i" " PROJECT SUBMISSION PROFORMA (To be bound in front of the submitted Dissertation) NAME: HOME ADDRESS. . .

I wish the dissertation to be considered for (tick one only) MSc in e-Business Management MSc in Engineering Business Management MSc in Enterprise Integration Management MSc in Management for Business Excellence MSc in International Technology Management MSc in Manufacturing Systems Engineering MSc in Process Business Management MSc in Programme & Project Management MSc in Supply Chain & Logistics Management I have checked that my modules meet the requirements of the above award I confirm that I have included in my dissertation: An abstract of the work completed A declaration of my contribution to the work and its suitability for the degree A table of contents A list of figures A glossary of terms (where appropriate) A clear statement of my project objectives A full reference list and bibliography I am willing for my marked dissertation to be used for staff training purposes Signed: Date:.............................................

ii" "

THE LOGISTICS INDUSTRY IN INDIA WITH PARTICULAR EMPHASIS ON 3PL SECTOR & THE CURRENT STATE OF AFFAIRS OF FAMILY-OWNED LOGISTICS COMPANY AND MULTINATIONAL 3PL PROVIDERS By Suyashh Gupta August, 2011
Presented in partial fulfilment of the requirements for the degree of Masters of Science (MSc) In Supply Chain & Logistics Management

Department of Warwick Manufacturing Group At the University of Warwick United Kingdom

iii" " ABSTRACT Third party logistics (3PL) is a business dynamic which has been of growing importance all over the world for quite some time now. However, it is at a very nascent stage in India due to the highly fragmented nature of its logistics industry. The industry is characterized by a large number of small truckers, customs agents, brokers, etc. in the road freight market that leads to highly unorganized form of logistics with limited barriers to entry. Despite all its flaws, there are some domestic and multinational companies that are trying to bring about a transformation in this sector citing reasons of explosive growth of the Indian economy, increasing globalization and therefore, increasing drive from companies towards outsourcing beyond basic road transportation and warehousing. As a result, the usage of third party logistics services is likely to increase substantially (40 percent) in the future. This research study is an attempt to provide a 3PL perspective in India. It focuses on four major issues current state of affairs logistics services providers in India, factors driving 3PL services, 3PL market in India and challenges it poses and the untapped opportunities it offers and the competitive strategies of the service providers to sustain and progress in this fiercely competitive and fledgling market. To assess the current state of affairs of service providers in India and the competitive strategies being implemented, three case companies were chosen as part of a multiple case-study approach, which formed the basis of the primary research. These three companies were specifically chosen on the basis of the influence they hold in terms of recognition in the industry, their ownership structure, the type of services they offered, the distribution network they had in India and lastly, the strategies been applied by them in order to compete with one another. These companies were carefully studied and their data analysed to finally provide a rich comparison and contrast by cross-analysing them on the basis of the elements of diversity they brought with them based on some of these factors as mentioned above.

iv" " ACKNOWLEDGMENT The writing of this dissertation has been one of the most significant academic challenges I have ever had to face. Without the support, guidance and patience of the following people, this study would not have been completed. It is to them that I owe my deepest gratitude. Gary Perkins who undertook to act as my supervisor despite his many other academic and professional commitments. His wisdom, knowledge and commitment to the highest standards inspired and motivated me. My father without whom this effort would have been worth nothing. It was because of his initial recommendation that I decided to do my research on the family-owned logistics company. His love and support, wisdom and knowledge, and the patience to hear me out really encouraged me to dive further deep into the topic. In the process, he managed to teach me the basic principles of sacrifice, discipline and integrity, which are going to help me shape my career in future. All the managers of Best Roadways Limited who participated in this research project with interest and enthusiasm. The Managing Director of Rhenus ProLog (India) Limited for his cooperation at the highest level to share all the information regarding his company without much hesitation. The Road Transportation Head of Schenker India Private Limited for being kind enough to accommodate me in his busy schedules and provide me with as much information about his company as possible. My friend and colleague, Arun Shan who inspired my final effort and assisted me with his computer skills in formatting and presenting the thesis in an organised manner. This dissertation is dedicated to all my family members.

v" " DECLARATION I have read and understood the rules on cheating, plagiarism and appropriate referencing as outlined in my handbook and I declare that the work contained in this assignment is my own, unless otherwise acknowledged. No substantial part of the work submitted here has also been submitted by me in other assessments for this or previous degree courses, and I acknowledge that if this has been done an appropriate reduction in the mark I might otherwise have received will be made. Signed candidate__________________________________________________ PROJECT JUSTIFICATION AS AGAINST DEGREE DEFINITION Project definition for my degree(as copied from www2.warwick.ac.uk/fac/sci/wmg/ftmsc/project/requirement) The project should relate to a logistics related topic eg. Purchasing/outsourcing, material/production control, inventory reduction, material flow, warehousing and distribution, supply chain management or transport planning. MSc SCLM My project relates to this definition in the following way: I did an exploratory study on the state of the logistics industry in India, with particular emphasis on its 3PL market. I also investigated three logistics service providers in India who provide 3PL services to their clients. I then compared and contrast between them based on strategies applied by them in order to compete in the industry. Since the whole research revolved around logistics outsourcing from service providers perspective, it is safe to say that my final project did fulfill the requirements of project that need to be done by SCLM students at WMG. This project can help me gain employment in the 3PL industry in India. I had always thought about working in the service sector upon my graduation from WMG. The amount of information I had to collect for this research- both from secondary sources and through my own efforts have only made me much more aware about the whole of business of logistics services in India. The topic of my project was of particular interest to me because it gave me an opportunity to go deep into understanding the entire operations of my family business, which is into transportation and logistics in India and that too, in a short span of time that otherwise would have not been possible so soon. The results that were revealed from this research should help its readers to change their perspective on India in general and perhaps gain a better understanding about the current situation of the Indian logistics industry in particular. The above shows the relevance of the work to the degree for which it is submitted. Signed Agree Disagree Supervisor Second assessor

! " TABLE OF CONTENTS PROJECT(SUBMISSION(PROFORMA(...............................................................................(i! ABSTRACT(..........................................................................................................................(iii! ACKNOWLEDGMENT(........................................................................................................(iv! DECLARATION(....................................................................................................................(v! LIST(OF(TABLES(.................................................................................................................(vi! LIST(OF(FIGURES(.............................................................................................................(vii! CHAPTER(ONE:(MAIN(INTRODUCTION(.......................................................................(1!
1.1! Chapter Introduction(........................................................................................................(1! 1.2! LOGISTICS INDUSTRY IN INDIA A BRIEF PERSPECTIVE(........................(1! 1.3! RESEARCH OBJECTIVES AND QUESTIONS(.......................................................(3!

CHAPTER(TWO:(LITERATURE(REVIEW(......................................................................(6!
2.1 Chapter Introduction(............................................................................................................(6! 2.2 ! LOGISTICS(.......................................................................................................................(7! 2.2.1! Defining Logistics!.....................................................................................................................!7! . 2.2.2! Supply Chain Management!....................................................................................................!9! . 2.2.3! Defining Logistics Management!...........................................................................................!9! 2.3! LOGISTICS & CUSTOMER SERVICE(...................................................................( 0! 1 2.4! LOGISTICS & COMPETITIVE ADVANTAGES(..................................................( 1! 1 2.5! THIRD PARTY LOGISTICS (3PL)(...........................................................................( 2! . 1 2.5.1! Defining 3PL!.............................................................................................................................!12! 2.5.3! Factors Driving 3PL Services!..............................................................................................!22! 2.5.5! Factors against Use of 3PL Services!.................................................................................!30! 2.5.6! Elements for Successful 3PL Relationships!....................................................................!31! 2.5.7! Third-Party Logistics in India!..............................................................................................!35! 2.5.8! Challenges in Indian logistics Industry!.............................................................................!44! 2.5.9! Opportunities in Indian 3PL Industry!................................................................................!52! 2.6! SUMMARY(.......................................................................................................................( 2! 6

CHAPTER(THREE:(RESEARCH(DESIGN(&(METHOD(..............................................(64!
3.1! Chapter Introduction(......................................................................................................( 4! 6 3.2! RESEARCH PARADIGM(.............................................................................................( 4! 6 3.3! METHODOLOGY(..........................................................................................................( 8! 6

! "
3.3.1! Case Study Strategy!................................................................................................................!71! 3.3.2! Multiple Case Study Selection!............................................................................................!73! 3.4! DATA COLLECTION & STORAGE(.........................................................................( 7! 7 3.4.1! Questionnaire!............................................................................................................................!78! . 3.4.2! Interview!.....................................................................................................................................!79! 3.4.3! Archive Searching For Secondary Data!...........................................................................!81! 3.5! ANALYZING DATA(......................................................................................................( 2! 8 3.5.1! Within-Case Study & Cross-Case Study Analysis!.......................................................!83! 3.6! RELIABILITY & VALIDITY(......................................................................................( 3! 8 3.7! ETHICAL ISSUES(..........................................................................................................( 6! 8

CHAPTER(FOUR:(WITHINECASE(STUDY(ANALYSIS(...............................................(87!
4.1! Chapter Introduction(......................................................................................................( 7! 8 4.2! Rhenus ProLog Logistics (India) Limited Case Study(............................................( 7! . 8 4.2.1! CURRENT STATE!.................................................................................................................!89! 4.2.2! COMPETITIVE SITUATION!............................................................................................!94! 4.2.3! STRATEGY REVIEW!..........................................................................................................!96! 4.3! Best Roadways Limited Case Study(........................................................................(103! . 4.3.1! CURRENT STATE!..............................................................................................................!103! 4.5.2! COMPETITIVE SITUATION!.........................................................................................!110! 4.5.3! STRATEGY REVIEW!.......................................................................................................!117!

CHAPTER(FIVE:(CROSSECASE(DISCUSSION(............................................................(126!
5.1! Chapter Introduction(...................................................................................................(126! 5.2! CURRENT STATE(......................................................................................................(126! 5.2.1! Companies Overview!.........................................................................................................!126! 5.2.2! 5.2.4! 5.2.5! Physical Distribution Networks!......................................................................................!129! Information Technology System!....................................................................................!132! Business Trend!.....................................................................................................................!133! . 5.2.3 ! Service Provided!..................................................................................................................!131!

5.2.6 ! Customer and Contract!......................................................................................................!134! 5.3 ! COMPETITIVE SITUATION(.................................................................................(137! . 5.3.1 Competition!.................................................................................................................................!137! 5.3.2 Competitors!.................................................................................................................................!138! 5.3.3! SWOT Analysis of Rhenus, Best & Schenker combined!........................................!140! 5.4! STRATEGY REVIEW(................................................................................................(142! 5.4.1! Information technology development!............................................................................!142!

! "
5.4.2! Willingness to Establish Partnership!..............................................................................!144! 5.4.3! Developing Compatibility!..................................................................................................!146! 5.4.4! Open Communication!..........................................................................................................!146! 5.4.5! Mutual Commitment!............................................................................................................!147!

CHAPTER(SIX:(CONCLUSION(......................................................................................(149!
6.1! Chapter Introduction(...................................................................................................(149! 6.2! OBJECTIVES OF THE STUDY(...............................................................................(149! 6.3! CONCLUSION(..............................................................................................................(149! 6.4 ! LIMITATIONS OF THIS STUDY(..........................................................................(154! 6.5! FUTURE RESEARCH(................................................................................................(156!

REFERENCES(...................................................................................................................(158! APPENDICES(...................................................................................................................(165! APPENDIX 1(................................................................................................................(165! APPENDIX 2(................................................................................................................(175!

vi" " LIST OF TABLES Table 2.1 Cost of logistics as percentage of GDP in India and markets.......................................... 38 Table 2.2 Ease of starting new business in India compared to other BRICs.................................. 50 Table 2.3 Recent Mergers & Acquisitions in the logistics sector......................................................54 Table 3.1 Key features of positivist and phenomenological paradigms............................................64 Table 3.2: Positivistic Approach Advantages & Disadvantages.......................................................65 Table 3.3 Phenomenological Approach Advantages & Disadvantages.........................................66 Table 3.4 Differences between Quantitative & Qualitative methodologies......................................69 Table 3.5 Types of purposeful sampling strategies and their definitions.........................................72 Table 4.1 SWOT Analysis of Rhenus ProLog Logistics (India) Limited.........................................94 Table 4.2 SWOT Analysis of Best Roadways Limited.....................................................................110 Table 5.1 SWOT Analysis of Rhenus, Best & Schenker combined together.................................139 Table 6.1 Compiled data of IT solutions in logistics.........................................................................148 !

vii" " LIST OF FIGURES Figure 2.1 The logistics implications of different competitive positions...........................................11 Figure 2.2 Composition of truck ownership in Indian market..........................................................15 Figure 2.3 Dissection of 3PL in Indian context...................................................................................16 Figure 2.4 Typical 3PL arrangement...................................................................................................17 Figure 2.5 Typical timeline of transformation from 3PL to 4PL......................................................19 Figure 2.6 Profit margin rise as service segment widens...................................................................26 Figure 2.7 Factors driving 3PL services from provider perspective..............................................27 Figure 2.8 Factors against the use of 3PL services.............................................................................30 Figure 2.9 Evolution of 3PL in India...................................................................................................35 Figure 2.10 Share of 3PL market in overall logistics industry of given countries...........................39 Figure 2.11 3PL Logistics integration model......................................................................................40 Figure 2.12 Total Contract Logistics Value Split By Category 2008 & 2013...................................41 Figure 2.13 Total Contract Logistics Growth in India (2004 2013)...............................................42 Figure 2.14- Comparison of Indias 3PL development to other countries..........................................43 Figure 2.15 Skill gaps in different segments of logistics in India......................................................46 Figure 2.16 Factors driving logistics outsourcing in India................................................................57 Figure 2.17 Reorganization of warehouses before and after GST....................................................59 Figure 4.1 TIMELINE OF PRO-LOG GROUP.................................................................................86 Figure 4.2 Rhenus India Distribution Network..................................................................................87 Figure 4.3 List of services provided by The Rhenus Group..............................................................88 Figure 4.4 Sales revenue of Rhenus ProLog Logistics (2008, 2009, and 2010)................................90 Figure 4.5 Offices owned by Best Roadways (Plotted on Map of India)........................................103 Figure 4.6 Project Logistics arm of Best (Example of ODC truck)................................................105 Figure 4.7 Sales revenue of Best Roadways Limited 2008, 2009 and 2010..................................106 Figure 4.8- Future Network Development- Best Roadways Limited.................................................118 Figure 5.1 Distinction between Traditional & Emerging Logistics Companies............................126 Figure 5.2 Features and Objectives of Foreign Logistics Companies.............................................127 Figure 5.3 Turnovers of Rhenus, Best & Schenker (2008, 2009 and 2010)....................................132 Figure 5.4 Proportion of revenues based on nationality of clients..................................................133 Figure 5.5 Expansion strategy of 3PL providers in India................................................................143 !

Chapter"One:"Introduction"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""1" " CHAPTER ONE: MAIN INTRODUCTION 1.1 Chapter Introduction

The present research study aims to provide information on the current status of the Indian logistics industry with particular mentioning of its 3PL sector underpinning the growth of Indian economy. The study also aims to discover the competitiveness of family-owned logistics business compared to multinational 3PL providers and other logistics companies operating in India. Chapter 1 starts off with providing a brief synopsis about the Indian economic climate and underlying state of its logistics industry. An overall background and facts about the fledgling 3PL industry are also mentioned.

1.2

LOGISTICS INDUSTRY IN INDIA A BRIEF PERSPECTIVE

India is the second most populous country in the world with a total population of 1.13 billion in 2008. The domestic consumption in India which comprises about two thirds of the GDP (55% private and 10% government) prevented a much steeper decline in GDP even during the global financial crisis during that time (Davenport, 2009). The countrys economic growth at 7.7% between 2008 and 2013 would continue to be a strong driver to the burgeoning growth of the industry. The economic growth driven by underlying growth in trade, industrial output, FDI inflows and private equity investments will boost the development of logistics in India. The logistics industry in India is expected to witness a robust growth of 7% between 2008 and 2013, when compared to other developing countries such as China (6.2%), Brazil (5.4%), Russia (5.9%) and South Africa (4.2%) (Datamonitor, 2009).

Chapter"One:"Introduction"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""2" " The average logistics spend to GDP stands at 12% in 2008, which is higher than most developed markets. Currently, logistics accounts for one fourth of cost of goods in India compared to one sixth in the developed economies. It is believed that even a 0.5% to 0.75% reduction in logistics costs will result in an additional 2% growth in trade and increase in the range of products exported. According to a report by Datamonitor, the Indian logistics industry was valued at $102 billion in 2008 (Davenport, 2009). The fast growing economy, increase in foreign direct investment (FDI), introduction of special economic zones (SEZ) and increasing globalisation are the macro factors driving the growth of the logistics industry. Additionally, factors such as increase in outsourcing of logistics functions, entry and expansion of international logistics players in India, private equity investments in logistics players, emergence of lean supply chains in manufacturing and retail sectors are driving the growth of the logistics industry. Third party outsourcing (3PL) has become imperative for industries such as automotive, pharmaceutical, retail and electronics to reduce costs and build efficiency in their supply chains. Specialized value added services, catering to the requirements of different industries are likely to boom as global logistics majors bring best practices to India. Value added services are gaining ground, as companies seek to attain competitive advantage. Most importantly, value added services such as tracking technologies, reverse logistics, ERP systems are gaining ground in the auto components, aftermarket, pharmaceutical, retail and electronic supply chains. As a result, logistics service providers are continuously expanding their service portfolio and emerging as end to end solution providers. Consequently, the industry sees immense potential for 3PL with an expected growth of 21% over the next five years (Datamonitor, 2009). An important regulatory policy expected to further bolster the growing industry is the introduction of the goods & service tax (or GST). GST is set to bring the much

Chapter"One:"Introduction"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""3" " needed uniformity in the prevailing tax structure and has been the most demanded policy reform by the logistics providers. This uniform taxation regime is expected to eliminate the hassles of the varying stateto-state taxation and reduce the time consuming documentation process, hence bringing about transparency in the system. The need for centralized warehousing, assembly operations, just-in-time supply to the manufacturing centres, order management, vendor inventory management are the main areas of concern for these industries. The introduction of GST is expected to be the most important factor to step up contract logistics, centralised warehousing and enable companies to invest in value added services. Currently, Indian warehouses are characterized by less usage of advanced technologies. The absence of modern warehousing practices cause slippages to the extent of 15-25% of cargo business. Shortage of skilled labour (Datamonitor, 2009) is also a key concern for both the logistics and warehousing industry. This untapped potential and more makes the future outlook looks very promising for the Indian market. The logistics industry in India is becoming more attractive for both Indian and multinational service providers. The industry provides immense opportunity for investments and is pushing companies to shift their focus from developed markets such as USA and Europe to India, and contribute in making it globally competitive.

1.3

RESEARCH OBJECTIVES AND QUESTIONS

The main motive behind doing this research study was to understand the present-day situation of the Indian logistics industry in general, and the Indian 3PL market in particular.

Chapter"One:"Introduction"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""4" " There have not been many case studies made on any specific India-based logistics company that was needed to evaluate the different competitive strategies being pursued by logistics companies to have a sustainable growth in the Indian market. Hence, the researcher has attempted to present case studies of three logistics companies that operate in India, focusing upon the providing a background of their operations and the competitive strategies pursued by these companies to compete in this market. All three companies hail from very diverse backgrounds and differ in their management style, ownership style, scale of operations, type of services offered, and so on. The two underlying objectives of this research study is summarized as under1. To investigate about the current state of the Indian logistics industry as part of a burgeoning Indian economy 2. To find out about the scope of 3PL growth in India given the infrastructural bottlenecks in the country 3. To evaluate India-specific operational strategies pursued by service providers 4. To draw comparisons and contrast between the case companies based on their core competitiveness 5. To evaluate the future direction of the case companies

Chapter"One:"Introduction"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""5" " The following are the research questions that were designed in order to achieve the above objectives1. What are the different types of logistics services provided by the case companies? 2. What is the distribution network of those companies in India? 3. What kinds of Information Technology platforms are the case companies adopting? 4. What are the challenges and opportunities for 3PL providers in India? 5. What kind of competition does each of the three companies face 6. What are the competitive advantages of the 3 case study companies that give them an edge over the rest?

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""6" " CHAPTER TWO: LITERATURE REVIEW 2.1 Chapter Introduction It is only in the recent past that businesses have started recognising the vital impact that logistics management can have in the achievement of competitive advantageMartin Christopher Chapter 2 provides with a review of literature by familiarising the readers of the fundamental concepts of logistics. It starts off by providing information in brief about the origin of the word logistics followed by a review of various present-day definitions of logistics and third party-logistics given by famous logistics and supply chain experts. In addition to that, relationship between logistics and customer service and how logistics and competitive advantages of companies are inter-related have been discussed. Based on the correlation that exists between logistics and competitive advantages such as providing low cost or bigger basket of services, the researcher has attempted to discuss the business model of third-party logistics and fourth-party logistics, the factors driving 3PL services and elements of successful relationships with 3PL providers. Eventually, after establishing a general framework of logistics and 3PL in particular, the final section of this literature review attempts to introduce its readers with the overview of the logistics industry in India with particular reference to its fledgling 3PL market and the challenges and opportunities prevailing in the Indian logistics industry alongside the growth of 3PL market.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""7" " 2.2 LOGISTICS

The word logistics is of French origin. Originally a military term called logistique, it is concerned with the art of transportation, supply, and lodging of military troops. Historically, logistics as part of a military science has been a deciding factor between success and failure in many military conflicts (Hoda, 2010). Transportation and logistics not only gave nations the ability to exercise military power domestically, regionally or even globally, but it also provided them with an impetus to expand their share in international trade.

2.2.1

Defining Logistics

Logistics means having the right thing, at the right place, at the right time. Modern definitions of logistics vary from author to author and from varying key components such as products, companies and systems that differ from one situation to another. According to Rushton et al (2010), an appropriate modern definition of logistics might be that, The efficient transfer of goods from the source of supply through the place of manufacture to the point of consumption in a cost-effective way whilst at the same time providing an acceptable service to the client (Rushton et al, 2010) Rushton et al (2010) give out a similar clarification as mentioned earlier stating that there cannot be a single true name or true definition of logistics that could be applied universally. Logistics is made up of many sub-functions and many subsystems- hence, the scope of its definition changes accordingly. Famous British supply chain and logistics guru Martin Christopher has defined logistics as:

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""8" " the process of strategically managing the procurement, movement and storage of materials, parts and finished inventory (and the related information flows) through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-effective fulfilment of orders. (Christopher, 2005) Peter Drucker, the most influential 20th century American management consultant observed, in 1962, that physical distribution was for the US a dark continent affecting negatively impacting its economy due to its primacy and laggardness (Koda, 2010). The murky picture that he drew of the way logistics was being handled in America at that time essentially marked the beginning of an era, which saw big advances in enhancing distribution management, embracing transportation and other logistics functions including order processing, inventory control, material handling, and warehousing. Philip Kotler, a well-known marketing expert defines logistics as, A business marketing function that involves planning, implementing and controlling the physical flow of materials and final goods from points of origin to points of use to meet customers requirements at a profit. (Kotler, 1997) According to the Chartered Institute of Logistics & Transport (UK) (2005), Logistics is the positioning of resource at the right time, in the right place, at the right cost, at the right quality. (Cited in Rushton, Croucher et al, 2010) The Council of Logistics Management (CLM), now the Council of Supply Chain Management Professionals (CSCMP), defines logistics asthat part of the supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers requirements (CSCMP, 2010) There have been other names that are often interchangeably used in the literature and

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""9" " in the business world when talking about logistics and distribution. Some of them include- 1) supply chain management, 2) logistics management, 3) physical distribution, 4) business logistics, and 5) procurement and supply. 2.2.2 Supply Chain Management

Supply chain management is one step ahead of logistics, in the sense that it covers broader scope of the business idea, including supply of raw materials and components and delivery of the final goods to the end-consumer (Rushton et al, 2010). Whilst Logistics = Materials Management + Distribution, Supply Chain Management = Suppliers + Logistics + Customers. It can be seen from above that logistics is a subset of supply chain management as the latter is considered to be very much a strategic planning process in which both the suppliers and the end users are included in strategic decision-making. 2.2.3 Defining Logistics Management

According to Stern and El-Ansary (1988), the term logistics management encompasses total flow of materials, from acquisition of raw materials to the delivery of final goods to the ultimate consumer and the counter-flow of information that controls and records the material movement (Stern et al, 1988). Hoda (2010) has stated a brief description of logistics management in simplistic layman terms, as involving the integration of information, transportation, inventory, warehousing, materials handling, and packaging. Whereas Bowersox & Closs (1996) provide a defined boundary to the description above by mentioning the words such as its a business strategy. They say that logistics management includes design and administration of systems to control the flow of material, work- in-process, and finished inventory to support business unit strategy (Bowersox and Closs 1996).

