Abstract
Ittu Sharma, the founder of Kodan Solutions Private Limited (KSPL) has been able to create a niche logistics service for mining, energy and construction sector, having addressed the market need for a safe and cost-effective intercontinental movement of industrial project cargo. As the sole investor, Sharma was able to maintain the profitability of her venture with a 50%–60% year-on-year growth in turnover since her firm’s inception in September 2014. Nevertheless, the dynamic Indian logistics landscape continued to get crowdy with numerous logistics service providers operating on asset-based and non-asset-based business models. A leading manufacturer of premium motorcycles in the country sought KSPL’s services to meet its end-to-end supply chain needs, coordinating the movement of motorcycles manufactured in its north India-based plant to the Southeast Asian markets. Confident of her vision that services such as last-mile logistics and delivery would not only allow for a healthy client pipeline but would also extend her typical Customer Life Value, Sharma was keen to explore this opportunity. But before she could take a firm decision in that direction, KSPL had to evaluate whether it was ready to enter the market segment of fourth-party logistics (4PL) services for discreet goods such as bicycles. Total value of ownership (TVO) framework for analysing cost and value drivers for the decision is presented below:
The Proposed Solution
To ensure optimal handling and transport of a diverse range of finished motorcycles from manufacturer to the dealer network in the Southeast Asian markets, an adequate network of specialized third-party logistics (3PL) partners was critical for KSPL. Partnering with efficient truck fleet operators specialized in two- or three-decker trucks for moving the finished motorcycles from the manufacturing plant to the port and roll-on/roll-off (RORO) vessel operators to the destination country was crucial to achieve economies of scale. Further, considering the customer expectation regarding delivery lead time, access to a network of terminals at major ports in Southeast Asia was crucial for the smooth distribution of vehicles to the dealer network. Considering the fragile nature of the cargo, KSPL needed to hire technical services provided at terminals for predelivery inspection, vehicle cleaning and quality control. Furthermore, investing in the development and implementation of IT-based solutions for ensuring interconnectivity and coordination with the 3PL network was also key requirement for accepting this business proposal. An in-house team of experts in international trade and an extensive global network of 3PL were behind Sharma’s optimism about the vehicle logistics service opportunity. However, it is to be seen whether Sharma, a woman entrepreneur, could create the synergy between vehicle logistics and project logistics, using her experience and strengths in the field. Following are several questions that needed to be considered post expanding into the highly demanding 4PL service for manufacturer of discrete products like bicycles:
Would KSPL be able to continue its focus on project logistics and sustainably increase the business value it had amassed over the years? Was KSPL ready to enter the market segment of 4PL services for discreet goods like bicycles?
Core T and L Services of KSPL
Some of the non-core activities for which KSPL services can be hired by large infrastructure developers and manufacturers are as follows:
Planning of Transport Routes
KSPL expert services can be employed for planning effective transportation or transfers of project logistics through multiple stops. With expert in-house team and partners specialized in naval infrastructure, engineering and project management, KSPL can help clients in ascertaining the most cost-effective route.
Warehousing Services
Large infrastructure developers and manufacturers could use KSPL services for warehousing facilities. It offered facilities for break bulk shipping for over- dimensional goods, which cannot be transported in/on a single container. It also offered cross-docking facilities, which allows cargo to be immediately unloaded from an incoming container and then loaded immediately to an outbound container. Additionally, it offered postponement services, which involves providing storage services to delay final manufacturing or distribution of a product until receipt of a customer order.
Value-added Services
KSPL offered additional value-added services, including reverse logistics, custom clearance and export packaging for project logistics to large infrastructure developers and manufacturers. As part of reverse logistics service, KSPL also supported its clients to manage the returns of cargo due to quantity or quality mismatch. It offered services for labelling, shrink-wrapping and blister packing. KSPL has expertise in export–import documentations required for custom clearance. Some of the key documents prepared were bill of lading, certificate of origin, export license, commercial invoice, inspection certificate, packing list, airway bill and dock receipt.
Differentiation Between 4PL and 3PL and 2PL
KSPL is a 4PL service provider. Some of the differences in the service portfolio of KSPL from second-party logistic (2PL) providers to 3PL like freight forwarder or transporter are as follows:
A first-party logistic service provider or IPL providers or transporter offer service of packages and transporting products using its own manpower and fleet of trucks. A second-logistic service provider (2PL) or freight services are limited to contracting or renting the transport infrastructure (such as trucks, containers, ships) to client company for the movement of freight. Unlike a 4PL service provider, KSPL has a strategic-level involvement in designing and implementing of logistics strategy for the client company. It manages the entire logistics function comprising infrastructure, manpower, technology and coordination with external parties like transporters, freight forwarders, etc., on behalf of the client company.
Some of the specialized services offered by KSPL included reverse logistics, custom clearance and export packaging for project logistics to large infrastructure developers and manufacturers. As part of reverse logistics service, KSPL also supported its clients to manage the returns of cargo due to quantity or quality mismatch. It offered services for labelling, shrink-wrapping and blister packing. KSPL has expertise in export–import documentations required for custom clearance. Some of the key documents prepared were bill of lading, certificate of origin, export license, commercial invoice, inspection certificate, packing list, airway bill and dock receipt.
Value of Clients
Some of the value-added services offered by KSPL in the project logistics area are:
Reverse logistics: As part of reverse logistics service, KSPL also supported its clients to manage the returns of cargo due to quantity or quality mismatch. Cargo packaging: It offered cargo packaging services for labelling, shrink-wrapping and blister packing. Custom clearance services: KSPL has expertise in export–import documentations required for custom clearance. Some of the key document prepared were bill of lading, certificate of origin, export license, commercial invoice, inspection certificate, packing list, airway bill and dock receipt.
Pros and Cons of Business Proposal
The results of strength, weakness, opportunity and threats or SWOT analysis for the business proposal to KSPL of offering 4PL services to two-wheeler manufacturer are:
KSPL has a vast network of supply chain partners specialized in project logistics. These partners include vessel owners, freight forwarders, carriers and custom. KSPL has a team of experts in the area of export–import documentation. Ittu Sharma, KSPL’s founder and owner, has vast experience of working in Transport and Logistics industry. KSPL is a licensed operator for handling multi-modal transport projects.
KSPL’s experience was limited to project logistics and lack of knowledge in vehicle(discreet) logistics. It has deficient information technology (IT) infrastructure to organize with 3PL partners, operating at a global level.
Transport and Logistics sector in India has been growing at a fast rate. Transport and Logistic sector was expanding with multiple consolidations. Large-scale infrastructure growth supported the growth of transport and logistic sector.
Many technology start-ups have entered the 4PL service market. Customer’s service expectations were evolving.
Some of the internal factors that KSPL needs to work on to realize the 4PL service opportunity are:
Investment on IT infrastructure for better coordination with network partners. Additional access to Southeast Asian ports for the smooth distribution of vehicles. Building technical skills for route planning and custom clearance documentation.