On
FOR
BATCH: 2013-15
I, Mr. Ajinkya V. Adurkar , Roll No.131401 of MBA 2013-15 batch of ASM’s Institute of Business
Management & Research has undergone a Summer Internship in Origin Logistics Pvt. Ltd.
(organization) for a duration of Seven weeks on a project title “Study of Overall 3 rd Party Logistics
Operations in the Origin Logistics Pvt. Ltd.”, hereby declare that this project is my original piece
of work.
I express my sincere thanks and deep sense of gratitude for the inspiring guidance and support
rendered by my research guide, Mr. SAINATH PATIL, Mentor , Origin Logistics Pvt. Ltd.
Bhiwandi, Mumbai.
I am thankful to Mr. Manoj More (Operational Head) & Mr. Raouf Anasari (Director) who
extended a helping hand during the course of the project, whenever needed, and to all the office
staff who have directly or indirectly contributed to the success in this project.
I thank my Internal Guide, Mr. S.G.Kulkarni Faculty at IBMR for imparting me the necessary
knowledge wherever needed and for guiding me as to how to go about with this project.
Finally, I am grateful so many ASM, SO, Retailers & Friends who shared valuable information that
helped in the successful completion of this project.
MBA 2013-15
Index
Sr. No. CHAPTERS PAGE No.
1 Executive Summery 4
2 Organization Profile 5
4 Introduction 9
14
5 Literature Review 16
6 Company Profile 18
1. Profile 19
7 Project Profile 32
1. Conclusion 48
2. Recommendation 49
9 APPENDIX 50
10 BIBLIOGRAPHY 51
List of Tables
6 Factor Matrix
Chain Security
Security
Services
33 Normalized Matrix for Quality of Services
38 Final Ranking
List of Graphs
EXECUTIVE SUMMARY
The third-party logistics industry has come a lo ng way in its relatively short history, a maturity
curve that has been documented in the seventeen years of this study. Early on, shippers cautiously
entrusted 3PLs with a relatively limited number of core services, such as managing warehousing
and transportation, then steadily asked 3PLs to do more. 3PLs honed their craft in delivery of these
services, while gaining shippers’ trust and building toward more collaborative, integrated
relationships with their customers. Similar to other industries, shippers (customers) sometimes
revisit their decisions to use 3PLs, even over short periods of time. Overall, however,
results of this study suggest that far more companies increase their logistics outsourcing in any
given year than those that bring most logistics services back in-house – which helps to explain
3PLs continue to rank their relationships with shippers a bit higher than shippers do, but the vast
majority (88% of shippers and 94% of 3PLs) view their relationships as successful. Openness,
transparency, and good communication as well as agility and flexibility contribute to this success.
Interestingly, figures from this year’s study suggest decreases in the use of gain sharing and
collaboration.
Later I went through the process of filling the questionnaires from 100 customers which using 3 rd
party logistics both retailers and customers were taken into account to make this project more
effective. Secondary data from various sources like magazines, a journal etc has also been taken.
Chapter 1:
Introduction
1.1 OBJECTIVES OF THE STUDEY
The study of this topic has been undertaken with a number of objectives. Following
are the objectives of this study:
a) To understand the concept of 3rd party logistics, various operations in 3rd party
logistics.
b) Cost and time savings for the client.
c) Ability of client to focus on core business
d) To study the warehousing, inventory management and damage control.
Definition
“Third-party Logistics is simply the use of an outside company to perform all or part of the
firm’s materials management and product distribution function.”
• Initially primarily domestic coverage, 3PL industry is now global in character with a
revenues approaching $150 billion in NA.
Characteristics of 3PL
Types of 3PL
• Transportation-Based
• Warehouse/Distribution-Based
• Forwarder-Based
• Financial-Based
• Information-Based
As conditions for doing business in a global setting have changed significantly during
the last two decades the importance of logistics and supply chain management
(LSCM) has been recognized universally. As companies realized the need to adapt to
the ever changing conditions in an environment of globalization, technological
innovation, and more sophisticated consumer demand to survive and flourish they
began to incorporate into their systems of operations and focus on a strong LSCM
component (Rushton & Walker, 2007). Superior logistics and supply chain
performance is now a well-recognized strategic dimension for companies to gain
competitive advantage.
The growth of logistics outsourcing in the USA is attributable to better transportation
solutions; greater focus on core businesses; impact on cost reduction; improvements
in services; development of necessary technological expertise; availability of
computerized systems; and the need for more professional and better prepared
logistics services (Sheffi, 1990). The growth of business dynamics has caused
outsourcing of the logistics activities to gain increasingly greater importance.
Companies have been considering various options to manage their logistics activities
including, creating in house dedicated logistics function, setting up logistics
subsidiaries or acquiring a logistics firm. (Sahay & Mohan, 2006).
A 3PL provider is a company which supplies and/or co-ordinates logistics functions
across multiple links in the supply chain. The company acts as a “third party”
facilitator between seller/manufacturer (the “first party”) and buyer/user (the ‘second
party’),
As logistics is the core competence of third party logistics providers. They possess better know how
and a greater expertise as any producing or selling company could be able. This know how together
with the global networks of the often large company size enables a higher time and cost efficiency.