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""10" " 2.3 LOGISTICS & CUSTOMER SERVICE

New product development and marketing departments of many companies regard logistics to be the single most critical factor determining the final demand for the product. Rushton et al (2010) mention about Paretos 80/20 rule, which in the context of logistics and customer service means logistics constituting 20% of the final cost of a product, whereas 80% of the impact that product will have on the end-consumers to be influenced by how effective its logistics will be handled. Thus, there is no denying the fact that no matter how attractive the product looks like, it wont reap full benefits to its manufacturer unless it has been delivered to its enduser in time. In other words, customer service to the end-user is very important and logistics plays a crucial role in providing good customer service (Rushton et al, 2010). As mentioned in the very first line under 2.2.2 while defining logistics, that logistics means having the right thing, at the right place, at the right time, Rushton et al (2010) have expanded that definition and considered right quality, right quantity, right cost and even right condition in order to provide superior customer service. It is easily to be noted that all of these seven rights of the end-consumer as it were that are mentioned above will successfully accomplished only if the manufacturer chooses quality logistics operations in getting the product to the market with all the seven rights of the consumer intact.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""11" " 2.4 LOGISTICS & COMPETITIVE ADVANTAGES

Figure 2.1 illustrated below talks about two strategies that the logistics service provider can adopt to gain competitive advantage over its competitors. Figure 2.1 The logistics implications of different competitive positions

Source: The Handbook of Logistics & Distribution Management, Rushton et al (2010), p26 Rushton et al (2010) explain that the LSP can either compete as a service leader, where in it will attempt to provide a certain number of key service elements to differentiate itself from its competitors, OR the LSP has the option to compete in cost and become a cost leader in the market. In this scenario, the service provider will undertake maximum utilization of all the available resources in order to provide services at the lowest possible price to its clients and thereby, differentiating itself to have productivity advantage over its competitors. As mentioned in the Figure 2.1 above, companies adopting a value advantage strategy will strive to differentiate their product or service offerings from their competitors by providing its clients with value adding services to generate high levels

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""12" " of customer service- for instance, sharing regular update about the status of their orders and giving them tailor-made customized solutions so as to ensure the product is made available at the marketplace through different channels of distribution smoothly and efficiently. 2.5 2.5.1 THIRD PARTY LOGISTICS (3PL) Defining 3PL

Aertsen (1993) and Bowersox et al (1990) state that there have been a variety of different terms that have been used interchangeably when describing about an organizations practice of contracting out all or part of their logistics activities, which had been earlier performed in-house (cited in Selviaridis & Spring, 2007). These terms include logistics alliances, contract logistics, logistics outsourcing, lead logistics provider, and finally, third party logistics. According to Martin Christopher, Professor-Emeritus at the Cranfield Universitys Department of Marketing & Logistics, Services provided by 3PLs are diverse where in they might operate distribution centres, manage the delivery of the product through their truck fleets or undertake value-adding services such as re-packing (Christopher, 2010). Unlike Professor Christopher who remains rather simplistic in his approach when defining 3PL, Selviaridis & Spring (2007) state that the definition of 3PL could have a simplistic or broad approach as well as narrow or a specific approach depending upon different considerations of the aspects of outsourcing arrangements the customers choose to have with their service providers. These aspects can vary based upon various factors such as, a) b) c) d) e) Number and types of services offered by the service provider, Nature and duration of relationships between the 3PL user and 3PL service provider, Performance outcomes, Extent of third party responsibility over the logistics process and lastly, Position or role of the service providers in the supply chain (Selviaridis & Spring, 2007).

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""13" " Ranjan & Tonui (2004) distinguishes third party logistics from the traditional outsourcing of logistics functions that is based on per-transaction and regarded as a one-off commodity. They say it is a partnership involving multiple transactions over a fixed duration of time bound by a contractual agreement. Thereby, if we see 3PL as more like a logistics alliance based on fixed contracts than as a one-off commodity, the definition by Bagchi & Virum (1998) seems narrowed down as it specifies the need for a long term relationship-, 3PL has a longterm formal or informal relationship between a shipper and a logistics provider to render all or a considerable number of logistics activities for the shipper. The shipper and the logistics provider see themselves as long-term partners in these arrangements. Although these alliances may start with a narrow range of activities, there is a potential for a much broader set of value-added services, including simple fabrication, assemblies, repackaging, and supply chain integration (Bagchi & Virum, 1998). Some 3PL providers have expertise in a select few range of services whereas others are capable to provide end-to-end solutions. These end-to-end solutions may include services ranging from road transportation, warehousing, outsourced freight forwarding, order management, distribution, to value added services such as packaging/ sorting/ labelling/ re-packing, inventory management services such as inventory optimization and vendor managed inventory (VMI), and information related services such as tracking and tracing, so on and so forth. Bowersox (1996) have referred to such extra value adding service while defining 3PL. He states, 3PL is a new type of service, which emerged from service providers that formerly offered warehousing and transport services and have extended now by adding new and unique value-added services.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""14" " A combination of broad and narrow themes on 3PL definitions are well stated by Berglund et al (1999), Bask (2001) and Coltman et al (2011) focusing more on European markets, which indicates either a dyadic relationship, vis--vis the 3PL user and the 3PL provider, or it could be a triadic relationship that involves the user, the service provider and also the supplier together to form a B2B relationship on either short-term (lasting 1-3 years) or long-term (more than 3 years) basis. Hence, their versions of 3PL definitions includeActivities that are carried out by a logistics service provider on behalf of a shipper and consisting of at least management and execution of transportation and warehousing. In addition, other activities can be included, for example inventory management, information related activities, such as tracking and tracing, value added activities, such as secondary assembly and installation of products, or even supply chain management. Also, the contract is required to contain some management, analytical or design activities, and the length of the co-operation between shipper and provider to be at least one year, to distinguish third-party logistics from traditional arms length sourcing of transportation and/or warehousing (Berglund et al, 1999) a dyadic or triadic relationships between the buyer and/ or seller of the goods in the supply chain and the third party logistics provider whose main business interests lie in logistics, providing anywhere between basic services (transportation and warehousing) and customized logistics solutions (value addition), in a shorter or longer term relationship, with the end goal of achieving effectiveness and efficiency [Modified from Bask (2001) & Coltman et al (2011)] Berglund et al (1999) emphasize that in their definition of 3PL they exclude execution of transportation activities that are not carried in conjunction with warehousing and value adding services. They also distinguish 3PL in the sense that the contract between the 3PL user and 3PL provider should be at least of one year rather than just a one-off transaction involving an arms length sourcing of transportation and warehousing (Berglund et al, 1999).

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""15" " Indian sub-context while defining 3PL

Sahay & Mohan (2006) have an Indian approach when defining 3PL that its logistics industry largely comprises of fleet owners and transport contractors with limited offering of warehousing and minimal or lack of capabilities in providing value addition services. Second point worth considering under the Indian context is based on the notion that 3PL relationships in India can also be on a one-off transaction basis. And if they are on contractual basis, they are generally not triadic in nature as they are limited to either between the seller of the goods and the logistics service provider, or the buyer of the goods and the service provider. The Indian logistics sector is still quite unorganized and fragmented with over 74% of the logistics service providers having less than 5 trucks and limited warehousing space to be able to accommodate for providing just the basic road transportation and warehousing services at most. (Nagporewalla & Shrinivasan, 2007). For this paper based on the Indian logistics market, the 3PL has been defined as provider of outsourced logistics services, which may include only a single service like road transportation or warehousing based on short-term or long-term contracts, or as a one-off commodity, and can also include a complete integration of the supply chain, also known as one-stop-shop solutions for all the logistical needs.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""16" " Figure 2.2 illustrated as under gives us a clearer idea of the nature of truck ownership amongst truck operators in IndiaFigure 2.2 Composition of truck ownership in Indian market

Source: CRISIL Research- Roadways & Highways Annual Review (2009) (Adopted from KPMG International Logistics in India Part 2, 2010) According to Nagporewalla et al (2007) 3PL industry in India can be looked at from three different elements- 1) Transportation, 2) Warehousing and 3) Value Added Services (Nagporewalla et al, 2007). Value added services as part of 3PL arises after leveraging core assets of transportation and warehousing and may differ from different modes of transportation. This is illustrated as under-

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""17" " Figure 2.3 Dissection of 3PL in Indian context

Source: KPMG International, Report on Indian logistics- Part 1 (Bhattacharya et al, 2009) Hence, based on the above information underpinning the Indian context, the following definition of 3PL emergesThird-party logistics activities that are carried out by a logistics service provider on behalf of shipper (either the seller of the goods or buyer of the goods) and consisting of a combination of at least transportation with or without any binding on any contractual agreement between the shipper and the service provider. In addition other services can be integrated into the service offering, for instance! ! ! Warehousing and/ or inventory management, Information related activities such as tracking and tracing, Other value added services as mentioned above (Modified from Sweeney et al, 2010)

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""18" " According to Sweeney et al (2010), there are a number of features of the above definition that are worthy of taking a note of, originally referred to the Italian logistics sector but seemingly which are also relevant under the Indian context: I. Companies that provide purely transportation services are included. II. The role of warehousing and the associated management of inventory, an integral part of many theoretical definitions, are cited as the first of the noncompulsory activity elements this implies that for many emerging 3PLs in India, their first foray apart from transportation services is in warehousing and for many that includes inventory management of customers as well. III. The non-compulsory activity elements include both information related activities as well as elements of supply chain functionality which may be outsourced by customers. IV. The word integrated is used to indicate the importance, where more than one service is offered, of providing a customer with a coordinated logistics support. (Adopted from Sweeney et al, 2005)

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""19" " 2.5.2 Business Model of 3PL Figure 2.4 - Typical 3PL arrangement 3PLs may have their own assets- known as assetbased 3PLs to fulfil the logistics functions or they may act as a conduit (as shown in Figure 2.4) to further subcontract these functions to other companies. These businesses are non-asset based and are also known as fourth-party logistics service providers or 4PLs. It is a term that was originally coined by consultants at the business consultancy firm Accenture. Accenture in 1996 at the time of coining this new term, defined it asA 4PL is an integrator that assembles the resources, capabilities, and technology of its own organization and other organisations to design and run comprehensive supply chain solutions (cited in Bedeman & Gattorna, 2003) According to van Hoek and Chong (2001), 4PL has been defined asa supply chain service provider that participates rather in supply chain coordination than operational services. It is highly information based and coordinates multiple asset-based players on behalf of its clients. 4PLs are a form of lead logistics provider (or LLP) often providing many of the supply chain operations directly with or without owning assets. They may have geographic limitations, and to overcome this limitation they re-outsource their activities to other LLPs such as the 3PL service providers. They focus on providing a range of services just as 3PL including demand forecasting, inventory management and so on (Williams, 2006). Figure 2.5 given below illustrates a typical transformation of 4PL from being a basic logistics service provider.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""20" " Figure 2.5 Typical timeline of transformation from 3PL to 4PL

Source: Bisham Consulting, Coventry (Williams, 2006) Non-asset based service providers such as the 4PLs are usually not bound to physical assets like distribution centres and transportation fleet. They merely act as a conduit for potential clients by sub-contracting their logistics activities to other 3PLs. The asset-based 3PLs that own transportation and warehousing assets have the ability to achieve economies of scale by utilizing their capacities over many clients volumes and in many cases, to provide better availability of services (Manatayev, 2004). The line between asset-based and non-asset based service providers is often quite blurry in the sense that there have been quite a lot of consolidation taking place in recent times, with asset-based 3PLs merging with non-asset based companies and vice-versa. In the case of new non-asset based entrants into this industry, Berglund et al (1999) note that they excel in IT skills and generally possess a good knowledge of supply chain concepts. But their challenge is in operations and strong network where the traditional asset-based service providers have proven track record.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""21" " The end goal of 3PLs is to act as a single-point-of-contact service provider of endto-end supply chain solutions. According to Manatayev (2004), to differentiate their businesses from the rest, 3PLs have traditionally been focusing upon tangible factors such as the type and variety of services and performance. That scenario seems to have changed in the last few years where in many logistics service providers have started focusing more on intangible factors like brand building, improving trust and awareness with their clients and also overall customer experience. Acquiring Asset Base

It is easier to acquire assets, given a strong position in concepts and systems, but it is not easy to acquire concepts, given a strong position in assets and systems (Berglund et al, 1999). Hence, the traditional 3PLs with strong financial backing and strong asset base often tend to tie up with non-asset based new entrant service providers to tap the knowledge skills and high-value staff they have who possess the right expertise to play a critical role in supply chain management and supply chain optimization, coupled with strong IT skills, thereby offsetting their weaknesses. According to Mitra (2009), from a new 3PL service providers perspective, it is best to share assets of dedicated asset owners who are big and state-of-the-art, on a transaction-to-transaction basis (Mitra, 2009). Decision to outsource

The decision to outsource logistics activities to 3PL is driven on three characteristics of the 3PL users business profile (Rao & Young, 1994), which influence the formation of a favourable or unfavourable climate for outsourcing. These characteristics include- (a) network complexity, taking into account the differing geographies where the shippers trading partners might be located as well as the complexity of business transactions with the selected trading partners; (b) process

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""22" " complexity, referring to time and task compression (or lack thereof) in the logistics process; and (c) product complexity, after considering certain special measures that might have to be taken for certain special products and materials due to the complexity and uncertainty of external environment (such as the temperature, humidity in the air and so on). Their transportation, storage and handling will need to undertaken accordingly.

2.5.3

Factors Driving 3PL Services

Factors from demand side

From the demand point of view, cost reduction or cost savings by focusing on core competencies have been considered as the primary reasons driving the companies toward outsourcing 3PL services. In addition to this, there are eleven key factors identified by Sahay & Mohan (2006) who state that the users are willing to outsource to 3PL if one or more factors are impacted positively. They are listed as underI. Impact on customer satisfactionDapiran et al (1996), Lieb et al (1993) and Bhatnagar et al (1999) believe that the future usage of 3PL service providers depend upon the level of customer satisfaction they provide at present. It remains a critical factor in driving 3PL services forward: simply put, the higher the customer satisfaction the higher the outsourcing by its users in the future (Sahay & Mohan, 2006). Ojala (2003) believes that apart from the primary driving forces in the 3PL sector relating to cost reduction and substituting capital allocation for alternative purposes or to be able to focus on core competencies, the contemporary driving forces in present global business landscape, which is affected by increasing competition and complexities have got more to do with strategic influences- in terms of market coverage, improving the level of customer service or increasing flexibility in view of the changing requirements of customers.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""23" " On-time shipment, inventory accuracy, customer complaints and shipping errors are important gauging tools that the users use to assess the level of satisfaction (Bhatnagar et al, 1999). Hence, as the 3PL service providers are able to provide superior customer satisfaction, the there have been upsurge in the usage of 3PL services. II. Impact on logistics system performanceIncreasing popularity of just-in-time (JIT) and other manufacturing methods such as computer-aided manufacturing, use of robotics technology in manufacturing, and revolution in computers and communication technology have services to a new level (Morasco, 2008). III. Reduction in capital investment in facilitiesAccording to Berglund et al (1999), on the demand side of 3PL, there have been significant reductions of assets seen as the distribution centres of the producers have gone a restructuring phase, which was in turn caused by the restructuring of the entire production structure. This is primarily driven the growth of 3PL services as more and more manufacturers have started focusing on their core competencies while outsourcing all that is non-core. IV. Reduction in capital investment in equipment Instead of buying equipment for materials handling, they can invest on buying equipment which will assist them in furthering their manufacturing requirements. V. Reduction in investment in information technology Companies dont need to invest on expensive IT software applications such as Transport Management Systems when 3PLs already have them. By being able to provide information processing services such as MIS reporting, vehicle track and trace, electronic data interchange, freight bill

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""24" " auditing and payment, transaction processing and so on and so forth, the 3PL service providers have opened a vast array of opportunities to create efficient, fast and reliable transportation systems (Sheffi, 1990). Because of this, the companies do not necessarily have to invest on their own on facilitating their supply chain anymore. They can simply outsource their requirements to the 3PL and thereby, save on their overheads. VI. Impact on employee morale A survey done by Dapiran et al (1996) on third party logistics service usage by large Australian firms revealed that over 68% of the companies using services of contract logistics service providers had a positive impact on employee morale of their own companies. Further it indicated that the displaced employees from their logistics department would get transfer within their organizations into other better departments they are good at thereby improving employee morale. The use of a 3PL brings logistics managers in contact with colleagues in finance, marketing, manufacturing and other areas, thereby potentially expanding the logistics influence throughout their organisation (Dapiran et al, 1996). VII. Reduction in manpower cost Third-party logistics providers dramatically reduce the need for freight audit and payment personnel. Since they are specialists in what they do, 3PLs have the necessary systems, manpower and the know-how in place for them to process thousands of bills a day at a fraction of the cost compared to shippers.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""25" " They can also audit all of the bills to make sure the carriers are charging the agreed upon rates. This process can be a real headache with large amount of LTL bills.

VIII.

Improvement on specific logistics function parameters Certain logistics function parameters such as order processing, inventory and procurement management, warehouse management can effectively be improved by experienced 3PL service providers.

IX.

Improvement in inventory turnover rates Companies use 3PL service to better their operational efficiency and effectiveness. A good 3PL service provider can help companies reduce their cash-to-cash cycle by significantly helping reduce investments in inventory (Husdal, 2011), and thereby reduce inventory turnover rate and improve inventory visibility.

X.

Improvement in on-time delivery Because 3PL providers bring with them best-in-class service mechanisms, it is possible for them to ensure on-time delivery of their clients goods. In measuring their success, they regularly review their KPIs (Key Performance Indicators), which also include on-time delivery as one of the measuring benchmarks to ensure they keep up to their desired performance objectives.

XI.

Increasing productivitySweeney & Evangelista (2010) cite an example mentioning about 3PLs having the opportunity to add value to unfinished products by providing mass customization and final assembly services, thereby acting as a contributor to the end-manufacturing process and increasing productivity. Sheffi (1990) believes this has led to the delivery system becoming an integral part of their product, to the extent that transportation and

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""26" " warehousing started to being considered as important as the product itself (cited in Sweeney et al, 2010). Bradley, P. (1995), Third parties gain slow, cautious buyer support, Purchasing, May, pp. 51-2. Factors driving 3PL services from supply perspective

According to Berglund et al (1999), declining profit margins for the service providers in freight transport and an intense price war competition together with recent positive attitude of the industries towards outsourcing and focusing on core competencies must be regarded as the strongest drivers of 3PL growth. Figure 2.6 below talks about an entire spectrum of logistics services segregated into three categories such as traditional services, service packages and integrated services. It is found that as the service provider progresses towards providing integrated services, their profit margins increase from less than 2% to more than 10%. This explains one of the factors why on the supply side many service providers are expanding into becoming end-to-end integrated solutions providers.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""27" " Figure 2.6 Profit margin rise as service segment widens

Source: Kuehne + Nagel (India) Private Limited, Internal Document Expansion Strategy (July, 1998) Figure 2.7 lists some of the other factors why many service providers are progressing towards becoming end-to-end service providers.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""28" " Figure 2.7 Factors driving 3PL services from provider perspective

Source: KPMG International, White Paper on Indian Logistics Part-2 (Bhattacharya, 2010) Morasco (2008) indicate several factors that are causing 3PL services to experience explosive growth across the world and especially in the emerging markets such as India. He talks about increased global competition, deregulation of the transportation industry, rising customer expectations on superior logistical service, growing focus of companies on core competencies. There is hardly any doubt that the logistics industry in India is going through a massive transition, in line with the mature markets of the world where in the last few years, major changes have been taking place across industries. A key rationale is the intensifying pace with which globalization is taking place across businesses (Sahay & Mohan, 2006). According to Cooper (1993), only within the last two decades, globalization has emerged as a reckoning force of shaping business strategies, thereby leading firms to develop products designed for a global client base and source components globally (cited in Sahay & Mohan, 2006).

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""29" " This has led to more complex supply chains requiring a higher involvement of logisticians and 3PL service providers than ever before. Also, firms requiring expertise of customs, tax structure and regulations, as well as infrastructure available in the destination countries have them wanting to outsource these activities to a 3PL. According to Sweeney et al (2010), on the demand side of 3PL, the growing need for businesses to diversify and delegate as their supply chains become broader and more complex has validated the role of 3PLs in every aspect of logistics. After gaining acceptance in logistics operations and growing with notable speed over the last few years, 3PL providers are now settling into their roles as integral parts of their customers' business plans. This has fuelled the transition from the traditional arms length approach to the supply of integrated logistics services packages on a one-stop shopping basis and has further facilitated the migration of companies from asset-based to information and knowledge-based, value-added logistics service enterprises (Sweeney, 2010). Increasing use of Information & Communications TechnologyIncrease use of IT software solutions have made it easy in information sharing, where information management is considered to be increasingly important activity compared to traditional asset management approach (Sweeney et al, 2010). There is little doubt that use of ICT by many large 3PL companies has driven many users towards 3PL. Lewis & Talalayevsky (2000) observes that use of information and communications technology allows both the buyers and the sellers of 3PL services to communicated directly over data rich and easy-to-use information channels, which helps in reducing coordination costs and foster strategic partnerships based on mutually agreed goals. The emphasis that is being given by both manufacturers as well as suppliers on the concept of integrated supply chain has given ICT an increasingly important role within contemporary SCM strategy (Sweeney & Evangelista, 2010).

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""30" " Therefore, now the ability of 3PLs to provide superior customer service levels due to high usage of ICT and increasing scope and characteristics of their service offerings have driven the use of 3PLs to a new level (Daugherty et al., 1992). As a consequence, 3PLs now have been entrusted with greater and more important role than in the past with the responsibility of ensuring physical and information flows along different levels of the supply chain with greater acceleration and integration (Cooper et al., 1998). In the Indian sub-context what it means

Under the Indian context, Sahay & Mohan (2003) lists certain factors that are especially important for the 3PL growth in India, which are driving their growth. They highlight opening up of the Indian economy and increasing globalization of businesses as key factors that are driving companies to align their business strategy with supply chain management streamline processes for supply chain integration and forming partnerships for minimizing inventories. In addition to that, Indian organizations have been quick in implementing supply chain strategies for logistics improvements to increase sales revenue, enhance profits, reduce order to delivery cycle time and minimize inventories. (Sahay and Mohan, 2003).

2.5.5

Factors against Use of 3PL Services

According to Manatayev (2004), the inherent problem with the asset-owning 3PLs is that they are more concerned about utilizing their assets to full capacity than serving the interests of any one customer in the most effective or efficient way. It can often lead to sub-optimal solutions to the clients logistical needs as the 3PLs would want to favour using their capacity and network, which may not be the cheapest or the most beneficial option in terms of lead time. This can additionally limit the ability to adapt to the changing supply chain requirement of the end-user. Outsourcing logistics to a 3PL provider will attract a service tax, which was increased in the last Government budgetary session from 8% to 10%; thereby increasing the outlay in service taxes should a firm decide to outsource its logistics operations. In the

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""31" " changed scenario, the firm may find it cost-effective to keep logistics operations inhouse. Figure 2.8 below illustrates some of the factors against the use of 3PL services. According to a joint survey of 93 big American companies conducted by Cap Gemini, Ernst & Young, & Accenture in 2001, 60% of them mentioned not renewing their contract with their 3PL providers. 38% of those companies expressed their discontentment in dealing with their service providers. And the most commonly cited reasons for all that have been mentioned belowFigure 2.8 Factors against the use of 3PL services

Source: Cap Gemini/ Ernst & Young (2001) & Accenture (2001)

2.5.6

Elements for Successful 3PL Relationships

According to Bowersox (1990), a common factor in all the companies who are in a successful alliance with their 3PL service provider is their ability to recognize logistics activity as an important part of their marketing strategy. Product, promotion and price have been the three traditional competitive ingredients in driving companys growth. Now, it is

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""32" " Before discussing the elements for a successful 3PL relationship, it is important to understand the different relationship building stages that are involved in the build up to a successful 3PL relationship. Morasco (2008) has enlisted these different relationship-building stages, each one of which goes through a number of interactions or activities. These stages are:I. Early build-up stage- In this stage, the prospective service providers are selected by companies to negotiate and produce a contract that could base upon either formal or informal terms and conditions. In addition, the type of logistics service required is also specified. II. Execution stage- The mutually agreed terms and conditions, and commitments that were discussed by both the parties in the first stage are carried into effect in this stage. In addition, the operations are organized, coordinated, and executed. The level of experience that companies of respective activities possess is carefully monitored (Morasco, 2008). III. Potential long-term stage- This is the stage where the ongoing affiliation between the buyer and the seller of 3PL services strengthens even further and the association of collaborating ways of working with one another becomes institutionalized. The close alliance is a result of numerous formal and informal adaptations between the two parties, which according to Hakansson & Johanson (1990) lead to sharing of technologies used by the two parties, sharing of personal knowledge and trust, administrative routines, legal contracts and procedures (cited in Morasco, 2008). Key Elements A successful 3PL relationship can lead toI. Information sharing- Bowersox (1990) notes that the glue holding the two ventures together is through open disclosure of information. Advancements in

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""33" " technology have made possible the capability of information sharing from operating details to strategic planning. Partners reluctance to share ideas can abort the relationship, after they have entered into an alliance, even if they also have to share information they earlier deemed as to be confidential. Synchronization of all activities and progress towards shared goals are realized when the communication gap between the user-company and the service provider is kept as minimal as possible. II. Working towards a common goal- Each party must see its task assignment in terms of its contribution to the alliance and the way in which it can add value to customers. III. Understanding each others culture- The 3PL user and the 3PL service provider must understand each others working culture, vis--vis the service provider must appreciate the value system that drives its clients decision making process; and the client or the 3PL user must grasp how the service provider approaches its business. A clash of cultures and working styles may arise; but the alliance must rise above it (Bowersox, 1990). IV. Branding and service attractiveness- According to Manatayev (2004), successful branding and delivering promised levels of service quality have a potential of turning small differences in service offerings into bigger differences in market share. Many customers would like to do business with 3PLs that are recognized for quality and reliability, as they would not like to risk having bad experiences with myriad different 3PLs that operate in the market today. The level of differentiation in service offering as compared to the competitors in terms of types and geographic reach can heavily influence customer relationship. The attractiveness in service offering will increase adoption rate, accumulate a larger customer base and it will also increase industry demand (Manatayev, 2004).

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""34" " V. Cooperation- An effective way to signal a willingness to work together is by establishing ground rules at the very outset. These rules should also include the procedure for conflict resolution so that any friction that later may arise can be dealt with effectively before it strains the relationship. Negotiating for roles and positions before the operations start, with compliance to the ground rules already set can actually help preserve the longevity of an alliance. VI. Developing trust- By setting unambiguous goals, establishing clear roles, laying down firm rules, and measuring performance rigorously, trust can be developed. Also, Bowersox (1990) states that by focusing on the relationship continuum rather than one-off transactions, a higher degree of reliance develops, which in turn stimulates further cooperation. Trust builds as both the parties start focusing on customer satisfaction and loyalty. Bowersox (1990) cites a wonderful case-study example of cooperation and working towards a common goal in his paper to Harvard Business Review, which is worth mentioning in this literature review section. It is about a trucking company called Robin Transport and General Motors in USA. After studying GMs needs, Robin designed innovative trailers that benefitted all the parties. The details are elaborated as underRobin Transport was one of the carriers for General Motors for their spare parts distribution in America. The transportation companys close understanding of GMs parts delivery needs and of their distribution channel led to an innovation that benefitted both the parties. What the fleet owning company did was to design their trailers with fabric walls on the side that made the trailers capable of being loaded and unloaded from the sides as well as the rear. The trailers could load and unload in places where the standard trailer could not go, and they could be unloaded from three sides at once, near points of assembly. Robin loaded the trailers in the sequential order for ease of component handling and delivered them at certain specified times when GM was ready to receive the shipments.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""35" " End ResultTo justify its investment in special handling equipment in the trailers and the dedication of part of its over-the-road fleet, Robin Transport sought and got the status of being a preferred carrier of General Motors and that also at a premium rate. GM set up its production facility to benefit from the different mode of materials handling. The manufacturer benefitted from Robins understanding of the distribution channel by realizing productivity improvement through inventory reduction, JIT delivery and more efficient materials handling.

