Appendix 1
Details of the Interviews
Expert interviews were held with a competitor, a consultant, a transport management service specialist of TNTL and a carrier.
The questions that were asked are included in appendix 1. I will describe here the relevant outcome of the interviews in the order that they were held. With relevant I mean what contradicts or supports the model. Thus, from the interviews the following facts highlighted.
Development & Marketing Director P&O Ferrymasters
The first interview that was held to test the results of the model was with the development and marketing director of P&O Ferrymasters (see frame below).
P&O Ferrymasters is a carrier that TNTL may hire as a third party. However, P&O Ferrymasters is also a competitor, since they can act as 4pl service provider as well. From the interview, the following remarkable answers are highlighted.
One of the first problems the director states is that there is a tension between the logistics manager and the chief financial officer (CFO). He says the LSP is always doing business with the ‘wrong’ person. By ‘wrong’ is meant that business is not done with a final decision maker. The LSP has contact with logistics manager, but the decision to outsource is not in his hands, but in the hands of others. The final decision to outsource transport management is taken by the board of directors, mainly the CFO or CEO. The logistics manager has often a final advice.
Because the main reason to outsource transport management is costs; or more precise the same service level, for fewer costs. The logistics manager’s position in his own organization will be undermined when a LSP says he can do the transport management at least five percent cheaper. The logistics manager position will then loose ground on his CFO. Therefore, these decision processes must be started off carefully.
About TNTL, he says that they should profile themselves more as a logistics company. He rarely reads about TNTL in the professional literature and some shippers even think TNTL is the old “van Gend en Loos” (taken over by DHL in 1999).
He says that companies originated in the U.S. are at the moment most likely to implement TMS; they focus of all companies the most on costs. This fits with the difference between the Rhineland model and the Anglo Saxon business model or as
P&O Ferrymasters, a part of the P&O ferries division, is wholly owned by the Peninsular & Oriental Steam Navigation Company. “P&O Ferrymasters provides an unique blend of transportations solutions, offering manufacturers both asset and non asset based Freight Management supply chain packages incorporating unit loads, a comprehensive intermodal network and access to the World Service of the P&O Group”. (www.poferrymasters.com)
it is also distinct, the difference between shareholders and stakeholders concept. European companies are becoming increasingly similar to their Anglo-Saxon competitors.
According to the director, It is foremost the characteristics of the product that determine for outsourcing transport management, instead of the characteristics of the companies. The more time critical the products for consumers are, the more likely it is outsourced. For instance, shoes are more time critical than the
replenishment of steel. Therefore, he says that the transportation management of shoes will be sourced out before the replenishment of steel. The replenishment of steel has easier planning constraints. He states that in order to sell the total concept of TMS, the execution has to be sold first. He largely agrees with my model, but says that IT is very important, especially for the monitoring and
negative performance reporting and is even order winning in his view. The trend in outsourcing logistics is irreversible, but the initiative will come from the financial department and will not come from the logistics managers.
Consultant TNO Infrastructure, Transport and Regional Development (TNO Inro)
TNO Inro is consulted in many areas, in transportation and in logistics. Before a shipper takes the final decision to outsource his transport management, a consultant is asked to do some extra research on the topic. The view from the consultant is therefore different from the others, since it is more the view of an outsider.
From the interview, some of the interesting answers and insights the consultant gave are highlighted.
First, he states that the outsourcing TMS trend is irreversible. The economies of scale the LSP’s offer since the marketplace demands for it will speed up this demand. It is like a flywheel. De LSP’s will have to convince the big companies to position their transport management in a strategic alliance. This will attract smaller companies in the following stage. The consultant was under the impression of the TMS-system by DHL. It had lots of functionalities. Second, the most importance realization of TMS is those cost savings. The last four years all innovation in logistics has been driven by cost. He only knew one example where the time to market was the main driver.