Another point is, that the equipment and the IT systems of 3PL providers are constantly updated
and adapted to new requirement of their customers, so that they are able to meet the requirements of
their customer’s suppliers. And that is more than essential to a company’s survival. Producing or
selling companies often do not have the time, resources or expertise to adapt their equipment and
systems as quickly as necessary. So in conclusion a 3PL provider can meet the technical
requirements in a faster and more cost efficient way than a company could do itself.
2. Low capital commitment
Thus the fact that most or all operative functions are outsourced to a 3PL provider there is no need
for the client to hold own warehouses or transport assets. There is very less or no tied up logistics
capital. This is very beneficial if a company has high deviations in warehouse capacity utilization,
because a bad capacity utilization ratio at equal fix cost (for warehouse) is evil for a company’s
efficiency and profits.
3. Ability of client to focus on core business
The outsourcing of logistics departments permits the company to focus even more on their real core
business. If logistics is one of the firms’ core businesses then outsourcing doesn’t make sense. But
if logistics is no core competency but rather needed or annoying attachment it should be outsourced
to a logistics provider, because the continuous increasing of business complexity makes it
impossible to be an expert in every division or sector.[4] And if you are no expert in a division, there
is always the opportunity to improve. Often only the core competency is really adding value to your
product. So it is immense important to be best in class or one of the market leaders to generate
profits, because normally the quality of the core product is the main (not the only, but the main!)
reason for the consumer to buy it.
4. 3PLs provide flexibility
Third party logistics provider can provide a much higher flexibility in geographic aspects and can
offer a much larger variety of services than the clients could provider their selves. In addition to
that, the client gets flexibility in resources and workforce size and logistics fix costs turn into
variable costs.
*Possible disadvantage of 3PL
The only big disadvantage (if you see it as one) is the loss of control a client has by working with
third party logistics. Eminently in outbound logistics when the 3PL provider completely assumes
the communication and interacting with a firms customer or supplier. By having a good and
continuous communication with their clients most 3PL’s counter and try to charm away such
doubts. Some 3PL’s even paint the clients logos on their assets and vest their employees like the
clients ones.
*Implementation issues
If a company gets the result that it wants to implement a third party logistics provider into their
processes, it has to work on the following implementation issues. These are points a company that
is purchasing the third party logistics services, has to fulfill.
The startup phase of such a strategic alliance is the most difficult and most critical phase. For
implementation considerations there has to be planned a time frame of between six months and a
year! Otherwise you risk quality and reliability losses. The client company has to clearly identify
their needs and expectations to the 3PL exactly to avoid misunderstandings and disaffections due to
miscommunications. Performance measure has to be set. Concrete guidelines are necessary.
Necessary guidelines:
Both parties, provider and client, must concentrate on the aim of a good collaboration concept with
mutual beneficial. Otherwise if there is no win-win situation one party suffers and reduce its
efforts.[ Just as important as the good communication between client and provider is the
communication within the workforce and employees and not only within the managers’ level. In the
best case the communication is informative, motivating and anticipatory. The integration of
employees should have highest priority! To avoid incertitude of employees, customers and business
partners’ changes in respect to structures and reliabilities have to be communicated internal and
external as early as possible. Good communication is essential within such a project, employees
want to know why a company is outsourcing and what the expectations of this step are. [Upcoming
fear in respect to employee reduction have to be faced within the different departments in an early
stage, if there is none, because fear of losing one’s livelihood is paralyzing the working morale. The
employees should be motivated and mobilized to an active cooperation by understanding the change
as a chance.
Standard 3PL Provider: this is the most basic form of a 3PL provider. They would perform
activities such as, pick and pack, warehousing, and distribution (business) – the most basic
functions of logistics. For a majority of these firms, the 3PL function is not their main activity.
Service Developer: this type of 3PL provider will offer their customers advanced value-added
services such as: tracking and tracing, cross-docking, specific packaging, or providing a unique
security system. A solid IT foundation and a focus on economies of scale and scope will enable
this type of 3PL provider to perform these types of tasks.
The Customer Adapter: this type of 3PL provider comes in at the request of the customer and
essentially takes over complete control of the company's logistics activities. The 3PL provider
improves the logistics dramatically, but does not develop a new service. The customer base for
this type of 3PL provider is typically quite small.
*On-demand transportation
On-demand transportation is a relatively new term coined by 3PL providers to describe their
brokerage, ad-hoc, and "flyer" service offerings. On-demand transportation has become a
mandatory capability for today's successful 3PL providers in offering client specific solutions to
supply chain needs.
These shipments do not usually move under the "lowest rate wins" scenario and can be very
profitable to the 3PL that wins the business. The cost quoted to customers for on-demand services
are based on specific circumstances and availability and can differ greatly from normal "published"
rates.
On-demand transportation is a niche that continues to grow and evolve within the 3PL industry.
Specific modes of transport that may be subject to the on-demand model include (but are not
limited to) the following:
Indian logistics industry is likely to continue its growth momentum due to the reviving fortunes of
the sector with booming end- user industries. Thus, to facilitate a better analysis of the penetration
level of 3PL logistic services across different industries in India, we have studied the market
potential of the 3PL services in four major industries including: Automobile, IT Hardware, FMCG
and Consumer Electronics till 2015. Subsequently, it has been found that the automobile industry
dominates the 3PL market with majority share, and is forecasted to remain the fastest growing
segment in Indian 3PL market.