2.5.7

Third-Party Logistics in India

According to Hoda (2010), the Indian transportation and logistics industry is in a transition phase, witnessing transformation and burgeoning growth, in line with the developments that are happening in other parts of the industrialized world. There were about 400 3PL or contract logistics providers in the country in 2005, which experienced a rapid growth after 2000. But a survey conducted by Mitra (2009) gives out a different story- the Indian 3PL industry being in its early stages of development lags far behind the American 3PL industry in terms of global reach and breath of service offerings. The origins of 3PL in India can be traced back to the mid 1990s when 3PL was the new buzzword and considered then by many as just a fad (Hoda, 2010). The phenomenon of globalization and a general increasing awareness regarding the convenience that an integrated service provider can bring to Indian companies have catapulted to the rise of 3PL providers in the country. Industries have started preferring service providers who can offer integrated transport solutions rather than just individual transportation or warehousing services.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""36" " Figure 2.9 below illustrates the evolution of Indian 3PL industry since its origination in the 1990sFigure 2.9 Evolution of 3PL in India

Source: KPMG International, White Paper on Indian Logistics Part-2 (Bhattacharya, 2010) According to Papadopoulou et al (1998), there are no clear cut boundaries to define the evolution of 3PL industry, but in general, the development can be divided into five different phases from the user-provider perspective, which are enlisted as under1. Introductory period- the concept of 3PL was almost non-existent. The companies never really outsourced anything apart from basic logistical need fulfilment (the bottom of the pyramid above) such as of transportation and transit warehousing, and that too when there was a shortage in-house. This period in India can be dated as far back as when the country became a republic in 1947 through till late 1980s. 2. Awareness period- the concept of 3PL started gaining popularity postliberalization or opening up of the Indian economy to the rest of the world in 1991. There was a trail of publicity by foreign freight forwarders and shipping companies that entered the country through FDIs (foreign direct investment) in with local service providers.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""37" " But still during this period, the companies outsourcing were reluctant and raised concerns over loss of power and control over logistics. They did not see much cost advantage in outsourcing their non-core activities to the specialists. 3. Necessity period- the concept of the 3PL started gaining popularity locally, and increasing awareness amongst the industry users gave rise to many transport contractors who were traditionally operating as fleet owners to venture out into new areas of logistics. This period can be traced back to mid 1990s. During this period, many service providers achieved a nationwide scale (second step in the pyramid above) with network and reach cutting across different states of the country, with road transportation services still forming the major source of revenue for them. There was a significant rise in the Indian economy and rising disposable income of the huge largely untapped middle class population. There was an influx of multinational FMCG and automotive companies giving rise to much needed sophistication in the distribution model under the Indian context. 4. Integration period- Post the year 2000; there had been a sudden rise of service providers having 3PL capabilities in the country. According to an estimate, that number had risen to over 400 by 2005. With the advent of globalization, increasing awareness and a need to cut cost down, many companies felt the need to outsource many of their non-core activities apart from basic transportation and warehousing to the specialist service providers. This period gave rise to many of the traditional local transport providers giving up their old ways of operating as fleet owners and transport contractors, and starting on with new brands of service providers such as such as Gati, SafeExpress, XPS Cargo, Om Logistics, All Cargo, and others.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""38" " These companies have the competitive abilities in providing transportation and warehousing services with a combination of tailor-made value-added services. (Ref: the third block from bottom of the pyramid above). In addition to the above, there were quite a few consolidation activities seen taking place with global major giants like TNT, DHL FedEx with aim of expanding their asset base in the country taking over some of the large Indian logistics companies thereby establishing a strong owned network of offices and blending in their global best practices and technology paradigms into the Indian market (the fourth bit of the pyramid). 5. Differentiation period- this is the ongoing period that started post-2005 onwards where in the buyers of 3PL services have started facing never-seenbefore competition locally with the massive rise of home-grown retail and FMCG sectors. From the service provider side, there has been a lot of financial institutions creating separate funds dedicated towards Indian logistics sector taking cue from the double digit growth rate per annum that the logistics industry in the country continues to see. Many domestic logistics service providers have established wide asset base of warehousing and distribution centres across the country with even wider network of trade lanes within the country. They have started offering complex combined services in addition to warehousing and transportation. During this period, there has been some buzz about 4PL or the fourth party logistics providers, who are able to provide highly specialized and customized solutions for supply chain orchestration on a global scale, by sub-contracting core logistics activities to the 3PLs. Accenture and IBM are such companies that have basically spearheaded the growth of the Indian 4PL market. And taking a cue from Berglund et al (1999), it is expected that there will be many more entrants in to the field of

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""39" " 3PL/ 4PL from such unexpected arenas of businesses such as information technology and management consultancy. (Note: Since the market of 4PL is extremely new and miniscule within the Indian context, it is of little importance for discussion in this paper.) The vast majority of firms is small and provides a very limited range of purely transport services in addition to a very limited use of information and communications technology. Sweeney et al (2010) in their report have mentioned categorizing 3PL based on the taxonomy given as under. They have mentioned the Italian transport and logistics sector while categorizing their industry but it seems that the same categorization applies under the Indian context as well. It includes1) Full Haulage Providers: They are those companies for which transport activities represent 100% of turnover. 2) Basic Logistics Providers: Companies for which transport and warehousing together comprise over 50% of turnover; and, 3) Advanced Logistics Providers: those companies for which transport and warehousing together comprise less than 50% of turnover (e.g. where more than 50% of the total turnover is generated by value added logistics and SCM services) Table 2.1 shown below compares the Indian logistics market to China and developed markets such as America, Europe and Japan, vis--vis its logistics cost as a percentage of GDP. Table 2.1 Cost of logistics as percentage of GDP in India and markets

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""40" " Source: KPMG International, Skill gaps in the Indian Logistics Sector (Nagporewalla & Shrinivasan, 2007) According to Nagporewalla & Shrinivasan (2007), Indias spend on logistics activities, equivalent to ~13% of the total GDP is higher than the US, Europe and Japan at 9.9%, 10%, 11.4% respectively. The key reason for this is relatively higher inefficiencies in the system with respect to strained and insufficient infrastructure, lower average trucking speed, high cost of administrative delays, higher turnaround time at the ports, corruption and red tape by the bureaucracy, and so on. Figure 2.10 shown below represents Indias share of 3PL in its logistics industry compared to the mature markets of the world. Figure 2.10 Share of 3PL market in overall logistics industry of given countries

Source: KPMG International, Logistics in India Part 2 (Bhattacharya, 2010) The Figure above shows that as compared to developed nations such as Japan for instance, penetration of 3PL in Indias logistics is quite miniscule. The reason for that could be from the supply side, vis--vis not many service providers with actual endto-end service capability, or from the demand side, vis--vis Indian companies are still not very open to outsourcing their supply chain requirements apart from basic transportation and warehousing services.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""41" " Figure 2.11 below describes the various logistics services offered by the service providers. Until a few years ago, each one of the seven different functions of logistics were being operated by an individual service provider, leaving the consignor and the consignee struggling for obtaining accurate information about the flow of goods across the transporting channels. Figure 2.11 3PL Logistics integration model

Source: Working group on Logistics, Planning Commission of India, Hoda (2010) The three blue bands seen in the figure above, vis--vis integrated management, integrated IT systems and integrated IT systems shows that at present, it is possible by many 3PL providers in the country to provide one-stop-solutions or endto-end cargo management of goods by integrating all aspects of the 7 listed activities by a single service provider while they gradually attempt to establish asset ownership in key parts of the cargo value chain (Bhattacharya, 2010). With increased competition that has resulted from opening up of the Indian economy to the rest of the world, many companies in India have decided to outsource either all or part of their logistics activities to a dedicated third party logistics provider, thereby leaving them to focus more on their core competencies. The Indian 3PL industry can be divided into the following 3 categories I. Large 3PL companies with nationwide presence II. Medium-sized 3PL firms with regional presence (more than one region) III. Small 3PL providers focusing on limited services in limited geographies

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""42" " According to Hoda (2010), after realizing that there is a significant amount of cost reduction, convenience, and other benefits involved, many domestic companies in leading industry sectors of small to medium sizes have begun to follow the footsteps of their multinational counterparts, starting with outsourcing their basic logistics functions to contract logistics providers. Larger domestic companies that have been using basic contract logistics services for quite some time now have not started to outsource advanced value adding services such as inbound logistics, reverse logistics and customer support (Hoda, 2010). As companies are realizing the importance of value addition in logistics, 3PL is expected to see high growth in the country. A growing trend of the sector from 2008 through to 2013, categorized by different services within 3PL is illustrated as underFigure 2.12 Total Contract Logistics Value Split By Category 2008 & 2013

Source:!Datamonitor!

Source: India Logistics & Express Outlook, Datamonitor (Davenport, 2009), p34

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""43" " Currently, the contract logistics market in India is pegged at $1.2 billion (Davenport, 2009), and it is expected to witness exponential growth unaffected by the recent economic slowdown. Contract logistics grew over 18.4% in 2007. According to a report published by Datamonitor in 2009 on Indian Logistics (Davenport, 2009), if the current growth trends were any indicator, the average annual growth rate of the contract logistics market was expected to be around 21% per annum from 2008 through till 2013 when the total value of the market reaches ~ $3.3 billion. The logistics industry in India is expected to witness a robust growth of 7% between 2008 and 2013, when compared to other developing countries such as China (6.2%), Brazil (5.4%), Russia (5.9%) and South Africa (4.2%). The average logistics spend to GDP stands at 12% in 2008, higher than most developed markets. Based on a report published by consultancy firm Frost & Sullivan, the third party logistics market in India was valued at $890.3 million in 2005, and through the year 2012 it is projected to grow at a compound annual growth rate (CAGR) of 21.9, reaching $3,556.7 million by the end of that period (Unknown, 2006).

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""44" " Below is a graphical representation of the growth the contract logistics sector has witnessed since 2004 up until now, including its future trend until 2013Figure 2.13 Total Contract Logistics Growth in India 2004 - 2013

Source: India Logistics & Express Outlook, Datamonitor (Davenport, 2009), p10 2.5.8 Challenges in Indian logistics Industry

According to a report titled Strategic Analysis of the Third Party Logistics Markets in India by Frost & Sullivan (2006), the challenges facing the emerging 3PL market in India are many, the most significant of which is the domination of the unorganized sector. Service providers in the unorganized segment benefit from lower overhead costs and consequently, are able to offer customers extremely competitive rates. This is a major challenge for the organized segment, for both multinational and domestic 3PLs. The barrier to entry into the logistics market is very low. This could lead to intense competition and falling profit margins of the service providers in the organized segments such as the 3PL business. Figure 2.14 below indicate the 3PL development stage in which India at now compared to the other markets of the world.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""45" " Figure 2.14- Comparison of Indias 3PL development to other countries

Source: Report of the working group on Logistics, Planning Commission of India, Hoda (2010) According to the Planning Commission Of Indias report titled Report of the working group on Logistics by Hoda (2010), the following challenges in the Indian logistics industry have been identifiedI. Lack of physical infrastructure According to Hoda (2010), physical infrastructure is the most critical factor that impacts the logistics environment of any country. The development of logistics in India is hampered by poor physical and communications infrastructure. The core infrastructural assets and facilitating infrastructure, such as transportation, warehousing, and inventory, logistics hubs and parks and so on are fragmented and inefficient. Slow movement of cargo due to bad road conditions, congestion at seaports due to inadequate infrastructure, and delay in procedural clearances, in

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""46" " addition to unreliable power supply and slow banking transactions, make it difficult to meet the deadlines for international customers. II. Low penetration of Information & Communications Technology (ICT) There is an acute problem in India of maintaining and obtaining error-free and smooth flow of information across the value chain of the logistics service providers, which creates a lot of hassles in terms of cost structure and service delivery because of so much uncertainty, unnecessary paperwork and delays that are involved. Hoda (2010) says currently, there is no real-time process by which a shipper may know about the availability of trucks and going rates at the destination market. To cite an example, he mentions an instance where in a client booked for LTL (less-thantruck load) actually end up paying more than it would cost for FTL (full-truck-load) shipment. Due to absence of real-time accurate tracking systems in place, the client is unable to track their consignment to ascertain when it is loaded at the point of origin and when it is going to reach its destination. Sweeney et al (2010) mentions about small and medium-sized logistics service providers and how it is a big challenge for them to maintain the supply of information-based services (such as real-time tracking and tracing of shipments). Such companies have more difficulties in using ICT due to the reluctance to change and insufficient human and financial resources (Sweeney et al, 2010). Implementation of IT software and applications is often perceived as an added cost in India, one that would involve total re-organization of the company and the development of soft skills associated with technology investments. The result is that small 3PLs generally getting turned-off by just realizing the initial costs involvement that they fail to envision the actual potential of ICT

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""47" " as a tool that can bring about increasing cost-efficiency and improved customer service for the clients (Evangelista & Sweeney, 2006). Secondly, according to a survey conducted by Mitra (2009) in 2006, one of the respondents from the 3PL industry in India felt that the shippers demand all the state-of-the-art information technology systems, but they consider them as a standard service package and are unwilling to compensate for the investments that are made. III. Skill gaps in workforce Deficiency and shortcoming of skilled manpower and professionals Figure 2.15 below gives a snapshot summarizing skill gaps issues gauged against the size of particular segment and its growth prospects. It shows the two arenas of Indian logistics, outsourced warehousing and integrated 3PL among others are currently witnessing the highest growth in their markets mired with severest of skill issues amongst its workforce. According to Nagporewalla & Shrinivasan (2007), the growth and development of these sectors are under a threat going forward unless manpower development related specific interventions are not undertaken in these segments. Efficient and responsive supply chains require use of handhelds, understanding of RFID technology, basic training in IT for usage of warehouse management system, driver training, specialized vocational courses, proper recruitment schemes, sufficient addition to skilled labour, low attrition rate and so on, which currently are either lacking or insufficient.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""48" " Figure 2.15 Skill gaps in different segments of logistics in India

Source: KPMG International, Skill gaps in the Indian Logistics Sector (Nagporewalla & Shrinivasan, 2007) IV. Scarcity or lack of willingness of service providers in implementing technologies Traditional transportation and warehousing service providers are generally seen to be not skilled in the knowledge of IT and it can bring a sea change of efficiency in their day-to-day functions. They see investing in IT as a liability, as more like a fad, which is more cosmetic in nature rather than utilitarian. They are not willing to upgrade to better IT applications as they believe it would not give them enough returns on the capital employed towards IT development in their company. V. High expectations from clients Customers in India want their service providers to have best-in-class physical assets, provision for more value added services to be able to provide end-toend logistics solutions, and to be able to have real-time track and trace facility along with other IT systems in place. To add to that, the pressure to keep prices low and competitive including not bothering to clear the outstanding

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""49" " payments within the stipulated time period. Lack of timely payments by the customers often leaves the service providers with inadequate working capital. The inability of the companies to provide value adding services such as packaging, sorting, re-packing, labelling, knitting, cross-docking, order processing and so on, have left the clients with little reason to outsource their logistics activities in a big way. VI. Cultural mindset Certain practices in the Indian community- such as stringent hierarchical orders, top-down approach in management, anticipated risk of upgrading technologies thereby making workers redundant- discourage change, coordination and development of new approaches in 3PL. VII. Non-uniform tax structure and regulatory environment remains a hassle for 3PL players Differing rates of state Value Added Tax have been discouraging logistics companies who want to expand into different states. This state-specific VAT structure was implemented in 2005 but it lacked uniformity across all the 29 states of India and did not emerge as a solution to the persisting problem of non-uniform tax laws. Apart from this, logistics service providers are expected to pay various other taxes, face multiple check posts for the movement of goods across the country. If calculated collectively and analyzed on to a macro perspective, fuel worth US$ 2.5 billion may well be getting lost per year (Mitra, 2009).because of the amount of time involved waiting at check posts. Apart from that, the organized players face unfair competition with unorganized players who often avoid taxes. They also refrain from following operating norms such as quality of drivers, vehicles, and volume and weight restrictions. High costs of operation and delays involved in compliance with

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""50" " varying documentation requirements of different states make the business cumbersome. Mitra (2009) has come up with an estimate that on an average, a vehicle on Indian roads wastes anywhere between 24 and 48 hours in just complying with all the paperwork and formalities at a multitude of checks posts. As for rampant corruption in the lowest levels of law enforcement, Hoda (2010) has come up with an estimate that says, informal taxes or bribes to the police at various check posts is very common and may well constitute to over 20% of total freight cost. In addition to this, there are numerous documentation procedures varying from state-to-state that have to be complied with, further adding to high delays in operations and increasing the cost of operations. Mitra (2009) concludes by stating that in the end, a vehicle that costs US$ 30,000 in India ends up paying around US$ 7500 per annum in the form of just various taxes (including excise tax on fuel). This probably also explains the reason why freight cost remains a major component of the overall cost of a product sold in India. VIII. Lack of trust and awareness According to a report published by Datamonitor (2009) on Indian Logistics & Express Outlook, the volume of outsourcing of logistics functions by Indian clients is as low as 10% in contrast to the developed countries where outsourcing levels are greater than 50% in most of the industries. One of the reasons for low penetration of third party logistics outsourcing is because of trust deficit with the shippers against the service providers. Apart from the relatively commoditized services of transportation and warehousing, the companies maintain a reasonable amount of scepticism involving outsourcing of more strategically oriented and customer focused

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""51" " services as that directly affect their revenue streams, and hence, they prefer to keep these services in-house (Mitra, 2009). Bowersox (1990) states an example where the 3PL users perceive with much scepticism the services offered by transportation and warehousing companies, with the belief that their selling of the alliance concept is a mere faade. But in reality they just want to sell the same old services that are widespread amongst shipper executives (Bowersox, 1990). Apart from that, Hoda (2010) believes that there exists a varying degree of scepticism about the risks involved, loss of control of sensitive information and lobbying by vested interests within organizations to keep logistics activities in-house. Indian clients are also unaware of the benefits of cost reduction and supply chain efficiency by employing a third party provider. Others take assistance from their foreign counterparts and adopt their supply chain practices to avoid spending on any additional third party. Previously, demand from Indian clients existed mostly for transport and warehousing activities from the procurement area to the manufacturing base and in turn from the manufacturing base to the distribution centres. Most small clients still operate on an ad-hoc basis, subject to the availability of orders and remain ignorant of the benefits of lead logistics providers. Indian clients are reluctant to use value added services, information technology, real time tracking systems for shipments due to concerns of affordability. Fear of additional costs among clients probably explains the reason for low share of outsourcing in India. IX. Doing business in India For new entrants, it is not very easy to start up a new business in India. This point may not specific be to the 3PL industry but industries in general in India, which the 3PL is also party to.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""52" " Table 2.2 below mentions the different parameters on the basis of which India was ranked compared to other BRIC countries. Part of a report by The World Bank, India was ranked the lowest amongst the four countries in terms of overall ease of doing business and starting a new business. Table 2.2 Ease of starting new business in India compared to other BRICs

Source: The World Bank: Doing Business 2010 (India) Having mentioned all the challenges above, there is a fairly long list of opportunities to counter the above mentioned challenge, which are discussed in the following section. For instance- there are a large number of initiatives being carried out and planned by the Government for the next 5-10 years to improve the logistics scenario in the country. 2.5.9 Opportunities in Indian 3PL Industry

Despite many problems the future outlook of the logistics industry still remains very promising for the Indian market. Bhattacharya (2010) who compiled the KPMG report on Indian Logistics opts to remain quite bullish on the Indian logistics sector. According to him, there exists a significant amount of opportunities across every segment of the Indian logistics industry.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""53" " As a testimony to that claim, the annual growth rate of the logistics industry was 20% in 2008 compared to the average annual growth rate of the rest of the world markets combined at 10% (Mitra, 2009). The share of organized sector such stands at a mere 1% of the annual logistics cost in the country hinting there is immense scope for growth particularly in 3PL. Indian Economy

The Indian economy has seen tremendous growth especially after the liberalization of the economy in 1991. The period between 2005 and 2008 witnessed robust growth of 8.5%, annually. Although a few sectors were affected by the economic slowdown, the economy at large has remained resilient to the global crisis compared to various other economies. Compared to the overall economy, the logistics industry in particular has shown double digit growth rate of 12% from 2004 till 2008. The countrys economic growth at 7.7% between 2009 and 2013 would continue to be a strong driver to the burgeoning growth of the industry. The economic growth driven by underlying growth in trade, industrial output, FDI inflows and private equity investments will boost the development of logistics in India. The logistics industry has also flourished due to growth in trade, which almost doubled over the period 2003 to 2007. As a result the trade to GDP ratio is increasing. The growth in total merchandise exports and manufacturing exports from the current $112 billion and $76 billion to an expected $132 billion and $95 billion respectively, in 2013 is also a positive indicator for the growth in the logistics industry as export logistics is a lucrative segment for logistics service providers. Leveraging Indias IT strength in logistics industry

Logistics management is becoming increasingly complex. Use of Information Technology facilitates simplification and integration of logistics activities such as transportation, warehousing & inventory management and value added services.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""54" " Indian logistics service providers have the distinct advantage of having a very mature Information Technology industry to rely upon, for improving their management. However, Information Technology applications in logistics can also result in a proliferation of data. The ability to harness this proliferation of data can become a key competitive advantage for logistics service providers. Globalization, proliferation of ecommerce and emergence of new technologies has modernized the Indian logistics industry. The Indian Information Technology industry has developed solutions to cater to the needs of diverse logistics services providers. The services offered by the Indian IT companies straddle across the entire range of logistics activities and service providers. These solutions are geared towards meeting ambitious customer expectations, optimal utilization of assets and streamlining of operations. Most of the IT companies have acquired a deep-domain expertise in transportation and logistics and count upon many multinational companies as their clients. Role of corporate sector

Many large Indian conglomerates such as the Tata Group, Reliance Industries, Future Group, and TVS Group have all been smitten by the growth potential of this sector. So much so that they have established their in-house arms of logistics to fulfil their massive indigenous demand and also, sensing the opportunities in this industry, they have started providing services to outside companies as well. In India, there is 100% FDI that is allowed in the logistics sector unlike in China where, until recently foreign investment was not allowed in domestic logistics. Almost all large global logistics companies have their presence in India, many of them involving in freight forwarding. Consolidation (M & As)

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""55" " The logistics industry in India is gradually consolidating .Synergies are sought to be exploited by calibrated partnerships. The growth in third party outsourcing provides impetus to more alliances between companies. The acquisitions and strategic alliances in India have been targeted for expanding networks, widening the service portfolio, and leveraging industry specific supply chain expertise. The market will continue to consolidate through acquisitions and strategic alliances in specific segments such as courier, express & parcels (CEP) and contract logistics markets. Bhattacharya (2010) sees a healthy trend by Indian logistics companies where he observes increasing activities of consolidation taking place with global logistics giants having the best-in-class expertise in all logistics fields. In addition to domestic service providers, the industry is becoming more attractive for multinational service providers. It provides immense opportunity for investments and is pushing companies to shift their focus from developed markets such as USA and Europe to India, and contribute in making it globally competitive. For domestic transportation and warehousing, they have been many consolidation activities seem taking place- either through tie-ups with Indian companies or they have taken over some of the major Indian logistics companies in recent years to establish a firm asset base in the country. Several leading international logistics companies have already entered the Indian market, both through green field set-ups and acquisitions. Table 2.3 below represents a list of mergers and acquisitions by foreign multinationals that have taken place in recent years. Some of them are listed as under-

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""56" " Table 2.3 Recent Mergers & Acquisitions in the logistics sector

Source: KPMG International, Logistics in India Part- 3 (Bhattacharya, 2010) The reason why these companies decided to acquire the above mentioned Indian companies is perhaps because they saw a larger strategic interest in line with the growth of the industry as a whole, and also their target companies were readily equipped with sufficient assets distribution network, and the need for building the base from scratch was thus pre-empted. Case study example of a recent consolidation activityIn 2006, Dutch transportation and distribution giant TNT acquired Indian 3PL service provider called Speedage Express Cargo Services for a sum of 100 million Euros. The acquisition was in line with TNTs strategic objective to becoming the leading provider of express deliveries in emerging Asian markets, specifically India. With that acquisition, TNT managed to establish a strong network base in India with 514 depots, 26 transit hubs, 730 vehicles, 1,195 employees and thereby enabling TNT to provide a comprehensive and integrated network covering all parts of the country. It managed to gain a top3 position in the fast growing road transportation market in India. As the Indian logistics industry progresses, foreign companies such as TNT are expected to play a bigger role.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""57" " Interest shown by private equity investors in Indian logistics

Apart from consolidation, there has also been a rise in private equity and capital markets to fund growth of this untapped industry. Some estimates indicate that within the past 5 years, private equity investors have pooled in $85.5 million in the logistics sector, which have boosted funding in specific segments of logistics, particularly cold chain warehousing and container logistics. Infrastructure development

According to Hoda (2010), the public infrastructure development is in the transition phase. The situation is improving albeit slowly- for instance, the highways that were mostly two lanes 10 years ago have now been expanded to 3 lanes on each side. There have been massive investment planned by the Government of India in infrastructure, increasing levels of disposable income, and dynamic manufacturing and retail sectors are combining to making it an opportune time for growth in logistics in India. Investments in the Golden Quadrilateral highway whose construction involved an investment of US$ 13.4 billion, has been completed with over 3,633 miles of four and six lane express highways connecting the four most important metros namely, Mumbai, New Delhi, Kolkata (formerly Calcutta) and Chennai. Governments planned investment on infrastructure to the tune of nearly $500 billion dedicated for roads & highways, rail, ports airports and electricity development will eventually lay the foundation for better logistics in India. According to a KPMG report on Indian Logistics, a sum total of US$ 75 billion had been earmarked for 2007 through till 2012 alone to develop the above mentioned infrastructure, which will have significantly improve the quality of logistics delivery in the country (Bhattacharya, 2010). Apart from this, construction of dedicated freight corridor, port infrastructure, airport modernization, will ensure smooth logistics. Rail transportation is expected to take

