Beruflich Dokumente
Kultur Dokumente
By
Mercy Money
MARCH 2013
Chapter I: Introduction and Design
of the Study
More and more corporations across the world are outsourcing their logistics
activities due to various reasons, some of which are outlined below which are:-
Logistics outsourcing may also reduce costs as the 3PL providers can get
the advantage of the economies of scale, which is otherwise not available to
the corporations.
Since the 3PL providers are now offering a number of value-added services
such as customs clearance, freight forwarding, import/export management,
distribution, after sales support, reverse logistics and so on, corporations can
outsource all these activities, and concentrate on their core business
operations (Subrata Mitra, October 2005)
The concept of logistics outsourcing can be traced back as far as one goes down
the history of mankind. In Europe, a number of logistics service providers can trace
their origins back to the Middle Ages1. We restrict ourselves to the recent decades,
and trace below the evolution of 3PL from the 1950s.
With the positive outlook for the 3PL business and the immense competition
which is likely to follow, it is critical that 3PL companies recognize that low price
is no longer a sure-win strategy. It is found that the most important selection
criterion for 3PL provider is core competencies. The competitiveness factors in
global business have pressurized suppliers and manufacturers to cut the cost of
finished products without compromising the quality of products and services. One
of the most important ways to reduce the cost and to increase the productivity and
customer satisfaction is to outsource the non-core functions. The role of logistics
services is very critical to conduct the smooth flow of materials and information in
forward and reverse supply chain. Following are the problems identified by 3PL
1.3 OBJECTIVES
The benefits of 3PL and the prospects of the logistics market in
India were essentially the motivation behind conducting this survey. To the
authors knowledge, there has been no survey of the Indian logistics service
providers so far. (Subrata Mitra October (2005), Working Paper Series, in A
survey of 3PL logistics Provider in India). 3PL management has changed
dramatically in the last decade due to a variety of factors. As the world moves
from a national and regional storage and fulfillment model to a global one,
pressures and opportunities are expanding on several fronts. This means theres
greater potential to recruit new customers. This also means theres greater potential
to lose them due to competition. Hence, the objective of the study is
OPERATIONAL DEFINITIONS
Survey: Refers to the operation of finding the competitive challenges faced by the
3PL providers.
The study focuses only on the third party logistics service providers.
This study has not taken into consideration towards the perspective of 3PL service
users. The view of the 3PL service user could affect the result of the success factor
for the 3PL service provider.
This study is limited to only St. John Freight Systems Ltd. (Mumbai) 3PL service
provider. The research can be improved by taking consideration of the unorganized
3PL service provider.
CHAPTER II : REVIEW OF
LITERATURE
Ballou , Sweeney and Tatham , Wesolowsky and Truscott 2000; carried out a
dynamic network configuration work. All these works addressed the problem by
dynamically changing the warehouse locations in response to changes in
requirements, and typically trade-off the savings achieved with the costs in
implementing the change.
Rao & Young, (1994); did a study/ Identified the factors influencing outsourcing
of logistics functions .The study identified factors such as
Bask, (2001); carried out a Study on benefits of outsourcing the logistics activities
in which he came to a conclusion that because of outsourcing the customer
satisfaction increases significantly .
Persson and Virum (2001); carried out a Study on growth strategies for logistics
service providers which states that Forming relationships with 3PL providers is an
efficient and effective means of achieving the required services without investing
heavily in assets and new capabilities
Sohail & Sohal, (2003); conducted a research to Examine the reasons for
outsourcing logistics activities in Malaysia,
Cost savings
Improved services
Better transportation solutions
Better professionalism
(Larsen, 2000). Usage of third party logistics services is a strategic decision and
hence it is necessary to perceive and quantify the impact it has on business
performance. The purpose of engaging in third party relations is seldom cost
reduction alone, but a combination of service improvements and efficient
operations
Gooley (1992); and Lieb et al. (1993)- Impact on customer satisfaction- added
flexibility as another reason for outsourcing based on his experience with European
firms. By understanding the reasons for outsourcing of logistics services, 3PL
service providers can gain insight into the benefits sought and provide focused
services. A third party logistics service provider with experience, focus and
expertise is regarded as more competent, compared to those service providers who
profess to be "all things to any consumer"
Lieb et al. (1993) and Dapiran et al. (1996) and Bhatnagar et al. (1999)- Impact
on logistics system performance: have observed that the future usage of third party
logistics services is a function of the current level of satisfaction of the firm with
the logistics services provider. The authors have also explored the changes in the
level and the nature of outsourcing of logistics services by the user firms. All the
above studies indicate high levels of satisfaction with third party logistics services
providers, which will translate in increased outsourcing in the future. Typically,
firms start with the outsourcing of few logistics services, moving over to activities
which have maximum impact on logistics performance and then increase scope of
usage of logistics services with perceived and quantifiable impact on overall
business performance
Craig Grossgart states that Indian Companies are relying on 3PLs to boost
Manufacturing efficiency. The market is still at a nascent stage but growing at a
healthy 18% a year (The Journal of Commerce, India Primed for 3PL boom,
March 5, 2007)
In 2006, Frost and Sullivan had undertaken a research on the Indian Logistics
Industry. Researcher, Ramesh Mohan, had indicated that with the opening up of the
economy, foreign entrants may not find it feasible to invest in logistics
infrastructure immediately and there is a huge potential for 3PL to tap.