Further, it has been revealed that storage infrastructure is the most important aspect of the logistics
industry supply chain and forms the fundamental platform for the development of logistics industry
in any market across the globe. The report also covers analysis of Warehousing, Cold Storage and
CFS/ICD (Container Freight Stations/Inland Container Depot) industry in India. It was found that,
the CFS/ICD industry is expected to register a strong growth in future, followed by cold storage
industry.
As infrastructure is the most important part of logistics industry, thus our report discusses freight
movement by roads, railways, air and ocean. Continuous improvement in logistic infrastructure has
led 3PL services to be perceived as a far better mode of controlling both internal and external
logistic processes. The report also covers brief overview of logistics parks in India along with
emerging industry trends such as Green Logistics and 4PL industry.
The report also provides profiling of the major public and private players, which will help the
clients to gain insights on their overall business and industry activities. Overall, the report is likely
to prove as a proper source of knowledge for investors and clients interested for investment in the
Indian 3PL Market.
Indian Third party logistics market has been consistent over the past few years, but it is expected to
show a tremendous change in the next few years. Growth of the sector is backed by investment in
infrastructure, globalization of manufacturing systems.
Supply Chain Integration
1.6 Why Use 3PL?
*BECAUSE SOMEONE ELSE CAN DO IT BETTER
Even if you have resources available, another organization within the supply chain may be able to
do it better, simply because its relative position in the supply chain, supply chain expertise and
economies of scale.
*TO SHARE RESPONSIBILITY
3PL companies can share responsibility for managing global supply chains, keeping customers and
stores properly stocked, and delivering the perfect order every time.
Warehousing Management is one of the important aspects of 3 rd party logistics companies; where
companies are store their stock in large warehouses in proper manner. A warehouse is
a commercial building for storage of goods. Warehouses are used
by manufacturers, importers, exporters, wholesalers,transport businesses, customs, etc. They are
usually large plain buildings in industrial areas of cities and towns and villages. They usually
have loading docks to load and unload goods from trucks. Sometimes warehouses are designed for
the loading and unloading of goods directly from railways, airports, or seaports. They often
have cranes and forklifts for moving goods, which are usually placed on ISO
standard pallets loaded into pallet racks. Stored goods can include any raw materials, packing
materials, spare parts, components, or finished goods associated with agriculture, manufacturing
and production.
Storage and shipping systems in Warehouses:
Some of the most common warehouse storage systems are:
Pallet racking including selective, drive- in, drive-thru, double-deep, pushback, and gravity
flow
Mezzanine including structural, roll formed, racks
Vertical Lift Modules
Horizontal Carousels
Vertical Carousels
A "piece pick" is a type of order selection process where product is picked and handled in
individual units and placed in an outer carton, tote or other container before shipping. Catalog
companies and internet retailers are examples of predominantly piece-pick operations. Their
customers rarely order in pallet or case quantities; instead, they typically o rder just one or two
pieces of one or two items. Several elements make up the piece-pick system. They include the
order, the picker, the pick module, the pick area, handling equipment, the container, the pick
method used and the information technology used.] Every movement inside a warehouse must be
accompanied by a work order. Warehouse operation can fail when workers move goods without
work orders, or when a storage position is left unregistered in the system.Material direction
and tracking in a warehouse can be coordinated by a Warehouse Management System (WMS),
a database driven computer program. Logistics personnel use the WMS to improve warehouse
efficiency by directing pathways and to maintain accurate inventory by recording warehouse
transactions.
For a warehouse to function efficiently, the facility must be properly slotted. Slotting addresses
which storage medium a product is picked from (pallet rack or carton flow), and how they are
picked (pick-to- light, pick-to-voice, or pick-to-paper). With a proper slotting plan, a warehouse can
improve its inventory rotation requirements—such as first in, first out (FIFO) and last in, first out
(LIFO)—control labor costs and increase productivity.
Benefits of Warehousing
Warehouses enable storage of goods when their supply exceeds demand and by releasing
them when the demand is more than immediate productions. This on one hand ensures a
regular supply of goods in the market and on the other hand it helps to stabilize prices by
matching supply with demand.
Warehouses provide for safe custody of goods. Businessmen can thus minimize the risks to
goods from loss, damage, fire, theft etc. Perishable products can be preserved in cold
storage. Also, the goods kept in a warehouse are generally insured.
A warehouse provides facilities for processing, packing, b lending, grading etc, of the goods
for the purpose of sale. The prospective buyers can inspect the goods kept in a warehouse.
Warehouses provide a receipt to the owner of goods for the goods kept in the warehouse.
The owner can borrow money against the security of goods by making an endorsement on
the warehouse receipt. By keeping the imported goods in a bonded warehouse, a
businessman can pay customs duty in installments.
A warehouse management system (WMS) is a software application that supports the day-to-
day operations in a warehouse. WMS programs enable centralized management of tasks
such as tracking inventory levels and stock locations. WMS systems may be standalone
applications or part of an Enterprise Resource Planning (ERP) system.
A warehouse manage ment system (WMS) is a key part of the supply chain and primarily
aims to control the movement and storage of materials within a warehouse and process the
associated transactions, including shipping, receiving, put away and picking. The systems
also direct and optimize stock put away based on real-time information about the status of
bin utilization. A WMS monitors the progress of products through the warehouse. It
involves the physical warehouse infrastructure, tracking systems, and communication
between product stations.