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""58" " away share from road supported by the emergence of dedicated freight corridor, logistics hubs, increase in multimodal transportation and privatization of rail containerization. The industry is fragmented especially in the road freight market characterized by several intermediaries such as truckers, customs agents and brokers leading to unorganized logistics. Due to lack of scale in both supply and demand in value adding elements of logistics, entry has often been into segments that have been perceived as relatively unattractive such as FTL trucking. Having said so, Bhattacharya (2010) believes that this can give a geographic network advantage to the service provider, along with developing new customer relationships, which later can be capitalized on to deal with more profitable services such as warehousing. The need to reinvent logistics business models is expected to lead to significant investment opportunities, across storage, transportation and services. However, there may be growth opportunities in segments that are seemingly less attractive, if new business models and niches can be created. Third party outsourcing (3PL) has become imperative for industries such as automotive, pharmaceutical, retail, electronics to reduce costs and build efficiency in their supply chains. Figure 2.16 below represents the reasons causing the growth of 3PL outsourcing in Indian market, including the increased outsourced manufacturing activity that is being seen in the auto ancillary, textile and pharmaceutical sectors in particular-

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""59" " Figure 2.16 - Factors driving logistics outsourcing in India

Source: KPMG International, Skill Gaps in the Indian Logistics Sector (Nagporewalla & Shrinivasan, 2007) Emergence of value-added services (VAS) Supply chain management in India is in its nascent stage as mentioned several times in this paper, with enormous scope for development with respect to value added services in transportation, warehousing and distribution. The supply chain structure has undergone various reforms since the past with increasing globalisation, growth in demand for logistics, increasing importance attached to quality and attaining cost efficiency and need for streamlined and orderly processes to reduce logistics costs. However, there remains tremendous untapped potential in outsourcing for value added services in the supply chain. The current penetration of value added services in

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""60" " contracts is very minimal at around 7%. The growth of value added logistics is parallel to the growth in third party outsourcing. These services are customised depending upon the industry verticals and require qualified personnel who have expertise in the respective industries. This is the major distinction in the supply chain activity performed by a third party provider and the shipper himself. The challenges of supply chain management can be addressed through the implementation of IT, enterprise resource planning systems, warehouse management systems, RFID labelling, packaging, and so on. Logistics service providers are continuously expanding their service portfolio and emerging as end-to-end solution providers. Consequently, the industry sees immense potential for contract logistics with an expected growth of 21% over the next five years. Introduction of GST (goods and services tax) An important regulatory policy expected to further bolster the growing industry is the introduction of the goods & service tax (GST). GST is a comprehensive value added tax on goods and services. It is collected on the value added goods and services at each stage of sale or purchase in the supply chain. The GST paid on the purchase of goods and services can be set off against that payable on the supply of goods and services. However as consumers are the terminal points in the supply chain, they have to bear this tax and as a result the GST practically becomes a last point retail tax. Introduction of this taxation structure is set to bring the much-needed uniformity in the prevailing tax structure and has been the most demanded policy reform by the logistics providers. According to Hoda (2010), after the GST has been fully implemented in all 29 states of the country, we will see a reorganization of large centralized warehouses in regional hub cities, giving rise to the hub-and-spoke model of logistics in India that has been in place in America and Europe since 1980s.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""61" " GST is expected to eliminate the hassles of the varying state-to-state taxation and reduce the time consuming documentation process, hence bringing about transparency in the system. This is expected to be the most important factor to step up contract logistics, centralized warehousing and enable companies to invest in value added services. Figure 2.17 below gives a hypothetical representation of how a reorganization of warehouses would appear after the planned uniform implementation of GST across the country. This reorganization is going to lead to significant investments in modern warehousing infrastructure in the past several decades (Bhattacharya, 2010). Figure 2.17 Reorganization of warehouses before and after GST

Source: KPMG paper on Indian Logistics (Bhattacharya, 2010) Existing sub-optimal warehousing networks stretching across numerous states- which are hypothetically as shown on the map of India on the left of the Figure abovewould be closed down and we would see the adoption of hub and spoke models for

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""62" " warehousing (seen on the right of the Figure above) where considerations of optimality in delivery and costs dominate rather than utilization of tax sops. Value added services such as tracking technologies, transport management systems, warehouse management systems are expected to proliferate as the scale of distribution and transportation activities increases and it becomes easier for firms to recover investments in the value added services. A large part of the modernization of Indian Logistics industry would happen on account of large-scale adoption of such value added service provision as mentioned before. The biggest structural shift that would happen as an indirect offshoot of the adoption of the GST is the attitude towards outsourcing in general and contracting out logistics activities to contract logistics players in particular. As discussed above there would be significant changes in transportation, warehousing and value added services. Logistics activities would increasingly get modernized and specialized. Clients would realize that it would be best to outsource them. 3PL players who can advise on the best practices in supply chain management would be in demand as we would be evolving towards adoption and harnessing of integrated logistics systems.

2.6 !

SUMMARY

Although, the usage of 3PL in India reveals a positive growing trend, the third party logistics industry as such is still in a very nascent stage (Sahay & Mohan, 2006). According to an estimate by Sahay & Mohan (2006), 75% of companies globally outsource to 3PL service providers; whereas in India, that percentage is about 55. And even those 55% of companies who do choose to outsource their non-core activities to the 3PLs in India, only transportation and warehousing-related services make the most of the chunk of the services being outsourced.

Chapter"Two:"Literature"Review"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""63" " According to Manatayev (2004), the relationship between the 3PL service provider and the 3PL user is expected to become more long-term and strategic with higher levels of trust, empowerment, and adequate risk and reward sharing (Manatayev, 2004). The idea of providing truly integrated solutions combined with good customer relationships in India is still a bit far-fetched to think about. But when that happens with all the opportunities that the 3PLs have in the country, it is going to create new growth opportunities that will not only rewarding for the customers but also to 3PLs as they become deeply engaged in customer organization, allowing them to focus on their core competencies. This wills in-turn lead to customers locking-in for a sustainable long-term relationship with their service providers. With the increasing number of 3PLs entering the market every year, the point of differentiation amongst the competitors, to increase the attractiveness for prospective clients, would be the development of value adding services into their product portfolio and an efficient and sufficient use information and communications technology depending upon the need and a deep understanding of customers businesses. Berglund et al (1999) strongly believe that soon a phase will come where there will be a lot of consolidation taking place with a small group of leading end-to-end solutions provider remaining who will manage the transportation and warehousing networks by closely linking with their customers. In addition to that, there will be a large group of second-tier service providers providing additional support services to the first-tier service providers.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""64" " CHAPTER THREE: RESEARCH DESIGN & METHOD 3.1 Chapter Introduction

The various kinds of research design and methods that went into finding out first-hand information about the case companies are mentioned in this chapter. Section 3.2 mentions about the various research paradigm options, the advantages and disadvantages involved with each and the one that was chosen for this particular study. Section 3.3 discusses the research methodology adopted in which the case study method is described and along with the reasons why multiple-case studies were chosen as the final method of research. Implications of conducting questionnaire surveys, which falls under quantitative approach and how it was blended with qualitative approaches such as conducting semi-structured interviews, using company archives for further information etc. have been also discussed. Under Section 3.4, data collection and storage techniques have been mentioned with respect to above mentioned methods of collecting data. Section 3.5 deals with analysing data and how it was done- both by using within-case analysis and cross-case analysis. Finally, Section 3.6 and 3.7 mention about various validity and reliability issues associated with the collected data, and ethical issues concerning the giver of the data, that were given due consideration throughout the process of this research study. 3.2 RESEARCH PARADIGM

A paradigm is defined as the patterning of the thinking of a person; it is a principal example among examples, an exemplar or model to follow according to which design actions are taken (Groenwald, 2004). A research paradigm can be defined as a basic set of beliefs that guide action (Denzin & Lincoln, 2000) one that offers a structure containing a basic and acceptable set of ideas, concepts and ways of defining data (Collis & Hussey, 2003).

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""65" " In the context of working on a dissertation project, it means a certain governing set of methods and principles the researcher should adopt while conducting his research. Positivist research approach guides the researcher to discover relationships and facts that can be generalised; research that is independent of subjective beliefs, opinions, and principles (Grinnell et al, 2010). The researcher viewed this approach as a potential glitch to the wide array of issues he wanted to raise pertaining to the Indian 3PL sector, the issues that could have different meaning to one service provider, while something completely different to certain other service provider. Whereas, under phenomenological research paradigm, Stones (1988) states that the basic aim of the researcher has got to do with describing the phenomenon as accurately as possible without refraining to any pre-given framework, but remaining true to the facts. Basically, the key implied meaning behind phenomenological research is to describe. Phenomenology is essentially a study of ones experience, and phenomenological research paradigm entails analyzing the structure- or the types, intentional forms and meanings, dynamics, and certain enabling conditions- of perception, thought, imagination, emotion, volition, and action (Smith, 2008). The advocates of the Phenomenological approach argue that human motivation is shaped by factors that are not always observable, e.g. inner thought processes, hence, it becomes hard to generalize on from observation of behaviour alone. Furthermore, people place their own meanings on events; meanings that do not always coincide with the way others have interpreted them. Therefore, to avoid generalization of views of the sample or the target organizations (how much ever small the sample is), the researcher decided to largely apply the phenomenological approach to his research paradigm.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""66" " Common synonyms associated with Positivistic and Phenomenological research paradigms

Positivistic Approach" Sometimes also referred to as Quantitative, Scientific, Objectivist, and Traditionalist and so on. Phenomenological Approach" Sometimes also referred to as Qualitative, Subjectivist, Humanistic or Interpretative. Listed as under are some of the salient features of positivistic and phenomenological paradigms of research: Table 3.1 - Key features of positivist and phenomenological paradigms POSITIVIST Ability to generate quantitative data (read: Objectivist nature of approach) PHENOMENOLOGICAL Ability to generate qualitative data (read: Subjectivist nature of approach)

Data gathered is specific and precise (read: Quantitative nature of data)

Data data)

gathered

is

rich

and

highly

subjective (read: Qualitative nature of

Large samples used to collect data

Small selected samples used to collect data

Generalization often done from sample Generalization done on case-to-case basis size to population by simplifying facts by looking at the totality of each fact

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""67" " Traditionalist approach need to abide Hermeneutic approach flexibility in by set designs and rules in collating and interpreting data based on researchers codifying data own insights and knowledge

Characterized by formulating hypothesis Characterized and testing data (read: Scientific nature of approach)

by

developing

ideas

through induction from data (read: Humanistic nature of approach)

Validity of data collected tends to be low Validity of data collected is high because because of large sample size and heavy of selective and small size of sample with generalization less generalization

Source: Combining quantitative & qualitative methodologies in logistics research, International Journal of Physical Distribution & Logistics Management [Modified from Mangan et al (2004); Hussey & Hussey (1997); Gill & Johnson (1991); The Denzin & Lincoln advantages (2000); and Ticehurst & of Veal (2000)] and

main

research

disadvantages

positivistic

phenomenological approaches are highlighted as underTable 3.2: Positivistic Approach Advantages & Disadvantages ADVANTAGES DISADVANTAGES

Ideal for research projects that are Not ideal for projects that require to descriptive in nature, i.e. identifying and explain why certain things happen quantifying the element parts of a phenomenon: the what aspect of the research

Suitable for projects that require highly Because of highly structured nature of

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""68" " structured and qualitative approach this approach, it is imposed by prearranged limits that restricts boundaries to a research Standardization makes it easier to collate Because of standardization, there is a and codify the collected data need to take a large sample to be able to make proper generalizations from the results Table 3.3 Phenomenological Approach Advantages & Disadvantages ADVANTAGES A small sample size for research is The sufficient DISADVANTAGES research findings are highly

subjective in nature, which pose a threat that the findings are open and wider ideas asserted that flow from the studies cannot be substantiated

Ability to generate rich data mixed with Research hard to reproduce as other personal insights and comments researchers if they want to reproduce the survey and test the findings of the original research they wont be able to

Exploring becomes easier below the presenting surface of an issue

3.3

METHODOLOGY

Methodology refers to the principles and ideas on which researchers base their strategies or methods, and procedures. Therefore, it is considered to be at the heart of

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""69" " the entire research design representing the foundational structure for scientific research and at the same time also establishing a basic yardstick for the collection and analysis of data. It is usually concerned with the following issues! ! ! ! ! Why a certain data was collected Where was the data collected What was the data that was collected How was it collected How was it analyzed

Quantitative and qualitative methodologies are generally associated with positivist and phenomenological paradigms of research, respectively. It was discovered that there has been a trend in management research- primarily concerning with supply chain and logistics- that was commonly associated with the adoption of a combination of methods and approaches that provided a middle ground between the contrasting positivist and phenomenological paradigms and perspectives (Mangan et al, 2004). For this paper, the dominant research paradigm and perspectives were adopting a case study approach that reflected accurately the entire surmise under which phenomenological paradigm of research design was based. The collection of data on the other hand was done through a combination of quantitative (read: questionnaire survey) and qualitative (read: semi-structured interviews) research methodologies that provided a rich description and greater insights of both the quantifiable and qualitative data of all the three companies, which would not have been possible if a single research methodology had been put into practice. As for the collection of data, Arksey & Knight (1999), Bloor (1997) and Holloway (1997) state that the purpose of collecting data from different targeted organizations or people is a form of triangulation data triangulation to contrast the data and

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""70" " validate the data if it yields similar findings (cited in Groenewald, 2004). For the purpose of this study, the researchers sample was the above-mentioned three 3PL service providers coming from varying backgrounds. Methodological triangulation, using both quantitative and qualitative methodologies in varying degrees was used. Under methodological triangulation, there are further two forms of collecting the data- either the within-method (intra-method) approach or between-method (or inter-method) approach. Researchers often use between-method approach to reaffirm the findings generated through one method and verifying it with another. For instance, the researcher had first conducted a questionnaire survey followed by a semi-structured interview, i.e. using a mix of both quantitative and qualitative approaches respectively. Depending upon the underpinning context for which research is required (in this case, the objective was to evaluate the different competitive strategies pursued by 3PL providers in India), it has the ability to provide the researchers with multidimensional insights into many management-related research problems, in particular relation to logistics and supply chain (Mangan et al, 2004). The two methodologies of research are complete opposite to each other. Some of the salient features that distinguish them are mentioned together as under:

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""71" " Table 3.4 Differences between Quantitative & Qualitative methodologies

Source: The Nature Of Qualitative Approach, Research Methods for Business: A Skill Building Approach (Sekaran & Bougle, 2010) 3.3.1 Case Study Strategy

Case study is an ideal methodology allowing a researcher to retain holistic characteristics of real-life events and at the same time enabling in-depth investigation of empirical events (Yin, 1989). Case study is in essence an empirical inquiry that Investigates a contemporary phenomenon within its real-life context: when,

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""72" " The boundaries between phenomenon and context are not clearly evident; and in which Multiple sources of evidence are used

There is a popular misconception that the case studies basically provide or are limited to qualitative analysis but in reality, they can use both qualitative as well as quantitative information (Schell, 1992). Purpose of case study Before taking on the task to design a case study it is important to consider that the phenomenon for which the case is to be designed is recognizable and well defined. Secondly, the phenomenon should be able to answer the how and why questions especially where there is little control by the researcher. Thirdly, the focus of the phenomenon should reflect contemporary events that are taking place at the moment. Taking these three considerations into perspective, the researcher decided to adopt the case study strategy because1. The phenomenon and its underpinning context or contexts for which the case study was to be designed were not clearly evident: it was to carry out an exploratory study of 3PL service providers in India as to know from them for instance, what competitive strategies they are adopting to succeed in the Indian market, among others. But then, this phenomenon of 3PL service providers and their competitive strategies in India would depend upon so many underpinning contexts, with relation to the location of the 3PL service provider, the tax structure of a particular state in which the 3PL is operating in, the government policies on infrastructure development, so on and so forth. 2. It was important to know from each individual 3PL organization the how and why parts of their competitive strategies, which would again vary depending upon- a) the size and reach of their operations, b) the challenges

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""73" " and opportunities each 3PL organization faced, and c) their vision and ambition for future growth underpinning the obstacles they faced in India, and lastly, 3. The phenomenon of 3PL business was relatively new under the Indian logistics industry sub-context and was plagued with numerous challenges as well as the prospects of future opportunities that the researcher had no control over. Also, there were not many readymade case studies of Indian service providers that were available. In addition to the above-mentioned reasons, the case study strategy was also used for this particular research study because case studies do not require a large sample size and also it allows researchers to use full range of evidence, which is not limited to interview transcripts but can also include internal documents of the company, archival records, information available on company website, articles published by newspapers and finally, the researchers own observation of the company. 3.3.2 Multiple Case Study Selection

The researchers decision to pursue multiple case study approach was backed by a brief review of the study background, research questions and main research objectives, which justified its application. Multiple-case study approach follows a replication logic that allows researchers to compare and contrast different cases (Schell, 1992). Evidence found from multiple case studies is believed to be more compelling than a single case study (Yin, 1994). Furthermore, the use of multiple case studies is likely to increase the methodological rigor of the study through reinforcing the precision, validity and stability of the findings (Miles & Huberman, 1994). Each case study consists of a whole study, in which facts are gathered from various sources and conclusions drawn on those facts (Levy, 1988).

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""74" " Unlike an experimental or a survey study where in the aim of sampling is pure generalization and prediction, the main aim of multiple case study inquiry is to create and test new interpretation (Kuzel, 1999) Case study cannot be conducted on any random selection of companies, nor can the selection be made on the basis of convenience and accessibility of the companies. According to Yin (1991), case selection process should incorporate proper justification as to why the researcher had chosen particular company or companies. In the Table 3.5 listed below, there are sixteen purposeful sampling strategies that have been identified by Patton (1990). The purposive selection of cases involves choosing companies or the individuals from which the researcher can substantially learn about the experience (Polkinghorne, 2005), and that it is important to use information-rich cases as one can learn a great deal about the issues of central importance to the purpose of the research (Patton, 1990); hence, the term purposive sampling. Any one type of purposeful sampling strategy or a combination of more than one can help researchers choosing their case companies.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""75" " Table 3.5 Types of purposeful sampling strategies and their definitions

Source: Qualitative evaluation and research methods, Patton (1990) A multiple, comparative case study selection of three 3PL companies was done based on the following considerations: The researcher chose maximum variation and snowball sampling strategies (highlighted in red frames as shown in the table above). Maximum variation sampling strategy was used because the case companies he wanted to compare and contrast had to have divergent backgrounds based on their ownership models, scope and size of operations, type of 3PL services offered and so on. At the same time these cases did represent important common patterns that cut across the variations- for instance, all the three logistics service providers were mired by the same challenges in the industry as everyone else. Apart from that, they viewed competition to be intense or very intense in the 3PL market. These two factors were core and common to all the three case companies.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""76" " In addition to Maximum variation, the researcher also pursued the snowball purposeful sampling strategy, as he knew people who knew people who held topmost positions ranging from Managing Directors to Heads of various marketing and operations department, who could provide him with rich information, show willingness and interest to carry out interviews, etc. The researcher wanted to draw comparisons between their operational reach, services offered, and to draw contrasts between the competitive marketing and operations strategies pursued by them under the Indian context. The researcher held the strong view that any strategy or decision adopted by a company, a lot of it would always be influenced based upon the ownership structure of the company- whether family-owned, close-knit and traditional setup OR a company in a joint venture with a foreign multinational OR, a fully owned subsidiary of a multinational logistics conglomerate. Hence, to stay according to the rules of maximum variation sampling strategy, and to come out with rich diverse range of data, the company selection was made on the basis of diversity of ownership backgrounds. One company comprised of a close-knit family-owned business of transportation and warehousing that had a very traditional hierarchical organizational setup but at the same time large operational reach and commendable vision and ambition for expansion and growth in future. Note 1- The Company currently only deals with transportation and warehousing but soon plan to foray into other verticals of the 3PL business to become an integrated end-to-end logistics solutions provider. Note 2- Collecting data on this company was of particular interest to the researcher as the company is family owned and the researcher hopes to work with this company in future.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""77" " The second company case was chosen on the basis of its 100% multinational character. It is a global logistics conglomerate having presence in almost all of the mature 3PL markets. The researcher wanted to understand how a multinational company operates given all the challenges that are prevalent in India. The researcher wanted to find out about how was the business operation of a multinational 3PL service provider different or similar to the family-owned logistics business. Lastly, the third case was based on a joint venture company; half owned by Indians half by a German 3PL provider with offices worldwide. As for this case company, the researcher wanted to dwell into the research of finding out how partnerships in 3PL in India function, especially one that involves a foreign 3PL provider tying up with a local logistics company with large asset base but limited management expertise. The researcher wanted to investigate how 3PL partnering works and by taking a case study of an Indian-German joint venture, he wished to learn and understand if this strategy of inorganic growth was feasible and viable and more importantly, necessary and if so, to try to use the same strategy in the family business in future. 3.4 DATA COLLECTION & STORAGE

The best way to gather evidence from a vast variety of sources is to integrate various data collection methods such as questionnaire surveys, interviews, and personal observations and archive searching (Collis & Hussey, 2003) Yin (1993) states that a good researcher would always keep a systematic record of all the different sources of data of a particular company in appropriately filed database. This is not only easier for the researcher to go back and forth for referrals but also for the supervisors. Hence, the database was classed into three different files under the three company names comprising of the following pieces of information-

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""78" " Questionnaire feedback Notes made during the interview Interview transcripts Field notes made after each interview Additional information given during the interview- for example, company brochures 3.4.1 Draft of interview transcription and analysis of interview Newspaper/ Magazine articles about the company Internal documents such as company newsletters Information retrieved from company website

Questionnaire

Data was collected through in-person questionnaire surveys. Primary sources were the respondents from the Managing Director-level to the department heads of Marketing and Operations. Variables for the questionnaire were obtained from various literatures available online. The questionnaire contained both close-ended as well as open-ended questions with a logical order and flow in order to keep it courteous, interesting and valuable for the respondents as they were devoting their precious time into and with this, to ensure a reasonably rich array of data was collected. For perception-related questions, a 5-point Likert scale was used where the respondents were asked to rank in the order of importance or criticality with 1 representing very high importance or very high criticality whereas 5 represented low importance or low criticality. The primary objectives of the questionnaire survey were to capture the following: a. Basic information about the participants company b. Participants perceptions of the industry size, growth rates, problems and

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""79" " prospects c. Competitive situation in the industry and how the participants and their companies are dealing with it d. Growth strategies the participants and their companies are pursuing and their key success factors underpinning a fiercely competitive logistics environment in the country e. What participants perceive their companies have achieved with respect to various performance metrics and dependency relationships with the key success factors

A rough draft of the questionnaire was initially created, which was administered by a select group of industry experts whom the researcher had personal connections with. It was more like a pilot study to assess its practicality and validity before the final version of the questionnaire could be drafted and be made available for use. After few modifications as recommended by the experts, the questionnaire was ready and accepted for use. A copy of the questionnaire is reproduced in the Appendices for reference. 3.4.2 Interview

Kvale (1996) asserts it is literally an inter-view, an interchange of views between two persons conversing about a theme of mutual interest, and the purpose to obtain descriptions of the life-world of the interviewee is achieved with respect to interpreting the meaning of the described phenomena. In-depth semi-structured interviews were conducted with the heads of the three 3PL organizations and also their department heads of operations and marketing.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""80" " The idea of conducting semi-structured interviews rather than a proper structured or even unstructured interview was simple- to keep a fixed amount of basic questions ready for which the information was necessary, and at the same time having certain questions handy that may or may not be omitted depending upon the situation and flow of conversation at that moment of time. The basic aim of the researcher was to gain as much information as possible from the participants. The questions were all open-ended questions beginning with How, Why and also What. These questions were directed more towards driving the respondents to provide answers on the basis of what they felt about a particular issue, experiences, conviction, opinions and instincts in as subjective way as possible. There was a document attached behind the questionnaire survey (Appendix 1) shown to the participant that contained 12-15 open-ended questions depending upon the situation and the companys representative that was present at that point of time. These open-ended questions were designed in a way to collect rich and inclusive data based on the main themes relating to the research. Literature review that was complied before the collection of primary information shaped the questions for the interview. The questions needed answers ofa) Competitive pricing and cost reduction strategies pursued by the company, b) How the company is tackling competitive pressures given the many challenges already plaguing the industry c) What needs to be improved in the company after comparing to other companies and d) How does the company manage different clients and their projects, among other questions. Polkinghorne (2005) feels that in order to obtain interview data of sufficient quality to produce worthwhile findings, researchers need to engage with participants in more than a one-shot, 1-hr session. They should try to establish a trusting, open relationship with the participant and to focus on the meaning of the participants life experiences

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""81" " rather than on the accuracy of his or her disquisition. According to Bailey (1996), the informal interview is a conscious attempt by the researcher to find out more information about the setting of the person. The researcher had conducted least more than one round of interview, depending upon different individuals and companies. The focus of the researcher in the first meeting with the interviewees was primarily on getting acquainted, developing rapport, laying out a theme that the researcher would like the interviewee to explore, and finally, trying some initial forays into the topic. There were certain questions discovered after the first round of interviews was over were raised by the researcher in the follow-up interview. The researcher by the second interview had observed more enthusiasm and openness in some interviewees and the researchers own frankness and open attitude towards them. This helped the researcher to establish a strong relationship with the participants and that further helped him to get follow up solutions and answers via email to more problems that occurred while compiling the case study. The interview was recorded on a Dictaphone and at the same time the researcher was also typing down certain keywords and making notes on his laptop. 3.4.3 Archive Searching For Secondary Data

Within the context of primary data collection, there were certain indirect sources that were referred to gather data on the case study companies. Such indirect forms of data are generally quite useful in case study building exercises as it reaffirms and add more value to the information collected during the interviewing sessions. Some spokespersons of the case companies guided the researcher through their internal documents such as newsletters that were meant for the employees of that company, in addition to business catalogue, brochures that helped the researcher in

