Thesis
Innovation at TNT Logistics Benelux
By
Rutger van der Stijl
2007
Thesis
Innovation at TNT Benelux and Multi Country Logistics by
analyzing and determining the critical success factors of
Transport Management Services: What are the order winning,
order qualifying and order losing aspects of TMS?
by
Rutger van der Stijl
S1230328
May, 2007
Faculty of Management and Organization Business Development
Rijksuniversity Groningen
Supervisor: Dr. K.S. Prins Second supervisor: Dr. M.J. Land Supervisor TNT Logistics: Ir. drs. W. Kusters
Abstract
6
Chapter 1: Introduction, research methods & trends
8
1.1 Introduction management problem 8
1.2 TNT NV 8
1.4 TNT Benelux and Multi Country Logistics 9
1.2 Research objective 9 1.3 Research question 10 1.3.1 Sub questions 11 1.5 Conceptual model 12 1.5.1 Data collection 14 1.6 Trends 15 1.6.1 Globalization 15
1.6.2 Increasing size of companies 16
1.6.3 Multi channel 16
1.6.4 Complex supply chains 16 1.6.5 Outsourcing non core processes 16 1.6.6 Growth world economy 17
1.7 Conclusion 17
Chapter 2: Supply
18
2.1 Introduction 18
2.1.1 Definitions and descriptions logistics management 18 2.1.2 Definitions and descriptions supply chain management 18
2.2 Transport Management Services 20
2.2.1 Operational level 22
2.2.2 Tactical level 23
2.2.3 Strategic level 24
2.2.4 Four enablers 26
2.3 Critical success factors according to TNT Logistics Benelux 27
2.3.1 RFQ process 27
2.3.2 Order winning 28
2.3.3 Order qualifying 29
2.3.4 Order losing 30
2.4 Overview of TNT Logistics’ view 30
Chapter 3: Demand
33
3.1 Introduction 33
3.2 Production processes shippers 33
3.2.1 MRP I and MRP II 33
3.2.2 JIT 35
3.3 Outsourcing 36
3.3.1 Outsourcing logistics 36 3.3.2 Outsourcing Transport Management 39
3.4 The demand from shippers 40
3.5 Critical success factors according to the shippers 40
3.5.1 Order winning 41
3.5.2 Order qualifying 42
3.5.3 Order losing 42
3.6 Overview of the shippers’ view 43
3.6 Conclusion 45
Chapter 4: Organization
46
4.1 Introduction 46
4.2 Current organization model TMS 46
4.3 The “Plug & Play” organization model TMS 46
4.3.1 Information exchange 48 4.5.2 Management of shipments 50
4.4 Critical success factors 50
4.4.1 Order winning 50
4.4.2 Order qualifying 51
4.4.3 Order losing 51
4.5 Overview of Critical success factors of the organization 52
4.6 Conclusion 52
Chapter 5: Overview, conclusions and reflection
54
5.1 Introduction 54
5.2 Comparison overview TNT Logistics’ view and shippers’ view 54
5.3 Overview of the Critical success factors TMS 56
5.4 Recommendations, steps to take and new business opportunities 57
5.4.5 Recommendation about the organization 59
5.5 Reflection 60
5.5.1 The research process 60 5.5.2 The research content 60
Literature
63
Websites 67
Reports 67
Internal information TNT 67
List of figures
Figure 0.1: the critical success factors TMS in general Figure 1.1: conceptual model content of this research
Figure 2.1: perspectives on Logistics versus Supply Chain Management (Larson and Halldorsson, 2004) Figure 2.2: some terms to describe the management of different parts supply chain (Slack, 2001: 414) Figure 2.3: Operational level TMS.
Figure 2 4: Tactical level TMS. Figure 2.5: Strategic level TMS.
