What is ERP ?

ERP is the short form for Enterprise Resource Planning,   a business process to integrate all functions across a company to a single computer system that can serve all specific needs of the company. ERP is  an integrated set of application software modules ,providing operational, managerial and strategic information, to improve the productivity, quality and competitive advantage. It may also integrate key customers and suppliers as part of the enterprise’s operation and provides integrated database and custom-designed report systems. It also adopts a set of “best practices” for carrying out all business processes. Integration” is the key word for ERP implementation.

 

Major reasons for adopting ERP

ü  Integrate financial information

ü  Integrate customer order information

ü  Standardize and speed up operations processes

ü  Reduce inventory

ü  Standardize Human Resources information

Third Party (3PL) and Fourth Party (4PL) Logistics

OUTSORCING - paved way to 3PL & 4PL

—  Outsourcing is one of the important features of SCM . It is the usage of other agencies to carry out non-core activities of an organization.

—  First , the parent organization separate the value adding and non-value adding activities. They concentrate only on value-adding core functions and leave the other activities to those who have the expertise.

—  In other words ,  do what you are best at and leave all other non-value-added activities to more suited players. This is the concept behind 3PL & 4PL.

            Third Party Logistics or 3PL

—  3PL and 4PL are terms coined by Accenture, an international research and consulting firm to describe the outsourcing of certain key business fulfilment tasks to other companies.

—  The outsourced functions include service managements in - demand, supply, transportation , materials , production, green supply chain and financial supply chain

—  Outsourced tasks such as warehousing, picking, packing, shipping and inventory management helps to manage the supply chain more efficiently and effectively.

—  Some 3PLs might also help with the administrative side of these tasks, such as invoicing and accounts receivable.

—  Logistics planning, customized logistics  solutions, warehouse management, Inventory Management , shipment consolidations , carrier selection, rate negotiations, fleet management, LIS , tracking/tracing ….etc….. are the functions carried out by 3PL firms.

ADVANTAGES OF 3PL

ü  Cost Reduction

ü  Maximizing Revenues

ü  Facilities

ü  Cost control

ü  Working Models

 

WHY 4PL ?

ü  3PL often lack broad set of skills, integrating technologies, strategies and global reach.

ü  To build up this, 3PLs go for collaborations with consultancies and technology providers

ü  Corporations outsource their entire set of supply chain requirements to one organization, who will assess , design, make and run integrated comprehensive supply chain solutions.

ü  This evolution is Fourth – Party Logistics or 4 PL.

Fourth Party Logistics or 4PL

ü  In 4PL, logistics is controlled by a service provider that does not own the assets to carry out logistics activities but outsources to subcontractors, the 3PL

ü  Globally, about 75 % of the Fortune 100 companies and about 45% of Fortune 500 firms have now gone in for 4PLs.

ü  A 4PL provide effective transport along with an entire distribution system, high reliability, transparency, quality, efficiency and design new distribution scenarios

ü  A 4PL company serve as consultants who manage the relationship between the principal company and one or more 3PLs to make sure all operations are running smoothly.

ü  They can carry various levels of responsibility, from advice on choosing the best companies, right up to the day-to-day management of essential logistical tasks being performed for the principal company.

ü  4PL caters to various clients, economies of scale is attained as the investment is spread across clients.

STAGES  OF 4PL SOLUTIONS

ü  Reinvention - Align business strategy with supply chain strategy

ü  Transformation – Focus on improving supply chain functions. (sales, ops, distribution, customer support )

ü  Implementation – Implement recommendations for efficient use of SCM

ü  Execution – Takes operational responsibility for multiple supply chains functions and ops.

3PL / 4PL COMPARISON

—  3PLs adopt a scientific approach to logistics, to optimise cost and improve service levels and response. They also help clients achieve efficient inventory turnover and working capital management.

 

—  4PLs facilitate single-point reference for all logistics needs, possess knowledge of logistics to obtain most efficient and effective solutions, have manpower resources of higher quality to supervise vendors and ensure continuous process improvements and, above, all an IT base to network customer systems.