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""82" " collecting certain flow charts, tables, other information pertaining to the company, which wasnt possible through interviews and questionnaires. Certain trade magazines such as Cargo Talk, LOG India, Logistics Week, Link, The Shipping Times, etc. which were lying in the reception lounge of a particular company proved to be quite useful. Apart from this, the interviewees asked me to refer to their companies websites to gather more information with regards to the history and development, specific project case studies they had uploaded online and other relevant information that the researcher was able to excavate from their own website, which would help him in his research. Their website addresses are1) Best Roadways Limited- @ www.bestroadways.com, 2) Rhenus Pro Log Logistics Limited- @ www.rhenus.com/india, and 3) Schenker India Private Limited- @ www.dbschenker.in

3.5

ANALYZING DATA

Data analysis forms one of the most critical steps in the qualitative research process. Hatch (2002) defines data analysis as, a systematic search for meaning, where in researchers tend to engage their intellectual capacities to make sense of qualitative data in evaluating, synthesizing, comparing and categorizing the themes of the research (modified from Leech & Onwuegbuzie, 2007). Many researchers view analysis of qualitative data as the most difficult aspect of conducting case studies for many reasons (Kohn, 1997). The sheer intensity of the data collection process and the overload of information obtained make it a challenging task for the researcher to collate and amalgamate the data together in the main study.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""83" " In analysis of case studies, inevitably there are many different points of data involved. Hence the traditional method of statistical analysis cannot be used and there rises a need to apply multiple techniques to organize and systematically review large pieces of information. The purpose of analyzing the data was guided by the research objectives and questions set by the researcher. The researchers multiple-case study selection approach was guided by the frameworks of within-case analysis that was individually conducted first followed by cross-case analysis of the three case companies. In addition to that, interview transcripts, observations and field notes were analyzed using content analysis. The researcher has chosen the following analysis method in the research study to make his overall analyzing of data more rigorous3.5.1 Within-Case Study & Cross-Case Study Analysis

The researcher chose within-case study analysis in order to first give a detailed description of each case company individually. This would help the researcher to create a fixed pattern of themes, events, opinions and phenomena for all individual case studies. Later, at the time of cross-analyzing the case studies, it will be easier for the researcher to stick on to those patterns and provide a rich comparison-contrast studied themes, opinions, events and phenomenon underlying in the three case companies. For instance, the types of services and network reach of each company varied. So, after noting that into individual case analysis, at the time of cross analyzing, it became easier to draw comparisons between the companies in terms of that particular phenomenon. 3.6 RELIABILITY & VALIDITY

Reliability and validity are in essence, two quality evaluation techniques determining how good or bad the qualitative research the researcher has carried out.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""84" " The validity of data refers to testing of the data to ascertain if they accurately measures what they were intended to in the first place, whereas reliability of the data collected refers to ascertain if the data collection method will yield consistent findings when replicated by others (Neville, 2005). The validity of the data in quality research can be verified and checked by using one or more of the following checks (Ratcliff, 1995)Member check" The participants who were interviewed can be contacted back after the completion of the study to determine from them about the information collected during the interview, if it was accurate and true to the best of their knowledge. The researcher can further ask them for elaboration and reconstruction of a previously discussed issue. Convergence with indirect sources of data check" This is one way where indirect sources of data collection can be very helpful. The primary data collected by interviews can be verified by extensive literature that is available online about the case companies. Various forms of triangulation and comparison methods can be used to verify the data collected. Complementary information checks" Notes taken during the interview, interview transcripts, and other notes can also be referred to. Independent checks with other researchers" Other researchers who have worked on the same issue before can be contacted for verifying the data Divergence from initial assumptions check" Check to see if the initial assumptions made by the researcher about the issues are relevant and match with the new data collected. As from the above, the researcher managed to keep in touch with the interviewees via email and check with them about the relevancy of the information they had provided and if they had anything extra to add.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""85" " The researcher attempted to also check for independent research to look for relevancy and accuracy. Unfortunately, because there is not much written about the Indian 3PL industry as yet, the researcher was not able to test the validity of his information with independent sources. Thirdly, the researcher verified with other sources of information and found out other relevant information about the companies in addition to the information already available through them directly. There were commonalities in patterns and themes that were evident. For instance, the financial information of the companies in the case studies was verified with the data available on Registrar of Companies (ROC) website (read: http://www.mca.gov.in/Ministry/annual_report.html). Since the three companies that were researched are either registered as public limited or private limited companies in India, it is mandatory for them to file their annual reports with the Ministry Of Corporate Affairs of the Government of India. As for reliability of the data collected under the phenomenological paradigm of qualitative research, since the research was based on the phenomenon that was contemporary in nature and beyond the control of the observer or researcher, it was hard to ascertain the reliability of the data. Also, realities are dynamic in nature and hence, the change is the only constant. For instance, you never cross the same river twice as its never exactly the same water, and the banks of the river are continuously undergoing erosion, and so on (Ratcliff, 1995). Reliability concerns with the findings of a particular research and to see if other researchers can replicate that same finding as well. But since the findings done through qualitative research are so subjective in nature, it is unlikely that any two findings of the same research are going to match. According to Ratcliff (1995), low reliability of data could mean that the data is highly valid if the social situation is constantly in flux, or people start looking at things differently because they are considering different aspects, levels, perspectives, which are far more complex than what any single person/ perspective might see.

Chapter"Three:"Research"Design"&"Method""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""86" " 3.7 ETHICAL ISSUES

As for the current research, the researcher carefully considered all the issues related to ethics. The researcher in particular regarded the confidentiality issue of the research as being the most critical. There were companies who were initially quite reluctant to share certain confidential information regarding their competitive strategies in marketing their services, their next 5-year plans in India, and companys financial information, for instance. All the participants were assured of its confidentiality and were informed that this research was only for academic purposes, which would only be accessed by the researcher and the research supervisor. To make things more transparent and professional, the researcher had also compiled a consent agreement, in order to take all the participants in full confidence. Some of the details of that agreement included the following pieces of information1. The purpose of the research 2. They were participating in a research used for academic purposes 3. Risks and benefits of the research 4. The voluntary nature of the research 5. The participants rights to abandon the research at any time 6. The various procedures in place to protect confidentiality This was done primarily to further strengthen the confidence and reduce the risk of deception in the minds of the participants towards the research and the researcher. According to Bailey (1996), deception might prevent insights, but honesty coupled with confidentiality would reduce suspicion and promote sincere responses from the participants (cited in Groenewald, 2004). By laying out clear cut goals and objectives about the interview in front of the interviewee, the researcher was able to portray sincerity and professionalism in front of them.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""87"

CHAPTER FOUR: WITHIN-CASE STUDY ANALYSIS 4.1 Chapter Introduction

In this chapter, case studies of the three case companies have been individually presented, discussed, analysed and summarised. The purpose of doing so is to assess the current working style of the family owned business, by focusing upon their scale of operations, competitive strategies and advantages and based on the same guiding principles, conducting the same for the other two case companies. Then, in the next Chapter all the three companies have been cross examined and analysed, compared and drawn conclusions of.

4.2

Rhenus ProLog Logistics (India) Limited Case Study

The historical roots of Rhenus go back to Rhenus Transport Gesellschaft m.b.H., which was founded in 1912 Germany. The company marketed shipping services and provided freight forwarding and storage facilities. Today, the Rhenus Group is part of a 7.1 billion euro German business conglomerate called Rethmann AG with over 17,000 employees working in more than 290 locations in 37 countries. The Rhenus Group has traditionally held a strong position in the German market. This is not only where it has its head-quarters, but also the densest network of business locations. But Rhenus has long been a European company: Rhenus now has an extensive network of its own business locations complemented by partner companies with their own facilities in most European and many Asian countries: as a result, it can offer the complete range of logistics services, In 2010, it entered the Indian market by signing an agreement to acquire 49% shareholding in the Indian-owned Pro Logistics India Ltd to form Rhenus ProLog Logistics (India) Limited.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""88" Figure 4.1 below provides a chronological description of events of the Indian group, the Pro-Group ever since they began as a small family-owned fleet owning and transportation company. Figure 4.1 - TIMELINE OF PRO-LOG GROUP

Source: Rhenus ProLog Logistics (India) Limited, Company Brochure (July 2011)

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""89" 4.2.1 CURRENT STATE

Distribution Network

Figure 4.2 Rhenus India Distribution Network ProLog has invested heavily over the last 5 years in establishing freight offices, domestic trucking offices, and regional distribution centres across India. They now have a total of 6 freight offices at Mumbai, Chennai, Bangalore, Kolkata and New Delhi. To handle domestic trucking operations, there are a total of 13 regional offices covering the lengths and breadths of the country- these include places of strategic importance such as Mumbai, New Delhi, Ahemedabad, Source: www.pro-logistics.com! Baroda, Surat, Vapi, Gandhidham, Chennai, Hyderabad, Goa, Bellary, Guwahati and Nagpur. There are over 350 self-owned trucks plying on the above-mentioned trade lanes. In terms of warehousing, they have over 300,000 square feet of leased and self owned space at places like Mumbai, New Delhi, Chennai, Pune, Ahemedabad and Hyderabad. Information & Communications Technology System Throughout its long history, Rhenus Group has been continuously adopting to changing ICT landscape in the logistics industry. It is understood that their India operations adopts a variety of technological applications such as Enterprise Resource Planning, Warehouse Management System, Vehicle Tracking System and Transport Management System.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""90"

The newly in-house created Warehouse Management System (WMS) called ProWMS guarantees that IT processes are available for even the most complex logistics tasks and it enables solutions that are tailored to each customers specific needs. At every stage of the supply chain functions information flows through seamlessly from the host interface- such as incoming merchandise and checks on orders to warehouse procedures and even dispatch and inventory processes. Assistance is also provided by the internally developed Business Networking Platform (BNP), which augments the WMS and ensures the dynamic interaction of different processes. In addition, for the clients from the industrial goods consumer goods, chemicals, or the automotive sectors dynamic systems are in place such as automatic supply management, pick and pack and pack to light systems, tracking and tracing or returns management. Services Provided According to the information made available through their company brochure, the Rhenus Group has four main business divisions- Contract Logistics, Freight Logistics, Port Logistics and Public Transport. Figure 4.3 List of services provided by The Rhenus Group

Source- The Rhenus Group The Whole World of Logistics, Company Brochure (July, 2010)

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""91" The Pro Log Group is in the business of offering services such as customs brokerage, industrial project management, government contracts, warehousing/ distribution, and cargo insurance. Apart from this, they offer complete warehousing and distribution services for diversified segments of products while specializing in handling semi-conductors and electronic components and finished/ work-in-progress goods within the automobile and garment industries. They claim to have cordial relationship with customs officers for facilitating smooth and efficient clearance for both export- and import-bound consignments of their clients. They believe that maintaining cordial relationship with the Customs Department in every country is important as it can make or break the successful transition of an entire shipment. Also, from the information received through the questionnaire survey, value-added services are also undertaken. Specifically mentioned services such as1. Cross-docking 2. Specific Packaging 3. Tagging, Labelling and Repacking 4. Just-In-Time Delivery 5. Vendor Managed Inventory (VMI) 6. Picking/ Sorting/ Packing 7. Documentation Business Trend

In the questionnaire, the respondent was asked to give their sales revenue figures of

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""92" the last three years. The results of which have been graphed in Figure 4.4 BelowFigure 4.4 - Sales revenue of Rhenus ProLog Logistics (2008, 2009, and 2010)

The graph above denotes a consistent rise of revenues before their tie up with Rhenus in 2010. These figures are to be read as 680 million Indian rupees and so on. In British sterling, it would equal to 10 million (1 = 68 Indian rupees). Following the acquisition, apart from gaining a strong foothold in the Asian market particularly in India, the regional turnover of Rhenus is expected to rise by approximately $50 million by the end of 2011. Customer & Contract According to the MD of Rhenus ProLog Logistics Limited, throughout its development, the Rhenus group has always had to face the challenge of responding to customers changing expectations. The same principle applies to the Indian-collaboration of the Rhenus Group as well: they need customers, not conversely. Customers have many alternatives and Rhenus ProLog is only attractive to them if it is able to fully concentrate on the customer in

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""93" question and integrates its operations in focused units. Their philosophy like many 3PLs is that the customers will only decide to hand over the service to an outside contractor if Rhenus ProLog can solve the task better than that customer when left to its own devices. Each customer is treated differently and the service offerings are tailor made to suit each individual customers own requirements. Its clients in India mostly include multinational companies in the automotive, hightech, pharmaceutical and healthcare industries, by providing specific made-to-order solutions and value-added services for handling their entire supply chain problems. They have a data bank maintained by the companys sales and marketing team that comprises a long list of all the companies that are presently operating in India. So what kind of customers to approach depends upon which of the verticals of industry they want to focus on business development- whether automotive, pharmaceutical industries, and so on. (Note: It was not possible to divulge the details regarding the names of the clients of this company) The length of contracts between Rhenus ProLog and its clients varies from 1 year to 3 years. According to the information discovered from the questionnaire, the following details are present in their contract agreement! Key Performance Indicators (KPI) for measuring performance ! Key Result Areas (KRA) are well spelt out ! Agreed Tariff or Rate ! Condition/ Procedure for termination of contract ! Disclaimer and limitation of responsibility ! Procedures for renewing contract The interview revealed that they maintain dedicated accounts manager for each of

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""94" their contractual clients. Furthermore, for each project, they have a project team. There are proper timeline programs designed that indicate clearly the deadlines before the commencement of a particular project. 4.2.2 COMPETITIVE SITUATION

Competition The new and emerging domestic 3PL companies and their competitive pricing strategy were mentioned regarding competition. Even though the Rhenus Group is globally quite successful and big, with immense capability of creating economies of scale but because of their limited asset base and network reach within India, they were not able to compete as well as they would like to given their global presence. Furthermore, the representative from Rhenus believed that there exists a chaotic environment of price competition in the Indian 3PL market, with the only prime motive being of the majority of established domestic 3PL companies to win the contract, whatever it takes. Competitors Rhenus ProLog Logistics considers both multinational 3PL service providers as well as domestic 3PL companies as their direct competitors. This view held by the head of the company was further strengthened by outside research done about the 3PL industry in India. The findings revealed thatAs the logistics industry at large is still quite unorganized and fragmented, there are many transportation service providers in the market who resort to unfair, unethical and many-a-times illegal business practices. For instance, for some service providers, it is easy to compete in price for transportation and warehousing as they would either overload the consignments or try to evade taxes, or both. Through special arrangements with Indian bureaucracy and the traffic police, through fixed bribes they are able to save 12% on service tax and overload the consignments into the containers to save multiple trips that would take them to deliver the goods, thereby making enormous savings as a result.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""95"

Because they are able to save money on taxes and lesser number of trips, they are in a better position than companies like Rhenus to quote lower than usual prices to their customers. As for the competition from foreign 3PL service providers was concerned, the Rhenuss representative stated that owing to the fact that it entered India just last year, it is a less popular brand in the country than many of its global arch rivals and were relatively less aggressive in advertising and marketing in news papers and logistics and shipping magazines as of date. Their global competitors who compete with them in India are some of the most famous household names today- they include, TNT, United Parcel Service, Inc., Agility Logistics Co., FedEx, and Expeditors International, Schenker India, Kuehne Nagel and so on. Most of these companies have been operating in India for more than five years and as a result of that, they have managed to establish a strong presence in the country. An estimated 60-70% of the clients of Rhenus ProLog are foreign companies, which results in the competition between the company and foreign 3PL providers. It is generally believed that most of the 3PL users in India from overseas are likely to use the multinational 3PL providers they are familiar with or currently work with in other markets. Regarding those multinational 3PL service providers, the company representative of Rhenus explained that such companies from abroad focus generally on management and quality of services of 3PLs. However, he mentioned further that under the context of Indian market, even the foreign 3PL providers have started competing with lower prices. Perhaps they can now afford to compete in that area as they have created a strong asset base in the country in the last 5 years to be able to operate on economies of scale. SWOT Analysis Rhenus ProLog Logistics

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""96" Table 4.1 below represents the SWOT analysis that was carried out based on the information collected through surveys and interviews. Table 4.1 SWOT Analysis of Rhenus ProLog Logistics (India) Limited
Strengths Association with a global logistics brand Standardized global best practices blended well with localization to suit Indian needs and compliance criteria Capital required for Advanced ICT systems Talented staff Strong financial support from the Rhenus Groups global headquarters Stable client relationships organic/ inorganic growth Limited asset base Weaknesses Limited network presence in India Lack of pan-India presence Opportunities Unlimited growth of 3PL industry High economic growth of Indian economy Early mover advantage of expanding into other verticals of 3PL Introduction of uniform taxation structure by the government Threats Shrinking profit margins Intense competition Lack of finding high-calibre managerial staff

With this, the Rhenus Group managed to enter the emerging Asian market with strongly established asset base of the Pro Log Group, part of a family-owned transport company known as Western Arya Company Limited. The Pro-Log Group has offices in over 32 locations in Asia. Pro Log Group managed to get global expertise, entry into European markets, strong IT infrastructure, of the Rhenus Group. Just over a year old, the new joint venture company is expected to grow 70-100% in the five years in India. 4.2.3 STRATEGY REVIEW

Competitive Strategy The corporate structure of the parent group in Germany has fundamentally affected the strategy and culture of the Rhenus ProLog Group in India. For instance, ProLog in

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""97" India has become even more focused enterprise. Corporate units concentrate on special sectors and special service segments. The managers of the individual business units in question can fully focus on meeting their clearly defined goals. Based on the information gathered through interviews and observation, it was found that the Indian clients of the Rhenus group weighed heavily on cost and service delivery performance as the deciding factor to outsource. Cost reduction and service improvement remain at the heart of the overall competitive strategy of the company. In the follow up interview with the representative of the company, five important strategies he mentioned of to have an upper hand in the Indian market1. Service quality improvement, coupled with reduction in costs. The company stresses on the need to reduce operational costs at the same time ensuring efficiency in managing the inventories of its clients. In an effort to create economies of scale, they believe both these phenomenon are simultaneously possible to achieve. 2. Reducing inventory levels- With their integrated network of 19 different locations across the country, with a shared network of warehousing and transportation management services, they strive to make sure that their clients are made available of the right kinds of products at the right time. 3. To enhance visibility of its clients supply chain- Kuehne + Nagels visibility technology keeps its clients and their clients informed on inventory and delivery status raw materials and spare parts. They provide with better supervision and control of supply chains and eliminate potential choke points. 4. To meet time-sensitive supply chain demand- On account of a surge in growing pharmaceutical and automotive goods industries in the country, it has remained a challenge to keep up time even with the best-managed supply chains. One of Rhenuss competitive strategies lies in optimally synchronizing

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""98" networks to the requirement of its clients and the demands that their clients pose indirectly. 5. Improving process efficiency- The Company has a competitive advantage by ensuring time and labour saving to its customers, vis--vis order fulfilment, tracking and tracing and finally, delivering and stocking their products. The company claims to have the ability to identify and eliminate on behalf of their customers, the intricate inefficiencies existent in their customers supply chain. By doing so, they increase the frequency at which their customers goods are dispatched, increasing the speed with which they are able to sell their products, and lastly, reducing the time it reaches the end-customers. (Source: Adopted from Rhenus ProLog Logistics India Limited, Company Brochure, 2010) Physical Network Development The company will increase its footprint in distribution and warehousing; create better understanding and visibility of its clients with real-time information. The Managing Director of Rhenus ProLog indicated that particularly in the last two years, the company has aggressively pursued expanding warehousing network keeping a close watch at the ever-increasing cost of real estate prices in the commercial space in the country. In 2010, the construction of a multi-user facility began in the northern state of Haryana, which also happens to be a big industrial hub for automotive spare parts. The total floor space after completion will encompass 85,000 square feet and will have a storage capacity of 6000 heavy-duty pallet racking capability. The new facility shown below will offer state-of-the-art infrastructure- equipped with material handling facilities, storage system, EHS (environment, health and safety) compliant to global standards and state-of-the-art IT infrastructure. It will also be equipped with heavy-duty hydraulic dock levellers on twin docks for any type of

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""99" vehicle handling; 24x7 transaction processing and easy approach to the warehouse and docks. Lastly, it will also have heavy Duty Selective Pallet Racking for customized storage solutions for any inventory enhancing flexibility, accessibility and throughput. Furthermore, according to the company representative, with the advent of Goods & Services Tax (GST) in a year or two, the complete working will of this industry will be forced to re-group and reorganize. So taking that as the cue, the group believed in establishing its operations in advance rather than after the introduction of the new tax regime. The third motivation of business expansion for Rhenus in India has been in line with its aim to double their business in the Asia-Pacific region by the year 2014. For instance, in contract logistics business, it aims to raise its sales turnover by 50 per cent. In addition, the company seemed quite upbeat about the infrastructure development initiatives of the government, especially the road networks and airports. (Note: With respect to divulging specific details regarding their expansion plans of regional office locations in India, the company representative said that is still under review with the Rhenus Groups head quarters in Germany. Hence, he said it would be premature to talk about those plans)

Information & Communications Technology Development

Powerful ICT systems allow information to be exchanged seamlessly between the customer, central warehouse and branches at every business location. The initial findings have indicated that the Rhenus Group have introduced and shall continue to introduce several information technology systems into its logistics management, such as warehouse management system (WMS), vehicle tracking system (VTS), transportation management system (TMS), radio frequency identification (RFID) and electronic data interchange (EDI) packages.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""100"

According to the information gathered from their website, they have introduced all these systems based on their operational requirements during the different phases of their market development plans. Under this context, the development of their ICT programs comprised of four different stages. In the first stage, this began as soon as they entered Indian markets with ProLog Logistics Limited early last year. Internet-based information system was introduced, which was initially used for mainly to provide basic information to the client accounts with respect to their transportation, warehousing and bookkeeping. Immediately after that, in mid-2010 installation of EDI system began and was accomplished by that year-end. It ensured the company achieving real-time data information exchange with its clients in addition to smoothing out business operations between them and their customers. The second stage that began in early-2011 involved a planned initiation into developing a Total Order Management System or TOMS and to link it to their own in-house Pro-WMS warehouse management system, transport management system and vehicle tracking system. Once everything is tried and tested, the new interlink between the various systems will allow the company to form its own 3PL information platform and thereby increasing the visibility through a birds-eye view of their entire logistics operations processes encompassing order processing, basic transportation, warehousing, finance and so on, functions. In their third stage, which is planned to begin in early 2012, it involves RFID to be introduced into the information system of the company that will ensure even greater transparency and accountability of operations to their customers.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""101" Customer Relationships

Ever since their merger with the Rhenus Group in 2010, the company has seen restructuring of their business activities including how they communicate with their clients- for instance, they have introduced a set rulebook known as Standard Operating Procedure (or SOP) into their daily operations and communications with their clients as well as with their clients clients. The cultural change has also affected client relations. Rhenus ProLog now places even greater importance on maintaining permanent close contacts with its customers. Consultancy services, customer-oriented solutions and the penetration of new areas of activity in conjunction with clients are just some of the success factors at Rhenus ProLog. There is one particular example that is worth mentioning here. It was narrated by the companys representative during the interview. As for the customer relationships, Rhenus Group for many years has been involved with BMW cars for their spare parts distribution in Europe and America. The entire distribution of their spare parts is managed and executed by them in those two markets. BMW in India is fairly new and they are still expanding their dealership and service centre networks around the country. Because Rhenus has had a consistently good relationship with the BMW Group in Europe and in America, the BMW Cars in India when deciding upon their service provider for their spare parts distribution in India took little time to decide and simply gave the contract away to Rhenus ProLog India for their entire distribution network handling in India. This is fairly a new contract, which began from July 1st, 2011 for a period of 3 years.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""102" The above example shows how important it is for any company establish strong customer relationships. In the interview, the companys spokesperson in India reiterated that the Indian operations of the Rhenus Group has the exact same intentions with regards to building long term sustainable partnerships in similar ways with home-grown Indian companies. To gauge if there is any potential long term relationship possible with their incoming new clients, Rhenus ProLog has drafted a peculiar client evaluation system, which contains a background check about the new client, including the nature of doing business, their market reputation, their dealings with other service providers, etc. to see if the client is able to build a healthy and sustainable relationship with Rhenus. For instance, from the information generated about that client if they see that the client has a very notorious policy in clearing outstanding dues with its service providers with some outstanding surpassing more than 90 days, the company will ignore the client irrespective of how much ever the amount of business the client may potentially bring to the table. As for the SOP, there are clearly set guidelines and policies in it detailing all the procedures on how to maintain communication between the company and its clients and also between the company and its clients clients, such as for instance- having information about whom the clients place order to, which suppliers should the clients contact to through telephone, and how both the parties can communicate with each other.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""103"

4.3

Best Roadways Limited Case Study

Company Overview

Best Roadways is a private logistics company established in 1985. It has seen a steady growth over 25 years since its founding. It was founded by four brothers- three based out of New Delhi and the founding Chairman & Managing Director who works from Mumbai. It is a privately held joint-family business, which has seen a particularly interesting rise in business in the past 3 years that will be discussed further in this case study. Best Roadways has been an established transport brand in the Indian industry today, particularly in the two most important Indian markets of Mumbai & New Delhi. They are primarily into contract logistics business with road transportation of FTL load being its forte, along with owning a large asset base of office depots, warehouses and fleet. They are one of largest fleet owners of containerized trucks in the country today and the largest light goods carrier plying on New Delhi " Mumbai " New Delhi route. They have the largest client base of exporters and importers in the country. They are one of the leading companies to provide time-bound road freight services in India. 4.3.1 CURRENT STATE

Distribution Networks Mumbai remains the corporate head quarters where most of the administrative work of the company is handled. Apart from Mumbai, the main operations of the company are taken place 23 miles away from Mumbai at Indias largest container port, the Jawaharlal Nehru Port, where Best Roadways has its operations infrastructure of warehousing, truck terminal, and repairs and maintenance workshop.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""104" Spread over a total area of about 15 acres, this operations hub of the company is the largest known private truck terminal complex in the Mumbai port area. The New Delhi office is the second most important administrative as well as operational hub that controls and monitors the activities around the National Capital Region (NCR) and other offices in North India. Apart from the trade lanes of Mumbai and New Delhi, the two most important Indian cities, Best Roadways has been steadfast in establishing its base by building regional distribution centres and branch offices in other important destinations within the country. The Figure 4.5 shown below is the non-scalable map of India plotted with the offices owned and operated by Best Roadways.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""105" Note- The three main offices (read: New Delhi, Mumbai & JN Port) were highlighted later by the researcher. The original figure was taken from their website, then modified and listed as underFigure 4.5 Offices owned by Best Roadways (Plotted on Map of India)

Source: Best Roadways Limited (Website source: http://bestroadways.com/Network.aspx) As can be seen from the distribution network above, the offices that Best Roadways owns are concentrated more on the Western coast through to North Western and finally along the Northern peripheries of the country. The locations of three major hubs- Mumbai, New Delhi and JN Port are highlighted in the map. In all, there are about 40 offices in India.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""106"

Services Provided

1. It specialises in light goods road transportation service- mostly in the Northern and Western regions of the country with 20-30 tonne capacity per consignment. 2. The company offers a rare and exclusive 36-hour guaranteed express delivery service between New Delhi & Mumbai. 3. Best Roadways also provides transportation for LTL (less than-truck-load) in addition to FTL cargo across any destination within the country. 4. Warehousing letting at over 40 locations strategically located based on clients need and choice. Total space encompasses 800,000 square feet as of July 2011. 5. It provides complimentary transit warehousing services to certain valued customers. 6. As of January 2011, Best Roadways started providing transportation for ODC (over-dimensional consignments) that weigh 150-200 tonnes. For this purpose, the company entered into a joint venture with a local firm called Arya Heavy Haulage Movers, which specializes in ODC movements across the country.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""107" Figure 4.6 below is an example of how an ODC truck looks like: Figure 4.6 Project Logistics arm of Best (Example of ODC truck)

Source: Best Roadways Limited, Company Brochure Information Technology Setup

Based on the information received from the questionnaire, the family-owned business appears to be more IT-driven than many of its contemporaries. Although, the amount of investment that the company makes into IT cannot be compared to a foreign logistics service provider of similar size, there appears to be a growing sense and awareness with the top officials at Best Roadways regarding benefits and convenience that IT applications can bring to them and to their customers. Out of the 650 trucks that the company owns, about 40% of them are equipped with VTS (vehicle tracking system) devices with plans of installing them in the remainder of the trucks by this year end. In addition, there are door-sensing devices installed at the container doors of these trucks that can detect whenever the doors are opened. The notifications are sent via SMS and email to both the dedicated staff that monitors the truck movements as well as the end customer.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""108" Apart from the few modules of Enterprise Resource Planning (ERP) system in place for accounting and booking, there is not been a company-wide full usage of ERP as yet. Business Trend

Figure 4.7 Sales revenue of Best Roadways Limited 2008, 2009 and 2010

Apart from consistent growth in revenues as shown in the graph above, the company registered a jump of 20 percent in net profits in 2010 in comparison to the year before that. The road freight division of the company grew by almost 19 percent as against the industry growth of 16%.