Figure 2.6: IT system the Matrix overview
Figure 2.7: critical success factors TMS according to TNTL Figure 3.1: production process continuum
Figure 3.2: Materials requirements planning (MRP I) schematic (Slack, 2001:451)
Figure 3.3: complexity as determinant of appropriate planning and control system (based on Slack, 2001: 507)
Figure 3.4: cooperation continuum
Figure 3.5: relationships between shipper and LLP (Bowersox, 1989)
Figure 3.6: core and non-core processes divided into primary & secondary functions (Thompkins, 2005) Figure 3.7: critical success factors TMS according to shippers
Figure 4.1: current situation LSP’s Figure 4.2: the ITEM value Pyramid Figure 4.3: ITEM solutions matrix
Figure 4.4: ‘plug & play’ organization model TNTL TMS Figure 4.5: critical success factors of the organization of TMS Figure 5.1: of the critical success factors TMS in general
Figure 5.2: Network Innovator in the TMS market and the relationship with the shipper
List of tables
Table 1.2: the RFQ process in business development of TNTL (BD Manual TNTL, 2005) Table 2.1: factors influencing the carrier selection
Table 2.2: the RFQ process in business development of TNTL (BD Manual TNTL, 2005)
Table 3.1: differences traditional and contract transport service (A.T. Kearney consultants, 1994). Table 5.1: market position (Porter;1980)
Appendixes
Appendix 1 details of the Interviews Appendix 2 questionnaire expert interviews Appendix 3 opportunity assessment form Appendix 4 TNT Logistics organizational chart Appendix 5 company history and strategy
Appendix 6 TNT Benelux and Multi Country Logistics sites overview Appendix 7 network Innovator explanation
Abstract
This thesis is about a relatively young service that TNT Benelux and Multi Country Logistics (TNTL) offers the marketplace, called Transport Management Services (TMS). TNTL has a problem with availing oneself of the business opportunities.
In this thesis, the critical success factors of this service are determined, in order to identify the business opportunities. These business opportunities can then be exploit more effectively and efficiently. That will increase the sales of TMS for TNTL.
The research question is: what critical success factors of the service characteristics of transport management lead to new business opportunities for TNTL?
First of all, the transportation management service is on the supply side. TMS is: ”the management, on behalf of the customer, of complex, multi modal, transport, Supply Chain Operations, where both daily and periodical challenges are supported by robust Information Technology (IT) and create added value to the customer’s supply chain on strategic, tactical and operational level.” That means all the management around and of the physical movements in a company.
In selling TMS, TNTL has to deal with the outsourcing decision of the customer, as well as the challenges the supply chain of the customer offers. These are in particularly the time to market, costs and flexibility. TMS is not easy to summarize in two sentences. Because TMS is applicable on three levels: operational, tactical and strategic. On the operational level TMS manages the shipments, critical milestones and the invoicing of the whole process: from the customer buying a product to the distribution of the sold product. In applying TMS that means transporting the raw materials, half fabricates or finished goods. This transport is then managed by TNTL while the agreed service levels are met. But that is only a start.
On a tactical level TMS of TNTL manages the (financial) performance and the improvement process. On a tactical level TMS is able to forecast and to report the performance. On a strategic level the carriers are evaluated, the network is designed and the information services between the parties are managed.
TMS is realized with the four enablers of TNTL. These enablers are the people, the control tower concept, the technology and the organized network. For every customer TNTL is able to adjust the service. TMS is partly made from standard building blocks and partly customized. According to TNTL there are order winning Critical Success Factors (CSFs) of TMS (and order qualifying and order losing). As this research will show these are different from those that the shippers say the CSFs are.
On the demand side is the market for TMS. The demand for TMS comes from other companies, or as it they are called ‘shippers’. A shipper may have hundred reasons to outsource their transport management. As this research shows it is mainly the price that triggers this decision. Nevertheless, there is something more important going on. For all sorts of reasons shippers do not do what seems right. Instead of sourcing out their whole transport management, and collaborating with a Logistics Service Provider
(LSP) on an operational, tactical and strategic level they source out ‘chunks’. That means that in the coordination of their supply chain they miss opportunities to consolidate their transportation flows. Cost savings of 5-10% are relatively easily realized by a LSP in the transportation management sector. For political reasons or oblivious behavior, shippers are not improving their logistics performances. TNTL has to communicate more effectively the benefits of TMS. The most important conclusions on what the CSFs are illustrated in an overview below (figure 0.1).
As it is shown, price is an order-winning factor. TNTL must do something about their prices. Other LSP’s are able to offer lower tariffs. TNTL also has to focus on wining trust of the shipper when it is in a tendering process. This can be done by showing that in a similar business case TNTL has successfully implemented TMS. The problem here is that TNTL has only sold parts of TMS so far. TNTL has to put all energy in selling TMS to a big shipper, getting a big fish in, and use this to attract new clients. This will trigger a process that consists of seven steps towards a more effective exploitation of the business opportunities and becoming a network innovator. These business opportunities lay in several sectors. In the industrial and high-tech sectors, shippers are not yet fully aware of the opportunities and chances of TMS.
