outsourcing_3pl_4pl_challenges_final

8/8/2019 Outsourcing_3PL_4PL_Challenges_final

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Presentation on

Outsourcing - 3PL / 4PL Challenges

Industry 2.0 Conference

Presentation on

Outsourcing - 3PL / 4PL Challenges

Industry 2.0 Conference

February 8, 2005

Arif A. SiddiquArif A. SiddiquiGeneral Manager


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Conten

Understanding the Outsourcing Landscape

Establishing the Outsourcing Strategy

Case Study 1 - Consumer Durable

Case Study 2 - Hi-tech

Challenges


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Challenges

Conten


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Globalization

Contract

Transportation/

Distribution

1995 - 2000

LogisticsOutsourcing

Integrated

Supply Chain

Management

1985 - 1995 2000 +

Single function Integrated multi-functions

Transactional Strategic partnerships

Local, regional Global, door-to-door

coverageAsset heavy, processexecution

Information/knowledge focus,integrated IT solutions

Landscape

80% of Fortune 500 Manufacturers use 3PL services accounting to 40% of the logistic

outlay. This is likely to reach 50% by 2006


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Asia-Pacific Logistics Overview

Markets

l

Hong Kongl Singapore

l Japan

l Australial New Zealand

l Koreal Taiwan

Mature

l

China

Unique

l

Malaysial Thailand

l Indonesia

l Philippines

l India

Mid-Level

l

Sub-Continentl Vietnam

l Cambodia

l Laos

l Myanmar

l Etc

Developing

l Developed

Logistics

l High Competition

l High Service

levels

l Lead time

pressure

l Lower Growth

l Rapid

Development

l Undeveloped

domestic mkt..

l Increasing

service levels

l High Growth

l Developing

sophistication

l Increasing

competition

l Increasing

service levels

l Varied Growth

l Poorer

infrastructure

l Lowercompetition

l Regulatoryhurdles

l OwnershipIssues

l High GrowthCharacteristics


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Outsourcing in India

Emerging Trends

Current India Logistics Market approximately Rs. 40,200 crore (Euro 6.7 bn) *

In-sourced Logistics accounts for 45%

Out-Sourced Logistics forecasted to increase

Driving factors

Supply Chain Management - Not a core competency

Changes in Regulatory Framework (e.g. Free Trade Zones, Exemptions,

Customs EDI, VAT, etc.)

Supply Chain integration intra-entities

Emergence of Global Logistics Service Providers

Improvement in infrastructure

ource: *ATKearney Estimate


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Extent of Outsourcing in India

Importance Rating and Extent of Outsourcing of Logistics Activities (2001)

ource : Third Party Logistics Practices: An India Perspective, B. S. Sahay and Ramneesh Mohan


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O t i St t


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Outsourcing Strategy

Develop a business case Select a service providers

B i


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Business case

Whyoutsource?

What to

outsource?How to

outsource?

Why to outsource?


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Strategic Factors

l Focus on core competencies

l Improve customer service

l Enhance flexibility

Operational Factors

l Improved process execution

l Improved technology

Financial

Factors

l

Reducecosts

l

Reducecapitalrequirements

Why to outsource?

Developing a business case helps logistics managers to determine if the decisionhas strategic, financial and operational justification

What to outsource?


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Dimension Transportation Distribution Import/Export

l Network design

l Carrier contracting

l Shipment

optimizationPlann

ing

Executio

nl Carrier selection/

tenderingl Shipment tracking

l Freight payment

l Facility design

l Project management

l Core warehouse

activitiesl Value added

services

l Coordination of

global freight

movements

l Customs clearance

l Freight forwarding

What to outsource?

How to outsource?


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How to outsource?

PerformStrategic

Assessment

Decision toform

relationship

EvaluateAlternative

Options

PotentialPartner

Capabilities

CompanyNeeds &Priorities

StructureOperating

Model

Implementaton &Continuous

Improvemen

Select Partner

Vendor Selection


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Vendor Selection

Jack ofAll Trades

One-StopShop

National

Operator

LocalExpert

Integrated

Niche

Local National

FunctionalGrowth

ValueManagement

(3PL/ 4PL)

GeographicGrowth

Multi-vendor Management(Transporter/ Landlord)