Early warehouse management systems could only provide simple storage location
functionality. Current WMS applications can be so complex and data intensive that they
require a dedicated staff to run them. High-end systems may include tracking and routing
technologies such as Radio Frequency Identification (RFID) and voice recognition.
No matter how simple or complex the application is, the goal of a warehouse management
system remains the same -- to provide management with the information it needs to
efficiently control the movement of materials within a warehouse.
More precisely, warehouse management involves the receipt, storage and movement of
goods, (normally finished goods), to intermediate storage locations or to a final customer. In
the multi-echelon model for distribution, there may be multiple levels of warehouses. This
includes a central warehouse, a regional warehouses (serviced by the central warehouse) and
potentially retail warehouses (serviced by the regional warehouses).
Types:
In its simplest form, the WMS can track product's data during the production process a nd act
as an interpreter and message buffer between existing ERP and WMS systems.
Chapter 2:
Company Profile
Company Profile
About Us:
Origin Logistics Pvt. Ltd. caters to the 3PL requirements, local distribution and express between
Mumbai-Pune of the Customers across industries. Origin today has a strong customer base of
Multinationals, Domestic Giants and New entrants.
Origin has grown from a team of few to now over 40 employees, over 60 vendors spread at multiple
locations i.e. Mumbai, Pune and Gurgaon.
Over 23 years of cross functional experience in Sales Operations (Air Express, Road Express, Bulk
Transportation, Rail transportation, Refrigerated transportation, Hard Freight), Supply Chain
Management (Warehousing, Local Distribution, Logistics, Stores Management, Contract
Administration). Currently an entrepreneur / Director of Origin Logistics Pvt. Ltd. providing
Warehousing and distribution services, with a customer base of over 160+ with major customer like
Lifestyle, Hypercity, Godrej, Redington, Odyssey, Max and Brandhouse, expected to cross the turnover
of over 7 cores in the 3rd financial year of operation. Worked for companies like Schenker Logistics,
TNT, Gati, Patel Roadways and Panchmahal Cement at various locations and various levels.
Over 14 years of cross functional experience in Operations (Road Express, Bulk Transportation,
Rail transportation), Supply Chain Management (Warehousing, Local Distribution, Logistics,
Stores Management, Contract Administration).
Currently an entrepreneur / Director of Origin Logistics Pvt. Ltd. providing Warehousing and
distribution services, with a customer base of over 160+ with major customer like Lifestyle,
Hypercity, Godrej, Redington, Odyssey, Max and Brandhouse, expected to cross the turnover of
over 7 cores in the 3rd financial year of operation.
Worked for companies like Schenker Logistics, Pyramid Retail, Gati, Elbee .
Some of the Customers who using 3rd Party Logistics Services at Origin Logistics Pvt. Ltd.
1. Keeda Sunglasses :
Chrysal Group operates with the attitude and motto “Open Minds, Open Doors”.
The corporate motto embodies the Group’s passion for ‘investing in new ideas’.
Whether it be Realty, Hospitality, Media or Fashion what sets Chrysal Group’s ventures
apart is the fresh outlook with which each business is approached.
Our first launch under the brand Keeda is in the eyewear category.
Eyewear by KEEDA
By design, by color, by shape, by material KEEDA sunglasses will be an eye-opener for
those who want to see the world differently.
Sturdy, snazzy & trendy. Keeda launches its eyewear in the market by combining the latest
from optical technology and style. Made from high performance lenses and lightweight
frames, every Keeda eyewear ensures a snug and a comfort fit.
Vision:
To be an enterprise that pursues ides that have the potential to be re warding business and
social ventures that offers value to the society.
Mission:
To be progressive company that is open to ideas, innovation, and unlocking potential.
To promote free-thinking corporate culture that recognizes individual and collective
Potential , nurtures talent and rewards contributions.
Values:
Open Minded, Transparent, Ethical & People Centric.
*Organization involves in the sector like Realty, Hospitality, Fashion, Media, and Ventures.
Chapter 3:
Industry
Profile
Figure 2. Outsourcing Development of Logistics Services and Network
Since the 1980s, along with the trend to outsource non-core activates (Sink and
Langley, 1997), companies have increasingly turned to third-party logistics
providers (3PL) both in the USA (Lieb and Randall, 1996; Rabinovich et al.,
1999; Knemayer and Murphy, 2004) and in Europe (Van Laarhoven et al.,
2000). 3PL services help to achieve the strategic objectives by concentrating
more on core competency of the main business. The study by Sahay and
Mohan, 2006, has cited substantial growth in various financial indicators using
services of 3PL, for instance, various improvements in sales revenue by 13.5%,
working capital by 12.3%, returns on assets by 10%, capital assets reduction by
10%, production cost reduction by 10.5%, labor cost reduction by 10.0%,
and logistics cost reduction by 15%. 3PL users depend on 3PL service
providers to secure capacity and gain agility (Hannon, 2005) who not only
provide core services like supplying right quality product,
in the right amount, at the right price and place, and at the right time but also provide
value added services such as tracking and tracing, sending information prior to the
arrival of products, flexibility in delivery, which are valued by customers. The role
3PL service providers play in enhancing services and thereby satisfying customers
has been universally recognized.
