3rd Party Logistics Practices at India

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3PL Practices in India
Dr. B.S. Sahay
Professor of Operations Management Chairman, Centre for Supply Chain Management

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Centre for Supply Chain Management
Management Development Institute
Gurgaon, India

Agenda for the Session
• • • • • •
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Some Facts Business Challenges Why 3PL in India? 3PL Practices in India Conclusions and Recommendations What should be done?

Financial Improvements
Percent Improvement 13.5% 12.3% 9.2% 10.5% 10.0% 10.0% 15.0%

Financial Indicator Improvement in Sales Revenue Working Capital Improvement Capital Asset Reduction Production Cost Reduction Labor Cost Reduction ROA Improvement Logistics Cost Reduction SCM

Some Facts:
• Annual Plan Outlay • Fiscal Deficit • Inventory tied up • Logistics Cost • GDP SCM

: Rs. 1.13 Lakh Crores : Rs. 1.35 Lakh Crores (5.3% of GDP) : Rs. 1.17 Lakh Crores : 13.6% of our GDP : Rs. 25.57 Lakh Crores

Logistics Cost
Country Asian region China Japan Korea Singapore Taiwan European region France Germany Italy Netherlands Spain UK Sweden North American region Canada Mexico US GDP (billions) Logistics as % of GDP 14.5 10.5 12.4 20.0 13.5 11.7 11.8 12.6 12.2 12.1 12.2 12.7 11.8 14.4 8.70 345 3363 283 40 148 1200 1566 1151 286 527 1015 237 593 208 5673

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International Comparison of Customer Orientation
Parameters

Product Quality 41.08 52.39 63.00 60.71 68.13 59.67 92.68 92.50 55.94 72.89

Product Design 34.05 56.62 58.50 48.57 58.06 69.84 81.46 71.39 66.96 63.11

O n - T i m e A fter-Sales M a n a g i n g D istribution Delivery Service 30.27 36.34 57.00 59.29 62.19 62.62 93.17 88.06 44.64 69.78 41.08 39.15 54.00 47.14 62.50 57.70 89.76 78.61 45.56 68.44 52.43 51.83 66.50 57.14 66.45 74.43 72.20 75.83 66.09 74.76

India Brazil Thailand South Korea Canada USA Japan Germany France Netherla nds No SCMt e : Source:

Companies are r ated 0=poor to 100=excellent World Competitiveness Report, 2000

Business Challenges
• Customer Expectation • Shortening of Product Life Cycles • World Competition • Shareholder Accountability • Competing Through Time • Return on Investment

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Supply Chain Model
Company
Design Supplier’s Suppliers Supplier Acquire Market Distribute Customers Customers/ End users

Convert

Mgmt

Control

Information, product and fund flow (forward and reverse) SCM

Logistics Management
“Logistics Management is the process of planning, implementing and controlling the efficient cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information from point-of-origin to point-of-consumption for the purpose of conforming to customer requirement”. SCM

Third Party Logistics
• A 3PL provider is a company which supplies /co-ordinates logistics functions across multiple links in the supply chain. • The company acts as a ‘third party’ facilitator between seller/manufacturer (the ‘first party’) and buyer/user (the ‘second party’).” SCM

Research Objectives
• To know the scenario of 3PL Practices in Indian Industry • To identify Critical Factors for evaluation, selection and relationship management with 3PL providers • To provide a benchmark for Indian firms looking to optimise their logistics operations • To project the future trends of 3PL services in India SCM

Research Methodology
Consultation Available World-wide Surveys Indian Economic Scenario Design of Survey Questionnaire Pilot Survey Data Analysis Questionnaire Modification Administration of Questionnaire (by Post & Personal Visits) Data Sorting & Evaluation Interaction with Respondent Non response bias & Data Analysis

Academic Study – India’s competitiveness, Global Supply Chain/logistics/ 3PL scenario

Identification Companies Administration of Questionnaire

Tabulation of Survey Findings

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Research Conclusion

Participation by Ownership
126 valid responses, 112 Users, 14 3PL providers

Public Sector 3%

Private 34%

Public Limited 63%

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