In 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.
It is now operating independently. This new flexibility must lead to better training of personal and a change of organizational structure that is definitely needed.
• LSP as a company / strategic partner • Proposal look and feel • Improved visibility • No business case • Solution not appropriate • No trust • Too dependent on one LSP • Politics at shipper and / or shipper not ready Figure 0.1: the critical success factors of TMS in general
• Price and tariffs • Project organization /
implementation • People (trust)
• Quality / Service level • Flexibility
• IT
• Proven business case • Consolidation: ‘Plug &
Play’ Model
Order losing Order qualifying
Chapter 1: Introduction, research methods & trends
This chapter has three main ingredients: outlining the structure of this thesis, the research methodology will be described and the occasion, the necessity is made clear. The company where this research took place, TNT Benelux and Multi Country Logistics (TNTL), is introduced in this chapter too. In the environment of this research there are six trends important to consider. These are described as well in this chapter. Foremost, after reading this chapter you will know exactly why this research had to be done in the first place and what it is about.
1.1 Introduction management problem
At the department were I did this research finding new markets and selling more services with higher margins than the traditional logistics services was their job. When I was asked to do this research they stated at TNTL that, to put it in very general words, they wanted to make it easier to get new business for their services. The reason TNTL wants this problem researched is that it expects on the long term to generate more profit with these services. To put it in these words: it is very difficult to make two euro from one euro in transportation alone.
On the short term, TNTL wants to know if it is doing the right things in the right way. Because: so far, TNTL has this great, new service concept, but they face difficulties in selling it. TNTL has hard times in getting TMS sold. So how can TNTL sell TMS better? This is the problem of the management and the people at TNTL. And this problem must be solved.
This research on TMS at TNTL took place from October 2005 until April 2006. At that time, things are different than that they are now. For instance, TNTL had a different owner. TNT Logistics has been sold to Apollo Management L.P., a private equity firm and is been re-branded to CEVA Logistics.
However, in this thesis the situation as it was that last year is described. The current situation will be described shortly, but who owns the company is not relevant for the outcome of this research. So, what kind of organization is TNT NV?
1.2 TNT NV
TNT NV is a multi-billion company. This multinational, Dutch company TNT NV has three divisions. These divisions are TNT Mail, TNT Express and TNT Logistics. This research takes place at a business unit (BU) from TNT Logistics. The BU where this research takes place is TNT Benelux and Multi Country Logistics (TNTL). But what does TNT Logistics do? Well, TNT Logistics designs, implements and operates ‘complex supply chain solutions on a national or global scale for medium to large enterprises’. That means it takes care of nearly all of the physical movements in a company. But
1.4 TNT Benelux and Multi Country Logistics
The division TNT Logistics operates in 39 countries. TNT Logistics employs more than 40,000 people who manage over 7 million square meters of warehouse space and operate complex transportation networks. TNT Logistics reported sales of Euro 4.1 billion in 2005 (www.tntlogistics.com). The business unit TNT Logistics Benelux reports its sales on a divisional level. Therefore, the sales of the individual business units cannot be given. The division TNT Logistics was not performing good enough. It was performing good compared to the competitors, but not good compared to the other two divisions. An organizational chart can be found in appendix 4. More can be found on the history and strategy of TNTL in appendix 5. In appendix 6 an overview of all the sites is given, to give you a feel of the size of TNTL. TNTL is widely represented in the Netherlands and Belgium.
The management of TNT NV perceives the margins on the sales of TNT Logistics are behind of the sales of the other two divisions. The shareholders of TNT NV expect all the divisions to perform above the market average. The business unit Logistics has a negative impact on the overall performance of the company. Therefore, actions to improve the margins on the sales of TNT Logistics were taken. This is the job of the management. The awareness something had to be done was created by the management in the whole organization before I started to do my research and they set up a department for transport management. Because the management knows that the margins on the services around the transport movements are higher, they decided to invest in transport management. This department was set up, now they were facing another challenge. How to sell it effectively?
1.2 Research objective
In the months before I did this research, TNTL has been very busy in improving the design of the services around transport. The product Transport Management Services (TMS) was ready to be sold. However, the department for transport management had difficulties to sell it. They had some markets they wanted to focus on, the industrial market, the health care market and the high-tech market. But it was not concrete yet. They wanted to sell TMS better. In order to do this, TNTL wants to know how to identify the business opportunities better for TMS.
