Size Estimates

Global Logistics Costs and Third-Party Logistics Revenues (US$ Billion)
2012 Region North America Country Canada Mexico United States Region France Germany GDP 1819 1177 15680 18676 2609 3401 Logistics (GDP%) 9.00% 12.00% 8.50% 8.80% 9.50% 8.80% 2012 Logistics Cost 163.7 141.3 1334.6 1639.6 247.6 299.7 3PL 2012 3PL

Revenue% Revenue 10.20% 16.6 9.00% 12.8 10.60% 10.50% 10.50% 10.50% 141.8 171.2 26 31.5


Italy Netherlands Spain United Kingdom Others

2014 773.1 1352 2441 3804.8

9.70% 8.30% 9.70% 8.80% 9.30% 9.20% 10.50% 18.00% 8.50% 13.00% 10.70% 8.50% 10.70% 10.70% 8.50% 9.00% 9.00% 10.70% 10.70% 10.70% 12.80% 12.00% 11.60% 11.50% 12.50% 12.50% 11.90% 14.20% 12.30% 17.50% 11.60%

195.4 64.4 130.9 213.9 352.9 1504.8 161.8 1480.9 22.3 237.1 94 506.9 32.5 26.8 23.5 103.9 42.8 39.1 14.8 23.4 2809.8 57 277.9 30.8 45.8 24.9 45.5 27.2 509.1 1887.3 8350.6

10.60% 14.30% 10.00% 10.50% 9.90% 10.50% 10.20% 8.00% 11.30% 7.00% 7.20% 10.50% 7.10% 7.10% 11.50% 11.10% 11.00% 7.20% 7.40% 7.30% 8.60% 8.90% 9.00% 9.40% 8.10% 8.40% 7.00% 5.80% 8.50% 3.70% 8.20%

20.8 9.2 13 22.5 35 158 16.5 118.4 2.5 16.6 6.8 53.2 2.3 1.9 2.7 11.5 4.7 2.8 1.1 1.7 242.7 5.1 25 2.9 3.7 2.1 3.2 1.6 43.6 69.6 685.1

Region 16394.9 Australia 1542 China 8227 Hong Kong 263 India 1825 Indonesia 878.2 Japan 5964 Malaysia 303.5 Philipines 250.4 Singapore 276.5 South Korea 1156 Taiwan 474 Thailand 365.6 Vietnam 138.1 Asia Pacific Others 218.6 Region 21881.9 Argentina 475 Brazil 2396 Chile 268.2 Colombia 366 Peru 199 Venezuela 382.4 Others Region Total 191.2 4277.8 71830

South America

Remaining Regions/Countries 10559.4

Distribution of 3PL Industry by Turnover:


< 500m (22%)

> Rs 10bn (18%) Rs 5bn- Rs 10bn (11%)

1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 5th Qtr

Rs 500m- Rs 1bn (13%)

Rs 1bn- Rs 5bn (36%)

CHAPTER 5 The 3PL Value Proposition:

Third party logistics providers enable firms to achieve reduced operating costs and increased revenues in new and existing markets. 3Pls provide firms an opportunity to enhance their market value by reducing ownership of assets, which translates to a higher return on remaining assets and greater return on stockholder investment. 3PLs also bring to the relationship their specialized expertise in managing logistics with contemporary technology and systems. The COOs decision to outsource company logistics operations to the 3PL is often justified solely on the favorable difference between the more efficient 3PLs price for the services and the firms higher costs of existing operations. The chief marketing officer views the enhanced services and distribution reach of 3PLs in existing and new markets as translating into increased sales and better longterm relationships with customers. CFOs are delighted to see assets property, plant, equipment, and even inventory disappear from the firms balance sheet, freeing up cash for more productive uses, instantaneously and "permanently" improving the companys returns on assets. CIOs are often very pleased to have access to the 3PLs systems and technology resources, avoiding the cost and trauma of upgrading their own. Reliance on the 3PL alliance frees up company employees to focus on their core competencies, doing more of what they are good at and less of what can be done better by the 3PL. Chief logistics officers begin to realize that ownership of resources is not necessary to achieve control over the results.

Expanding the 3PL Value Proposition:

Third party providers with sophisticated data base management systems and competency in activity-based costing can secure long-term alliances with their customers and their trading partners. Firms value timely, accurate, comprehensive, and actionable data about the activities that constitute their sourcing and fulfillment processes, whether it is used for planning, scheduling, measurement, costing, or pricing purposes. Successful third-party providers supply this knowledge. Under gain sharing arrangements, the firm and its 3PL partner can implement improvements that result in lower costs and share the benefits on an equitable basis. There remains a great opportunity for this alliance to involve the firms trading partners in the gainsharing program. Changes by suppliers and customers in how and where the work gets done can produce additional logistics savings that can be shared by all. The selection and integration of a capable 3PL requires managerial skill in establishing and maintaining trusting, long-term relationships. It also requires a continued investment in the

success of each party, based on a strategic and systemic perspective of the interdependencies and potential of the alliance.