The administrative pressure the transport regulations and management generates on the organizations, besides the execution is very suitable to outsource. The shipper though has in some cases the feeling to be standing on the side. It is therefore important to give the shipper the feeling still to be in control.
A shipper from Japan, a manufacturer in high-value products has developed a database with world-wide tariffs, to make that check and be confident not being overcharged.
TNO Inro in Delft does independent multiple discipline research on the cooperation between government and business. The research is often quantitative orientated. The consultant that was interviewed works in transport, logistics, supply chain management and advices companies on collaboration in logistics.
He states that TNTL on the basis of the name should at least make it to the second round. In the next round it is the pro-active attitude that counts. Exel, the second largest logistics company, taken over by DHL, had a manager flown in from England to propose him to manage a project similar to he had manage in the past. Those are the order winning qualities of Exel. The familiarity of TNTL is too small compared to their capabilities he states. The will also be a consolidation in the logistics market: the top four of the express market holds over 50% and in the logistics market this is the top eight. He also states that TNTL should focus more on the big players in this world.
The combination with reliability and the control of costs is crucial, as well as trust in the strategic alliance. He sees the IT as order winning as well as the P&O Ferrymasters director. In twenty years, the entry barriers for transport management might be as low as the execution of transport are now.
Marketing Manager van den Meerendonck 4PL
From the interview, the following remarkable answers are highlighted. The marketing manager says that outsourcing and in-sourcing is a an up and down movement. Source out and sourcing in with an alternate way. Since VDM 4PL has mainly clients in retail, he gives an example of Albert Heijn (AH). It was until recently out of discussion to outsource the expedition there. Now is even AH thinking about reshaping their focus and doing what they are best at: pushing as many products out of their store by display and store set-up. In the US, they are ahead of this. Nevertheless, even in the US they are thinking about in sourcing, although the concept of ‘sticking to your knitting’ is originated in the US. The transportation sector itself is responsible for its low margins and thus the need to innovate is necessary.
The main driver is costs. The widespread perception in the field is that transportation costs are mainly expenses and does not bring many benefits. Of course, this is not true. You may produce superior products, it still has to find the right consumer.
Van den Meerendonk 4PL (VDM 4PL) is an independent dynamic shipping company. Numerous (mainly retail) companies entrust their goods to VDM 4PL. VDM 4PL is a flexible and innovative company. Van den Meerendonk 4PL facilitates logistical services and has no warehouses or an own fleet. Their main asset is knowledge and
He states that any process in the picture of VDM 4PL of the comparable concept drawn below can be sourced out (figure). The figure shows some abbreviations on international commerce terms (Incoterms). These are ‘ex works’, Free on Board (FOB), Free on Truck (FOT). These incoterms are common in international sales transactions. But I will leave those here for what they are.
VDM 4PL assumes supplier management is probably the last function to outsource, because than you are sitting on the chair of the purchase department and most companies do not want a third party to act like that. An organization really has to think the consequences of outsourcing through.
The first thing he emphasizes is that there is always someone responsible for the logistics in the own organization. Companies are afraid to loose the skills that are needed for organizing logistics. This is somewhat strange, since shippers often do not have their data collection around logistics organized. In outsourcing
transparency in the partnership and trust must play a central role.
At the moment, it is difficult for TNTL, since it is to be sold. The uncertainty about who the new owner is makes a partnership more complex.
In the US and sometimes in the EU as well I have seen that mainly big companies are talking to big companies. For smaller players like us it is hard to generate business at larger companies. Although the commitment at smaller companies is certainly, present. Often we can save after our calculations about ten percent of the logistics costs. Since many of these costs are hidden.
It is important that the responsible ones are ready and support the decision. The airfreight sector is ahead of the seafreight sector, so the standardized (“Easy jet”) container will be introduced. And of course trust is important, but sometimes it is Supplier Management Ex-Works FOB Loading port FOB / Quay Port of discharge Customs Brokerage Quay / FOT Warehouse Warehouse Stock Control/VAL Distribution & Reverse Logistics Operational Administrative Financial Commercial Analysis
just as simple as what happened with the broadcast rights of soccer in the Netherlands: then it is time to try collaborating with an other party.
