EXEL PLC Supply chain management at Haus Mart
TABLE OF CONTENTS Page No.
1. Executive summary3
2. Problem (Issue) statement 4
3. Data analysis 4
4. Key Decision Criteria 5
5. Alternatives analysis 6
6. Recommendations 8
Exel Plc is the world’s largest third party logistics service provider. The company offers variety of services which can be broadly classified into mainly two major groups. * Freight Management
* Contract Logistics
Freight management is the upstream part of supply chain where material is handled in bulk. Exel plc takes the responsibility of transporting by freight on customer’s behalf. Contract logistics groups offer all kinds of logistics solutions except freight management. They include * Warehouse management
* Inventory management
* DC management
* Reverse logistics
* E-commerce services.
Exel has demonstrated their expertise in both the service groups and therefore the company is largest logistics provider both in terms of freight management and contract logistics. Exel plc offers mix of both the service groups in the proportion of 44% for freight management and 53% from contract logistics. The turnover of Exel was 5.1 billion in 2004.(Exhibit 1)The Company has extensive network of 675 locations and 112 countries for freight management and 1600 facilities and 120 countries for contract logistics. Still Exel has only 2% share from the total spend of its customers on logistics. Thus there is huge potential for growth and expansion. This is only possible if Exel thinks beyond its traditional disaggregated service delivery and enters into integrated service package. Exel is planning to move from execution to planning with integrated model approach and they wanted to start the joint planning process with Haus Mart.
There are currently four issues for which decision has to be made. 1) Is Exel ready to move into supply chain planning?
2) Do they have capability and skills to manage entire supply chain from planning to execution? 3) Do they have necessary bandwidth for this project as well as for the customers who would request similar service? 4) Is Haus Mart, the right choice to start with this new strategy?
The company was established in 2000 and in 5 years, it has grown with net free cash flow increase of 30% CAGR. But at the same time, turnover increased by mere 3% CAGR. This indicates the level of operational excellence Exel plc has developed to cut down the costs and thereby increase in net cash flow. (Exhibit 1) In 2003, Exel was serving 70% of world’s top 250 non-financial companies. The company has been successful in maintaining relations with customers which can be indicated by the fact that 75% of the contracts were renewed after they were expired.
Though Exel was growing at phenomenal pace, there was still tremendous potential for the Exel to grow. The total share of Exel in the amount spent by its top 50 customer on logistics was just 2%. (Exhibit 2)Till now Exel was providing the customer disaggregated service or single service category as 86% of Exel’s revenue came from disaggregated services. The remaining 14% came from integrated services that include overall coordination responsibility additional to regular services like warehouse management, moving etc. This approach could fetch more returns as Exel can charge for providing integrated services.
This integrated model was termed as LLP (Lead Logistics Partner). In this model, Customer and Exel would for joint team to manage single flow link across the supply chain from purchasing to customer delivery. Initially this team is responsible for making post-production supply chain decisions like inventory holding, shipment routing and scheduling etc. In later stages, the team will take deeper...