Performance Measurement and 3PL Value Proposition:

Regardless of the approach a firm takes in establishing logistics measurement, the real value comes when the information is acted upon to align the effectiveness and efficiency of the logistics process performance to a level that is valued by the customers. How well is the organization meeting the customers logistics expectations. What role can the 3PL have in ones success. According to Keebler and Durtsche (2001), in the case of logistics performance measurement, five recent studies published by the Council of Logistics Management (CLM) also known as Council of Supply Chain Management Professionals (CSCMP), indicate that most firms do not comprehensively measure logistics performance, and even the best performing firms fail to realize their productivity and service potential available from logistics performance measurement. In addition, logistics competency will increasingly be viewed as a competitive differentiator and a key strategic resource for the firm. There are many papers on logistics outsourcing and Razzaque and Chang did a comprehensive review on the outsourcing of the logistics function. In general, this literature can be generally categorized according to different focus area. Some of these focus areas include logistics practices, usage of 3PL logistics services, current state and future trends, strategies and performance measurements.

CHAPTER 6 Performance Measurement of NYK

About NYK:
Nippon Yusen Kabushiki Kaisha or NYK Line, is one of the largest shipping companies in the world. It is a core Mitsubishi company. The company has its headquarters in Chiyoda, Tokyo, Japan.

1870-1900 The company traces its history back to the Tsukumo Shokai Shipping Company founded by the Tosa clan in 1870, as the renamed Mitsubishi Shokai, the inaugurated Japans first passenger liner service, with a route from Yokohama to Shanghai; and in the same year, the company name was changed to Mitsubishi Mail Steamship Company. In 1885, a merger with Kyodo Unyu Kaisha (founded 1882) led to the adoption of the companys present name. The merged company had a fleet of 58 steamships and expanded its operations rapidly, first to other ports of the East and then worldwide, with a liner service to London being inaugurated in 1899. 1900-1950 In World War II the NYK Line provided military transport and hospital ships for the imperial Japanese Army and Navy. Many vessels were sunk by the Allied Navies, and installations and ports were attacked from the air. Selected Ships The NYK fleet expanded in bursts, responding to changed economic conditions and perceived changes in the market for passenger liner travel. The evolution of the fleet mirrors some of those developments. In the following lists, the dates of maiden voyages are indicated with each ships name. 1950-present By the mid-1950s NYK ships were again seen around the world. As the demand for passenger ships dwindled in 1960s, NYK expanded its cargo operation,

running Japans first container ship Hakone Maru on a route to California in 1968 and soon establishing container ship routes to many other ports. NYK became a partner in Nippon Cargo Airlines in 1978, and in 1985, added United States container train service in cooperation with Southern Pacific. NYK revived its passenger ship business in 1989 with cruise ships operated by its newly formed subsidiary Crystal Cruises. In 1990 NYK resumed passenger services under its own name when MS Asuka entered service on the Japanese Cruise Market. In 2006 Asuka was replaced by the much larger Asuka II, formerly Crystal Cruises Crystal Harmony. NYK is the 10th largest container transportation and shipping company in the world.

A 50:50 Joint Venture shipping company set up between Indian Steel major TATA Steel Ltd and Japanese Shipping major NYK Line in 2007. TATA NYK was established in May 2007 to cater to bulk shipping (dry bulk and break bulk cargo) requirements of TATA companies. It is headquartered in Singapore to take advantage of its strategic location as a global shipping hub. The company has a wholly-owned subsidiary in India with offices in Kolkata and Mumbai.

Business Operations:
The company is primarily into the business of owning, operating and chartering of ships to carry dry bulk and break bulk cargo including coal, iron ore, bauxite and steel products, mainly for the Tata group and the Indian market. Tata NYK has grown its fleet rapidly within three years of inception, from just one ship in May 2007 to 16 (14 long-term time-chartered and two owned) at present. As part of its long-term strategy, the company is endeavoring to grow its fleet size to up to 30 vessels by 2015, half of which will be owned. The vessels include Capesize (150,000 DWT and over), Panamax (65,000 DWT to 80,000 DWT) and Supramax (45,000 DWT to 60,000 DWT). The companys location in Singapore facilitates better networking, availability of low cost shipping finance and easy access to ship management companies, charterers, forward freight agreement market players, class and audit companies and some key customers.


DENSO is a global automotive components manufacturer headquartered in the city if Kariya, Aichi Prefecture, Japan. Established December 16, 1949 as Nippondenso Co. Ltd., in 1996 the company became DENSO Corporation worldwide. DENSO is a member of the Toyota Group of companies. The company is known for creating the QR Code, a two-dimensional barcoding system which has become prevalent in much of the developed world. As of March 31, 2010 DENSO Corporation consisted of 184 subsidiaries with a total of 120,812 employees. In 2010, DENSO was listed at #232 on the Fortune 500 list with a total revenue of US$ 32,060 million.