The growth in 3PL service providers is seen across the world. As the logistics service
demand increases, the challenges and opportunities will continue to increase. With
the wide availability of modern decision making tools and information technology a
paradigm shift in logistics is witnessed. Figure 2 depicts the evaluation and the state
of the art witnessed in logistics outsourcing.
Companies across industries and around the world regard logistics and supply chain
management as key components of their overall business success. Many users feel
that their relationships with 3PLs have helped them achieve critical goals related to
service, cost, and customer satisfaction.
\
Third Party Logistics in India:
Ever since the liberalization of its economy India has been on a path to become one
of the top economic powers in the world. New avenues for progress and development
have opened up; manufacturing and retail sectors gained popularity because of the
changes in China’s export policy of not exporting manufactured items, from which
Indian manufacturing firms have benefitted. Hence this sector will contribute to GDP
significantly in the long run. The growth and competitiveness in these two sectors
largely depend on the efficiency of the logistics operations that facilitate the
companies’ ability to reach out to their customers quickly and at the desired location.
Realizing this many manufacturers and retailers are now restructuring their supply
chain processes in a manner to incorporate partnerships with expert supply chain
service providers and outsourcing such activities as domestic transportation,
international transportation, customs brokerage, warehousing, forwarding, cross -
docking, product labeling, packing, assembly, kitting, reverse logistics, freight bill
auditing and payment, IT services, fleet management, supply chain consultancy
services provided by 3PLs, order entry, processing and fulfillment and limited
liability partnership (LLP)/4PL Service.
Currently 3PL services are in their nascent stage in India. Third party logistics will
gain considerable share of the logistics sector because of the following compelling
facts.
Globally, the logistics industry is valued at US$3.5 trillion and the Indian
logistics industry is currently estimated at US$90 billion (CII)1.
The industry has generated employment for 45 million people in the
country in comparison with the IT and ITES sector, which employs
approximately 4.3 million people1.
As per the World Bank Survey, India ranks 39th in terms of the logistics
performance index and indicators, with Singapore on top, the UK, USA and
China in 9th, 14th and 30th positions, respectively. India spends US$1,148
in handling costs to import one cargo container and US$820 to export it. In
comparison, Singapore spends US$367 per imported container and China
US$390, according to a World Bank study1.
India spends 13% of its GDP on logistics compared to an average of 10% in
developed countries, while the U.S. spends just 8%. Better supply chain
management has reduced logistics costs by nearly 1% in 10 years 1.
The Indian government plans to spend US$24 billion over the next eight
years on supply chain infrastructure1.
3PL solutions are on course to grow at a compound annual growth rate
(CAGR) of over 16% from 2007-2010. Consequently, 3PL service
providers are expected to corner an increased share of the Indian logistics
pie, from 6% in FY2006 to 13% in FY2011, at a CAGR of 25% (CII)1.
According to the ASSOCHAM2, outsourcing of 3PL businesses in India
should reach the value range above US$ 90 million by 2012 as the concept
first introduced in US and Europe is being adopted at a pace that will lead
to increases in the efficiency of domestic operations through better
managed logistics functions.
Companies in textile, automotive, pharmaceutical, manufacturing, retail and
FMCG sectors are increasingly opting to outsource their logistics
requirements to specialized service providers.
According to a recent survey of 3PL service providers engineering,
automotive and retail sectors were top revenue earners.
The 3PL market in India is comprised of two segments: the first one is asset based in
which assets like trucks, distribution centers and warehouses are utilized in supply
chain management, and the second one is non-asset based. There is a significant
difference between the nature of Indian 3PL and its counterpart elsewhere, especially
in the U.S., Table 1.
Table 1: Comparative Analysis of 3PL in India and the U.S.
Studies based on user firms appear to indicate that outsourcing logistics activities is
appropriate if it has an impact on one or more factors depicted in Table 3.
Factor Indentified by
Impact on customer satisfaction Gooley (1992); and Lieb et al. (1993)
Impact on logistics system performance Lieb et al. (1993) and Dapiran et al. (1996) and Bhatnagar
et al. (1999)
Reduction in capital investment in facilities Foster and Muller (1990) and Richardson (1992, 1995)
Reduction in capital investment in Fantasia (1993), Foster and Muller (1990) and Richardson
equipment (1992)
Reduction in investment in information Goldberg (1990), Sheffi (1990), Trunick (1990) and
technology Fantasia (1993)
Impact on employee morale Bowersox (1990) and Dapiran et al. (1996)
Reduction in manpower cost Foster and Muller (1990) and Richardson (1992, 1995)
Improvement on specific logistics function Minaham (1997) and McMullan (1996)
parameters
Improvement in inventory turnover rates Richardson (1990, 1995)
In UK there is several research studies are made on 3 rd party logistics, below are the some of the
authors research in brief format:
Title: Third Party Logistics: a literature review & research agenda
Abstract:
Purpose – To provide taxonomy of third party logistics (3PL) research and, based on that, to
develop a research agenda for this field of study.
Findings – The review reveals that 3PL research is empirica l-descriptive in nature and that
it generally lacks a theoretical foundation. Survey research is the dominant method
employed, reflecting the positivist research tradition within logistics. It identifies certain
knowledge gaps and develops five propositions for future research. It suggests that focus
should be directed towards more normative, theory-driven and qualitative method-based
studies. It also argues that further empirical research in relation to 3PL
design/implementation and fourth party logistics services is needed.