Business Development Manager TNT Benelux and Multi Country Logistics
From the interview, the following answers are highlighted. He states that
companies have to make more use of the economies of scale and that TMS is a good idea for any company. But of course he would say that, since he is a sales man of TNTL. He says that the costs are the main reason, but to focus just on that is not very fruitful for the alliance. Other benefits have to play a role as well. It is harder to win business when the processes are more closely to the client. Transportation will be the first activity to outsource, but for instance, checking the invoices and doing the order management is more difficult to take over.
Companies are scared to lose control and many times, they are unfamiliar with the phenomena. They think for instance they have to sent all their packages with TNT Express and that they do not have a choice. He thinks that the proven capabilities are the main argument. The quality and custom solution is also an order-winning factor. He thinks that maybe sometimes TNTL is perceived as expensive by shippers but it is the job for TNTL to convince the shipper TNTL is worth the price.
The challenge for TNTL is to communicate TMS with potential clients. TNTL is really working hard on that. American companies are more likely to adapt TMS. The reliability of the costs, the control of the costs and the visibility are important convincing consequences of TMS for shippers to take the step. About the model he states that he agrees, although he has not had experience with too dependent on one LLP. He agrees on that the LLP as a company is placed in the order-qualifying category, but says that many times the selection for a company is just personal preferences.
Manager at Grundfos Spare Parts Distribution Center Grundfos Nederland B.V.
From the interview, the following remarkable answers are highlighted. Grundfos is a client of TNTL. At the time, Grundfos started with TNTL, Grunfos wanted to have a one-stop-shop for Express and Logistics. TNT had it all and it was promising that there would be only one point of contact by the Key Account Management (KAM) concept. Because of this TNTL won at that time from K&N and DHL.
Grundfos is Danish manufacturer of a wide range of centrifugal pumps and systems for water applications in industry, irrigation, heating and wastewater treatment. With an annual production of more than 10 million pump units, Grundfos is one of the world's leading pump manufacturers. (www.Grundfos.com)
About TNTL is written a lot in the previous chapters. The Business Development Manager at TNTL tries to generate turnover for TNTL and coordinates the implementation of logistics projects TNTL has won.
This manager has had a career at Dell. Dell computers is thé process innovater in the personal computer manufacturing industry. He learned that you (or a company) have to do what you’re good at. He states very clearly that Grundfos and other companies should outsource TMS, because it is not the core business. It is a
believe. Everything that is a ‘redundant’ process can be outsourced. To operate on the cutting edge of SCM he believes that is the way to do it.
Several departments or production sites are autonomous in a company. These do not want to give away power to the head office. They have their own bailiwick or territory. People in an organization tend to overlook the greater picture or the 30.000 feet view as he puts it. Besides that, people are redundant of change. The facility at Eindhoven of TNTL was impressive and convinced him they could do it. The one-stop shop ended up tough in triangle meetings with TNT Express and TNTL. The sale of Logistics division is a development that will influence the
negotiations on the renewal of the contract. It is crucial to put the right people on the right place. At DHL the personnel sometimes does not know where the
shipments are. It is important to deliver what is promised.
Companies that are focused on SCM and have embraced the concept are most likely to adapt TMS. Taking this step is not easy and not many companies are organized like that. Trading companies are sooner too easier to transform to SCM. The make-or-buy decision should and hopefully will always be a logical and economical one. The control and visibility is a huge benefit. Otherwise having the same service level for a lower price is an order winning aspect. It is not important how things are done, as long as they are done. From the conversation followed that he concludes too trust is crucial as well the communication service.
General conclusions on interviews
All five respondents embrace the American perspective of doing business. In logistics this view is widely spread, I have noticed during my research. Maybe that leads to tunnel view, but it can be said that the logistics sector is aware of the challenges to overcome. All of them agree could at the end agree upon the model presented in Chapter five. All of them view IT in the perspective of the shipper as order winning too.
