Literature Assignment: Added Value Developments of Truckers 2008.TEL.7249
March 2008 Pieter Jongen, 1104284 7
II Summary
Road transport companies are hardly profitable these days with an average rentability of -2% and subject to the biggest competition in small businesses in the Netherlands. Nowadays, road transport companies offer their suppliers many Value Added Logistic activities (VAL-activities) to extend their business. VAL-activities provide an extra source of income for road transport companies during the logistic process, mostly executed in their distribution centers and warehouses. The relevance of VAL-activities is the reason why road transport companies have become Logistic Service Providers (LSP’s). This literature assignment is written to explain what VAL-activities are, why they are offered, how the developments have influenced the LSP’s during the last decade and which future trends are expected. A market analysis by TNO and Holland International Distribtuion Council of the top 50 LSP’s in the Netherlands is used to get insight in the facts and figures of LSP’s.
VAL-activities are all the activities executed to add value to a product, by postponed production and by services, during the distribution from supplier to customer. The demand for postponement is deduced from a survey of 291 manufacturing companies in the EU by Van Hoek and Visser (2001). Postponement takes place relatively rare upstream the production process. This high level postponement occurs the most in the automotive industry and the least in the medical technology industry. Dutch manager’s show to have the least affinity in high level postponement in respect to their EU-colleages. Postponement overall in Europe is more relevant than in the USA.
Postponement is directly related to the Customer Order Release Point (CORP). The further a customer can specify its order, the more upstream the CORP has to be placed and thus potential for VAL-activities is created. VAL-activities are used to increase the profitability and to take an advantage with the Dutch capabilities (high-educated personnel, 44 % of all European Distribution Centers are located in the Netherlands and the usage of IT-applications) in respect to cheap labor countries in the EU. Road transport companies have become LSP’s by implementing a certain level of VAL-activities and some have taken over (part of) the supply chain of their suppliers. There are five degrees of LSP’s, from 1-st Party Logistic Service Providers (1PL) offering transportation solutions solely till 5-th Party Logistic Service Providers (5PL) being a pure logistic link working on-line to couple services of suppliers and customers.
This assignment divides all VAL-activities in Value Added Logistics in a narrow perspective, Value Added Services (VAS) and reverse logistics. Reverse logistics is the logistic process when products are transported from a consumer to a resource for repair and recycling. All activities are clarified in chapter three.
VAL:
• Storage and Warehousing
• (Re-)Packing and Filling
• Cross Docking
• Order Picking
• Adding Information and Kitting
• Reconditioning and Repair
• Customization
Literature Assignment: Added Value Developments of Truckers 2008.TEL.7249
March 2008 Pieter Jongen, 1104284 8
VAS: • Custom Procedure • Quality Control • Invoicing • Financing / Insuring • Customer Service • Consulting • Merchandising
The biggest 10 of the top 50 LSP’s in the Netherlands have been analysed, their specializations are mentioned, just as their VAL-activities. DHL Exel Supply Chain is by far the largest employer. A remarkable fact is the many mergers and acquisitions of LSP’s during the last five years. The advantage of scale enlargement and low profitability are the stimulus to merge or acquire these companies.
The future trends in VAL-activities by LSP’s are related to globalization, customization, reverse logistics and supply chain integration. Products are transported worldwide to be manufactured in low labor countries and sold all over the world, making the logistic process more complicated. Another trend due to globalization and a grown prosperity is the level of customization. Customers are willing to pay for customized products, making the supply chain complex as well. IT-applications can help LSP’s in organizing their flow of products efficiently. The supply chain can in some cases be simplified by joining the steps of a logistic chain in an efficient and effective manner, which is denominated supply chain integration. Reverse logistics at last is a growing business due to the growing environmental consciousness and legislations and due to the rising prices of commodities, making recycling and repair more important.