1. To identify the success factors of Indian 3PL firms and their relative importance.
2. To analyze the gap between achievement and expectation as defined by the success factors
identified.
Research Issue
Research Questions
First Version
Development of
Questionnaire
Final Version
Data Collection
Data Analysis
Conclusion
5 . Data Analysis
5.1 To identify the success factors of Indian 3PL firms and its relative importance.
Component
1 2 3 4 5 6 7 8
Q1 .504
Q2 .431
Q3 .760
Q4 .417 .502
Q5 .639
Q6 .488 -.407
Q7 .646
Q8 .505
Q9 .813
Q10 .739
Q11 .555 .419
Q12 .699
Q13 .647
Q14 .639
Q15 .823
Q16 .815
Q17 .772
Q18 .457
Q19 .514 .491
Q20 .658
Q21 .731
Q22 .643
Q23 .742
Q24 .676
Q25 .688
Q26 .635
We note that about 65% (.64958) of the total variation in the 26 variables is attributable to the first
eight components, Table 10. We also observe that Component 1 explains a variance of 3.064, which
is 11.786% of total variance of 26; Component 2 explains a variance of 2.964, which is 11.398% of
total variance and so on. The rotated component matrix contains the same information as the
component matrix, except that it is calculated after rotation, Table 11. From this table we construct
the following factor matrix, Table 12, where the key elements of importance in relation to the eight
factors are shown.
Table 6 : Factor Matrix
Eigen Value
Factor % of Items
Factor Name Items
No. Total Variance Loading
Realized Cost Reduction 0.823
Geographical Coverage 0.814
1 Reduced Cost 5.997 23.065
Experience as a 3PL Provider 0.739
Continuous Improvement 0.635
Knowledge Based Skills 0.742
Project Management Skills 0.676
Operational Global Capabilities 0.646
2 3.356 12.909
Performance Skilled Logistics Professionals 0.643
Real Time Access to Information 0.555
Route & Load Optimization 0.514
Enterprise Resource Planning 0.699
Online Tracking System and
0.688
Information Transaction System
3 1.625 6.250
Technology System Transportation Management System 0.639
Warehouse Management System 0.488
Use of RFID Technology 0.431
Breadth of Service Offered 0.647
Integration among Internal 3PL
0.639
4 Versatility 1.379 5.305 System
Flexibility & Adaptability 0.505
Focus on specific Industry 0.504
Speed of the Delivery 0.731
5 Quality Management 1.249 4.802 Availability of Data on Time 0.658
Product Returns & Repair 0.457
Compatibility with the
6 1.161 4.467 Good Relationship with Service user 0.813
Users
Investment in IT Systems 0.760
7 Fixed Assets 1.098 4.225
Investment in Quality Assets 0.502
Performance Management of Key Performance
8 1.023 3.935 0.772
Measurement Indicators
In order to analyze the gap between achievement (factor importance) and expectation (company
importance) of identified success factor SERVQUAL analysis was applied on the success variables.
In gap analysis, a positive difference between expectation and perception points out the strengths,
whereas a negative difference shows the weaknesses of the service quality. In this context, the data
collected from 124 3PL service providers was analyzed. From the Table 13 and Table 14, we can
say that reduced cost, information technology system, versatility, quality management,
compatibility with user and fixed asset factor, there is scope of improvement.
Table 7:
The Analytic Hierarchy Process (AHP) is a rational framework for structuring a decision problem.
It has been used in a wide range of decision- making situations to evaluate alternative courses of
action and identify the one that is most desirable in view of the decision maker’s preferences (Roger
1987). The stages of the process require the decomposition of the decision problem into
a hierarchy of easier sub-problems that can be considered independently. The hierarchical elements
can relate to any aspect of the decision problem. After building the hierarchy the elements of the
decision situation are compared to one another in a pair wise manner using judgments about their
relative importance. These evaluations are converted to numerical values that represent the weight
or priority of each element of the hierarchy. Finally numerical priorities are calculated for each of
the decision alternatives.
We applied AHP to prioritize growth strategies for Indian 3PL providers. The chart of the model for
growth strategies used by the companies is shown in Figure 4. The growth stra tegies have been
identified through extensive literature review.
In this section the most important growth strategies are identified and then after the ranking is given
to selected companies like RAS India, Unique Air Express, AFL Pvt. Ltd and FEDX.
Description of the Model:
Growth strategies have been determined through literature review and the relevant attributes have been
selected for the AHP model for the selection of growth strategies. The attributes are:
Alliance [AL]
Integration [IN]
CRITERIA
DI UP GS SP
SUB
CRITERIA
MA AL RI RE BS IS GS IN SS QS
ALTERNATIVES
Unique Air
RAS, India AFL Pvt. Ltd FEDX
Express
5. Having done all the pair-wise comparisons and entered the data, the consistency is
determined using the Eigen value. To do so, normalize the column of numbers by dividing
each entry by the sum of all entries. Then sum each row of the normalized values and take
the average. This provides Principal Vector [PV]. Table 2 illustrates the normalized
comparison matrix. The check of the consistency of judgments is as follows:
Let the pair-wise comparison matrix be denoted M1 and principal vector be denoted M2.
Then define M3=M1*M2; and M4=M3/M2. λ max = average of the elements of M4.