Logistics cooperation in the supply chain is gaining ground. There were fifteen cooperation cases presented in the magazine called Logistiek.nl (march 2006). In this magazine pitfalls following from the cultural differences between parties were described. Culture is an aspect that the interview at Grundfos brought up.
Grundfos has a culture that is similar to the culture of TNTL: both companies are taking their social responsibility seriously. TNTL is working seriously on their social responsibility with the World Food Program (WFP) of the United Nations. At
Grundfos, environmental, social and ethical responsibility have been key values
ever since it was established. Both companies have signed the UN Global Compact with the ten business principles.
Lieb and Bentz (2004) argue in their article in the first time use of 3pl services to be sure that the cultures of the two organizations are similar. This is an aspect that is not further researched, but when a shipper is selecting a partner and a mutual trust is developed, the cultures must have a fit to come to a successful
Appendix 2
Question list semi-structured expert interviews
1. What do you think about outsourcing transport management in general? 2. What do you think are the main reasons for outsourcing transport
management?
3. What primarily and what supporting processes are most suitable for outsourcing to a Lead Logistics Provider?
4. Why are some companies sometimes doubting or hesitating to outsource their transport management?
5. What do you think are the main reasons in outsourcing transport management to choose for TNTL?
6. What do you think are the main reasons in outsourcing transport management not to choose for TNTL?
7. What aspects of transport management should be more emphasized by TNTL to persuade shippers?
8. What do you think is the relation between the production processes of the shipper and TMS?
9. What companies are most suitable for implementing TMS?
10. What characteristics of companies are determinative for outsourcing transport management?
11. What aspects of TMS add the most value in order to reach the goals of outsourcing transport management for the shipper?
12. What do you think is the role of trust, IT, people, etc. in outsourcing transport management?
Appendix 3
OPPORTUNITY ASSESSMENT SHEET - SIGN OFF PROJECT START
Client name Date BD Manag er Market sector
Project scope Warehouse / Transport
Estimated revenue
Reception date of the RFQ / RFI Date to transfer the proposal to
the client
Start of the contract
Contract term Business potential Lo w Mediu m Hig h Weig ht sco re ma x Sco re Comme nts 1 Market sector 20 0 20 0% 2
Project in line with
strategy of TNT 15 0 15 0% 3 Revenue potential Logistics 20 0 20 0% 4
Revenue potential other
TNT (eg. Wilson, Express) 10
0 10 0% 5 Contribution potential (margin / EBIT) 10 0 10 0%
6 Added Value potential 10 0 10 0%
7
Long term growth potential (3 years) 15 0 15 0% 0 0 0 100 0 10 0 0% Success potential Lo w Mediu m Hig h Weig ht sco re ma x Sco re Comme nts 8
Relationship with the client
10 0 10 0%
9 Contact level (DMU) 10 0 10 0%
10 Existing client of TNT (TPG) 10 0 10 0% 11 Experience with outsourcing 5 0 5 0% 12 Relationship current 3PL provider 10 0 10 0% 13 Impact on client organization manageable 10 0 10 0%
14
Financial situation of the client
5 0 5 0%
15
Strategy of the client clear and well defined
5 0 5 0%
16
Track record market sector
5 0 5 0%
17
Quality of the data provided by the client
5 0 5 0% 18 Track record/capabilities logistics solution 10 0 10 0% 19
Possibility to manage the Risk involved
10 0 10 0%
20
Possibility to win from Competition 5 0 5 0% 0 0 0 100 0 10 0 0% internal resources Comme nts 21 impact on high impact low impact internal resources 22
Estimated availability not available
available
of internal resources
TNT Logistics Benelux signs of this project Yes Yes No
Signature BD Director :
Name
comments upon decision:
Appendix 4
Figure B: Organizational chart of the division TNT Logistics
Group Managing Director
Business units Business units Divisional Functions
Business Development & Marketing Information & Solutions Technology
Finance & Legal Operations & Standardization Corporate services
Human Resources Project Director
TNT-Italy & South America North America
France China Wilson Logistics & Freight Management
UK & Ireland Central & Eastern
Europe Benelux, Spain &
Turkey Australia and Asia TNT Logistics organizational chart
Appendix 5
Company history and strategy
The Dutch postal organization PTT Post is the basis of TNT. After the Dutch post was privatized in 1989, the company was called KPN in 1994.
