Third Party Logistics Value Addition in Economic Crisis Abhijeet S. Ghadge 26 th April, 2009

Overview Meltdown and its Impacts 3PL - Value Preposition Customers’ Issues & Expectations

Global Meltdown Immediate Sub prime defaults Network Stock market crash & credit crunch Cascade Slowdown in economic activities across globe Avalanche of the financial crises

Gl obal Meltdown Effects on Supply Chain Crashing Demand in market – “ Inverse Bullwhip Effect” Stagnation of Inventory – Increased warehouse cost Reduced movement of goods – Operational inefficiency & Increased Logistics cost Restrictive trade practices – Increased hassles in Import/Export

Changing Trends in Logistics Source : 3PL 2005: Results and Findings of the 10th Annual Study

Woes Vs Opportunities Clients’ Recession Woes Pilled up Inventory - Underutilized logistics fleet - Issues relate to Custom Duties - Coordination of bills and- payments - Hunger for continuous – improvements - Waste Disposal - 3PL Opportunities - Improved WMS - ‘Economy of scale’ - Value added Services in Customs - Customs clearance and Brokerage - IT support & Consultancy - Reverse Logistics Support

3PL Value Prepositions TIME TO INVEST IN NEW WAREHOUSE SYSTEMS Piled up inventory due to demand shrinkage needs efficient WMS Use of Auto ID Data Capture (AIDC) technology for status of goods. Integrating WMS with ERP as “Interpreter and message buffer” “ Right stuff” for end-to-end fulfillment and distribution. Reduce inventory- 5 to 20% Increase labor productivity-15 to 40% Improve shipping accuracy- 2 to 5% Increase inventory accuracy- 99+% at location level Reduce direct operating costs

TIME TO INVEST IN NEW WAREHOUSE SYSTEMS

Piled up inventory due to demand shrinkage needs efficient WMS

Use of Auto ID Data Capture (AIDC) technology for status of goods.

Integrating WMS with ERP as “Interpreter and

message buffer”

“ Right stuff” for end-to-end fulfillment and

distribution.

3PL Value Prepositions CONSOLIDATION OF TRANSPORTATION FLEET Reducing the fleet maintenance cost for clients by acquiring clients’ fleet (value investment for 3PL). Improve transportation asset utilization by leverage across multiple clients. Harness technology (RFID, GPS) for fleet operations optimization and explore cross docking opportunities. Use of ‘logistic software's for reducing cycle time and eliminating inefficiencies.

CONSOLIDATION OF TRANSPORTATION FLEET

Reducing the fleet maintenance cost for clients

by acquiring clients’ fleet (value investment for 3PL).

Improve transportation asset utilization by leverage

across multiple clients.

Harness technology (RFID, GPS) for fleet operations optimization and explore cross docking opportunities.

Use of ‘logistic software's for reducing cycle time and eliminating inefficiencies.

3PL Value Prepositions CUSTOMS & BILL PAYMENT COORDINATION Provide TOTAL FORWARDING SOLUTIONS including customs related services, fright bill auditing and payments. Provide consultancy in shipment route planning for clients to minimize shipment costs and tax liabilities.

CUSTOMS & BILL PAYMENT COORDINATION

Provide TOTAL FORWARDING SOLUTIONS including customs related services, fright bill auditing and payments.

Provide consultancy in shipment route planning for clients to minimize shipment costs and tax liabilities.

3PL Value Prepositions IT SUPPORT & CONSULTANCY Provide Electronic Logistic Management (ELM) with use of visibility tools for In-transit inventory tracking (Mobile/ Web enabled). Provide Intelligent Warehouse Solutions for integrating across clients’ ERP & FMS to extend support up to line side delivery.

IT SUPPORT & CONSULTANCY

Provide Electronic Logistic Management (ELM) with

use of visibility tools for In-transit inventory tracking

(Mobile/ Web enabled).

Provide Intelligent Warehouse Solutions for integrating across clients’ ERP & FMS to extend support up to line side delivery.

3PL Value Prepositions REVERSE LOGISTICS Reverse logistics support for reusable packing materials. Provide logistic support for waste disposal, reclamation (regulatory), product returns and ‘Re-X’ activities in line with clients product planning strategies. Boost from Government regulatory plans for “Green” Supply chain.

REVERSE LOGISTICS

Reverse logistics support for reusable packing materials.

Provide logistic support for waste disposal, reclamation (regulatory), product returns and ‘Re-X’ activities in line with clients product planning strategies.

Boost from Government regulatory plans for “Green” Supply chain.

Clients’ Concerns with 3PL Lack of cost control Unsatisfactory customer service Inadequate technology and capabilities Lack of understanding scope of work Inadequate knowledge/performance and lack of “proactive” management Unsatisfactory transition during Implementation phase

Lack of cost control

Unsatisfactory customer service

Inadequate technology and capabilities

Lack of understanding scope of work

Inadequate knowledge/performance and lack of “proactive” management

Unsatisfactory transition during Implementation phase

Challenges Ability to develop advanced services. Need for relationship reinvention. Mechanisms for continual improvement, and solution innovation. Increasing importance of repeatable and leveraged solutions. Emerging role of supply chain integration. Meeting Cultural feet and global needs of 3PL usage.

Ability to develop advanced services.

Need for relationship reinvention.

Mechanisms for continual improvement, and solution innovation.

Increasing importance of repeatable and leveraged solutions.

Emerging role of supply chain integration.

Meeting Cultural feet and global needs of 3PL usage.

Key Survey Findings KPIs for 3PL 3PL Globally preferred deals Study based on 3PL conferences: 1996-2008 findings Sector-wise usage of 3PL Target decision makers - Logistics Exe., CEOs Best ROI - WMS & TMS

Target decision makers - Logistics Exe., CEOs

Best ROI - WMS & TMS

Future predictions of 3PL Continued expansion, acquisition, innovation need of hour for 3PL Conventional 3PLs will face the competition from the online logistics providers. Product returns and repair are projected to have 100% growth in use of 3PL. Demand for logistics support will grow with the booming e-commerce/business. “ The best way to predict the future is to invent it.” — Alan Kay, noted computer scientist.

Continued expansion, acquisition, innovation need of hour for 3PL

Conventional 3PLs will face the competition from the online logistics providers.

Product returns and repair are projected to have 100% growth in use of 3PL.

Demand for logistics support will grow with the booming e-commerce/business.

Abhijeet S. Ghadge M.Tech. (Industrial Engineering & Management) Indian Institute of Technology Kharagpur [email_address] +91 93333 75414