NYK is a 3PL company for DENSO Haryana. DNHA procures its material from Japan through NYK. Material is shipped from DNJP to Mumbai, and then in containers the material is sent to DNHA. Every year DNHA renews its contract with NYK. NYK has been the oldest 3PL advisor to DNHA.

Performance of NYK as a 3PL provider:

NYK is the oldest 3PL provider to DNHA and DNJP. If a shipment is made from DNHA to DNJP then DNJP has to pay for the shipment and vice versa. NYK has always supported DENSO, the organization in critical situations as well. For instance, in case a material is getting short in WIP in next two days in DNHA and its a material coming from Indonesia, China or DNJP and the material is in transition, then NYK will do the urgent shipment of that particular material through air. NYK executes its actions efficiently and effectively. As a service provider it has always satisfied its customers.

NYKs performance has been measured as a 3PL provider on the following grounds: 1. 2. 3. 4. 5. Response Time to the requests Order error/success rate On time shipping percentage Inventory count accuracy Report accuracy and availability.

CHAPTER 7 Procurement:

Procurement is the acquisition of goods, services or works from an outside external. It is favorable that the goods, services or works are appropriate and that they are procured at the best possible cost to meet the needs of the purchaser in terms of quality and quantity, time, and location.

Asmo Japan:

Asmo Co. Ltd., develops, manufactures, and sells small motor systems products for automobiles and office automation machines. The company provides environmental products, such as electric power steering, electronic throttle valve control, variable nozzle turbo and cooling fan motors etc. It offers safety products including front wiper and rear wiper systems. Tanaka Instrument Co., Ltd., and Small Motor Manufacturing Division of DENSO Corporation merged into ASMO CO., Ltd. The head office was located in the Kosai.


Denso procures its material from AMSO Japan as well through NYK. ASMO being a part of DENSO is again very supportive. There are three stages involved in the material procurement. The three stages are: Stage 1: Needs Analysis Determine the need and whether procurement provides the optimal solution. ASMO J manufactures finished goods and so does DNHA and so incase of an emergency or any sudden requirement or at the time of line transfer or when DNHA is not able to meet customer needs due to line stoppages then finished goods are procured from ASMO J. NYK is again responsible for shipping of the material. Stage 2: Funding approval

If the shipment is to be done by air or sea is to be decided and a business case is developed for funding and is supposed to get approved. Stage 3: Project Procurement Plan Determine the strategy for approaching the market to ensure strategy objectives are achieved.

CHAPTER 8 DENSO and Indian 3PL providers:

Other activities include warehousing and transportation facilities that are outsourced by DENSO. DENSO outsources its warehousing facility from GATI-KWE (Kintetsu World Express) and transportation facilities from different local transporters. Example, for Haryana the local transporter is Rahul Cargo.

About GATI-KWE: It is a joint venture company between GATI- Indias pioneer and leader in Express Distribution and Supply Chain Solutions and Kintetsu World Express Japans leading logistics provider. Following the joint venture GATI-KWE today offers an unmatched service offering that brings in local experience with global expertise. GATI-KWE is a 3500 people strong company with an annual turnover of Rs. 8088 million.


GATI-KWE provides warehousing facility to DENSO. Material from the supplier is received in Noidas warehouse and stored till any further shipment is made to the customer.

The route for this shipment isDNIN (Sister Company of DNHA) KWE Warehouse (DNHAs warehouse) Customer (Through a transport that is outsourced).


3PL customers report identifies service trends, 3PL market segment sizes and growth rates. Report shows 86% of domestic Fortune 500 companies use 3PLs for logistics and supply chain functions Jamison RFID announces strategic partnership with Barcoding, Inc. Partnership to expand solutions for the warehouse distribution and third party logistics (3PL) markets. 3PL news: Armstrong and Associates report says industry is growing. Overall, 3PL U.S. gross revenues jumped 18.9 percent in 2014 to $127.3 billion slightly exceeding the 2010 market result. 3PL Management: Bombay Companys fresh start for a new age. The global retailer relaunched in North America a built a new multi-channel supply chain from the ground up with the help ogf existing 3PL Partner.

Logistics optimization provides strength and value to the 3PL supply chain. Companies are allocating resources and money to make their logistics departments more efficient and economic. Through proper planning and using the right logistics optimization tools, companies can acquire considerable cost reduction across their logistics and distribution operation and can accomplish better delivery standards.

1. Hines, Tony. (2004). Supply Chain Strategies: Customer Driven and Customer Focused. London, England: Elsevier Butterworth-Heinemann. 2. Keebler, J.S., Durtsche, D.A., 2001. Logistics performance measurement and the 3PL value proposition. Logistics Quarterly 7 (2) 3. M.A. Razzaque and C.C. Chang, Outsourcing of logistics functions: a literature review, International Journal of Physical Distribution & Logistics Management, vol. 28 No. 2, pp. 89107, 1998.