At the other part of the world, in Australia, in 1946, Ken Thomas started his own company, called Thomas Nationwide Transport, with a fleet consisting of a single truck. In half a century, his company grew into a global enterprise, even operating its own fleet of aircraft. The friendly take-over of TNT by KPN was completed in December 1996 (www.TNT.com). Looking back on the acquisition we can say TNT has then bought its strong brand and orange color. In 1998 TNT Post Group (TPG) separated from KPN that focused on telecommunications. In 1995, TPG operates globally under the brand TNT for all its activities and became the company as it is known today.
The turnover of TNT as a group in 2005 is just above 10 billion euro excluding the discontinued operations. The Earnings Before Interest and Tax (EBIT) is 1,159 million euro and 659 million profit was attributed to the shareholders.
The division logistics consists of fifteen business units (figure 4.2). The turnover of the logistics division in 2005 is 3.55 billion euro and an operating income (EBIT) of -17 million. TNT Logistics does not report on business unit level.
Strategy TNT NV
The strategy of TNT NV is outlined in order to show that this research and that innovation is a crucial part of the strategy of the company.
The strategy of TNT NV is based on taking steps forward. TNT calls it the Network Innovator strategy. TNT Logistics’ long-term strategy is to be a network innovator by “leading the logistics industry in specific sectors in terms of two main drivers:
1. Offering cost competitive solutions based on best practice operations and sector specific shared networks
2. Offering high value solutions to customers on the other hand by a mix of actions, including the ability to offer global solutions and having state-of the-art technology that allows end-to-end visibility in the supply chain Strategy TNT Benelux & Multi Country Logistics
The strategy consists of the mission, vision and goals in a company. The mission of TNTL is a dual aim: reducing the costs of each logistical process while simultaneously adding value for our customers. In achieving this dual aim, TNTL can also fulfill the needs of all of the stakeholders: creating happy customers, happy shareholders, happy employees and a happy society (www.tntlogistics.com). TNTL’s vision is based on the balanced combination of happiness, excellence and passion and in combination with the way, TNTL views the world. That way is from the perspective, everything is logistics® (see the intermezzo below).
Intermezzo: Everything is logistics® Taken from the website of TNT Logistics Benelux
At TNT Benelux & Multi Country Logistics, we look at the world around us a little differently. We see everything through logistical spectacles. This means that we examine every single aspect of a supply chain and ask ourselves: ‘What’s it made up of?’ ‘Where did it come from?’ ‘How did it get to where it is?’ ‘Who helped it on its way?’ And most of all, ‘Can we improve it?’.
Our unceasing search for excellence has brought us within the top three logistics providers in the Benelux market, and the first logistics organization to have received all ISO certifications. We also hold Investor in People certification, and aim to always deliver the best service and the highest quality – while proving our capabilities through audited processes. We also create and implement initiatives to improve our clients’ businesses, such as our successful Lean Work program.
As dedicated specialists, we really put our heart into our work. We greatly enjoy solving logistical issues, and our expertise and drive keep us thinking about logistics 24 hours a day. Our mission is to reduce the costs of each logistical process – while simultaneously adding value.
By the end of 2006, TNT will have only two divisions: express and mail. The division logistics is discontinued by TNT and sold. On December 6th, 2005, TNT announced that TNT will “sharpen its strategic focus on its core competency of providing delivery services by managing transport networks like Mail, Express and Freight Management. The focus on networks and the exit of Logistics will allow TNT a simplification of the organization”.