 

MANAGEMENT STRATEGIES OF EMPTY MARINE CONTAINERS

THE BACKGROUND

Since the beginning of containerization , the shipping industry has shown enviable developments in increased productivity, vessel capacity, speed ,safety , reduction in service time and cost. Despite these achieved efficiencies, marine container logistics has been suffering from severe trade imbalances between the major trading regions. And these imbalances cause one of the biggest hidden costs to the shipping industry– repositioning of empty containers!  As per an article appeared in the  Shippingwatch , every year Maersk Line moves around 4 million empty container from point A to point B which costs around USD 1 billion. 

Drewry Shipping Consultants estimated that there were over 82 million port to port moves of empty TEUs worldwide in 2010.  The Port of Los Angeles alone reported 831,370 empty TEU shipments during the first half of 2011, representing over 42% of their outbound container traffic.

 

                                                 

 

Empty Containers are repositioned at various levels , namely Global ,interregional, regional and local.

 

(a)   The global level involves massive all sea empty container repositioning from surplus to deficit area (eg.Cochin to Chinese ports).

(b)   The inter-regional level involves either balancing repositioning inside a wide geographical area ( within Asia , Europe , ISC) or on a leg finally leading to global repositioning ( Tuti / Chennai > Colombo / Port Kelang > Europe / USA).

(c)   The regional level involves the empty balancing between ports / ICDs of same region  (Cochin to Tuti / Mangalore /Bangalore/Coimbatore) by road , rail or by sea using coastal services.

(d)    The Local level involves empty shunting between marine terminal and depots, the  storage and maintenance issues.

 

Each empty container move involves fuel and electrical consumption by ships, terminals, trucks, and railroads and results in excessive unproductive empty vehicle miles in a region. Hence, another important aspect to be considered associated with repositioning empty containers is the carbon footprint. 

Due to insufficient port / depot infrastructure and poor logistics management strategies of the carriers, the whole process of empty container evacuation used to be cumbersome , time consuming and expensive. This situation demands for an empty container management strategy which rationalizes the repositioning, storage and maintenance of empty containers in major importing regions. For formulating a suitable management strategy, issues mentioned in the below chart are to be addressed.

MANAGEMENT STRATEGIES

Various empty container logistics management optimization strategies for minimizing the cost to carriers are currently either being explored or implemented to a certain extent. The most popular strategies includes :  

(i)            Effective service net work design with empty container reposition considerations to avoid vessel calls dedicated to empty repositioning.

(ii)           Matching cargo to empty containers to reduce empty frequency

(iii)          Design of a empty storage & maintenance network

(iv)          Transportation options for less expensive repositioning.

Among the upcoming management strategies to reduce the energy, cost and effort to reposition empty container , the most popular one is  the concept of folding containers.  Presently a number of options are under various stages of implementation, including Staxxon folding/nesting container technology (New Jersey), Holland Container Innovations (Delft), CargoShell (Rotterdam) and Foltainer (Brisbane), all of them have developed their own collapsible or composite container designs.  If empty containers can be folded and nested and moved in sets of 2 or more,  occupying the same space and dimensions as one container,  operators  could  save huge money on account of transportation, handling and storage. 

Another recent innovation is the Tworty Box, two 20 ft containers that can be linked together to form a single 40 ft unit ! The first tworty box completed its maiden voyage from Hamburg to Montreal on the containership OOCL Montreal.  

Even though the empty container repositioning is a non-revenue generating, complex, expensive and undesirable exercise, it is an integral part of the maritime sector, which balances demand and supply between regions. Ultimately only time will tell whether it is folding containers, tworty  boxes, trans-loading, or some other solution to address this growing global issue .

P3 – The New Mega-Alliance !!!!!

The announcement of setting up of The Mega P3 Alliance  by  Maersk, MSC & CMA CGM literally stirred up the shipping community as a whole. The P3 network is expected to commence from the 2^nd quarter of 2014. Assuming regulatory hurdles are overcome, the P3 network will cover the three trade lanes of Asia-Europe, transpacific and transatlantic, using the existing capacities of each member.  The network is estimated to have a market share of about 42%on the Asia-Europe trade, 24 % on the transpacific and 40% on the transatlantic trade.

An independent operating centre will be set up in London to manage the P3 network, responsible for ensuring that each line's schedule integrity is maintained at a high level. The centre will be headed by former Maersk Trade Manager Lars Michael Jensen. The working style of MSC is different from Maersk & CMACGM and it is to be seen how the mega carriers perform together.