N: Number of elements
Random Index Table
N 1 2 3 4 5 6
RCI 0 0 0.58 0.9 1.12 1.24
If CR is less than 10%, judgments are considered consistent. And if CR is greater than 10%, the
quality of judgments should be improved to have CR less than or equal to 10%.
6. Steps 3–5 are performed to have relative importance of each attribute for all levels and clusters in the
hierarchy.
First the pair wise comparison matrix for growth strategies was formed and then after normalizing the same
matrix the weight of particular strategies was find out. The same procedure was followed for all the level of
the hierarchy.
DI SP GS UP
DI 1.00 0.75 0.86 0.75
SP 1.33 1.00 1.14 1.00
GS 1.17 0.88 1.00 0.88
UP 1.33 1.00 1.14 1.00
The Indian 3PL provider largely uses Service Portfolio and 3PL User/Provider Relationship for the growth
of the business.
MA AL RI RE
MA 1.00 0.71 0.83 0.63
AL 1.40 1.00 1.17 0.88
RI 1.20 0.86 1.00 0.75
RE 1.60 1.14 1.33 1.00
From the table18 one can say that Indian 3PL providers uses Regional Expansion and Alliance as Direct
Invest for the growth of the business.
So, waitage of MA, AL, RI & RE in Direct Investment can be found out by,
MA = 0.207*0.192 + 0.207*0.269 + 0.207*0.231 + 0.207*0.308 = 0.040
Weight in DI
MA 0.040
AL 0.056
RI 0.048
RE 0.064
BS IS GS IN SS QS
BS 1.00 1.00 1.14 1.14 1.00 1.00
IS 1.00 1.00 1.14 1.14 1.00 1.00
GS 0.88 0.88 1.00 1.00 0.88 0.88
IN 0.88 0.88 1.00 1.00 0.88 0.88
SS 1.00 1.00 1.14 1.14 1.00 1.00
QS 1.00 1.00 1.14 1.14 1.00 1.00
Now the ranking of the company can be obtained by constructing comparison matrices with respect to
various growth strategies used by the company.
Table 15. Pair Wise Comparison Matrix for Merger & Acquisition
RAS, India Unique Air Express AFL Pvt Ltd FEDX SUM Eigen Vector
RAS, India 4.00 20.00 4.00 3.33 31.33 0.29
Unique Air Express 0.80 4.00 0.80 0.67 6.27 0.06
AFL Pvt Ltd 4.00 20.00 4.00 3.33 31.33 0.29
FEDX 4.80 24.00 4.80 4.00 37.60 0.35
SUM 106.53
RAS, India Unique Air Express AFL Pvt Ltd FEDX SUM Eigen Vector
RAS, India 4.00 6.40 4.57 4.57 19.54 0.18
Unique Air Express 2.50 4.00 2.86 2.86 12.21 0.11
AFL Pvt Ltd 3.50 5.60 4.00 4.00 17.10 0.16
FEDX 3.50 5.60 4.00 4.00 17.10 0.16
SUM 65.96
RAS, India Unique Air Express AFL Pvt Ltd FEDX SUM Eigen Vector
RAS, India 4.00 3.56 6.40 3.56 17.51 0.16
Unique Air Express 4.50 4.00 7.20 4.00 19.70 0.18
AFL Pvt Ltd 2.50 2.22 4.00 2.22 10.94 0.10
FEDX 4.50 4.00 7.20 4.00 19.70 0.18
SUM 67.86
RAS, India Unique Air Express AFL Pvt Ltd FEDX SUM Eigen Vector
RAS, India 4.00 9.33 3.50 3.11 19.94 0.19
Unique Air Express 1.71 4.00 1.50 1.33 8.55 0.08
AFL Pvt Ltd 4.57 10.67 4.00 3.56 22.79 0.21
FEDX 5.14 12.00 4.50 4.00 25.64 0.24
SUM 76.93
Table 23. Pair Wise Comparison Matrix for Broadening Service Lines
RAS, India Unique Air Express AFL Pvt Ltd FEDX
RAS, India 1.00 1.00 1.29 1.29
Unique Air Express 1.00 1.00 1.29 1.29
AFL Pvt Ltd 0.78 0.78 1.00 1.00
FEDX 0.78 0.78 1.00 1.00
RAS, India Unique Air Express AFL Pvt Ltd FEDX SUM Eigen Vector
RAS, India 4.00 4.00 5.14 5.14 18.29 0.17
Unique Air Express 4.00 4.00 5.14 5.14 18.29 0.17
AFL Pvt Ltd 3.11 3.11 4.00 4.00 14.22 0.13
FEDX 3.11 3.11 4.00 4.00 14.22 0.13
SUM 65.02
RAS, India Unique Air Express AFL Pvt Ltd FEDX SUM Eigen Vector
RAS, India 4.00 6.40 4.00 4.57 18.97 0.18
Unique Air Express 2.50 4.00 2.50 2.86 11.86 0.11
AFL Pvt Ltd 4.00 6.40 4.00 4.57 18.97 0.18
FEDX 3.50 5.60 3.50 4.00 16.60 0.16
SUM 66.40
Unique Air
RAS, India AFL Pvt Ltd FEDX SUM Eigen Vector
Express
RAS, India 4.00 5.60 4.00 4.00 17.60 0.17
Unique Air Express 2.86 4.00 2.86 2.86 12.57 0.12
AFL Pvt Ltd 4.00 5.60 4.00 4.00 17.60 0.17
FEDX 4.00 5.60 4.00 4.00 17.60 0.17
SUM 65.37
Table 31. Pair Wise Comparison Matrix for Supply Chain Security
RAS, India Unique Air Express AFL Pvt. Ltd FEDX SUM Eigen Vector
RAS, India 4.00 5.14 5.14 4.00 18.29 0.17
Unique Air Express 3.11 4.00 4.00 3.11 14.22 0.13
AFL Pvt. Ltd 3.11 4.00 4.00 3.11 14.22 0.13
FEDX 4.00 5.14 5.14 4.00 18.29 0.17
SUM 65.02
Ranking waitage for RAS, India = 0.29*0.192 + 0.18*0.269 + 0.19*0.231 + 0.18*0.308 = 0.200
Table 37. Matrixes for Service Portfolio
Figure 5 shows the relative weights of all elements in AHP model. Service portfolio (0.276) and
3PL User/Provider Relationship (0.276) is very important and common criterion followed by the
Indian 3PL Service provider when it comes for selecting the growth strategy. It is followed by
Green Supply Chain (0.241) and Direct Investment (0.207). Green Supply Chain is getting
importance due to the ever-changing environment of the world. This is very important to control
the green house effect and hence to control the temperature of the world. On the basis of the sub
criterion FEDX secure the first rank in terms of using proper strategy as per change of the business
condition in India. While RAS, India secure second rank.
