1.1.1.

Inbound Logistics
The first step in the industry starts with receiving a booking confirmation from the
customers. Booking confirmation contains information on carriers bill of lading, packing
list, and shipment details. This is also where activities begin such as preparing the
necessary services required for import and export such as truck, freight forwarder, and
customs broker. Competitors in this industry may have their own resources or outsource
these services. The first stage comprises 75% of the cost.
1.1.2.

Operations

The next step in the industry value chain is clearing of goods from custom and
delivering of goods to clients. Direct labor such as staff processing of documentation,
securing approval, coordination of activities, monitoring, and loading of goods to trucks
are included in the cost. This step in the industry value chain accounts for 10% of the
cost.
1.1.3.

Overhead

Overhead is included in the costing of profitability as support to inbound logistics,

operations, marketing, and distribution. Overhead consists of administrative and
miscellaneous expenses of the company such as electricity, water, insurance, supplies,
and maintenance. Overhead components contribute indirectly to the income of the
company but are considered important in achieving the revenue. This step in the
industry value chain accounts for 5% of the cost.
1.1.4.

Sales & Marketing

Firms start promoting their services through affiliations, key management accounts, and
relationship management that includes online marketing, advertising, attending business
events, and establishing networks. The final activity would be closing the contract with
clients availing the services. This step in the industry value chain accounts for 5% of the
cost.
1.1.5. Distribution
Distribution is a process where products are ready to be dispersed to distribution
centers of importers and wholesalers. This step will start when requirements are fulfilled
and approved by the Bureau of Customs. Activities such as loading the goods into
trucks, transport of goods, and unloading of goods to warehouse will be critical in terms

of safety and timeliness of delivery. The last activity is storing of goods to warehouse
owned or rented by clients. This step in the industry value chain accounts 5% of the
cost.
1.1.6. Consumption
The final step of the industry value chain is the actual delivery of the goods. The
goods are received by importers, wholesalers, and retailers that are sold to consumers.
1.1.7. Key Findings and Insights
Macoda Logistics Inc. is directly involved across the stages in the value chain. It is
significantly encompassed in operations that begin with processing requirements,
completing documentation, clearing of goods in customs, monitoring, and coordinating
activities related to the smooth movement of goods to clients warehouse. While some
competitors perform end to end logistics activities in-house, Macoda uses
subcontractors for its inbound and outbound deliveries of goods to customers. The firm
is very active in sourcing for vendors that offers remarkably low prices for bulk
shipments since the company competes as a low-cost service provider. Marketing
activities are practiced in a number of ways by each competitor in the industry. Some
opt for high-scale advertising by acquiring industry certifications, affiliations through
memberships, sponsoring events, and close partnership with large volume importer and
exporters. Some engage in tactical advertising via online activities. Macoda Logistics
Inc. promotes their services through client-to-client referrals and face-to-face meetings
for presentation and negotiation. Another activity is advertising their services through
Internet websites and email broadcasts.
Value is added significantly in operations, distribution, and marketing steps. In
operations, the company coordinate closely with the freight forwarder and ensures
completion of trade documents prior to the arrival of the vessel. Once confirmed,
documents required are submitted to Bureau of Customs for approval. Compliance is
particularly important in making sure that there are no misses and lack of information in
documents to avoid further delays in the release of goods by customs. For distribution,
safety and timely deliveries of goods are crucial to customer satisfaction. For marketing,
value is added in relationship management with vendors, partners, customers, and
custom connections. The better the performance of employees in terms of speed of
delivery and customer satisfaction, the higher the revenue.

