National Logistics Management

1
National Logistics Management
Turn of Events? Turn to NLM.

• Cindy Westcott
• Gerri McCann
• John True

2
3PL Opportunities Provided by the Internet

• Real-time information
• Track loads
• No need for traditional phone line link
• Common platform for sharing
• Opportunity to reach larger audience
• Post information and wait for responses
• Ease of sharing information between supplier
  ? 3PL ? customer
• No EDI required

3
3PL Opportunities with Internet

• More value brought to industry
• Traditionally 6-10 capacity not utilized
• Internet allows for more options to optimize
  underutilized capacity
• Quicker turnaround
• More accurate orders

4
3PL Opportunities with Internet

• Non-asset based 3PLs
• Do not own any transportation methods
• Rely solely on transportation firms to deliver
  scheduled loads
• Standard processes can be automated
• Tech savvy customers can complete their own forms
• No large staff required to answer phones

5
Does this industry have good structure?
6
3PL Industry
Competitive Advantage
Low Cost
Differentiation
Logistics.com Celarix.com Transplace.com
Some offer value adding services - Size
- Modes of Transp. -
Location - Storage
Broad
Competitive Scope
National Transportation Exchange
(unused space)
National Logistics Management (premium
freight)
Narrow
7
NLM Target Niche Market

• Premium Freight
• Items that are high priority
• Delays cost 20-50k per MINUTE
• Not subject to standard contract rates
• Potential for high profit margins due to high
  risks taken to deliver loads
• Automaker does not care about being charged high
  rates
• Reputation of shipper more important than cost
• Cost savings of one shipper can be wiped out when
  a late shipment occurs

8
Industry Structure Porter Model
Source Applegate. Lynda M. Robert D. Austin, and
F. Warren McFarlan, Corporate Information
Strategy and Management. Burr Ridge, IL
McGraw-Hill, 2002.
9
3PL Industry Pre-Internet

• Suppliers
• Manufacturers for big three automakers
• Very strong power
• Need cargo picked up at right time
• Customers
• Big three automakers
• Very strong power
• Need cargo received at right time at right
  location

10
3PL Industry Pre-Internet

• Barriers to Entry
• Must be on plant manger contact list
• Expensive to have fleet available
• Must have reasonable size fleet always ready
• Staff on hand to take phone calls
• Traditionally 6.3 9.6 of costs spent on
  processing transactions
• Substitutes
• In house logistics management
• Company owned transportation
• Sign contracts to single or few companies

11
3PL Industry Post-Internet

• Suppliers and Customers
• More power
• More 3PL companies to chose from
• More cost conscious to decrease costs in value
  chain
• High value is expected
• Commoditized industry

12
3PL Industry Post-Internet

• Barriers to Entry
• Less expensive due to website interfaces
• Not as many calls have to be answered
• More steps in process automated
• Still requires capital investment to start
• Data management allows for outsourcing of
  trucking
• Strong reputation required
• Substitutes
• In house logistics management
• Company owned transportation
• Sign contracts to single or few companies

13
Why would a customer use a 3PL service, such a
NLM?

• Lack of knowledge of shipping industry
• Lack of labor force to manage logistics
• Need for low cost transportation of goods
• Time sensitive deliveries

14
Advantages and Disadvantages to using 3PLs
15
Advantages for Customer with 3PLs

• Single point of contact to reach multiple
  potential shippers
• Potential cost savings due to competition
• Reduction of company overhead
• Provides labor and management of labor
• 3PL maintains their own facilities to manage
  their business
• Specialization in field
• Experience More efficient Lower costs

16
Disadvantages for Customer with 3PLs

• Having to pay extra company profit margin in
  supply chain
• 3PL may not select most cost effective supplier
  of transportation
• May be biased to some suppliers
• Limited access to suppliers of transportation
• Another potential for human error that could
  result in increased costs

17
Winners and Losers of a 3PL Dominated Industry
18
Winners in a 3PL Dominated Industry

• 3PLs
• Best prices
• Transportation is a commodity
• Will continue to grow if have low prices
• Add Value
• Industry differentiation is as good as the value
  it adds
• IT employees at 3PLs
• Web based applications require constant
  modifications
• Customers
• Costs continue to lower as more 3PLs enter the
  industry
• Cost savings can be passed to stockholders

19
Losers in a 3PL Dominated Industry

• 3PLs
• Low prices
• Only one low cost provider
• Not enough room to support many 3PLs
• Add Value
• If customer can not quantify value, it is not
  value
• Employees in 3PL industry
• Web based software will continue to replace need
  for humans
• More technical savvy employees will be required
  as industry advances

20
NLMs Expedited Management System

• Web based format
• Many steps automated by using EMS software
• Load optimization
• Sharing of information
• Customer and NLM staff monitors shipments using
  real-time data
• Only trusted transportation providers used

21
NLMs Expedited Management System
22
NLM Role in the Shipping Process

• Receive orders
• Optimize
• Post orders
• Determine best carrier
• Dispatch carrier
• Monitor delivery
• Real-time information from shipper
• Apply corrective action when needed
• Follow Up
• Ensure customer satisfaction

23
Potential growth strategies for NLM
24
Possible Growth Strategies

• Organic
• Grow naturally as it has in the past
• Slow, but business plan has worked
• Proactive Partnerships
• Explore partnerships with other companies in
  industry
• Cover more than existing niche market

25
Possible Growth Strategies

• New Playing Fields
• Reach out to smaller shippers
• Be a dedicated 3PL for companies with multiple
  shipping contracts
• Profits may be lower
• Could create diverse customer base
• Branch out to other industries
• Existing system easily modified for other
  industries
• Possible modify EMS to automatically award jobs

26
Recommendations for NLM Growth
27
Recommendations for What Not to Focus on for
Growth

• Organic Growth
• No need to pursue as long as strong player in
  industry
• Will come with time
• Proactive Partnerships
• Other large 3PLs always under pressure to be low
  cost provider
• Highly competitive industry with decrease in
  profit margins as more 3PLs join industry

28
Recommendations for Growth

• New Playing Fields
• EMS software
• Easily be adapted for other industries
• Scalable to fit customer or industry needs
• Minimal expense to expand
• Automation of shipment awarding
• Scoring of received bids can be automated along
  with awarding of shipment to carrier
• Have customer set most important criteria for
  scoring of bids
• Force shipper to be responsible for shipment
  tracking
• Notify customer if shipment will not make
  deadline
• No need to track specifically if non-critical
  load

29
Questions ??

• Comments??