Customer & Contract As per the information received on the company website and through interviews undertaken with the Marketing vice-president of the company, it is learnt that there are no fixed number of clients that the company serves at a given point of time. The client list keeps fluctuating based on the demand from their side and supply of services from the companys point of view.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""109"

However, there are a certain number of valued clients that the company has been associated with many years- that includes many Fortune 500 companies as well- such as the Tata Group, Reliance Industries Limited, government-owned companies such as Indian Oil Corporation Limited and Oil & Natural Gas Corporation Limited. Large conglomerates such as the ones mentioned above usually have a fixed tenure with the company, ranging from 3 years to 5 years, which is renewed with newer requirements and terms and conditions from both the parties after the completion of the existing contract. In addition to that, the company also values relationships with certain multinational FMCG companies such as Colgate Palmolive India Limited, Hindustan Unilever Limited, and Kelloggs India Limited and so on. Interestingly, it was found that Schenker India Private Limited (one of the case companies in this research study) outsources its transportation requirements to the company. Apart from Schenker, other multinational 3PL service providers who outsource their transportation activities to Best Roadways include, Kuehne + Nagel India Private Limited, Nippon Express (India) Private Limited, DHL Lemuir Logistics Private Limited and Bertling Logistics India Private Limited. All these multinational companies do not usually deal with Best Roadways on a transaction-to-transaction basis but rather, they have fixed contracts ranging anywhere between 1 year to 3 years. In the contract, the main issues that are addressed from the companys point of view include1) Price/ rate per kilogram 2) Trade lanes 3) Compensation and penalty provisions 4) Key Performance Indicators (KPI) for performance measurement

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""110" 5) Procedure for termination/ dissolution of contract 6) Special needs (special care required for certain goods or special IT requirement) 7) Procedure for contract renewal For contract renewal, the company strongly views service delivery as the most important factor followed closely by service cost. According to the survey participants, the main reasons that were identified as to why the companies would like to outsource their logistics needs to Best Roadways, reducing logistics cost figured as the top most important factor in all the surveys done at this company. This was followed by improving customer service, lowering capital investment, focusing on core competencies, and finally, reducing risk and uncertainty. In addition, the survey participants also believed that the companies who viewed Best Roadways as their preferred choice of service provider were because of the vast asset base owned by the company, along with quality service assurance, commitment and a sense of reliability. 4.5.2 COMPETITIVE SITUATION

Competition The Managing Director of the company believes the competition within the Indian logistics industry to be very fierce, with the most critical factor of competitive pressure being the cost. Sometimes, as cited by the respondent, the competition becomes unreasonable and unviable to fight against because of many Indian companies inviting tenders from various service providers who distort prices to really low levels. Since the bidding process is done on a real-time basis on the online tendering systems of the companies itself, it is sometimes believed that to get the most rock-bottom prices, the companies themselves indulge in the bidding process by creating dummy

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""111" bidders acting as logistics companies. The Managing Director at various logistics meet and conferences, also with the companies themselves has raised this issue of unethical and totally unfair business trade practices, and called for the entire tendering process to be restructured and made transparent and fair for the service providers at-large. Apart from this, he also felt that there are certain state-owned logistics companies and certain private companies who like to compete by offering next-to-impossible prices. They are more concerned with increasing their sales turnover rather than focusing on profit margins. Unlike Best Roadways, they are ready to quote the lowest possible prices for transportation, which they believe they can later break-even by doing volume business. This kind of competition is not good for those companies in the future as it would increase their working capital needs and the risk long outstanding dues, and bad debts along with that. The company therefore likes to focus on profit margins per transaction rather than increasing turnover year on year. Although because of this strategy, the company has lost many business opportunities to competition and broken few long years of relationship because the company was adamant in not reducing prices after a certain point and its competitors were ready to offer similar services at reduced prices.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""112" Competitors Best Roadways Limited views domestic transportation providers of similar size and repute as their immediate competitors that create competitive pressure on the company. This view is held in contrast with the other two case companies who have mentioned both multinational logistics companies along with the domestic 3PL companies as adding competitive pressure on them. As for this case company, there are several multinational shipping and logistics companies that outsource their basic transportation and warehousing requirements to them. Hence, the company views these service providers more as partners rather than competitors driving their growth further. As for the domestic companies, the Managing Director of Best mentioned about aggressive pricing and marketing strategies pursued by such companies. The company has little competitive advantage in offering reasonable prices to its prospective clients, which these companies are managing to do. In terms of service quality however, the company is much better off than most of its competitors. According to him, higher quality services do come at a premium and that they regard the quality in services to be a better distinguishing factor than offering low prices to its customers. As mentioned above, the low prices offered by its competitors may not represent their real cost; they may well be selling their services below or at par what it is costing to them. But rather, with the sole aim of winning the tenders (read: by hook or by crook), they resort to such pricing strategies. When competing on certain trade lanes such as the Mumbai New Delhi (or vice versa) where the company has a stronghold, it is able to attract the largest customer base on the basis of sheer goodwill ever to be seen in any of its competitors operating on the same trade lanes.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""113"

As for the overseas 3PL service providers, because of lack of sufficient asset base, they are not able to compete against Best Roadways and concede that they are rather better-off focusing on other areas of logistics than transportation while partnering with companies such as Best Roadways in outsourcing their transportation business to them. Having said that, observing the rapid growth of the road freight industry in India, there are a certain number of service providers from abroad who have now gradually started establishing their asset base either by taking over existing transportation companies, or growing on their own, to provide superior transportation services at lower prices than offered by Best Roadways. SWOT Analysis Best Roadways Limited Based on the responses received from the questionnaire survey, interviews, archive searching, observations and information from third party industry observers, a SWOT analysis of the company was carried out, which is illustrated in the Table 4.2 as belowTable 4.2 SWOT Analysis of Best Roadways Limited Strengths
Established brand name Strong asset base Big client base Service quality assurance (98% service level track record) Stable client relationships Experienced operations staff Strong growth and consistent financial record Sound relationship with banks

Weaknesses
Autocratic and hierarchical organizational structure Limited IT implementation Lack of pan-India presence High staff attrition rate

Opportunities
Unlimited growth of 3PL industry High economic growth of Indian economy Early mover advantage of expanding into other verticals of 3PL Introduction of uniform taxation structure by the government

Threats Shrinking profit margins Intense competition Lack of finding high-calibre managerial staff

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""114" The main strengths of the company are its huge asset base of 650 trucks, over 800,000 square feet of warehousing space, vehicle repairs and maintenance workshop, extensive branch locations, and a strong brand image in the country. In addition to that, over the course of 25 years since it first began its operations, the company has managed to maintain strong relationships with its clients, with some of the major clients having been associated with the company since the beginning. Due to its consistent growth and great financial track record, the company has been able to build cordial and friendly relationships with its banks. The company does not have problems in seeking for working capital loans or commercial vehicle loans because it has never defaulted or paid back on those loans late. The company has a big base of permanent clients ranging from multinational logistics and shipping companies to Indian governments public sector undertakings, FMCG companies, clearing house agents and clearing agencies, IMPEX (import-export) clients from India, among others. Apart from a rare marginal error rate, the company has consistently been able to place vehicles to the clients whenever they have demanded, and because of which it has been able to achieve 98% customer service level. To handle operations of this scale, the company has been successful in retaining its operations and traffic control staff for many years. Some of the managers, who sit at the port office of Mumbai, are those who are some of the smartest and most experienced in the industry. The company is mired with quite a few weaknesses. Apart from the strengths that are mentioned above, Best Roadways Limited has had some inherent weaknesses that have been part of the company since its inceptionThe companys organizational structure is very autocratic in nature, where the sole decision making authority is the Managing Director of the company. Because hes the sole decision maker involving any field of work in the company, a lot of

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""115" the times the decisions miss the deadline or the decision are taken haphazardly as hes not able to devote 100% of his time to all the projects all the time. There are a lot of the revenues that might have been lost because of this centralization and top-down approach of business dealings by the company. Regarding the usage of IT software and communications applications, apart from vehicle tracking system (VTS) on 70% of their trucks, the company does not have robust IT systems such as electronic data interchange (EDI), warehouse management system (WMS), and web-enabled communications system in place that can provide superior end-user service. The company has recently upgraded its ERP systems but that has not been implemented across all the branches of the company. When asked about the reason for selective implementation, the company spokesperson mentioned about lack of Internet facility and insufficient computer skills of the staff at some of the branch offices of the company as reasons. As can be seen from Figure 4.5, the present network of the company encompasses mostly the western, north-western and northern rims of India. The network is virtually non-existent in the South, North East and Central India. The company has been focusing all its efforts to strengthen the Mumbai New Delhi Mumbai trade lane but not the other 3 important metros of India such as Kolkata (formerly Calcutta), Chennai and Hyderabad. The branch network of the company is linear-shaped (straight-line) instead of being radial (circular and wide) so that it can offer services to its customers and operate through multiple destinations from hubs established at specific radiuses around the country. The lower level staffs of the company such as drivers and booking agents have a high attrition rate not just in this specific company but in the industry in general. At any given point of time, there will be at least 50-60 trucks standing idle at the terminal complex in Mumbai without drivers to use them.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""116" Note: It is fair to say that this particular staff problem is not specific to Best Roadways but it is an industry-wide dilemma. With the underlying weaknesses, there are certain opportunities that the industry in general can capitalize upon and in particular, Best Roadways can exploit. These are listed as underAs mentioned in the literature review, there is an immense growth forecasted for the 3PL industry in India for at least the next 7 years. Because of an already established vast asset base and market leading position in certain segments, coupled with a strong brand image of the company allows it to have an early mover advantage to expand its service offering into different other verticals of the 3PL business apart from basic transportation and warehousing. With the Indian economy growing at over 8% per annum, large and emerging urban middle class with high disposable income, there has been huge growth projected for various industries, some of them the company already possesses as its clients. Introduction of uniform taxation structure like the Goods & Services Tax across the state will encourage many service providers, who earlier had limited and fragmented warehousing space, to build large distribution centres in strategically located areas and thereby creating economies of scale. The company can take similar advantage of the planned introduction of this uniform taxation structure and expand into different states of the country than the ones it already has significant presence. The India is a very complex market place that has its own share of opportunities along with myriad different kinds of threats that it poses to the 3PL companies. Some of the imminent threats that the company can face are listed as under: Because of the influx of multinational service providers, changing working standards of domestic service providers, there has been growing competition in the transportation sector. It is not business as usual as the customers have started demanding more from their service providers with multiple kinds of service offering.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""117" Even though their business is growing and revenues at an all time high, the profit margins are seen to be shrinking year on year. Unless the company decides to introduce newer segments of services apart from basic transportation and warehousing, it faces the risk of eventually declining its growth in the future. With the rapid increase of growth seen in the logistics industry, the demand for trained human resources has naturally seen a rapid rise too. But unfortunately, the industry has not been able to keep pace with adequate training facilities in place to train the people who want to work in this industry. The problem seems to be omnipresent across various levels of human resources and particularly in the upper-management level jobs.

4.5.3

STRATEGY REVIEW

Competitive Strategy The information received from frequent observations about the company tells that the companys main competitive strategy lies in providing transportation services in its all-weather ISO-certified containerized fleet of trucks that ensures zero damage, leakage or pilferage done to the goods. The company claims to be the largest fleet owner in the country having such containerized trucks. Within this fleet, the company also has a first-mover advantage in owning such diverse range of trucks based on tonnage-capacity, type of cargo (whether liquid, palletized, or loose cartons) and storage space- such as 40-feet high cube containers, 40-feet trailers, 180-tonne capacity Volvo hydraulic trailers, 20,000 kilo litre-capacity for tankers for liquid cargo, 20-feet containerized trucks, and so on. Apart from that, the company also weighs emphasis on cost and considers it one of the most critical factors in competition. The market segment that the company focused upon is the Indian textile and garment industry, of which the export-client base that the company possesses is claimed to be the largest in the country currently.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""118" Apart from this, the company focuses on customs house agents, multinational shipping and logistics companies, Indian FMCG companies, government owned public sector undertakings and so on. There are certain focused customer segment of the company such as the customs house agents and clearing agencies. This segment in particular, in sensing the recognized brand and having a forte in serving importers and exporters always recommends their clients who are all exporters and importers to give the transportation business to Best Roadways. They also believe that the company has better equipped IT systems in place, experienced management staff, experienced operations and traffic/ booking managers and a vast network of trade lanes than most other service providers in the country. The pricing the company sets differs from each segment mentioned above. For instance, with respect to Indian companies, which are purely concerned with the price, the company does not compete with other service providers in bringing down price after a certain extent. The companys core competitive strategy lies in providing with quality service assuring zero damage to the goods at the time of the delivery. In such a scenario, it is not always for the company to rigorously pursue competition in quoting low freight charges. There are many clients that were mentioned by the Managing Director during the interview who want to be associated with Best Roadways exclusively as they claim to receive more benefits from the company than other service providers. For instance, it was found out on the testimonial page of their company website, one client called Writer Corporation quoted as saying, Writer (Corporation) has been associated with Best Roadways for many years now taking care of our transportation requirement for North sector. Apart from a few marginal errors, I can honestly mention that in all cases, your services fulfil our 98% of the requirements. The rates offered by BEST are competitive from the market, vehicles are well maintained and are over all

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""119" effective in ensuring that the vehicles reach the destination as per the schedule and in some cases before time. Your employees are well accessible and can understand our requirements even when given at the eleventh hour. Doing business with your organization is tension-free as we are sure once a commitment is given by you it is honoured in totality. (Source: http://bestroadways.com/Testimonial.aspx) The flagship service provided by the company for which it charges a premium to its customers, guarantees to deliver goods from New Delhi Mumbai (or vice-versa) in flat 36 hours. This service offering has been proved to help its customers achieve benefits of both cost reduction in the long term and service quality improvement overall. The company claims there are hardly any other service provider of similar scale and repute currently that is able to assure its customers of time-bound deliveries on these trade lanes. Physical Network Development It is learnt that Best Roadways Limited is keen on expanding its base to other major business hubs of the country. Branch network expansion was found to be one of the critical strategies of the company. As can be seen from the current presence of the company in India (Refer to Figure 4.5), over 75% of the offices are located along side the Mumbai New Delhi route, i.e. denser on the western and north western corridors of the country, and scant in the eastern, north eastern and southern parts of the country. The reason for that is simple- over 90% of revenues generated by the company by its road freight business is through these routes as mentioned above. Hence, what can be seen now is more like a linear setup of offices encompassing the western peninsula and the northern and north-western areas of the country. However, the company has grand plans lined up for the next 5 years. Refer to the Figure 4.8 below-

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""120" Figure 4.8- Future Network Development- Best Roadways Limited

Source: Adopted from Best Roadways Limited, Internal Document, BRL Expansion Strategy, July 2011 The company has grand plans lined up for the next 5 years. Referring to the Figure 4.8 above, the company plans to connect the five major cities including Mumbai & New Delhi, the cities of Hyderabad, Chennai and Kolkata (formerly Calcutta). The company has given a name to this expansion strategy, it is called 5 Year 5 Circle Strategy. The Figure above represents new trade lanes that the company plans to slowly establish to become a pan-India operating company in the next 5-7 years. The five circles will represent the companys main regional hubs, which will be equipped with state-of-the art infrastructure relating to modern warehousing and distribution centres and value added service provision in addition to basic transportation base.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""121" As part of their 5 Year 5 Circle strategy, the network will grow to other parts of the country (marked as points of presence or PoP) revolving around those 5 circles and gradually radiating towards southern, eastern and north eastern states of the country. At the moment, the main purpose of the company has been to establish their network to other parts of the company irrespective of having received business opportunities already in advance. There have been four motivational factors that led them to go on an expansion spree: a) The company holds high optimistic views about the prospect of the Indian `logistics industry for the next 20 years, and those service providers that are able to have a pan-India presence rather than having dominance on specific and limited trade lanes stand to be at a competitive advantage over the rest of others. b) Since the companys belief has always been to own all the assets rather than leasing them or franchising them, it was in the interest of the company to look at buying land at the new circles sooner than later citing ever-increasing real estate prices as one of the reasons. Growing urban middle class with their ever-increasing disposable income and purchasing power has driven the lifestyles that are dependent upon organized industries such as telecom, FMCG retail, automotive and electronics. These organized sectors are ultimately dependent upon the unorganized sectors of transportation and warehousing. And because of this, there has been a rapid growth seen in 3PL industry. So, sooner the company would start looking at buying spaces in these locations, the cheaper and financially more viable it would be rather than waiting for the business opportunity to come knocking on their door. c) Introduction of uniform taxation structure across the states will eliminate the need to have fragmented pieces of land for warehousing. Goods &

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""122" Services Tax would bring a hub-and-spoke model of network model like it is practiced in the western markets. Hence, the company thought it apt to start expanding their hubs (for the 5 circles refer to Figure 4.8) and followed by smaller branch offices thereafter. d) With respect to certain highly placed sources in certain client-companies of Best Roadways, it is understood that those companies are actively pursuing expansion plans in some of the cities and towns that the company is already planning to expand. Note: This point above (point d) is explained in more detail down in the Strategic Partnership section of the case study. Information Technology System Development From the information gathered so far from personal observations that there is a general consensus amongst the four directors of the company on upgrading their IT infrastructure. They are well aware of the fact that the way they continue to do business as usual will not be sustainable in this era of rapid change in ways of doing business. They realize that IT is and will always remain a strategic differentiator, which will hold them at a competitive advantage over other service providers. It is understood that the company need to simplify and modernize their information and communications technology environments, standardize and automate business processes, which will make their planned business expansion other verticals of logistics (as cited earlier) easier. With this in perspective, the company has taken steps towards implementing Enterprise Resource Planning (ERP) platform for its booking, operations, vehicle maintenance, accounting and finance modules. The aim of this is to reduce the paper work by integrating all the data into a single uniform platform. Apart from reducing paper work, new ERP system will help centralizing customer data, shipment and enterprise master data, thereby lowering IT cost and accelerating decision-making.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""123" With respect to automating business processes, they plan to adopt quote-to-cash platforms that will allow newer and bigger basket of services to be introduced quickly and reliably by ensuring adherence to contracts and pro-active monitoring by automating the workflows. With the planned projects of warehousing and modern distribution centres in the pipeline, the company plans to implement Transport Management System (TMS) and Warehousing Management System (WMS) platforms that will support multiple clients, multiple locations, and reducing time and costs for both the company and the client. One unique development that the company plans to do is towards ensuring service reliability and maintaining optimum level of customer satisfaction- the company plans to automate the business rules of all the clients so as to keep track of the nature of how each client transact and expect from their service provider. For Best Roadways Limited, computing and collecting Key Performance Indicator (KPI) data from the clients has been problematic, as it has been done manually, thereby delaying and making proactive process improvement difficult. To address this issue, the company plans to invest in robust data collection systems for KPIs, thereby ensuring complete automation of KPI computations and making rigorous and continuous process improvement a priority. Customer Relationships From the interview transcripts of the Managing Director, it is understood that its customers from the shipping and logistics industry in particular have approached the company on a regular basis to have a long-term strategic partnership with them. There are a certain reasons why the researcher came to this interpretation. First of all, a certain multinational freight forwarding and logistics service provider in 2010 showed keen interest in asset sharing with Best Roadways. The service provider as understood by the researcher wanted to establish a strong asset base in the country. According to them, both the parties stand to win if a merger is to take place, because the multinational company will get hold of a large asset base of the company in India

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""124" to improve their geographical base in the country, whereas the family-owned company will get a much needed makeover in terms of improving its management and IT implementation capabilities, along with getting access to global client base of that company. Besides that, with the global best practices of the multinational company and its ability to provide a plethora of services apart from basic road transportation and warehousing to its clients, Best Roadways will get an impetus to become a total logistics service provider, integrating almost all the functions of logistics into one big wholesome service delivery mechanism. This option is something that their Board is actively studying because there are a lot of caveats involved in this type of a strategic relationship- such as that the members of the family losing power and ownership to an outsider, revenue and profits being split, and so on. However there are certain other aspects of strategic partnership that does not involve entering into a formal alliance. For instance, the Managing Director stated that there is one really old client called Bharat Petroleum Corporation Limited (or BPCL who is understood to have communicated certain classified information about their growth strategy with the company. The strategic information included opening up of new distribution centres and a new factory by BPCL. Because of such sharing of information, both the parties made efforts to coordinate and cooperate. For instance, as being a strategic partner with that company, Best Roadways took steps to open up their own office and to build a brand new warehouse of the size that was required by BPCL near their new plant location to be able to facilitate providing them with the vehicles on time and every time they required, thereby both the parties stood to achieve win-win scenarios translating into rise in revenues.

Chapter"Four:"WithinHCase"Study"Analysis""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""125" In 2009-2010, BPCL registered a 23% growth in sales and mentioned in their testimonial (refer to http://bestroadways.com/Testimonial.aspx) to Best Roadways that facilitating this growth was made possible by not only their sales and production team but also the logistics companies such as Best Roadways without whom this would have been impossible to achieve. Apart from BPCL, there are other high-valued clients of Best Roadways who regularly communicate with the company talking about their expansion plans into other towns and cities of the country, forecasting requirement for the vehicles, new trade lanes and so on. This helps the company in advance to look into acquiring new offices, placing new orders for increasing their fleet size and to establish new trade lanes for future use.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""126" " CHAPTER FIVE: CROSS-CASE DISCUSSION 5.1 Chapter Introduction

The information on three case studies that was analyzed and discussed previously is collated and compared in this section cross-case discussion. By doing so, the researcher has attempted to investigate the differences and also the similarities of the three case companies that were studied. These differences and similarities span across different working elements of their business riding under the present situation- such as the scale of their operations, how they manage customer relationships, the competition they face in the Indian market, the competitive strategies pursued by them to fight the competition and the next fiveyear plans they have to sustain and grow in the fiercely competitive and challenging 3PL industry of India.