Service ProvidersScope of Service

Service Providers

Geographic Breadth

Manag

ementSty

le

Conten


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Challenges

Conten

Scope


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Scope

Warehousing - 20 locations

Finished Goods

Project Material

Primary Transportation

Secondary Transportation - Inter-city/ inter-region

Secondary Transportation - Intra-city

Existing - SCM Mode


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Factory/Plant

Warehouse2

ImportLocations

Warehouses 1

Dealer/Distributor/Customers

LST billing

EXPRESS

CST Billing

EXPRESS

IBSTFTL

ImportsFTL

TRANSACTION

DISTRIBUTION MODE

TRANSACTION

DISTRIBUTION MODE

Imports DomesticMULTIPLE

VENDOR ANDWAREHOUSES INHE SAME REGION


LST Billing

EXPRESS

One region of Customer

Existing SCM Mode

IBSTFTL

ImportsFTL

Limitations

Push Model resulting in huge inventory

across the system and sub-optimalutilization of warehousing space

Low inventory information visibility due to

decentralized system

High logistics cost due to movement to

and from multiple warehouses to samemarket

Factory feeding the market directly

leading to longer lead-time

Port of clearance not completely in

alignment with cost and consumptionmarket

Lack of standardization resulting in

longer lead-time for policy roll-outs, MIS

generation, etc.

Expectations and Challenges


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Expectations

Uniform processes across country

Visibility of inventory through the entire

supply chain

Shorter order to delivery TAT

Reduction in inventory holding

Facilitating right stock at right place based

on pull system

Reduction in working capital through

increased inventory turns

Optimization of warehousing space across

the country

Shift from Static to Dynamic model

Over all reduction in logistics cost

Manage smooth transition

Logistics Challenges

Initiating change management and

implementation of new process across theorganization

Vendor re-evaluation on proper SLAs and

cost optimization - 4PL

Integrating systems, standardizing process

& MIS across multiple locations

Framing stringent KPIs/ SLAs and

implementing the same as part of the

operations

Flexibility in offering dynamic services

required due to seasonality of demand

Facilitating movement based on pull as

against push system

Reduction in total logistics cost to turnover

Recommended - SCM Mode


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Recommended SCM Mode

RegionalWarehouse

2

State/ SatelliteFlow-throughWarehouses


IBST

EXPRESS

LST Billing

EXPRESS

TRANSACTION

DISTRIBUTION MODE

RegionalWarehouse

1

RegionalWarehouse

3

ImportLocations

RegionalWarehouse

4



IBST

EXPRESS

LST Billing

EXPRESS



IBST

EXPRESS

LST Billing

EXPRESS



IBST

EXPRESS

LST Billing

EXPRESS

CST Billing

EXPRESS

IBSTFTL

IBSTFTL

IBST

FTL

IBST

FTL

ImportsFTL

ImportsFTL

ImportsFTL

IBSTFTL

TRANSACTION

DISTRIBUTION MODE

Imports Domestic

SINGLE 3PLVENDOR

Factory/Plant

Highlights of theI l d SCM M d


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Integrated operation and standardized logistics policies across the country facilitating better MIS

and inventory visibility through the supply chain

Two step distribution model - RWH for stocking and state warehouse for LST billing with state

warehouses essentially holding low inventory only of fast moving SKUs

Movement from factory to RWH to be on FTL mode, onward movements on express mode

facilitating economies of scale

Slow moving manufactured items to be stocked primarily at RWH

Non-saleable/ damaged stock cleansing on regular intervals

Single point accountability across services across country

Considerable reduction in lead time envisaged in servicing orders of finished goods across India

Movements based on pull as against push will result in lower inventory at regional/ state

warehouse, thus reducing inventory holding cost

g gImplemented SCM Mode

Conten


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Challenges

Co te

Scope


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p

Warehousing - 4 mother warehouses, 17 state-warehouses, 24 tertiary

warehouses

Finished Goods

Infrastructure Material - open space

Defective Returns Management

Intra-country distribution

Rapid Fulfillment

Existing - SCM Mode


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Factory/Plant

Port ofEntry

Warehouses1


LST billing

EXPRESS

CST Billing

EXPRESS

TRANSACTION

DISTRIBUTION MODE

TRANSACTION

DISTRIBUTION MODE

Imports Domestic

MULTIPLEC&F VENDOR

Few Geographical Markets

g

IBSTFTL

ImportsFTL

Drivers

Strategy of expanding PAN India on

short notices, with focus on B Classcities apart from metros

Rapid Fulfillment - last mile deliveries

Increase in volume of transactions

Barcode integration to capture serial nos.

of goods

Shorter product life cycle and increased

importance of logistics during new

product/ service launches

Postponement logistics - product

activation at warehouses

Cost optimization through refurbishing

and reuse of returned material



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p g

Expectations

Large mother/ regional warehouses and

small satellite warehouses across India

Process standardization at national level

Integration of systems like Oracle, SAP,

etc.