This is a very broad problem, so I narrowed it down. I cannot solve all the problems of the management, but I researched a part of it. I decided after reading articles and talking to several people at TNTL that I was going to focus on what aspects of TMS are the order winning aspects for TNTL in the several leads or tendering processes they have every year. This is what I call the critical success factors of TMS. I want to know what aspects of TNTL get them to win those orders. Therefore, the research objective is to determine the critical success factors of TMS.
1.3 Research question
The question of my research is:
To answer this question I decided to take into account two important sides of doing business, the supply side and the demand side. Because that is what business is all about: getting the demand side and the supply side to meet.
The supply side of this research is the transport management service that TNTL has for any shippers with any transportation flows. Because the transportation of goods, half-fabricates and raw materials become increasingly complex, it is better to leave this up to the experts. Transport nowadays demands more of the management functions. In researching the supply side of the market, the Transport Management Services of TNTL are described. Then in order to identify the CSFs those aspects that are often mentioned in literature and in interviews as crucial or in other words important are determined as order winning. But for a moment, back tot the CSFs.
CSF is a term that was first used by Rockart back in 1979. He defined it as follows:
The term critical success factor has become a classical term in business literature. There are many articles partly titled with it and it is widely used. But the general definition of CSF is too vague for this research. Therefore, I combined the term with a view from Hill (1993). Hill is an expert in combining the manufacturing view with the marketing view. It is a true that in offering of a service no manufacturing takes place. However, I think that the terminology Hill uses is also on service organizations very usefull. Hill talks for example about the price, quality or performance. In all, Hill has made a very practical manufacturing framework. There are of course other manufacturing frameworks. Vos (1995) distincts the three paradigms; “Best practice”, “competing through manufacturing” and “strategic choices in manufacturing”. Hill has defined one of the best formulated under the heading of competing through manufacturing. Hill states there are order winners and order qualifiers (Hörte, et al, 1997).
Order winners are those customer requirements that enable a firm to win business.
Order qualifying those criteria that a firm must meet to have a customer consider it to be a possible supplier.
“CSFs are the limited number of areas in which results, if they are satisfactory, will ensure successful competitive performance for the organization.”
• What critical success factors of the service characteristics of transport management lead to new business opportunities for TNT Benelux and Multi Country Logistics?
In this research, I add order losing as well. Important to emphasize is that some criteria might be order losing for one shipper, but not for another. Because TMS serves different markets. However, in this thesis the situation of TNTL determines the consensus on the order winning aspects. The definition of order losing is negatively related to the order winning aspects.
With this approach, it leads to the situation that the strength of this research is that it brings together the external and the internal characteristics of the supply chain. 1.3.1 Sub questions
TNTL has developed TMS, assuming that it fits better with the demand of the shippers that want to outsource their management of transport, than other services in the market. The service TNTL offers the marketplace is what I call the supply side in the conceptual model. Therefore, a general description of what supply chain management is and what TMS is described. Having said all this, the first sub question is:
This first sub question as well as the following three will be answered by a literature study and a study of the internal documentation of TNTL. The extensive description of TMS is done in Chapter 1. The service characteristics are first of all functionalities; complementarily, the service TNTL offers is intertwined with supply chain management and with value added logistics services. Therefore, these two concepts are described as well.
The second question is about the demand side of this research. TNTL wants to know if there is a fit between the supply and the demand for transport management services. In order to determine this other step needs to be taken first, so the second sub question is:
The demand for TMS has to do with the willingness to outsource and with the value chain of the shipper. From a study on outsourcing logistics is analyzed why companies’ source out certain business and in particular logistics functions, the demand from shippers. The performance of the supply chain drives the demand for TMS. The demand for TMS increases when a shipper is not able to deliver the required service level or competitors offer lower price. The demand from shippers can be partly derived with the request for proposals from the shippers that TNTL receives frequently
What are the supply characteristics of TMS and what CSFs are derived from these?
What are the demand characteristics of the shippers for TMS and what CSFs are derived these?
Order losing are those customer requirements that are not met to have a customer consider it to be a possible supplier.
and from other documents at TNTL. To meet the demand for TMS the organization aspect has to be suitable. Therefore the third sub question is:
Fout!