5.2 5.2.1

CURRENT STATE Companies Overview

Out of the three case companies, the family-owned Best Roadways Limited and Rhenus ProLog Logistics (India) Limited have their corporate office located in Mumbai, the financial nerve centre of India, which generates 6.16% of Indias GDP (Thomas, 2007), 40% of Indias foreign trade, 33% of Indias income tax collections and US$ 892 million in corporate taxes year-on-year (Swaminathan & Goyal, 2006). Five of the Fortune 500 companies have their headquarters located in Mumbai and as of 2008, the cities GDP stood at $205.07 billion. All the figures mentioned above imply that there are a lot of business opportunities in this city, and logistics industry has been able to prosper faster here than any other parts of the country.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""127" " The third case company, Schenker India Private Limited, having its corporate office in the National Capital Region near New Delhi, also recognizes this fact and therefore, has established a regional office in Mumbai encompassing an area of 10,000 square feet with 300 full-time working administrative staff and their Chief Operating Officer and Chief Financial Officer holding office in Mumbai rather than their corporate office in Gurgaon, the National Capital Region. Whereas Best Roadways is a 100% family-owned closely held company, Schenker India is a fully owned multinational subsidiary, part of the German logistics conglomerate called DB Schenker. Rhenus ProLog Logistics is a joint-venture between another German logistics group known as the Rhenus Group and the Indian logistics service provider called ProLog Logistics. While Rhenus ProLog is relatively a new entrant in the market having established the company just last year, Best Roadways Limited and Schenker India have been operating for over 25 and 11 years respectively. They both are famous companies depending upon whom you ask- Best Roadways would be known by everyone who is aware of the Mumbai and New Delhi market, any road transportation service provider, customs house clearing agents as majority of them are based in Mumbai. On the other hand, Schenker would be known by all clearing and freight forwarding agents, multinational companies in India, shipping and logistics companies and also companies like Best Roadways, which are primarily into road transportation and warehousing business who are hired by foreign multinationals such as Schenker who dont own trucks, to outsource their transportation activities to companies like Best Roadways. The three case companies can be divided into different categories1) Best Roadways Limited Traditional Transportation Company 2) Rhenus ProLog Logistics Emerging 3PL Company

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""128" " 3) Schenker India Foreign 3PL Company Based on the categories mentioned above, the following features of the three case companies emergeFigure 5.1 Distinction between Traditional & Emerging Logistics Companies

Source: Mercer Consulting, China 3PL Survey (2002) It can be seen that Best Roadways Limited inherently has been a transportation company for the last 25 years with significant transportation and warehousing assets around the country. In the case of Rhenus ProLog, its a joint venture company with focused services and customers in India. It does own fixed assets but in limitation as compared to Best Roadways. It tends to maintain high growth by introducing strategic partner or investor. Now referring to Figure 5.2, which is below, there are many features that can be associated with Schenker India, a large foreign 3PL player in the market. It has some of the most advanced IT systems in place, with strong financial backing from the headquarters in Germany and good relationships with global clients.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""129" " Figure 5.2 Features and Objectives of Foreign Logistics Companies

Source: Mercer Consulting, China 3PL Survey (2002) Note: Internal logistics companies are in-house logistics arms of big conglomerates (for example- The Tata Group has its own internal logistics arm). 5.2.2 Physical Distribution Networks

All three companies that were studied found to have sufficient physical network to support their individual operations. Each trade lane that they presently operate on was carefully studied and the data was collected on the amount of revenues collected by each one of them . Baring certain new network that the family-owned business had started in 2008 in the midst of global economic slowdown that generated sub-optimal profits, rest all the networks that were established by them prior to that was seen to be working much above the breakeven point. But in terms of the extent and spread of network across the country, there were many differences found between the layouts of the distribution network of all three companies. It was found that Schenker India absolutely had a competitive advantage over the other two in having its regional offices, branch offices and centres of logistics crisscrossing practically the entire length and breadth of the country.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""130" " In the case of Best Roadways, it was found out that their network was the densest along the Mumbai New Delhi Mumbai trade lane, with offices fragmentally located at other parts of the country in limited numbers. As for Rhenus ProLogs case, it seemed more of a mix bag- they did not have focused distribution network like Best Roadways, nor was it found to have offices spread across various states of the country. The offices that this company currently has are mostly located in the port-cities of the country and not the inland cities as such. The common factor between all these companies however, was that all their offices were self-owned by them. All three of the case companies reported that none of the offices were leased or franchised to another service provider. As part of the physical networks, to connect these networks were a range of different capacity of trucks owned by Best Roadways. In fact, the study found that the familyowned company had the largest fleet, 650 ISO-certified containerized trucks in the country. In order to facilitate movement of such a massive fleet of trucks, Best Roadways had its own petrol stations, vehicle repairs and maintenance workshop and container making manufacturing unit spread across 13 acres in the National Capital Region. The family owned company had around 800,000 square feet of warehousing space, mostly located in their truck terminal complex in JN Port. No specific detail on vehicle ownership by Schenker India was revealed. But information gathered from industry observers, it was found that the company either leased trucks from the market or sub-contracted their transportation activities to assetbased service providers such as Best Roadways. As for warehousing facilities, Schenker India scored the highest out of the three, having 34 warehousing locations encompassing a total storage space of 1.2 million square feet. Rhenus ProLog had over 300,000 square feet of leased and self-owned warehousing space located in the industrial towns of the National Capital Region, Mumbai, New Delhi, Chennai, Pune, Ahemedabad and Hyderabad, and over 350 trucks plying

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""131" " through 13 different regional offices and 6 freight offices in the port cities of Chennai, Bangalore, Mumbai, New Delhi, Kolkata, Vishakhapatnam. It is understood that these three companies have developed their network based on how they can serve their specific clientele better. For instance, most of the clients of Best Roadways are importers and exporters based in Mumbai and New Delhi respectively. Hence, it was imperative for them in their early days to try and strengthen their physical network along this route. 5.2.3 Service Provided

Logistics services provided by all the three case companies vary from each otherfrom hiring single vehicles or a fleet for road transportation, to providing complete end-to-end solutions, including finished goods storage and distribution, logistics consultancy services, last-mile deliveries, freight forwarding, project relocation, order processing, inventory management, home movers and packers, provision of valueadded services such as cross-docking, picking, packing, repackaging, just-in-time delivery, merge-on-transit delivery, transportation documentation, and so on. The family-owned logistics business have traditionally been involved in providing basic road transportation and warehousing services for the past 25 years since its existence; be it high-priority delivery, FTL/ LTL shipments, and so on. Schenker India on the other hand, have proven track record across the world in providing a plethora of logistics solutions. Amongst the three case companies, Schenker India can be dubbed as a true 3PL-capable service provider having the capability to provide all of the services and more as mentioned above. In India, it was found that the company provides a complete range of international air and ocean freight services as well as integrated logistics services and global supply chain solutions from a single source supported by its strong network of 2000 locations worldwide.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""132" " Schenker India was found to be more capable of providing tailor-made as well as standardized/ commoditized end-to-end solutions than Rhenus ProLog, which also have a similar business models as theirs albeit on a smaller scale. All the three participating companies were ISO 9001: 2008 compliant and the warehousing arm of Schenker India was even a step ahead from the rest of the two, in securing TAPA and C-PAT certifications for all its warehouses across India. These two certifications do not apply to warehousing the family-owned company owns as it only provides basic storage and transit warehousing facilities and not advanced storage provision such as distribution, inventory management and value added services inside the warehouse such as packaging, labelling and sorting.

5.2.4

Information Technology System

It was learnt that across the three companies, implementation of RFID and GPS technologies is not 100% in place, which makes logistics management much more cumbersome. Although it involves high costs, advanced technologies such as these are becoming the key differentiating factors. Most of the domestic clients are not aware of the benefits of these services; hence marketing these service offerings is imperative in the Indian scenario. Differentiated services through these technologies would help logistics managers in convincing clients about reducing costs and fetch high margins. With regards to Best Roadways & Rhenus ProLog, the interviewees often used certain expressions to describe the current IT setup in their operations- such as our ICT system is outdated, incomplete implementation of ERP across the business, absence of cutting-edge technical support and so on.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""133" " Not surprisingly, Schenker India bringing its global best practices to India is said to be all equipped with different information systems to fulfil their operational needs efficiently and effectively. In the last fourteen years they have made substantial investments in their IT infrastructure with sophisticated Warehousing Management System (WMS), Purchase Order Management (POM), its own version of electronic data interchange (EDI) known as Schenker Worldwide Online Data Network or SWORD and customer information systems (CIS) in place. A stark difference in the way a multinational company like Schenker operates and how a family-business like Best Roadways led the researcher to a lot of introspection and self-evaluation of his family business that is lagging far behind in adopting such IT systems. 5.2.5 Business Trend

According to a report compiled by Datamonitor on Indian Logistics & Express Outlook (2009), Indias contract logistics market is witnessing a burgeoning growth as also mentioned in the literature review previously. Compared to the 3PL industry, which is expected to grow by around 21% from 20082013 (Datamonitor, 2009), the three case companies in the past 3 years (2008, 2009, 2010) have grown at an average of 25%, which is more than the overall growth of the 3PL industry. Figure 5.3 below summarizes all the sales turnovers of the three companies in year 2008, 2009 and 2010, which show the overall increasing trend in different companies in different years. In the case of Schenker, the difference in their revenues from 2009 to 2010 was seen to be much larger because they already have had large turnovers in the past. The growth rate was around 20%.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""134" " Figure 5.3 Turnovers of Rhenus, Best & Schenker (2008, 2009, and 2010)

5.2.6

Customer and Contract

There is a stark contrast in the demography of clients that Best Roadways has and the clients that Schenker India and Rhenus ProLog have. Although, there was no direct information pertaining to the clients of both the latter companies were revealed, through market analysis and observations, it was found that a sprawling majority of the client base of Schenker comprised of multinational companies in automotive, electronics, pharmaceutical, chemical, fashion retail and FMCG segments. More than 70% of clients that Schenker serves in India also happen to be their partners in other markets of the world such as China, America and Europe. These companies have operations on a global scale just as Schenker. Figure 5.4 below indicates the results from a survey conducted by a consultancy firm that was to know the proportion revenues generated by both Indian as well as multinational service providers based on the nationality of their clients.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""135" " Figure 5.4 Proportion of revenues based on nationality of clients

Source: Mercer Consulting, Indian 3PL Survey (2002) The Figure above shows that many Indian companies regard their Indian service providers as having capabilities in only providing basic transportation and warehousing services. As these domestic companies are themselves engaging in outsourcing of just those two activities, they often resort to popular domestic transportation companies. The results above also reveal that over 98% of the revenues generated by multinational 3PL providers in India come from their foreign clients. It is also understood now that foreign companies choose Schenker as their preferred service provider in India because of their relationship with them that goes back to many years operating as an end-to-end solutions provider at other parts of the world, at a time when 3PL revolution in India had just begun. Whereas in the case of Best Roadways, it was revealed that there were a plethora of different clients (mostly home-grown) that the company had partnerships with. These service users hail from different industry verticals such as exports and imports, Indian as well as multinational FMCG companies, clearing house agencies, and even multinational shipping and 3PL organizations such as DHL, Japans Nippon Express,

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""136" " Kuehne Nagel and even Schenker. The analysis of within-case study that all the three participating companies own relatively mature client bases, with their contracts with them ranging anywhere from 1-3 years in the case of Schenker and Rhenus ProLog, and 1-5 years in the case of Best Roadways. For all those clients entering into a contract with the respective case companies, the general reasons that they decide to outsource their logistics function included factors such as improving customer service, reducing risk and uncertainty, reducing costs, focusing on core business, and accessing technology and management skills. Accessing to technology and management skills was seen to be more applicable in the case of Schenker as they are found to be more advanced than the other two companies in this study. When it comes to ensuring success in contractual agreements, all the three companies mentioned cost and service to be the two most important factors, depending upon the variety of clients they service to. As for the multinational clients held with all the three case companies, more than cost it was the service quality and the range of services executed were cited as the main area of criticality, in addition to flexibility, reliability and commitment. The Indian clients served by Best Roadways were seen to be purely and heavily concerned with the price, which often have led to them either providing one-off commoditized services or terminating the contract midway. These clients were seen to be responsible for stimulating competition amongst the less mature 3PL service providers such as Best Roadways. According to the results studied from the case studies, it can be learnt that the more mature the clients are, the more they start focusing on building long-term strategic relationships with their service providers to provide better customer service to their clients. They seek to gain long-term benefits and pay little heed to short-term factors

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""137" " concerning costs in particular. All they want is consistency in delivering high quality services. And these clients are with all the three case companies in varying numbers, and mostly comprise of big corporates and multinational conglomerates. To ensure a desirable level of customer service guarantee, all the three case companies have introduced in varying degrees a series of KPIs to assess and monitor the customer service performance when serving their clients. The main KPIs used by the companies include on-time delivery, on-time bill return, customer complaint handling, customer satisfaction rate, and goods damage rate. In the case of Schenker in addition to these KPIs, they also had certain other measuring criteria in place; based on order accuracy, order cycle time, inventory levels, among others.

5.3

COMPETITIVE SITUATION

5.3.1 Competition

From the within-case study analysis of the three companies, it was found that the Indian 3PL industry was generally considered to be quite fiercely competitive, with varying proportions- for instance, Best Roadways indicated that the 3PL market place was very competitive. Rhenus ProLog indicated that the competition was intense but not very intense, whereas Schenker India had a more subtle view on competition in this perspective, indicating neither very intense nor mild. As for Best Roadways, the main competitive pressures arose from cost and technological backing, for Rhenus ProLog it was more to do with service and capital investment, whereas in the case of Schenker with all its best-in-class practices pertaining to technological setup, capital investment in infrastructure, it was only to do with cost.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""138" " All the three companies indicated the dominant way of garnering business and potential new clients was through Tendering/ Bidding process. They were all aware of the fact that often many big Indian companies who have online tendering systems, often resorted to unfair trade practices by creating bogus service provider accounts and bidding as low as possible to stimulate price war amongst the actual bidders and eventually get the lowest price possible. However, all the three companies mentioned that after a certain point they stop competing in price as they were of the opinion that doing business at cost for the sole purpose of increasing the turnover then anticipating that by doing volume business and later accumulating collective profits was an unfounded and misconstrued business idea.

On the other hand, the case companies preferred entering into a bidding process with more mature and experienced users of 3PL who believed in strategic partnerships, mutual commitment and cooperation to gain overall long-term benefits. In general, multinational service providers like Schenker and Rhenus were of the strong opinion that India happened to be a very complex market ladened with chaos, lack of business ethics and illegitimacy in many levels of logistics business. They revealed that unfair and unreasonable competition also stemmed from the past historical governing rules such as the License Raj, excess of bureaucracy, red tape and presence of mafia and cartels in the business.

5.3.2 Competitors

The two multinational 3PL companies Schenker and Rhenus considered other multinational 3PL providers and some of the emerging home-grown 3PL providers as

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""139" " their immediate competitors putting competitive pressure on them. As for Best Roadways, their main competitors were generally other transportation and logistics companies of similar scale and repute. They did not consider multinational 3PL providers to be their immediate threat. On the contrary it was found that Schenker India was one of its clients outsourcing their transportation requirements to Best Roadways Limited. The more important reasons why Schenker and Rhenus believed the home-grown 3PL providers were putting competitive pressure on them more than other multinational 3PLs1) These home-grown 3PL providers have emerged from being traditional transportation and warehousing service providers. Hence, they are equipped with long-established asset base of infrastructure space and vehicles, plus the distribution network in the country, of the scale the multinational providers have struggled to achieve so far 2) These domestic service providers bring with them global best-in-class business practices with extended value added service provision, at par with either Schenker or Rhenus 3) They are slightly cheaper than multinational 3PL providers, perhaps because they are able to achieve economies of scale. Best Roadways indicated that they do not consider multinational companies to be their immediate threat for the following reasons1) The family-owned business is primarily into road transportation activity, with vast asset base of vehicles, which the foreign multinationals do not possess, in addition to a vast distribution network and physical infrastructure. 2) There are certain specific segments of industries the company cater to giving them just the road transportation services, something which is still the most dominantly outsourced activity by Indian companies.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""140" " 3) Majority of its clients are Indian companies. 4) Companies such as Schenker often resort to transporters like Best Roadways to sub-contract their transportation requirements to them.

5.3.3

SWOT Analysis of Rhenus, Best & Schenker combined

Table 5.1 below illustrates a combined SWOT analysis of the three case companies. It is worth noticing that as for opportunities, each company had more or less the exact same opportunities, that is to do with the general environment of the industry in India. Other noticing factors below were that as for Schenker their biggest weakness was to reduce price and reduce operational cost. They had a high cost structure because of which in order to offset those costs, they had only option which was to quote high price to their clients. With regards to lack of finding highly qualified managerial staff, it threatened both Rhenus and Best Roadways. In addition to that intense competition was their common threat and shrinking profit margins were their common threats.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""141" " Table 5.1 SWOT Analysis of Rhenus, Best & Schenker combined together
Company Name Strengths Association with a global logistics brand Standardized global best practices blended well with localization to suit Indian needs and Rhenus ProLog Logistics Limited Advanced ICT systems Talented staff Strong financial support from the Rhenus Groups global headquarters Stable client relationships Company Name Strengths Established brand name Strong asset base Big client base Service quality assurance (98% service level track record) Best Roadways Limited Stable client relationships Experienced operations staff Strong growth and consistent financial record Sound relationship with banks Weaknesses Autocratic and hierarchical organizational structure Limited IT implementation Lack of pan-India presence High staff attrition rate Opportunities Unlimited growth of 3PL industry High economic growth of Indian economy Early mover advantage of expanding into other verticals of 3PL Introduction of uniform taxation structure by the government Threats Shrinking profit margins Intense competition Lack of finding high-calibre managerial staff compliance criteria Capital required for organic/ inorganic growth Limited asset base

Weaknesses
Limited network presence in India Lack of pan-India presence

Opportunities
Unlimited growth of 3PL industry High economic growth of Indian economy Early mover advantage of expanding into other verticals of 3PL Introduction of uniform taxation structure by the government

Threats
Shrinking profit margins Intense competition Lack of finding high-calibre managerial staff

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""142" "
Company Name Strengths Leading market position and strong brand name ! International provider with strong overseas and pan-India presence ! Very high growth and relatively high productivity ! Talented staff pool Schenker India Private Limited ! Advanced IT systems ! Strong financial support from headquarters in Germany ! Standardized global best practices coupled with local needs and compliance criteria Weaknesses ! High Price ! High cost structure ! Weak margins and returns Opportunities ! Unlimited growth potential in India ! First mover advantage ! Relaxed government taxation and regulation Threats ! Growing homegrown 3PL competition ! Foreign competition ! Falling margins ! Currency risk !

5.4 5.4.1

STRATEGY REVIEW Information technology development

Although information technology industry is highly developed in India, implementation of IT in the warehouses, improvement of supply chain visibility between suppliers, manufacturers and retailers and inventory management is still developing. The IT spend in the logistics industry in India is less than 1% whereas it should be around 3-5%. However, software solution companies such as Infosys are aiding logistic companies by integrating IT solutions in their supply chains. This is expected to increase IT spend by logistics players in the country.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""143" " Schenker India at the time entering 3PL market, wanted to develop and integrate applications to perform true transport sub-contracting. One of Indias leading IT services companies re-engineered the client's legacy application and developed a transactional application for logistics operations. Additionally, the reporting layer of the data warehouses was improved, enabling the company to analyze trends better. The application enabled the client to streamline its business processes and to experience better productivity. As for Best Roadways, a leading IT services company developed a well designed web-based vehicle tracking system, which has tremendously helped improve customer service and cut costs for the customers of this large fleet owning company. Leading IT Services Company is under the process to develop real time integration of Oracle Transportation Management with existing ERP systems for the company. Rhenus ProLog faced a high degree of data latency because of its recent merger that affected revenue collection, customer satisfaction and operational efficiency. The company partnered with a leading IT services company in India for a cost-andtime-effective solution. Their solution reduced data latency from eight hours to 15 minutes for 200,000 daily checkpoints. It enabled trace and track business processes to provide timely customer updates. In addition, the solution reduced the revenue cycle through on-time capture of checkpoints for about 1500 daily shipments. The three specific examples mentioned above shows that all the three companies recognizes the importance of IT systems in their operations and are making great strides in continuously upgrading the same. All the three companies have varying degrees of IT penetration into their operations.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""144" " As for Schenker India, which is miles ahead in IT usage, it went to three stages of development to become a fully functional IT driven 3PL company. At the first stage, it introduced IT systems to support intra-company information sharing across various departments, internal data processing, thereby ensuring efficiency and effectiveness in the overall functioning of their administration. Second stage involved to introduce similar IT systems but for inter-company sharing, involving their clients and the clients of their clients. Finally, the last stage involved introduction of sophisticated supply chain-specific software solutions (some of them also mentioned above) to support the ever-increasing growth of their business. 5.4.2 B2C In order to establish competitive edge in the market place it is necessary for all major service providers in a fast growing industry to build a successful business cooperation based on long term partnerships with their clients (Tate, 1996). The family-owned transportation company does often indulge in one-off transactions with its customers. There are many clients on its list that do not enter into a contract with them but rather prefer buying their services as a commodity. Same can be said for Rhenus ProLog and Schenker. However, all three companies do also realize the importance of establishing long-term partnerships with their clients. They are aware of the obvious mutual benefits in entering into such B2C relationships, which otherwise in the short-term to compete in this industry with low prices without maintaining relationship could be tough and prove counter-productive in the long-run. B2B As for developing partnerships with other service providers, there was a survey conducted by Mercer Consulting in 2002 that revealed there are many Indian service providers who are looking for partners to establish a joint-venture who can provide Willingness to Establish Partnership

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""145" " overseas network, management expertise among others. Figure 5.5 below provides with more detailsFigure 5.5 Expansion strategy of 3PL providers in India

Source: Mercer Consulting, India 3PL Survey (2002)

It is quite clear as to why the ProLog Group must have entered into a joint-venture with Rhenus Group of Germany in 2010- their prime purpose was to get hold of the overseas network of Rhenus in addition to securing sound financial support from their headquarters. Apart from that, they were also successful in getting BMW Cars in India as the Rhenus Group have been associated with the BMW Group elsewhere in European and American markets for their spare parts distribution. In other words, by entering into a JV with a multinational 3PL provider, ProLog group was benefitted in getting foreign clients to be associated with them.

As for Rhenus Group, by entering the Indian market alongside ProLog group, they got access to their strategic assets and resources in India, established domestic network coverage, among others. Therefore, they did not have to build everything from scratch in India.

In order to establish and grow as an integrated solutions provider, collaborating with companies that are good at certain specialized verticals of business where the domestic company might be falling short could prove to be a beneficial for both the companies.

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""146" " So, M&A can be a win-win strategy for both Indian logistics companies and Best Roadways Ltd. in particular and the foreign logistics companies having immense global expertise and knowledge. Indian logistics companies such as the family-owned business can quickly gain foothold of latest technology and global best practices and foreign logistics companies can capitalize on the physical infrastructure and network much easier in collaboration than building up all by themselves as said for the real-life example of Rhenus ProLog as well. 5.4.3 Developing Compatibility

The results of within-case studies have shown that these companies try to build partnerships with those companies that have similar business culture, mindset, ideology and concept of doing business. For instance, Best Roadways Limited had to terminate a contract with one of Indias largest FMCG retail conglomerates because they were not very sincere in paying off their outstanding bills with the company. In many instances, their outstanding would go way past 90 days. Even after having a good cash flow and ability to pay off to their creditors, they would not consider paying to their transporters in time. This went against the basic tenets, corporate culture and values, and ethics of Best Roadways. Hence, they decided they would not want to continue building partnerships with such companies. This retail giant was a mature 3PL user. A sour relationship and an eventual breakup with the mature companies such as their have not deterred Best Roadways to form partnerships with other clients. All three case companies have shown that they go out of their way to try to accommodate less mature 3PL users who have a reasonable business potential in the future. They believe that the new users of 3PL as sincere and serious about establishing relationships with their service providers. 5.4.4 Open Communication

Ensuring zero communication gap with its clients, have been a strategy of Best

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""147" " Roadways which has led them to provide superior customer service to them from time to them. Apart from Best, the other two case companies have also realized the importance of open communication with their clients as a pre-requisite to providing better services to them. All these companies are said to have regular meetings with their main clientsbetween the chief executives, operations heads, marketing heads of the companies, to gain more understanding about the business and the various functions of the business such as production, marketing and sales. In addition to sharing information pertaining to the present operations, many companies do also share strategic information with their service providers- such as advance information regarding the possibility of a new plant location, sales strategy and so on. To cite another example from Best Roadways, there is one very major client of theirs called Reliance Industries Limited. Its a Fortune 500 company and Indias largest conglomerate in terms of market capitalization. They were planning to start a new gas plant at a location where Best Roadways also operates. The logistics and operations head of that company had started communicating with Best Roadways in advance regarding all the logistical support they would need in terms of transporting pipelines from JN Port (another stronghold of Best Roadways) to the plant location. They also regularly updated the company with the number of trucks they would require, the size and capacity of trucks, which helped the company plan in advance to accommodate for the future demands. Thus, this example shows that open communication tends to benefit both the parties and can go a long way in relationship building. 5.4.5 Mutual Commitment

A mutual commitment can be addressed in the relationships between the participating

Chapter"Five:"CrossHCase"Discussion""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""148" " 3PL companies and their main customers. Commitment must go both ways, as In Tate, (1996), emphasized that successful partnerships, like marriages, demand that both partners be committed to weathering and working out bad times (p.11). this study, the commitment can be identified by the two aspects below. First, the commitment can be understood based directly on the customer base. As mentioned earlier, all three participating companies consider commitment is one of the important factors affecting the success of their contracts. This can be understood that if the 3PL providers make a commitment to their customers, the customers will keep outsourcing their logistics to the 3PL providers; while the 3PL providers will constantly provide satisfying logistics services to these customers in return for their commitment. Second, the mutual commitment also can be interpreted from the direct investment by the participating companies and joint investment with customers in the customers logistics facility building and development. According to the results of within-case kind of uneven study, all of the three companies have more or less been involved in logistics infrastructures and facilities development for special customers. This cooperation is built up from long-term relationships and mutual trust. An in losses on both sides. cooperation requires high level of mutual commitment between the parties. Also the commitment in the cooperation may lead to a failure logistics partnership, and result

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""149" " CHAPTER SIX: CONCLUSION 6.1 Chapter Introduction

From the findings revealed through individual case studies followed by cross-case discussion, Chapter 6 tries to summarise and reaffirm if the objectives of this research were satisfactorily met, which are mentioned below for a quick referral. In the end, limitations of this study, some clarifications are mentioned, and future research possibilities are recommended. 6.2 OBJECTIVES OF THE STUDY

1. To investigate about the current state of the Indian logistics industry as part of a burgeoning Indian economy 2. To find out about the scope of 3PL growth in India given the infrastructural bottlenecks in the country 3. To evaluate India-specific strategies pursued by service providers in order to compete 4. To draw comparisons and contrast between the case companies based on their core competitiveness 5. To evaluate the future direction of the case companies

6.3

CONCLUSION

General Situation

The growth in the Indian economy at almost 8% per annum, coupled with increasing globalization and competition across various industries has contributed to the growth of 3PL industry in India.