The P3 Alliance will first deploy 255 vessels with a capacity of 2.6 million TEU, operating across 29 separate loops.  Maersk will contribute 42% of the capacity,  MSC with 34%, and CMA CGM with 24%. Vessels provided by the lines will continue to be owned and chartered individually by the carriers. Also, they would be allowed to trim down sailings during the low seasons  and  might add extra loaders at times of high demand.

 

 

 

As per the reports , the P3 Network partners have still not agreed on which port will serve as the key hub in Southeast Asia . According to analysts SeaIntel, choosing a key port in Southeast Asia is very important and one of the major challenges for Alliance, as cargo from countries such as Indonesia, the Philippines, Vietnam, and Thailand is distributed further through the three key ports currently used by each carrier. For Maersk Line this port is Tanjung Pelepas and for CMA CGM it's Port Kelang, also in Malaysia, while MSC is using Singapore.

 The member lines will continue to negotiate with customers separately and also set individual freight rates. Shippers can book container with any of the three carriers, and a ship from one of them will move the goods port to port . "We believe that customer experience is more than just sailing schedules, which is the only thing this alliance shares. Areas such as sales, customer service, IT service, physical conditions, commitments, and prices are some of the many other important criteria that come into play when customers make choices. We will continue to differentiate our products on the basis of the these criteria. On Asia-Europe as well as other routes around the world we'll share our infrastructure with partners while continuing to offer a differentiated Maersk service to our customers," says Vincent Clerc of Maersk Line.

The announcement of the P3 Alliance has been both applauded as the solution to the over-capacity   situation in the global ocean liner trade and despised as a monopoly cartel devised by the world's           three largest container carriers. In reality, it is somewhere in between those two extremes. However, P3 alliance hopes to reverse the downward financial trend by deploying most suitable vessels , avoiding duplicate trips and cutting fuel costs.

Coastal Shipping is a need rather than a desire!!

India with an expansive coastline of about 7517km,  studded with 12 major and 185 Non-Major (Minor / Intermediate) ports ,  should be having  a vibrant and viable shipping industry. The maritime industry should be the cornerstone of India’s transport industry given that more than 95% of India’s  EXIM trade by volume and 77% by value, moves by sea.

 

In recent years coastal shipping have increasingly become the focus of attention in India. Coastal movement of cargo by sea in the country has grown at a CAGR of 3.3% during the period of 2001-10, while overseas cargo movement has registered a CAGR of nearly 12% during the same period. However, at present country’s domestic transport demand is being mainly met by the road (54.4%)and rail (34.4%) transport systems. Coastal shipping carries only 6.84% of domestic freight( Delotte report , 2011). In fact, it should have been the natural transport choice for domestic supply chain logistics!

 

Coastal shipping has many advantages, such as better fuel efficiency, lower unit transportation cost, eco-friendly, free of congestion, etc. over competing modes of transportation such as road and rail.   However the economic viability of a transport mode depends mainly on the actual trade size, distances involved (Origin – Destination) and competitive forces. Unlike road transport, coastal shipping can only be a link in a multimodal transport chain. Hence for coastal shipping to be viable, the multimodal chain as a whole, including the land legs, should be efficient and cost effective. 

 

 

In developed countries, coastal shipping forms a vital link in the overall transportation infrastructure. European Union perceives coastal shipping as an integral part of its transport policy to develop efficient, multi-modal transport system for meeting existing and future business requirements, achieve modal balance, reduce pollution, congestions, accidents etc. Presently in European Union, 43% of cargo is handled by coastal shipping.

 

In India, though seaborne trade has been growing at a rate of over 11% in the last 10 years, the Indian tonnage is not growing in pace with the fast growing maritime trade. As on 31st March 2011, India had 708 vessels under coastal trade and 347 vessels under overseas trade totalling to a fleet size of 1055 ships (source INSA report) with a 10.36 million gross tonnage. In terms of fleet size, the Indian shipping industry makes only a marginal share of just about 1% of the global fleet.

 

Though coastal vessel number increased from 244 in 2001 to 708 in 2011(as on 01.03.2011, source INSA report), actual number of cargo carrying fleet is very small. The major percentage of fleet comprises of passenger – cum – cargo vessels, passenger vessels, dredgers etc. As per INSA report, around 52%of the Indian shipping fleet are over 20 years of age and overdue for replacement.