From the three sub questions above two overviews are presented with the order winning, the order qualifying and the order losing criteria. These models give an overview of the CSFs of TMS in the eyes of TNTL and in the eyes of the shippers. Then the views are combined and conclusions are made about the business opportunities for TNTL. The fourth sub question is:
1.5 Conceptual model
This research is based on a conceptual model of reality. The objective of this research, as said earlier, is to identify new business opportunities. The context of this research is business development. In business development, there is always tension between the old products (or old services) and the new demand from a (changing) customer. An organization must offer the right products, at the right time, to the right customer. This challenge is what economics call the fit between supply and demand. And these terms are triggering; because these terms represent the core in doing business (Berry et al, 1995).
In essence, Supply Chain Management integrates supply and demand management within and across companies (the former Council of Logistics Management, 2003). TMS is a consequence of a trend in logistics. Logistics is now widely spread seen in a broad perspective. The perspective of Supply Chain Management (SCM) is winning ground and is not just another name for logistics (Cooper, 1997). Therefore, literature study is done on SCM. It is not possible to understand TMS without understanding SCM. So, SCM is placed on the supply side of the conceptual model.
Supply chain management or fourth party logistics (4pl) is pushed into the market by logistics service providers and consultants, instead of that SCM is originated from demand (pulled) by companies. The term “4pl” was created and trademarked by Andersen Consulting –now Accenture- in 1996 to describe the practice of consulting firms, as non-asset-based managers in overseeing the work of multiple third-party logistics providers in managing global supply chains. Literature and business research on SCM is actually ahead of practice and today the term has multiple meanings, but the trend is clear: companies are outsourcing bigger parts of the supply chains to bigger asset-based providers (Biederman, 2005). Not only are companies outsourcing
What are the business opportunities for TNTL with TMS?
What are the characteristics of the organization around TMS and what CSF can be derived from these?
parts of the execution of the supply chain, such as the transportation. The management of transport is sourced out as well.
Outsourcing is pulled into the marketplace; driven by the demand of companies focusing on their core competences. The degree of adaptation of the strategic concept of focusing on core competences is higher than it is for SCM. The demand cannot be understood if not first is explained and studied what outsourcing means. Therefore, outsourcing is placed on the demand side of the conceptual model.
From the demand side there is a trend in outsourcing non-core activities. There is a growing need to be more responsive to customer service and market demand. (Razzaque and Sheng, 1998). Companies think they can realize this by outsourcing in order to be more flexible in their operations. “The globalization of manufacturing and business activities has led industries to outsource many production functions and focus more on their core competencies. This created complex supply chains consisting of multiple layers where buyers spread worldwide” (Abdel Malek et al, 2005). Of course for some companies production is a core competence, but the point is that multi-national are trying to make optimal use of the opportunities and substantial cost savings outsourcing and off-shoring (outsourcing to another country) offers.
I have conceptualized these variables in my conceptual model. It is not possible to bring demand and supply together without some form of an organization. Think of a market place or auction where demand and supply physically comes together. Therefore, I have added organization to my conceptual model.
In addition, from a business development perspective, the organization perspective is crucial. In business development, organization is one of the conditions for successful innovation. Thus, this research is about a service called TMS, the demand for this service and the ideal organization suitable with TMS. That is just the beginning of the research.
From these three variables are the Critical Success Factors (CSF) derived. It has to be mentioned that this was a creative part of this research where a lot of discussion took place between the researcher and TNTL. This process was very iterative and aspects were changed from positions frequently. However, at the end a form of consensus on the CSFs could be achieved. Then, these CSFs are placed in a model, representing a simplification of reality. These models is then again sharpened and improved, by expert interviews. With this model and with the interviews TNTL is given recommendations in how to generate business in a more effective way. The conceptual model is presented below (figure 1.1).
The conceptual model presents the variables in the blocks. In the circles the number of sub research questions is given.
As seen in the conceptual model, TMS plays a central role in this research. TMS is as TNTL states: “The management on behalf of the customer of complex multi modal supply chain operations where both daily and periodical challenges are supported by
robust IT technology and create added value to the customers supply chain on strategic, tactical and operational levels”. This sounds rather abstract, but it will be clear after the reading of Chapter 2.
