Case Study:

Logistics Operations ABC Ltd. is the countrys largest manufacturer of spun yarn with well-established
market. ABC Ltd. has good reputation for quality and service. Their marketing department identified that
the potential for global market is expanding rapidly and hence the company undertook exercise for
expansion of the capacity for export market.
The company formed team of Marketing and Materials department to study the global logistics
possibilities. After extensive study, the team came up with a report on global logistics and submitted that
global logistics is essentially same as domestic due to following similarities:
The conceptual logistics framework of linking supply sources, plants, warehouses and customers is
the same.
Both systems involve managing the movement and storage of products.
Information is critical to effective provision of customer service, management of inventory, vendor
product and cost control.
The functional processes of inventory management, warehousing, order processing, carrier selection,
procurement, and vendor payment are required for both.
Economic and safety regulations exist for transportation.
The company had very economical and reliable transportation system in existence. For exports as well
they decided to evaluate capabilities of their existing transporter and entrusted them with the job of
transport till port. For customs formalities they engaged a good CHA after proper cost evaluation and
entered into contract for freight with shipping company agent.
The response for companys export was very good and the company could get as many as 15 customers
within first two months and reached to a level of USD 250,000 per month by the end of first half of the
year. Based on this response the export volumes were expected to grow to a level of USD 400,000 per
month by the end of the year. When the review was made at the end of the year, company found that
export volumes had in fact come down to the level of USD 120,000 which was much lower than it had
reached in the first half of the year.
The managing committee had an emergency meeting to discuss this and the export manager was entrusted
with the task of identifying the reasons for this decline. Mr. Ganesh decided to visit the customers for
getting the first hand information. When he discussed the matter with the customers, the feedback on the
quality and price were good but the customers were very upset on the logistic services due to delayed
shipments, frequent changes in shipping schedules, improper documentation, improper identifications,
package sizes, losses due to transit damages etc.
After coming back, the export manager checked the dispatch schedules and found that production and ex-
works schedules were all proper. Then he studied the logistics systems and found that the logistics cost
was very high and all the logistics people were de motivated due to overwork and were complaining of
total lack of co-ordination and the system had become totally disorganised.
Questions:
1. Explain the problems experienced by ABC Ltd. What is the main cause of these problems?
2. What logistics model should the company go for to ensure proper operations of the company?
Possible Solutions:
1. Here in this case, the company has faced problem of dissatisfied customers. The company has faced
this problem due to improper handling of their logistics operations. The employees of the company are
feeling the pressure of overwork as well as are demotivated due to the inefficiency in their logistics. The
problem has been faced by the company due to their inadequate understanding of international logistics.
Although their analysis of similarities between domestic and global logistics is correct but they have
overlooked the fact that there are basic operational differences between global and domestic logistics
operations.
The basic difference in the domestic and logistics operations are as follows:
Distance : Global supply chain is typically greater than the domestic supply chain
Language: In domestic supply chain, usually only one language is spoken; whereas in a global supply
chain, multiple languages are utilised.
Meaning : In international trade, same word has different meaning in different countries. Ton ( Short=
2000, Metric=2205, Long=2240)
Cultural : Culture and work ethics vary across the countries.
Govt. Regulations : Country wise rules and regulations are different.
Currency : Exchange rate fluctuations are common in global chain.
Political Situation: Political instability in various parts of the world is a common factor for global
supply chain.
Infrastructure : The infrastructure facilities vary in different countries.
Environment : Environmental regulations and compliances vary considerably in the global supply
chain. Labeling : Labeling laws differ among countries.
Customs: Each country has regulations controlling the exporting and importing of goods and services
and can change overnight.
Transport Regulations : Transport regulations in different countries vary to a great extent.
Paperwork: Typical global logistics may require 20 to 30 different types of documents to be prepared
depending on the country regulations.
Payment Modes : Compared to local payments, mode of payments for global logistics is governed by
different regulations.
Govt. Regulations : Banking, Insurance, Accounting etc. regulations.
Govt. Schemes : Understanding of DEPB, Drawback, Advance License, EOU, Free Shipping bill.
Cross Country Agreements: Agreements like SAFTA, NAFTA,ASEAN etc.
Carrier Selection: As regards selection of mode of transport, many modes and combination of modes
are required in international logistics e.g. Charter Vessels, Break-Bulk, Containerised
( GP,HQ,FR,OT) LCL, Air
Stuffing: Different loading options are available for global logistics and the procedures and
documentation is different depending on the type of loading like Factory stuffing, Dock stuffing,
Consolidation etc.
Preservations : Various atmospheric conditioning requirements are there for global logistics due to
higher transit time.
LC conditions : Understanding of Contracts and other conditions has to be very clear as different
countries have different contractual obligations and payment modalities.
2. The solution for this problem is appointment of 3PL / 4PL service provider. A third-party logistics
provider (abbreviated 3PL) is a firm that provides outsourced or "third party" logistics services to
companies for part or sometimes all of their supply chain management function. Third party logistics
providers typically specialise in integrated warehousing and transportation services that can be scaled and
customised to customers needs based on market conditions and the demands and delivery service
requirements for their products and materials. There are numerous reasons why using 3PL can help to run
a business more efficiently. Outsourcing logistics, first and foremost, helps a business preserve valuable
time. By freeing up resources in the organisation, more time can be allocated to focusing on core
competencies. It is also important to note that having the required resources available does not guarantee
success. 3PL providers exist because they have an expertise in providing logistics support and therefore
can potentially add value to the business supply chain. Outsourcing to a Third-Party Logistics Provider
can also create shared responsibility for the business. The 3PL can share responsibility for a variety of
services, such as supply chain management and locating economies of scale. Utilising a 3PL provider can
also help to re-engineer a business distribution networks by plugging the business into new markets. All
of the benefits of outsourcing logistics to a 3PL provider contribute to gaining a competitive advantage in
the market. A 3PL provides integrated logistics services (i.e. the complete set of logistics activities from
the buyer to the seller). A 3PL is assets based unlike a 4PL (fourth-party logistics provider). The term
"4PL" was actually coined by the consulting group Accenture. In fact, they also hold the trademark to the
name 4PL. Accenture defines a 4PL in the following manner: "A 4PL is an integrator that assembles the
resources, capabilities, and technology of its own organisation and other organisations to design, build
and run comprehensive supply chain solutions."
Following diagram give insight into working of 3PL and 4PL.

Thus, it will be advisable for ABC Ltd. to go for integrated 3PL service provider who will handle all their
activities of export logistics operations.