(A. Ansari1, Batoul Modarress2 Volume 7, Number 2/2010 )The focus of this
study is on the challenges that shippers faced using Third-Party Logistics (3PL)
providers. The study is based on a mail survey of 126 shippers and personal
interviews with eight shipper executives and four 3PL provider executives. The
study first identifies the major challenges including, finding a 3PL with the
capabilities meeting the shipper's specific logistics requirements, the
incompatibility of information systems between shipper and 3PL, the failure of
3PL to meet a shipper's future growth needs, and issues related to security. Second,
it offers some recommendations for shippers to consider in overcoming any
challenges encountered
(Samir K. Srivastava, 2007) There is a growing need for integrating
environmentally sound choices into supply-chain management research and
practice. Perusal of the literature shows that a broad frame of reference for green
supply-chain management (GrSCM) is not adequately developed. Regulatory
bodies that formulate regulations to meet societal and ecological concerns to
facilitate growth of business and economy also suffer from its absence. A succinct
classification to help academicians, researchers and practitioners in understanding
integrated GrSCM from a wider perspective is needed. Further, sufficient literature
is available to warrant such classification. This paper takes an integrated and fresh
look into the area of GrSCM. The literature on GrSCM is covered exhaustively
from its conceptualization, primarily taking a reverse logistics angle. Using the
rich body of available literature, including earlier reviews that had relatively
limited perspectives, the literature on GrSCM is classified on the basis of the
problem context in supply chain's major influential areas. It is also classified on the
basis of methodology and approach adopted. Various mathematical
tools/techniques used in literature vis--vis the contexts of GrSCM are mapped. A
timeline indicating relevant papers is also provided as a ready reference. Finally,
the findings and interpretations are summarized, and the main research issues and
opportunities are highlighted.
This paper uses the extant literature to identify the key success factors that are
associated with performance in the Indian third-party logistics service providers
(3PL) sector. We contribute to the sparse literature that has examined the
relationship between key success factors and performance in the Indian 3PL
context. This study offers new insights and isolates key success factors that vary in
their impact on operations and financial performance measures. Specifically, we
found that the key success factor of relationship with customers significantly
influenced the operations measures of on-time delivery performance and customer
satisfaction and the financial measure of profit growth. Similarly, the key success
factor of skilled logistics professionals improved the operational measure of
customer satisfaction and the financial measure of profit growth. The key success
factor of breadth of service significantly affected the financial measure of revenue
growth, but did not affect any operational measure. To further unravel the patterns
of these results, a contingency analysis of these relationships according to firm size
was also conducted. Relationship with 3PLs was significant irrespective of firm
size. Our findings contribute to academic theory and managerial practice by
offering context-specific suggestions on the usefulness of specific key success
factors based on their potential influence on operational and financial performance
in the Indian 3PL industry.
3.1Industry profile
St. John Freight Systems Limited is a multiple services
provider in the Logistics & Shipping industry. Established in 1979, the company
has its presence in 15 countries with 50 own offices and 1400+ employees working
across the globe.
Our Philosophy is "To Provide Total Logistics Solutions with 'One-Stop' service
and Single-Point Contact, across the Globe, aided by Total Commitment and
Quality to ensure Total Customer Satisfaction."
In this short span of a little over 30 years, the small steps we first took have
transformed into long strides and now St.John is a household name in the Logistics
and Shipping business and has carved out a "Niche" for itself.
VISION: To be a leading international service provider of innovative end-to-end
logistics solutions and to be amongst the top 20 global logistics & shipping
companies by 2020.