Shortcomings that the company needs to prepare on is the moderate bargaining

power of suppliers and buyers. Outsourced partners prices can increase based on the
market price while the buyer has the power to dictate pricing and switch quickly to other
vendors without incurring cost. In addition, the buyers and the sellers are capable of
building and extending the same services offered by the company.
Relevance to the firm: Given the factors and mechanisms of the logistics industry value
chain, Macoda must consistently search for alternatives to increase its revenue, lower
costs, hike up quality, and create more value in each stage. Transforming outsourced
services to in-house can be revisited by the company though this may be challenging
since this will require expertise on other services and high capital investment. On the
other hand, additional steps in the value chain can still be enhanced by creating more
value to them such as investing on technology and cost improvement process. There is
also an opportunity to improve marketing expenses by pursuing industry certifications,
affiliations, and aggressively offering special discounts to bulk traders. Advertising has
not yet been explored by the company since it has been dependent on client-to-client
referrals. Aside from these, the company must also be cautious of possible threats in
each step of the value chain. The imminent variation of outsourced prices and quality of
vendors are highly disadvantageous for the company. Outsourced resources already
compose 75% of cost and increase in vendor prices will further increase cost.
Competitors in the industry are able to increase their net income margins by expanding
their services, investing on revenue generating assets, and achieving quality
certifications. Fluctuating prices and quality of the firms outsourcing components will
further decrease the profitability of the company. Another consideration to heighten
revenue is to increase the service price, but a careful approach must be done first to see
whether an increase in service price would gain customer acceptance.
1.1.8. Waterfall Chart
Figure 4.1.8-A: Waterfall Chart

25,000.00

20,000.00
2,000

15,000.00

1,000

1,000

1,000

10,000.00

20,000
15,000

5,000.00

Inbound

Operations

OverheadSales & MarketingDistribution Service Price

1.2. Porters 5-Forces Model

1.2.1.
Industry Definition and Direct Competitors
As per Philippine Standard Industrial Classification (PSIC), Macoda Logistics
Inc., belongs to the Transportation and Storage Industry, mainly in Logistics Services
under subclass code 52293. Logistics services organize the physical movement of
goods through various activities that include transportation, storage, loading and
unloading, consolidation, packaging, transhipment, off docking, courier, and distribution.
It incorporates the functions performed by transport intermediaries such as freight
forwarders and multimodal transport operators. The company competes in providing
logistics services that focus on inbound and outbound importation and exportation of
goods from port to warehouse through the freight forwarder, customs clearance, and
trucking services. Direct competitors are those that offer the same services to industrial
customers in National Capital Region. The distinguished ones are Logistics Cargo, RV
Marzan, Time Cargo, GTLI, and Cyrus Logistics.
Summary of 5-Forces Analysis:

Force
1. Rivalry of Competition

Conclusion
Moderate

2. Potential for New Entrants

Weak

3. Bargaining Power of Suppliers

Weak

4. Bargaining Power of Buyers

Moderate

5. Threat from Substitutes

Moderate

1.2.2.

Rivalry of Competition

RATING: MODERATE
As of 2012, there are 638 companies in the National Capital region engaged in
freight forwarding and custom brokerage services 1. With the high availability of players in
the industry, new players need to push for low prices, innovation, speed of delivery and
customer relationship to acquire customer satisfaction and loyalty. In addition, assetbased companies have greater advantage than non-asset-based players that could be
evident in the trucking service, when rates went up twice due to the implementation of
truck ban2. It is expected that there is an intense competition resulting to high barriers to
entry of new players.
However, the increasing volume of import and export trade at 12% CAGR drives
the need for logistics services. To support such demand, huge logistics companies who
have the capacity to gain full control over the entire value chain are starting to recognize
that it is economically advantageous for them to outsource non-core activities, hence
giving the opportunity to contract logistics companies. Transport Intelligence study
forecasts that the size of the Philippines contract logistics market will increase from 478
EURmn in 2013 to 1.4 EURbn by 2020. This opportunity lowers the barriers to entry of
new players3.
Moreover, the fixed cost in this industry is low since non asset-based logistics
services can specialize and outsource based on the needs of the client. Eventually,
small companies that become profitable begin to purchase trucks and warehouses to
add value to customers. Starting a non-asset-based specialized logistics that depends
solely on outsourcing lowers the barriers to entry of new players.

1 Philippine Statistics Authority / 2012 Census of Philippine Business and Industry

December 2014
2 PIDS / A System-wide Study of the Logistics Industry in the Greater Capital Region
March 2015
3 Transport Intelligence / Philippines Transport & Logistics 2015