There is no arrow drawn directly between supply chain management and outsourcing logistics, because that does not support the focus of this thesis: identifying the new business opportunities. There is a causal relation between the supply, demand and organization and their Critical Success Factors towards the new business opportunities. 1.5.1 Data collection
As said earlier, the research data is collected in different ways. In the study part, there has been an extensive literature view. I have done research on the topics of outsourcing, supply chain management, transport management systems, distribution,
Research stud
y
Supply TMS Organization TMS Demand TMS
3 4 2 1 legend = causal relation = research question Business opportunities for TMS
Figure 1.1: conceptual model content of this research
Outsourcing Supply Chain
transportation, value added logistics, service characteristics, the history of logistics and logistics organizations.
For the theoretical framework I have researched critical success factors, order winning, order qualifying and order losing aspect, business development, logistic trends and innovation. In addition, several sources from TNTL were used. TNTL uses a commercial “sales presenter”, which is in fact a PowerPoint presentation, to inform (and convince) the customer about TMS. The structure of this presentation has been very useful to describe TMS. In addition, the proposals with the logistics solutions from TNTL were used to collect data. The requests for quotation (RFQ’s) and the requests for information (RFI’s) from the shippers received by TNTL are used as well in order to support the conclusions following from the literature.
In the interviewing part of this research, the data collection is done by expert or in depth interviews. I have interviewed people at TNTL, a shipper, a competitor, a carrier and a consultant. The data given in this part is supported by secondary data as the available business literature.
1.6 Trends
In this research, there are six trends important to emphasize. These trends together form the environment of this research. The demand, transport management services, the organization of TNTL and the critical success factors are influenced by these trends and I will frequently refer to these trends. Their influence on transportation is clear: these trends offer TNTL the opportunity to innovate with TMS.
1.6.1 Globalization
A major force in the world today is globalization. This trend is relevant for all aspects of doing business, but in particular the logistics industry. Jensen (2001) states that ‘the transportation system has to be integrated across borders, which until ten years ago were barely passable’. This development is unstoppable. The flow of trade, capital, goods, and information has an increasingly international character (Groothedde, 2005; Caputo et al, 2005). The rapidly developing worldwide marketplace is leading to the geographical dispersion of production, assembly and distribution operations (Schmidt and Wilhelm, 2000). That means that the transportation modes are changing. The distances are becoming longer, more diverse and more time critical.
The political movement and the enhanced Information Technology (IT) drive the globalization. The transaction costs to cross borders are lowered (Hayes et al, 2005). The European Union, NAFTA, Asia / Pacific and Mercosur are trade zones, initiated by politics that facilitate globalization. Enhanced IT and in a broader perspective the enhanced logistics technology have accelerated this. Logistics chains are constantly changing to facilitate the increasing global movements. Long-term trends in logistics services indicate a growing degree of product customization and an increased responsiveness in order delivery. The key starting point is the need for increasingly efficient transportation and sophisticated logistics processes (Tavasszy et al, 2003)
1.6.2 Increasing size of companies
In most industries, multinationals no longer compete primarily with companies whose boundaries are confined to a single nation. “Rather they go head-to-head with a handful of other giants that are comparable in size” (Hansen and Nohria, 2004) More companies (and therefore more customers) have a direct presence in more countries (Gailbraith, 2001). Multinational companies and their increasing company size bring more complex transportation, which can be characterized by an increased pressure on reliability, customization, and flexibility (Tavasszy et al, 2003).
1.6.3 Multi channel
Products reach the customer through a distribution channel or through a sales channel. The use of multi channels by one company increases steadily (Coelho and Easingwood, 2004). This makes the transportation moves more complex to manage.
The process of multi-channel integration is one of the most important processes in Customer Relationship Management (CRM), because it takes the outputs of the business strategy and value creation processes and translates them into value-adding activities with customers (Payne and Frow, 2005). These customers are serviced over multi-channels. In addition, in this context, one can notice a change in channels and product. For instance, companies that produce finished products are now also producing and selling half fabricates. A multinational as Philips is producing televisions and other consumer electronics, but the screens for the mobile telephones are made by Nokia. Six out of every ten mobile phones contains Philips-technology (www.emerce.nl, accessed April 2004). Consumers and businesses can also order Philips product and half fabricates over the Internet. That means that the distribution over multi-channels increases the complexity of the transport management of that company, but at the same time savings (per shipment) could be realized by smarter management. The marketing, distribution and the production are now interconnected. 1.6.4 Complex supply chains
The designs of trade and transport chains are moving towards logistic systems that manage the entire supply chain, blurring the distinction between production transport and distribution activities (Hayes, et al, 2005). The trend in outsourcing made the supply chains longer, making coordination more important. There is more attention to the management of supply chains, because of the fluctuating demand from customers and the pressure on inventory (Ploos van Amstel and van Goor, 2005). The upcoming network society brings also more complex supply chains (Kruijff, 1999).