Logistics support during new product/service launches

Equipment Serial Nos. capture for

integrated billing and AMC

Rapid fulfillment

Value added services

Reverse Logistics

Dynamic Cost model (pay-by-use)

Logistics Challenges

Managing transition, systems integration &

process standardization across threeentities within client organization

Implement SCM across 45 locations in

India including roll-out of closed and open

warehouses

Formulating and implementing investment

plan to scale up

Managing logistics during new product/

service launches

Ability to provide value added services like

product activation, kitting, etc.

Reverse Logistics Management includingrefurbishing activities

Managing rapid fulfillment and tatkaal

deliveries

Recommended - SCM Mode


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Motherwarehouse

Circlewarehouse

Clusterwarehouse

In-Bound Out - Bound

Overseas Supplier

Local

Supplier

AgentCustome

Material Receipt

Quantity Check

Put Away

Receive Order-STN/Invoice

Pick List Generation

Material Retrieval

Dispatch

System Update

Generate System Report

System Update

Serial Nos. Capturing

Equipment Activation

Systems Updation

Reverse Logistics

Conduct inspection and segregation

Equipment refurbishing

Highlights of theImplemented SCM Mode


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Surrogate customer account management (single window - Program Mgmt)

Standardized logistics policies across the country

Customized SCM reports for effective inventory management through bar-

coding technology

Warehouses scaled across 45 locations in India within 6 months

Rapid fulfillment mechanism from warehouses to meet immediate demands

Standard Operating Procedure to manage distribution during new service and

product launches

Value added activities conducted at warehouse

Reverse logistics management within warehouse

Implementation/ Roll-out of customers ERP within warehouses

Implemented SCM Mode

Conten


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Challenges


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u sourc ng a enge Vendor Selection


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Selection Challenges

Ability to understand and assess customers requirement

Project management and roll-out capabilities

Framing appropriate performance measurement system

Information technology integration and interface

IT and communication infrastructure upgradation

Managing relationship with customers/ vendors/ authorities/ employees

Developing short-term and long-term infrastructure

Developing strong intra-country dependable distribution service

Ability to scale-up/ down depending on customers requirement

Developing and enhancing Intellectual Capital

Continuously enhancing and expanding service offerings

Developing and implementing industry-specific SCM solutions with tangible

measurable results

Vendor Selection

u sourc ng a enge External Business Environmen


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External Challenges

Optimizing within infrastructure constraints

Poor road conditions

Lack of dependable communication infrastructure

Real estate hurdles

Managing multiple government authorities

Sales tax authority

Octroi Authorities/ Entry Tax Authorities

Local bodies (Gram Panchayats, etc.)

Understanding and adopting laws of land

Sales Tax

Entry Tax

Excise Laws

Octroi rules

Other documentation like permits, etc.

External Business Environmen

Future Expectations from 3PL


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Logistics

ProductionControl &ProductionManagement

TransportationManagement

Distribution

Management

Network

Management/Optimization

Customer

Service and

OrderManagement

Procurement

& Inventory

Management

Strategy

& Planning

InformationTechnology

Forth Party Logistics - managing multiple

3PLs and technology partner

Transportation Excellence

National Footprint

Advanced IT Application - WMS,Track and

Trace, RFID, etc.

Optimizing Decision Support Tools

Transition and relationship management

capabilities

24/ 7 Service Capability

Managing Mission Critical installations

during high cost machine down timescenarios

Value added services and Postponement

logisticsGetting the right combination

Key Success Factors


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Management Buy-in

Project Management Capabilities (Service Provider & Customers end)

Flexibility in scaling and adapting to changes

Standardized service and processes across the country

Strict adherence to performance management - KPIs/ SLAs

Cost reduction and resource optimization initiatives

IT integration and upgradation capabilities

Change management capabilities

Adequate trained and skilled manpower


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Future competitive weapon


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Speed

Openness Collaboration

Time Trust Skills

Collaboration(CPFR),

Communities of

Interest (ServiceProviders & Industry)

Speed

Economy of Skill

Commandand Control

Costs

Economy of Scale

Competitive Weaponsof the 2000s

Competitive Weaponsof the 1990s


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Thank youThank you

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