3.3NETWORK:
Group Corporate Office: Tuticorin
Overseas branch offices: Belgium, Canada, China, Dubai, UK, Hongkong, Ivory
Coast, Malaysia, Netherlands, Nigeria, Singapore, Sri Lanka, Thailand and USA.
ii. Container Freight Station services: St. John Freight owns and operates the
largest ICD/CFS at Tuticorin sprawling over 65 acres in Tuticorin. ICD
handles over 75,000 TEUs per annum over 250,000 sq. ft of Warehouse
space including bonding facility. This is the first ICD / CFS facility in
India to receive ISO 9002 standards from BVQI, ISO-9001-2000 standards
from DNV & IKEA I-WAY certification for systems & socio-environmental
standards. Currently 100,000 sq.ft expansion has been undertaken including
50,000Sq.ft of High technology warehousing in Tuticorin facility.
iii. Stevedoring services: The Company is leader in handling sugar and timber
cargo ex-Tuticorin. The company holds National record of discharging over
7,839 metric tonnes of pine- wood Timber logs per day and record of
discharging over 12,000 tons of Import Sugar per day. The company has
been the recipient of various awards for handling the Highest Bulk / Break
Bulk volume by Tuticorin Port Trust and also in handling each year
highest volume of containers in the port.
iv. Feeder services The Group operates two feeder vessels (a) Tuticorin-
Colombo biweekly sailing sector and (b) Chennai Colombo weekly
sailing. The combined capacity of the vessels deployed by the company is
about 2000 TEUs. The Group enjoys about 30% market share across
respective sectors
v. NVOCC services The Group owns about 750 TEUs and leases about 2000
TEUs and operates in India, Singapore, Sri Lanka, Bangladesh and Port
Klang. The Group is the market leader for Tuticorin- Colombo sector by
capturing about 80% of the market.
Fumigation
3.5 CUSTOMERS
1. BIRLA TYRES
2. MAHINDRA FORGE
3. CASTROL INDIA LTD
4. WHIRPOOL OF INDIA ltd etc!!!
CHAPTER IV: RESEARCH DESIGN
AND METHODOLOGY
4.0 RESEARCH METHODOLOGY
This chapter deals with research design, setting of the study, variables,
population, sample size, sampling technique, sample selection, description of the
tool, content validity, reliability, pilot study, method of data collection, and plan for
data analysis.
4.1 Research Design
The term research design refers to a researchers overall plan for obtaining
answers to research questions or for testing the research hypothesis (Polit and
Hungler, 1999 ).
Quantitative approach
Survey
Sample size :
3.3. Population
Tool 1
Tool 2
The study was conducted in St. John Freights Ltd. Data collection was done
for a period of 4 weeks. The data was collected. Before administering the
questions, the investigator introduced self, explained the purpose of the study to
the 3PL providers and the confidentiality was assured. Data collection was done
using self administered questionnaire.
Primary Sources: 3PL providers, and Data collection was through Questionnaire
Surveys, Telephonic Interviews and Personal Visits.
Secondary sources: Books, EXIM newsletters, Journal Articles and the Internet.
Upon designing the questionnaire, the next step was to locate the potential
respondents for administering the questionnaire. This was not an easy task since
the employees had to complete their work in their appointed time as Logistics is all
about time which directly leads to customer satisfaction so employees wouldnt be
in their respective place most of the time as they had to be in Fields for their work
and employees working on floor had to answer the frequent calls of the customers
and the author could not lay hands on a formal directory of Indian logistics service
providers. The author could gather some information after and during the Lunch
break for a little time for the employees by having an Oral communication with the
employees .
One of the reasons why a higher response rate could not be realized might be the
fact that many of the potential employees were freight forwarders and custom
house agents were in the fields and not available most of the time and with very
small scale operations.
1) OUTSOURCING
OUTSOURCING
80
70
60
50
OUTSOURCING
40
30
20
10
0
ASSET NON ASSET
(Fig No.1: Represents the Percent Assets are Owned and Leased)
The above Bar chart represent that 25% of the asset is owned by the company and
the rest i.e 75% is being outsourced by the company.The NVOCC area and FF here
the company has its owned containers which is given to the customers on lease to
load their cargo whereas the rest ,vehicles for transportation is is being Outsourced
from Liners or Transporter.
2) Extent of coverage
The entire country was divided into 6 regions: North, South, East, West, North-east
and Central India, and the Employees was asked the regions that it covered. The
number of states covered and the number of branches and offices that the
employees had were also asked for in order to ascertain the reach of the employees.
GEOGRAPHICAL COVERAGE
80
70
60
50
GEOGRAPHICAL COVERAGE
40
30
20
10
0
NORTH SOUTH EAST WEST
(Fig 2: Represents the Geographical area within India covered by St. John Freight
systems Ltd).