1.6.5 Outsourcing non core processes
Since Prahalad and Hamel (1990) wrote their influential article, corporations are rethinking their way of organizing and their core competences. An attitude of ‘sticking to your knitting’ has emerged, as many companies regret the acquisitions that never generated the anticipated growth and profit (Bakker, et al, 1994). Outsourcing non core processes and in particular, outsourcing the logistics activities is increasing. Some firms routinely have achieved up to 30 per cent to 40 per cent reductions in logistics costs and have been able to greatly streamline global logistics processes as a
expected to increase. It will continue to evolve at least in Europe (Ohmae, 1989; Coyle et al, 1992; Peters et al, 1998; cited in Bask, 2001).
1.6.6 Growth world economy
International trade expansion since the Second World War has been spectacular, and since 1990, it has accelerated with a growth rate twice as fast as global GDP (Hayes et al, 2005). Logistics services grow with the pace of the growth of the world economy and often more. In 2006, the growth of the world economy is estimated on 6,25% (CBS, newsletter December 2005). Without transport, the world economy cannot grow. The economy of the European Union grows slowly, but steadily with the world economy. These trends and developments form a “fertile soil” for transport management services. They also represent the playfield and environment of this research.
1.7 Conclusion
This chapter presented an introduction of this research by six trends, the conceptual model, the research questions and the methodology.
The choice of these six trends is of course arbitrary and not exhaustive. These trends form a driver for TNTL to identify new business opportunities, since it places companies in a position to thoroughly look at their logistics and transportation management. In acquiring clients and generate new business it is very helpful for TNTL to know the CSFs and their distinction between winning and order losing of TMS. So I have set up the above research to find these factors.
At this moment we know how to get to these critical success factors. What they are is we will find out in the next three chapters. In the next chapter we tackle the sypply side.
Chapter 2: Supply
This chapter presents and studies the supply side of this research. The supply side consists of the products and services that logistics services companies use from their logistics service provider(s). And most important: in this chapter is described what transport management services (TMS) are and how TNTL offers this to the market place.
2.1 Introduction
After an extensive literature review, I have seen that there are many concepts in logistics. First, I will describe what logistics, supply chain management and transportation is. I will also describe some popular description of these concepts. Then I will describe what transport management services are and how TNTL offers this service to the shippers. I will close this chapter with a conclusion.
2.1.1 Definitions and descriptions logistics management
Logistics is a field that originated from the military. Now, it has evolved in a much broader (business) perspective. There are many definitions available for logistics. The definition of logistics management from the former Counsel of Logistics Management (CLM), now called the Council of Supply Chain Management Professionals (CSCMP) is widely accepted, although it is a very broad definition.
Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements. Logistics management activities typically include inbound and outbound transportation management, fleet management, warehousing, materials handling, order fulfillment, logistics network design, inventory management, supply/demand planning, and management of third party logistics services providers.
To varying degrees, the logistics function also includes sourcing and procurement, production planning and scheduling, packaging and assembly, and customer service. It is involved in all levels of planning and execution— strategic, operational, and tactical. Logistics management is an integrating function, which coordinates and optimizes all logistics activities, as well as integrates logistics activities with other functions, including marketing, sales, manufacturing, finance, and information technology. (www.cscmp.org, March 2006)
The (biased) CSCMP does not leave any opportunity unused to emphasize the importance of logistics management. They include marketing and information technology in their definition, while these fields are still seen as separate functions. They also define logistics management as a part of supply chain management. Below supply chain management is described. I will use the definition from van Goor, et al (1996). “Logistics is physical supply, materials management, physical distribution and reverse logistics and the management (originally in Dutch)”.
2.1.2 Definitions and descriptions supply chain management
Supply Chain Management (SCM) is not just another word for logistics (Cooper et al, 1997). Larson and Halldorsson (2004) describe four perspectives on ‘Logistics versus
SCM’ (figure 2.1). One perspective, the re-labeling perspective simply renames logistics. This narrows the scope of SCM and development of the logistics field.