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""150" " Having said that, the contract logistics sector in India currently has minimal penetration in delivering value added services. Big mature 3PL users seeking logistics assistance prefer value added logistics for long-term benefits and cost optimization. And Indian companies, who are less mature in 3PL service usage, still prefer to outsource just their basic transportation and warehousing requirements. Still, the researcher has reasons to believe that the potential of market for logistics service providers to grow in India remains huge, and the early adopters to new and improved technologies and expansive growth strategies will have an edge. There will be opportunities for certain service providers to operate in niche segments, whether related to industries or geographies. Larger 3PLs with already established asset base are likely to be more successful in India than the new entrants in the market with limited asset base unless of course if the latter consolidate with already established companies to make their presence felt in the industry. Growth in the Indian logistics industry is largely characterized by reliance on domestic consumption and increasing openness of the economy with the rest of the world is improving the importance of trade logistics. Robust economic growth, boom in domestic consumption aided by increasing levels of consumerism and the steady shift of manufacturing outsourcing to India are the pillars for the strong growth in logistics. The three case companies were chosen in particular because they represented the same growth trajectory that ran parallel with the kinds of growth as mentioned above. Apart from that, what makes these companies interesting to study is the diversity they bring with each other- all three companies have different ownership structure, different business model, types of services offered, and industry segments served, and so on. One of them started as a basic fleet operator and transport contractor and gradually

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""151" " moved towards becoming an integrated logistics solutions provider by joining hands with a global logistics company (Rhenus ProLog Logistics). The other one, a wholly owned subsidiary of a multinational logistics giant (Schenker India, part of DB Schenker). Finally, Best Roadways Limited- a wholly owned Indian business entity primarily with a very hierarchical and traditional organizational setup with powers in the hand of few family members. All three companies have proven consistently in the last three years with their revenue growth standing at an average 25% year-on-year, which is more than the overall growth of the logistics industry. These companies are aware of the fact that the Indian market even though poses a lot of challenges that stymies their growth, does also offer opportunities to counter those challenges, they attempt to capitalize on the above-mentioned opportunities by constantly growing their distribution network, fleet size (in case of Best Roadways), and their infrastructure capability. Infrastructure as key enabler to growth

Infrastructure development is considered to be a critical enabler to Indias economic growth. Logistics infrastructure, comprising of road, rail, waterways and air network of a country, is the backbone, on which the nation marches ahead (Gupta et al, 2010). Although the Government in the past decade has realized the urgency to develop Indias logistics infrastructure, the task at hand is daunting. Change is taking place but not at the speed with which it is required. Indias logistics infrastructure still remains insufficient, ill-equipped and ill-designed to support the expected growth rates of 7 to 8 per cent over the next decade, with road

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""152" " freight traffic growing 2.5 times during the same period is likely to put a good deal of pressure on Indias most used transport route- the road infrastructure. According to Gupta et al (2010), if India fails to achieve its ambitious goals of infrastructure development as mentioned in the literature review, waste caused by poor logistics infrastructure will increase from USD 45 billion prevailing at the moment (which is equivalent to 4.3 per cent of todays GDP), to USD 140 billion or more than 5 per cent of the GDP by the year 2020 (Gupta, 2010). On the flip side, if it is tackled in an integrated and coordinated manner, a reduction of 15-20 percent in nations oil requirement can be attained. IT as key enabler to growth

The 3PL companies have the capability to combined different IT techniques into special platforms to meet their practical needs. The challenges posed by supply chain management are now being addressed through the implementation of IT, enterprise resource planning systems, warehouse management systems, RFID labelling, packaging etc. Table 6.1 below gives a compiled data of all the IT solutions being considered/ already being used in their logistics activity.

Table 6.1 Compiled data of IT solutions in logistics Source: Datamonitor (Davenport, 2009) The growth of value added logistics is parallel to the growth in third party outsourcing. These services are customized depending upon the industry verticals and

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""153" " require qualified personnel who have expertise in the respective industries. This is the major distinction in the supply chain activity performed by a third party provider and the shipper himself. A large part of the modernization of Indian Logistics industry would happen on account of large-scale adoption of value added services. Value added services such as tracking technologies, transport management systems, warehouse management systems when proliferated 100% by the case companies as the scale of distribution and transportation activities increases, it would become easier for them to recover investments in the value added services due to economies of scale. With the distribution networks and information systems, the case study companies especially Best Roadways Limited, will be able to provide a bigger range of logistics services from, from basic transportation, to value added services. The basic logistics services currently provided by Schenker India & Rhenus ProLog: transportation, warehousing, distribution, order processing, inventory management, and services of international freight forwarding. The value-add services and supply chain solution service provided include: tagging and labelling, on demand packing and repacking, quality management, sorting and sequencing, cross-docking, just-intime delivery, and merge-in-transit delivery. Although, the contract logistics sector is well organized, there exist immense untapped opportunities as few Indian companies opt for long-term relationship with the service provider. Closing remarks

To date, there has not been much written about specific big companies of the Indian logistics industry. Hence, this research study attempts to fill that void by presenting detailed case studies of some of the major logistics companies operating in the Indian market today.

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""154" " A qualitative case-study based research approach has led the researcher into gaining a good deal of knowledge in minute details about the current situation of the 3PL industry in India in general and the family-owned logistics business in particular. The researcher has attempted to accomplish all the objectives mentioned at the start of this study. These objectives were revised over and over again as a result of a lot of groundwork after the start of the research study. The original objectives were quite different from the present ones. The findings from this study hope to enlighten its readers and present a different perception of the Indian market than might be inherent before. In conclusion, the objectives of the current research study seem to have been achieved. It can be said that to an extent, the researcher has tried to provide a clear understanding of the state of Indian logistics industry through the three case companies. The research also reveals that despite the numerous challenges plaguing the Indian logistics environment, the 3PL industry has significantly developed and has immense potential for many service providers. It now seems that there are opportunities for every service provider to grow together because of such massive demands posed by the companies. Unlike yesteryears, the perception of logistics industry is seen to be changing- from being regarded as unorganized dirty business involving a large number of uneducated and illiterate workforce entering the industry to becoming one of the fastest growing industries within the economy and citing untapped opportunities as reason, hundreds professionally-run multinational shipping and logistics companies opening shops in India.

6.4

LIMITATIONS OF THIS STUDY

The researcher strongly believes there are quite a few limitations toward completing this research study.

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""155" " The current research has been restricted for the lack of time. As even Yin (1984) rightly pointed out in his book on case study research methods, that one of the critical disadvantages of pursuing a case-study based research study was that it can take up to a lot of time to compile and produce a massive amount of documentation, regarding which it was hard to estimate the time needed for completion in advance. It proved increasingly difficult for the researcher to study more number of companies to be able to later pick and choose which ones to include in the study. The researcher was left with limited choice of case companies in the end. Due to certain confidential information as deemed by two companies, for instancedivulging details about their clients, financial information and strategies for the next five years, it was hard for the researcher to find exact data on the same from thirdparty sources. The researcher was still able to find the financial information of Schenker and Rhenus from outside sources, but since the 2010-2011 fiscal year data was not available, the financial trends of all the three companies were compared based on the three years prior to 2011, i.e. 2008, 2009 and 2010. The best data was available from the family-owned business of the researcher as it was easier to approach the company representatives by frequent personal visits to the office. However, the same was not the case with other two companies- first of all being part of a multinational group, they have certain standardized code of conduct and ethics in place. So to be fair to them, it was increasingly difficult for arrange for repeated meetings at their premises. Because of not-so-rich information that was collected on Schenker & Rhenus ProLog, it proved difficult to draw comprehensive comparisons and contrast between their business operations and strategies and the same of the family-governed company.

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""156" " BRIEF CLARIFICATION

Yin (1984) has challenged the assumption that individual interviews should be "written up" at all as a case-study, believing that what is more important is to demonstrate converging evidence from various sources and to document such convergence and divergence (Kohn, 1997). The full case study of Schenker India Private Limited was not included in the write up to this research because of the number of words it would have taken (approx. 5000 extra words). Though the data generated from first hand research done at their office premises in Mumbai was carefully studied, discussed and analysed to compare with the rest of the two case studies. As the current research had already become quite lengthy, the researcher felt it appropriate to exclude one case study after prior consultation with the supervisor. 6.5 FUTURE RESEARCH

Perhaps in future, more case companies can be studied and analysed. There are many home-grown companies that have the ability to provide in its real sense, fully integrated end-to-end logistics solutions. Companies such as Future Supply Chains (http://www.futuresupplychains.com/home.html) claim to be the Indias first fully functional 3PL service provider company established just 4 years ago. Including companies like Future Supply Chains in case study analysis will help in understanding the operational and strategic differences between an Indian 3PL company and multinational 3PL companies as it would provide neck-to-neck comparison and a much reasonable ground for discussion and analysis. It was hard to gain full understanding of companies like Schenker India because there were many confidentiality issues that prevented them from being very open about their companys operations and strategies.

Chapter"Six:"Conclusion"""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""""157" " Therefore, it would be worthwhile that in future to choose companies that are more open and willing to share information. For instance, to be more accommodating and cooperative by letting the researchers go to their sites and conduct interviews with various managerial level staff, observe their infrastructural and operational setup to collect fuller and richer data, rather than just by interviewing few representatives on telephone, through very brief in-person interviews, and for the rest, relying on their companys website.

----- THANK YOU -----

"

"

158"

REFERENCES Bagchi, P & Virum, H. (1998). Logistical Alliances- Trends & Prospects in Integrated Europe. Journal of Business Logistics. 19 (1), p191. Bedeman, M & Gattorna, J. (2003). Third- & Fourth Party- Logistics service providers. In: Gattorna, J Gower handbook of supply chain management. 5th ed. Aldershot: Gower Publishing. p473. Berglund, M., Van Laarhoven, P., Sharman, G. and Wandel, S. (1999), Third party logistics: is there a future? International Journal of Logistics Management, Vol. 10 No. 1, pp. 59-70. Berglund, M., van Laarhoven, P., Sharman, G., Wandel, S., 1999. 59-70. Bhattacharya, S. (2010). Logistics in India, Part 2. KPMG International. 1 (2), p1-17. Bowersox, D. (1990), The strategic benefit of logistics alliances, Harvard Business Review, July-August, pp. 36-45. Bowersox, D. J., and D. J. Closs (1996), Logistical management: The integrated supply chain process, 3rd ed. New York: McGraw-Hill Companies. Christopher, M (2005). Logistics & Supply Chain Management- Creating ValueAdded. 3rd ed. London: Pearson Education Limited. p4. Christopher, M., 2005. Logistics and Supply Chain Management. Pitman Publishing, London, U.K. Collis, J. & Hussey, R. (2003). Business research (2nd ed.) New York: Palgrave Macmillan. Third party

logistics: is there a future?. The International Journal of Logistic Management, 10 (1),

"

"

159"

Coltman, T. Keating, B., et al, (2011) Best-Worst Scaling Approach to Predict Customer Choice for 3PL Services Journal of Business Logistics 32 (2): 139-152 (in press JBL 09-058-00) Daugherty, P.J., Sabath, R.E., Rogers, D.S. 1992. Competitive Advantage through Customer Responsiveness, the Logistics and Transportation Review, Vol. 28 (3), 25772. Davenport, L. (2009). India Logistics & Express Outlook. Datamonitor. 1 (2), p6-57 Denzin, N. K. & Lincoln, Y. S. (Eds.). (2000). Handbook of qualitative research (2nd ed.).Thousand Oaks, CA: Sage. Denzin, N., Lincoln, Y., 2000, Handbook of Qualitative Research, 2nd ed., Sage Publications, London. Drucker, Peter F. (1962), The Economys Dark Continent, Fortune, Vol. 65, April, p. 14. Easterby-Smith, M., Thorpe, R., Lowe, A., 1991, Management Research: an Introduction, Sage Publications, London. Evangelista, P., Sweeney, E., 2006. Technology usage in the supply chain: the case of small 3PLs. The International Journal of Logistics Management, 17 (1), pp. 55-74. Feagin, J., Orum, A., & Sjoberg, G. (Eds.). (1991). A case for case study. Chapel Hill, NC: University of North Carolina Press. Frost & Sullivan (2006), Strategic Analysis of Third Party Logistics (3PL) Market in India, June, Singapore. Gill, J., Johnson, P., 1991, Research Methods for Managers, Chapman Publishing, Liverpool.

"

"

160"

Grinnell, R, Williams, M et al. (2011). Research Methods for Social Workers- Online Glossary. Available: http://www.pairbondpublications.com/for_students/online_glossary. 15th May 2011. Groenewald, T. (2004). A Phenomenological Research Design Illustrated . International Journal of Qualitative Methods. 3 (1), p2-26. Gummesson, E., 2000, Qualitative Methods in Management Research, 2nd ed., Sage Publications, London. Gupta, R, Jambunathan, S et al. (2010). Transforming the nation's infrastructure. McKinsey & Company - Infrastructure practice. 1 (1), p5. Hakansson, H., Johanson, J., 1990. Formal and informal cooperation strategies in international networks. In: Ford, D. (Ed.), Understanding Business Markets. Academic Press, London, pp. 459467. Hertz, S & Alfredsson, M (2003): Strategic development of third party logistics providers. Industrial Marketing Management 32 (2003) 139-149 Hoda, A. (2010). Report of the Working Group on Logistics. Planning commission of India. 1 (1), p1-98. Husdal, J. (2011). 3PL Outsourcing good or bad?. Available: Last Last accessed

http://www.husdal.com/2011/05/13/3pl-outsourcing-challenges-and-benefits/. accessed 20th Jul 2011.

Hussey, J., Hussey, R., 1997, Business Research: A Practical Guide for Undergraduate and Postgraduate Students, Macmillan Press, London. Kohn, L. (1997). Methods in Case Study Analysis. The Center for Studying Health System Change. 2(1), p2-8.

"

"

161"

Kotler, P (1997). Marketing management: Analysis, planning, implementation, and control. 9th ed. New Jersey: Prentice Hall. p34-56. Kotler, Philip (1997), Marketing Management: Analysis, Planning, Implementation, And Control, Upper Saddle River, NJ: Prentice Hall Kvale, S. (1996). Interviews: An introduction to qualitative research interviewing. Thousand Oaks, CA: Sage. Leech, N & Onwuegbuzie, A. (2007). An Array of Qualitative Data Analysis Tools: A Call for Data Analysis Triangulation. School Psychology Quarterly by the American Psychological Association. 22 (4), p557-584. Levy, S. (1988). Information technologies in universities: An institutional case study. Unpublished doctoral dissertation, Northern Arizona University, Flagstaff. Logistical Management: The Integrated Supply Chain Process, New York: Mc- Graw Hill. Manatayev, Y. (2004). Commoditization of the Third Party Logistics

Industry. Massachusetts Institute Of Technology. 1 (1), p8-59. Mangan, J, Lalwani, C et al. (2004). Combining quantitative and qualitative methodologies in logistics research. International Journal of Physical Distribution and Logistics Management. 34 (7), p565-578 Miles, M.B. and Huberman, A.M. Qualitative Data Analysis: An Expanded Sourcebook, Sage Publications, Thousand Oaks, 1994. Mitra, S. (2009). The 2008 Survey of Indian Third-Party Logistics (3PL) Service Providers: Comparisons with the 2004 Survey of Indian 3PLs and 2006 Survey of North American 3PLs. INDIAN INSTITUTE OF MANAGEMENT CALCUTTA. 1 (3), p1-28.

"

"

162"

Morasco, A. (2008). Third-party Logistics: A Literature Review. International Journal Of Production Economics. 113 (1), p127-147. Nagporewalla, Y, Shrinivasan HR. (2007). Skill gaps in the Indian Logistics Sector: A white paper. KPMG in India & Confederation of Indian Industry. 1 (1), p11. Neville, C. (2005). Effective Learning Service- Introduction to research and research methods. University of Bradford, School of Management. 1 (1), p2-43. Ojala, L. 2003. Estimating the size of the Finnish TPL market, in Andersson, D., Dreyer, H., Halldorsson, A., Jahre, M., Ojala, L., Skjott-Laarsen, T., Virum, H. (Eds.) Third Party Logistics - A Nordic Research Approach, Turku School of Economics and Business Administration, Turku, Finland, 50. Patton, M.Q. Qualitative Evaluation and Research Methods, Sage Publications, Newbury Park, California, 1990. Polkinghorne, D. (2005). Language and Meaning: Data Collection in Qualitative Research. Journal of Counselling Psychology. 52 (2), p137-145. Ranjan, M & Tonui, R. (2004). Third Party Logistics: An Analysis of the Feasibility and Contexts of Strategic Relationships. MASSACHUSETTS INSTITUTE OF TECHNOLOGY. 1 (1), p8-9 Rao, K., Young, R.R., 1994. Global supply chains: Factors inuencing outsourcing of logistics functions. International Journal of Physical Distribution & Logistics Management 24 (6), 1119 Rushton, A, Croucher, P et al (2010). The Handbook Of Logistics & Distribution Management. 4th ed. London: Kogan Page Limited. p4-5. Sahay, B.S., and Mohan, R. (2003), Supply chain management practices in Indian industry, International Journal of Physical Distribution and Logistics Management, Vol. 33 No. 7, pp. 582-606.

"

"

163"

Sahay, B.S., and Mohan, R. (2006). 3PL practices: an Indian perspective. International Journal of Physical Distribution & Logistics Management. 36 (9), p666-689. Sekaran, U & Bougle, R. (2010). The Nature of Qualitative Research. In: Sekaran, U & Bougle, R Research Methods for Business: A Skill Building Approach. 5th ed. London: Wiley Publications. p16-17. Selviaridis, K & Spring, M. (2007). Third party logistics: a literature review and research agenda. The International Journal of Logistics Management. 18 (1), p125150. Sheffi, Y. (1990). THIRD PARTY LOGISTICS: PRESENT AND FUTURE PROSPECTS. Journal of Business Logistics. 11 (2), p27-39. Smith, D. (2008). 6. Phenomenology and Philosophy of Mind .Available: http://plato.stanford.edu/entries/phenomenology/. Last accessed 15th May 2011. Stern, L., and A. El-Ansary (1988), Marketing Channels, Englewood Cliffs, NJ: Prentice-Hall, Inc. Stones, C. R. (1988). Research: Toward a phenomenological praxis. In D. Kruger (Ed.), An introduction to phenomenological psychology (2nd ed., pp. 141-156). Cape Town, South Africa: Juta. Sweeney, E., Evangelista, P.:3PL definition and taxonomy. Technical Focus in Logistics Solutions, the Journal of the National Institute for Transport and Logistics, Vol. 7, No. 2, pp. 9-10, June 2005. Ticehurst, G.W., Veal, A.J., 2000, Business Research Methods, Longman/Pearson, Australia.

"

"

164"

Van Hoek, R.I. and Chong, I. (2001), Epilogue: UPS logistics practical approaches to the e-supply chain, International Journal of Physical Distribution & Logistics Management, Vol. 31 No. 6, pp. 463-8. Williams, M (2006). 3PL, 4PL, LLP - Is there a difference and what is the future. Coventry: Bisham Consulting. p1-32. Yin, R.K. Case Study Research: Design and Methods, Sage Publication, London, 1994. Yin, Robert K., Case Study Research: Design and Methods, Sage Publications, Beverly Hills, 1984

"

"

165"

APPENDICES

APPENDIX 1
RESEARCH QUESTIONNAIRE SURVEY ON 3PL IN INDIA This information is for reference purposes only and will not be published.

Company Name:

Respondent Name:

Position/ Title:

Phone Number:

Email Address:

"

"

166"

(PLEASE USE BLACK INK. PUT TICK MARK WHEREVER APPLICABLE) Part 1 Company information 1. Type of Company ! ! ! ! Joint Venture Foreign-owned Indian-owned Other (Please specify)

___________________________________________ 2. Age of Your Company (Operations in India) ! ! ! 3. More than 20 years old Between 10 and 20 years old Less than 10 years old

Number of Employees (Full-time Administrative Staff) ! ! ! More than 1000 Between 500 & 1000 Less than 500

4.

Annual Turnover of Last 3 Years (in INR) 2008___________________ 2009___________________ 2010___________________

Part 2 Current Situation 5. Do you provide 3PL Services Apart from Transportation & Warehousing? ! ! YES NO

"

"

167"

6.

Types of Logistics Services provided (Tick wherever applicable) ! ! ! ! ! ! ! ! Transportation Warehousing Freight Forwarding Distribution Order Processing Inventory Management Reverse Logistics Other Services (Please elaborate) - __________________________

7.

Length of Contracts (On Average) ! ! ! ! More than Five years Three to Five years One to Three years Less than One year

8.

Rank in the order of importance: The most important factors to attract customersTimely Service- ___________________________________________________ Low Cost- _______________________________________________________ Flexibility- ______________________________________________________ Commitment- ____________________________________________________ Reliability- ______________________________________________________

" 9.

" To what extent does your company focus on Costs! ! ! ! ! Very Important- customer service level can take a back seat Important- second priority is customer satisfaction Neither Important nor Unimportant Unimportant- as long as customer service levels have been met Very unimportant- customer service level extremely important

168"

10.

How often are costs reviewed! ! ! ! Not at all Annually Quarterly Monthly

11.

How often are customer services reviewed! ! ! ! Not at all Annually Quarterly Monthly

12.

What kinds of value-added services does your company provide! ! ! ! ! ! ! Tracking/ Tracing Cross-Docking Specific Packaging Tagging/ Labelling/ Repacking Just-In-Time Delivery Merge-in-Transit Delivery Others (Please Specify)

"

"

169"

13.

When customers first approach, how much does your pricing affect their decision to outsource? ! ! ! ! Pricing is a very important factor Pricing is not very important or very unimportant Pricing is not at all important if quality service is guaranteed Depends on the kind of customer (whether domestic or foreign)

14.

When clients first approach, how important is the service level criteria before deciding to outsource? ! ! ! ! ! Very Important- Performance is the key Important- Performance as important as pricing Neither important nor unimportant- Pricing more important Unimportant- As long as pricing criteria are met Very unimportant- Pricing the only thing important

15.

From your company perspective why did your customers decide to outsource logistics with your company? ! ! ! ! ! ! ! Extensive service network and reach Large Fleet Size Established Brand Management Expertise Improve Their Customer Service Focus On Core Competencies Capabilities in providing value-added services Details Please_______________________________________________________ _______________________________________________________

" ! Others (Please Specify)-

"

170"

_______________________________________________________ ______________________________________________________ 16. How does your company gauge its customer service performance! ! ! ! ! ! ! Customer Complaints On-time Delivery Frequency Of Delivery Inventory Turnover Inventory Level Order Cycle Other Factor (Please Specify)_____________________________________________ 17. What kinds IT applications are used in your company? ! ! ! ! ! ! ! ! Enterprise Resource Planning (ERP) Warehouse Management System (WMS) Transportation Management System (TMS) Vehicle Tracking System (VTS) Electronic Data Interchange (EDI) Radio Frequency Identification (RFID) All of the Above Others (Please Specify)__________________________________________________________ __________________________________________________________ 18. What are the main issues normally addressed in the contract or agreement-

"

"

171"

! ! ! ! ! ! !

Price/ Rate Service Standards and Performance Requirements Key Performance Indicators (KPI) for measuring performance Compensation/ Penalties Procedure for Termination Procedure for Contract Renewal Others (Please Specify)__________________________________________________________

Part 3 Competitive Situation 19. What do you think of the competition in the Indian logistics market today ! ! ! ! 20. Very intense Intense Mild No competition

What kind of competitor creates the most pressure on your company in this industry? ! ! ! Domestic Multinational Both

21.

Rank in the order of criticalityWhat is the most pressure coming from your competitors? Competitive Pricing-_____________________________________________ Service Quality- _________________________________________________ Aggressive Marketing Skills-_______________________________________

"

"

172"

Skilled Labour-__________________________________________________ Use of IT- ______________________________________________________ Capital Investment- _______________________________________________ 22. What opportunities does your company have in todays Indian market? ! ! ! ! ! Nascent Stage of 3PL Massive 3PL Growth Relaxed Government Taxation (Introduction of GST) All of the Above Others (Please be elaborate)-

23.

What are your companys strengths compared to your competitors? ! ! ! ! ! ! ! ! Competitive Pricing Distribution Network Fleet Size Management Expertise Long Years of Experience Extensive use of IT All Of The Above Others (Please be elaborate)-

24.

What are your companys weaknesses compared to your competitors? ! Inability to compete in pricing

" ! ! ! ! ! ! Smaller Fleet Size

"

173"

Smaller Distribution Network Lack Of Skilled Management Expertise Inadequate Marketing & Operational Strategies Weak Capital Investment Others (Please specify)-

25.

What threats does your company face in todays Indian market? ! ! ! ! ! ! ! ! Intense competition Influx Of Multinational Companies Increasing Oil Prices Lack Of Skilled Labour Lack Of Drivers Government Regulation Inadequate Infrastructure Others (Please Specify)-

26.

What are the biggest obstacles hindering your companys future development in Indian market? ! ! ! ! Lack of Skilled Workforce Government Policy Lack Of Capital Inadequate Management Expertise

"

"

174"

Others (Please Specify)-

27.

Would you like to participate in a follow up interview to discuss about the above issues in depth? ! ! NO YES

nnnnTHANK YOU FOR YOUR TIMEnnnn

"

"

175"

APPENDIX 2
INTERVIEW QUESTIONS 1. 2. Can you provide the timeline of your operations in India? How do you assess the future direction of your company in India? OR Where do you see your company growing in the next five years? 3. What kinds of strategies are adopted in your company to help your clients to achieve cost reduction? 4. For different clients, does your company use the same pricing strategy or policy? Why? Or why not? 5. What kinds of strategies are adopted in your company to help your clients to provide superior customer service to their customers? 6. For different customers, does your company use the same service strategy or policy? Why? Or why not? 7. How does your company view the relationship between your service strategies and the corporate objectives or strategies of your client? 8. What procedures or service policies are in place as part of your market developing strategy? Or how does your company translate potential clients into long term strategic clients? 9. How can your company ensure that the services provided by your company can help your clients to achieve competitive advantage? 10. How does your company manage different projects of your clients? (For instance, certain specific project needing certain specific IT capability, etc.)

"

"

176"

11.

How can your company adapt to new systems to meet special client needs?

12.

Comparing to other Indian 3PL providers, what aspects does your company need to improve?

13.

What are the factors according to you that set apart multinational 3PL providers from their Indian counterparts?

14. 15.

What do you think are the challenges for your company in future? How is the functioning of a joint-venture between an Indian provider and a multinational provider, and a pure multinational service provider different from each other?*

*- This question was only meant for Rhenus ProLog India.