 

Government of India has envisaged an ambitious plan to grow the Indian shipping fleet from 10 million GT to 40 million GT by the year 2020. Despite the global downturn, Indian domestic trade is expected to remain strong and coastal shipping would retain its strong potential. It is to be noted that the maritime states with developed infrastructure and favourable environment for business growth, are likely to have larger share in cargo traffic with high pace of growth.

 

Among the maritime States in India,  Gujarat (29%) and Maharashtra (19%) leads in growth of coastal cargo traffic at ports. With the implementation of the Delhi-Mumbai Industrial corridor by the next decade, the maritime environment in the two states will remain bullish. Further, the four states namely, Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu, clubbed together have more than 75% share of coastal cargo. These states have been forerunners in creation of infrastructure and attracting investments. Also, these states are blessed with thriving industrial hinterlands.

   

The challenges facing the coastal shipping industry may be significant, but a number of opportunities are also emerging.  Booming automobile industry, increasing industrialization, growing project cargo moves for power and construction sector , port development and retail trade reforms are expected to give a thrust to the coastal traffic in India . Following factors are expected to be the growth drivers which would contribute to the sustained growth of coastal shipping in India.

 

ü  Population growth and thereby consumption growth

ü  Growth of economy and trade

ü  Increase in transportation demand thereby requiring the need to explore alternative transportation modes

ü  Increased emphasis on clean development

ü  Fuel scarcity forcing to utilize fuel efficiently

ü  Increase in containerization

ü  Huge investments in maritime infrastructure

 

Shipping connectivity is an important determinant of trade competence. The time has now come for policy makers to rethink their development philosophy to focus on non-major ports, transhipment hubs, inland ports, container freight stations, transport corridors, IWT as well as coastal shipping. A relatively modest investment in coastal sea routes with appropriate policy changes would bring substantial benefits by reducing burden on present transportation system, traffic congestion and pollution.

 

A number of prominent committees have made their suggestions and recommendations to the Ministry of Shipping (Government of India) to revive the fortunes of coastal shipping. These recommendations are still gathering dust in the corridors of the Shipping Ministry. These are compelling times and efforts have to be made to divert cargo from road and rail transport to coastal shipping as it is the most energy efficient and economically viable mode of transportation.

 

The economic progress of India depends on the value addition of its trade, commerce and industry. A comprehensive and strategic transportation plan, national and intermodal in its scope, is the need of the hour.  Therefore, coastal shipping should be put on fast-track development, as it would not only lead to reduced cost of transportation but also reduced social and environmental costs.  

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Freight Forwarders & NVOCs – What is the difference?

Freight Forwarders act as agents of merchants/shippers. Many forwarders act as consolidators too, ie, combining small lots of cargo into big parcels/full container loads. Generally they issue forwarder B/Ls (House B/Ls) to each shipper. Under this B/L they accept responsibility as the agent of the shipper only. Incase of an issue, the holder of the B/L will have to take it up with the actual carrier.
 

NVOCCs (Non Vessel Operating Common/Container Carrier) –  When a forwarder acts as a carrier he is termed as a NVOCC. Though NVOCC is not the actual ship operator, his role is same as that of a principal and accepts the carrier’s responsibilities.
 

Both freight forwarders and NVOCCs are important customers of the lines. Their profit is the difference of freight rate received from shipping line and that charged to the shipper, plus the margins from pre/on carriage, documentation and other value added services.

Through Bill of Lading & Combined Transport Bill of Lading – Are they same ??

No, there is a significant difference between the Through B/L and Combined Transport B/L.

Through B/L -  Under a Through B/L the ocean carrier acts only as an agent for the shipper in arranging the pre and on carriage. The pre/ on carrier may be a feeder vessel or land transport (road/rail). The  ocean carrier will arrange the pre/on carriage and will charge merchant for the service. But, will not have any direct liability for any loss or damage to the cargo during those part (pre/on carriage) of the journey. The responsibility of the carrier is limited.  

Combined Transport B/L – Here the carrier accepts liability from beginning to end. This B/L is the requirement of container trade to facilitate door-to-door movement. In the case of a door-to-door movement of containers  there is carrier haulage at both ends, which combines various modes of transport, and it is logical that the carrier accepts liability from the shipper’s premises to the consignees’ premises.