In the autumn of 2006 TNT Logistics has been sold to Apollo Management L.P., a private equity firm based in New York and is been re-branded to CEVA Logistics (www.cevalogistics.com).
Appendix 6
TNT Benelux and Multi Country Logistics sites overview
TNT Benelux and Multi Country Logistics is a business unit of the logistics division of TNT NV. TNTL has sites where only one client is serviced. These sites are called dedicated sites, like the central European distribution site in Tongeren, where the inventory for Black & Decker is managed. Multi-user sites are sites where more then one client is served, like Eindhoven. In addition, show freight is part of TNTL. TNT Showfreight is able to offer a truly worldwide network of exhibition freight logistics partners. These partners work closely with the customer in arranging collection from any point of origin through to delivery at the customer’s stand (www.tntsf.nl).
In practice is Show freight a relatively autonomous operating part of the business unit, since the service offering are specialized.
Figure C: overview of the size of TNT Benelux and Multi Country Logistics
= Multi-user sites = Dedicated sites = Show freight
Appendix 7
network innovator explanation
In order to be a Network Innovator -as TNT Logistics aims to be- it is necessary to offer cost competitive solutions” (www.TNT.com).
The goals to achieve this is to be excellent in the areas by:
Taken from the website of TNT Logistics Benelux
Customer and sector focus
Key elements here include Key Account Management (KAM) and the focus on a number of target sectors, including Automotive, FMCG & Retail, Electronics, Tyres and Publishing & Media.
Operational excellence
The objective is to further develop, define and implement industry leading operational
standards, including policies, processes and performance levels. A key initiative is LEAN, which is designed to increase productivity, reduce costs and improve service levels. This is realized through reducing waste by eliminating non-value adding processes, reducing inflexibility by better matching of throughput and demand and reducing variability, i.e. improving process reliability.
Technological leadership
This is driven through the continued development and rollout of Matrix™. Matrix™ is our flagship IT suite that is built on best-of-breed proprietary and off-the-shelf software solutions, and provides real-time links between TNT Logistics and our customers. Matrix™ supports inbound, outbound and reverse logistics processes across multiple verticals, and comprises a complete range of transportation, inventory management, order fulfillment, financial settlement and e-commerce applications.
TNT NV illustrates the above strategy with a picture (figure Z).
Key Account Management
High Value to Customer Cost Competitiveness Best Practices Generic 3PL Improve service levels
Achieve cost effective logistics solutions Manage and design changes in the supply
chain
Network Innovator
Shared Networks Reconfiguring Sector Network Operational excellence Additional services Sector Expertise Technology Re-engineering skills Global footprint
Appendix 8
List of abbreviations
3pl = third party logistics 4pl = fourth party logistics CEO = Chief Executive Officer CFO = Chief Financial Operator
ERP = Enterprise Resource Planning (software) EDI = Electronic Data Interchange
ERP = Enterprise Resource Planning FCL = Full Container Load
FOB = Free on Board (seller expense until delivery on board, buyer is responsible for main carriage, freight, insurance, etc.) FOT = Free on Truck (same responsibility as FOB)
FSL = Forward Stock Location or FSL (2) = Field Stocking Location FTL = Full Truck Load
IS = Information System
JIT = Just In Time
KPI = Key Performance Indicators LCL = Less than Container Load LLP = Lead Logistics Service Provider LSP = Logistics Service Provider LTL = Less than Truck Load MiT = Merge in Transit
MRP I = Materials Requirements Planning MRP II = Manufacturing Resources Planning POD = Proof of Delivery
OEM = Original Equipment Manufacturer RDC = Regional Distribution Center RFQ = Request For Quotation
TMS = Transport Management Services
TNTL = TNT Benelux and Multi Country Logistics VAL = Value Added Logistics
VATS = Value Adding Transportmanagement Services WMS = Warehouse Management Systems