The above Line Graph represents that the Geographical area covered within INDIA
is mainly concentrating on the WEST (70%) Geographical location of India, (13%)
of NORTH, (2%) of EAST and (5%) of SOUTH. They do have Global Tie ups but
the graph above show the coverage within India
3) Started Logistics service in the Year 1998, then in the year 2005 they started
full fledge 3PL service, which states that they are surviving in this competitive
environment now for a long period of time
4) Employees working in Mumbai office are 100 who responded to the survey with
respect to their Education, Experience, etc; where employees with degree holders
but have recently joined this area of work, some employees who are experienced
have different perspective as they are into this work for more than 10yrs. Some
people having experience but have migrated from south to have experience in this
city shared their experience about their area of work..
5) 54 Offices in 18 countries, its states that it is an MNC which still has to grow in
this field growing its Branch office in various other countries so they can work out
their strengths in other countries and get to learn more and progress in this work
area.
NVOCC
FREIGHT FORWARDING
CUSTOMS
LCL
FCL
TRANSPORTATION
The above Pie Chart represents the various services offered in Mumbai branch
office to their customer where the top slot is taken by:
8) The area where they can be described as having their experience are Space
Booking with Carrier, Clearing of Goods Through Customs, Preparation Elaboration
and submission of trade documents in compliance with Customs as this industry is
also very competitive it and depends upon the customers requirement i.e If the
cutomer get these service at a low cost from other providers they may not come to us
they will go to other service providers or they may get only one service from us and
the rest they may do it by themselves, this happen usually in cases where they have
their own CHA/ Asset.
9)
INDUSTRIES HANDLED
TEXTILE
AUTOPARTS
ELECTRONIC
ELECTRICAL
INDUSTRIAL MACHINERY AND
EQUIPMENT
AGRI PRODUCTS
FERTILIZERS
The above Pie Chart represents the cargo movement from the Industries Handled
where the Top Slot is taken by A number of industries were listed and the
respondent was asked to tick the industries that it catered to. The respondent was
also asked to list its major customers;
TEXTILE (20%), AUTOPARTS (15%), ELECTRONIC (15%), ELECTRICAL (14%),
INDUSTRIAL MACHINERY AND EQUIPMENT (5%), AGRI PRODUCTS (14%),
FERTILIZERS (17%).
12) The company did not want to disclose its Actual sales and hence gave a approx
answer of +10% growth. They did say that during recession period in the year 2008
they faced some losses and in the month of March April 2013 the sales went down as
the Market condition itself was bad and for a proof it was stated in EXIM Newsletter on
12th February 2013 describing the fall in Movement of Cargoes with the head topic as
Throughput a Major Ports drops by 3% in April- Dec.
13) +8%
14) +10%
15) 3PLs rely on their customers to mine new growth opportunities, working back
through the supply chain to organically grow their business. Increasing customer
demand for new and innovative services and technologies has afforded 3PLs equal
leverage in expanding their value proposition to other markets and industries.
16) The importance of having an attentive 3PL partner attuned to a company's unique
needs is as important as it has ever been. As businesses compete to meet growing
customer expectations, and expand market share and global presence, they face a litany
of obstaclescapacity constraints, soaring transportation costs, security compliance,
contingency planning, and technology implementationthat obscure their core
competencies.
17)
50
45
40
35
30
25
20
15
10 3PL Relationship Failure
5
0
(Fig 5: Represents the some major reasons for 3PL relationship Failure)
Acc. To St. John (Mumbai) the above are the major reasons for a failure of
3Pl relationship. But when searched other site it was found that there are other reasons
Such as Failed Expectations, Poor Customer Service, Cultural Dissimilarities, More
Competitive Options, and Loss of Control.
18) The respondents reported the use of logistics softwares such as Ice Gate, They also
reported using customised and in-house developed software packages.
19) Threats to the growth of the 3PL industry in India show the average scores of the
threats to the growth of 3PL in India. Poor transportation and communications
infrastructure was again identified by the employees as the most important criterion. It
is followed by the lack of trust and awareness, diseconomies of scale due to differential
sales tax structures, limited value-added services and imposition of service tax. The
employees also mentioned the lack of skilled manpower, lack of good 3PL providers,
high costs of operations and government control as other deterrents to the growth of
3PL in India.
20) Opportunities for the growth of the 3PL industry in India shows the average scores
of the opportunities for growth of 3PL in India. The employees identified the increasing
awareness towards logistics outsourcing as the most important factor. This is followed
by the demand for more specialized services as a result of a steadily increasing,
development of infrastructure, uniform VAT regime likely to be effective and
possibility of investments by global 3PL providers. Some of the employees also
mentioned about government support towards the growth of 3PL in India.