SUB
GOAL CRITERIA ALTERNATIVES
CRITERIA
0.040
Alliance
Direct
Investment
0.056
0.207
RFID & IT
0.048
Regional
Unique Air
Expansions 0.265
Express
Growth Strategies 3PL 0.064
User/Provider
Relationship Broadening
0.276
Service Lines
0.048
0.241
0.048
Global
Service Portfolio Service AFL Pvt.
Ltd. 0.326
0.276 0.042
Integration
0.042
Supply Chain
Security
0.048
Quality of
Services
FEDX 0.378
0.048
*Conclusion*
3rd Party logistics having good scope in India as well as in foreign Market.
It manage, support and fulfill customer demand in all serviced regions.
It resulted in increasing the customer by fulfilling their demand in short
period of time.
Attain a continuous and unrivalled 100 % customer satisfaction.
Faster turnaround time to deliver goods to customer.
Optimize price setting, increase sales, and reduce shipping cost to maximize
customer satisfactions.
Logistics and supply chain management plays very important role in manufacturing organization.
Most of the companies are outsourcing these activities to concentrate on their core business. So
the outsourcing companies are giving importance to the reduction in the cost to gain the
advantage of the lower cost in the competitive business. So most of the Indian 3PL service
provider gives importance to Reduced Cost for most important success factor. This can be
achieved by giving more emphasis on variables like geographical coverage, experience as a 3PL
provider and continuous improvement. The cost can be reduced by vast geographical coverage;
higher experience for giving particular types of the service and emphasis on continuous
improvement. The second most important factor for success is Operational Performance.
Knowledge based skills and project management skills can help the growth of the organization
and can become the important success factor for the service provider. Information technology
system is also important for success of the business. By concentrating more on this factor the
company can easily and effectively share and convey the information with the end user. This can
also improve the speed and accuracy of the work and hence better satisfaction to the customer.
This would increase the profit and improves the brand image of the company.
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, use of RFID technology, enterprise resource
planning, transportation management system, skilled logistic professionals, online tracking
system & transaction system, ware house management system, investment in quality of assets,
route and load optimization, 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 company’s 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.
This study is limited to only organize 3PL service provider. The research can be improved by
taking consideration of the unorganized 3PL service provider.
7. Managerial Implications
This study presents important findings for logistics managers. Realized cost reduction,
geographical coverage, continuous improvement, knowledge based skills, project
management skills, global capabilities, skilled logistics professionals, real time access to
information and route & load optimization are the most important factors for success as a
third party logistics provider. Also expertise in information technology system is gaining
importance to provide faster and better service-to-service user. This will not only give
competitive advantage but also help to gain market share. As the organization increase its
market share it has to give more importance to breadth of service offered, integration
among internal 3PL system, flexibility & adaptability and focus on specific industry for
continuous growth of the business. This study also throws some light to improve in
particular segment for better growth of the organization. For this the gap between
achievement and expectation of identified success factor was measured. Success factors
like reduced cost, information technology system, versatility, quality management,
compatibility with the users and fixed assets indicate weak service quality. This can be
improved by giving special attention to product return & repair, geographical coverage,
flexibility and adaptability, use of RFID technology, enterprise resource planning,
transportation management system, skilled logistic professionals, online tracking system
& transaction system, ware house management system, investment in quality of assets,
route and load optimization, 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. The strategies are playing
very important role for the growth of the business and to gain competitive advantage over
others. In the service industry service portfolio plays major role. One can improve the
service to the user by concentrating on broadening of service line and industry
specialization this not only increase the customer base but also increase the market share.
Today the business is became globalized so the company should also give more
importance to global service for growth of the business. The relationship between third
party user and provider plays very important role for the business of the both. If there is a
good relationship between the user and provider then both can understand the need of
their business. Both parties can share the risk and augment the profit of the organization.
Direct investment is also one of the important growth strategies for the logistics service
provider. Regional expansion and alliance can be used for growth of the business.
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