21) In a country like India, where 3PL Industry is still at its nascent stage, the efficient
storage infrastructure is a pre-requisite for the industrys growth. Luckily, the
government and the private sector is paying due attention for the development of the
countrys storage infrastructure. This in other words is opening doors to the growth in
Indian 3PL Industry. The Indian 3PL market is expected to surge at a CAGR of over
22% during 2012-2015. Future forecasts on 3PL market in Automobile, IT-Hardware,
FMCG, and Consumer Electronics segments during 2012-2015.
CHAPTER V: FINDINGS,
SUGGESTIONS AND CONCLUSION
5.1Summary of findings:
It is clear from the survey that the 3PL market in India is
relatively new and fragmented where a few large players dominate the entire
market. One of the most important factors plaguing the growth of 3PL in India is
poor infrastructure from the review about Logistics market in India we come to
know Many large shipping liners avoid Indian ports in order to avoid delays in
loading and unloading, and hence the Indian exporters have to resort to
transshipments at ports like Singapore, Dubai and Colombo, which again adds to
the cost of shipments and delays the delivery of export goods
Another important factor responsible for the slow growth of 3PL in
India so far, perceived by the employees is the lack of trust and awareness among
the Indian firms. On the one hand, the Indian firms have not been aware of the
benefits of 3PL. On the other hand, they do not trust the 3PL providers and do not
want to share with them sensitive organisational information.
On some finding done by Subrata Mitra said, in an interview that many firms do
not want to outsource logistics activities because of vested interests. They always
want to put pressure on the transporters for material benefits which otherwise they
could not do with the 3PL providers. They do not want to interact with
knowledgeable persons. Another disadvantage of the 3PL business is that it is a
high-cost, low-margin business. Different sales tax requirements in different states,
numerous other taxes, octrois, multiple check posts, police harassment and bribes
paid by the truckers add to the woes of the 3PL providers. The same Delhi-based
respondent mentioned that the money that the truckers have to pay as bribes at
different points on the route is a substantial portion of the shipment cost. For
example, he pointed out, if a shipment from Delhi to Mumbai by a 9-ton truck
costs Rs. 9000, Rs. 2000 or about 22% has to be paid as bribes along the route. He
also mentioned that the clients look for quality assets owned by the service
providers and prefer to deal with a single service provider rather than many for
fulfilment of logistics needs.
St.John Freight systems ltd are facing stiff competition from the multi-national 3PL
providers, especially in international freight movements. The multi-national 3PL
providers are mainly into freight forwarding, but they are also into domestic
logistics where they have made little or no investment. They outsource all the
domestic logistics activities like transportation and warehousing to small operators
so that they can squeeze cost advantage out of them. This also happens because
right now no information on the fragmented logistics market is readily available, as
St. John doesnt have hold in the market as the other competitive MNC they dont
get cost privilege from the Transporter as the Other MNC get... With respect to
freight forwarding, the multi-national 3PL providers enjoy several advantages over
St. John Freight systems ltd. Because of their size and operations in many
countries, they are able to offer lower freight rates. Also, their multi-national
clients prefer to deal with a single service provider across all the nations. As
such,Tulsidas Khimji, Evergreen, Maersk, Ceva etc,. Since the multi-national 3PL
providers have financial muscle, they can give extended credit to their clients,
which the St. John (Mumbai) cannot give as they do not have volumes as well as
access to cheaper capital.
5.2Conclusion
The gap analysis was done to identify the gap between achievement and
expectation of identified success factors. There is a weak service quality in most of
the success factors like reduced cost, information technology system, versatility,
quality management, compatibility with users and fixed assets. This can be
improved by giving special attention to product return & repair, geographical
coverage, flexibility and adaptability,online tracking system & transaction system,
investment in quality of assets, breadth of service offered, integration among
internal 3PL system, good relationship with service user, investment in IT system,
experience as a 3PL provider, real time access to information and speed of delivery
to get the competitive advantage and market share. Most of the 3PL service
provider has to improve the Information Technology System because there is a
large gap.
Service Portfolio and 3PL User/Provider Relationship is the most important and
common growth strategy used by the Indian 3PL service provider. One of the
interesting result found that now most of the 3PL service provider emphasis on
Green Supply Chain for growth. The world is facing the problem of global
warming and the meeting on Kyoto Protocol between developing and developed
countries was failed, if one can implement the green supply chain then the
organization will be able to get advantage of good brand image. By doing this
organization will be able to get advantage of carbon trading also and hence
improve the profit of the organization. Also most of the companies focus on
Regional Expansion so as to give better services to the customer and to reduce the
cost. The companies are focusing on Alliance for risk sharing and reduce the fixed
asset cost.