The re-labeling perspective is widely adopted by shippers. One example is a remark from a consumer packaged goods manufacturer: SCM coordinates the flow between factory and the customer. Traditionalists position SCM within logistics. The traditionalists are the opposite of the unionists. The traditionalist view SCM as logistics outside the firm and as “a special form of logistics”.
The unionists view SCM as “more than logistics”. They include, like the CSCMP, these components in SCM: logistics (inventory, warehousing, packaging, distribution, transportation, customer service, purchasing, production planning and demand forecasting); strategic planning; information technology; marketing; and sales. These unionists also strive for “logistics in the boardroom” (Cavinato, 2004). The Intersectionist state that” SCM is not a part of logistics, but is a broad strategy, which cuts across business processes within the firm and through channels (Larson and Halldorsson, 2004). There is in the academic literature no consensus on SCM versus logistics.
TNTL (and I) view SCM as broader than logistics. Slack et al, (2001) defines SCM as “the management of the interconnection of organizations which relate to each other through upstream and downstream linkages between the different processes that produce value in the form of products and services to the ultimate consumer”. Therefore, TNTL’s perspective is the unionist’s perspective.
Logistics SCM Logistics SCM Logis- tics SCM SCM Logis- tics
Traditionalist Re-labeling Unionist Intersectionist
Figure 2.2: some terms to describe the management of different parts supply chain (Slack, 2001: 414) Logistics management at TNTL consists of two services. These services are transportation and warehousing. However, in their mission statement TNTL claims, “to design, implement and operate complex supply chain solutions”. Therefore, in practice the logistics services are limited by transport and warehousing, not by formal strategy. However, TNTL is, according to their mission, becoming more and more of a “supply-chain-solution-provider”. Figure 2.2 shows the difference between distribution and purchasing and supply management. It is important to remember that the purchasing and supply of one operation is the distribution of another and vice-versa.
2.2 Transport Management Services
TMS is a service that is closely linked with Supply Chain Management. The way TNTL describes TMS: “The management on behalf of the customer of complex multi modal supply chain operations where both daily and periodical challenges are supported by
Second-tier supplier First-tier supplier Second-tier supplier
Supply side Demand side
The Operation
First-tier supplier
Purchasing and supply management Physical distribution management Logistics
Materials management Supply chain management
robust IT technology and create added value to the customers supply chain on strategic, tactical and operational levels”
TNTL uses in this definition the term ‘customer’ to describe the end-users of their services. Other service providers use the term clients. The term client gives you a view of someone you take care of, rather than just someone that you sell your product to. The definition of TMS also talks about: "complex and multi-modal transport supply chain operations". By this is meant that transport has more than one mode, such as rail and road. Thus, this definition excludes single mode transport and simple supply chain operations. In practice, TNTL is also prepared to manage straightforward transportation flows, although these flows require less management. Many shippers, as in Chapter 3 will be described; do yet only outsource parts of their transport and its management. And these in particular are quite simple to outsource. Most of these operations are well defined, controllable and straight forward, and they are managed by 3pl’s or 4pl’s. In Chapter 3 will be shown why possible cost savings are not realized. TNTL describes in their definition three levels in the supply chain of customers: strategic, tactical and operational. This distinction is commonly made in strategic planning. The outsourcing of the logistics function is a serious strategic planning decision. Schmidt and Wilhelm give in their article a definition of these three planning levels. It cannot be said more comprehensive than they do, they state:
“The strategic level prescribes a set of locations where facilities are to be located (i.e. opened), production technologies to be employed at each facility, and the capacity of each plant. Strategic decisions thus determine the network through which production; assembly and distribution serve the marketplace. Any model applicable to the strategic level must provide manufacturing capacity to satisfy forecast demand for all products and observe precedence relationships among assembly tasks. The objective is to maximize total profit, including the fixed costs of investments to open facilities and the variable cost of manufacturing and distribution, including ‘border crossing fees’ that might be incurred in transit. Border crossing fees include all costs associated with moving materials from one country to the next, including tariffs and monetary exchange rates. The strategic level establishes the design of the logistics network and thereby provides the environment in which tactical and operational levels perform.
The tactical level prescribes material flow management policies, including production levels at all
plants, assembly policy, inventory levels and lot sizes. For instance, should finished products be assembled in large lots and held in centralized warehouses, each of which distributes to a larger geographical region, or should final assembly be performed at numerous locations only on demand? Thus, it is important to determine a measure of customer service that can be expected to result at the tactical level and provide this as feedback to the strategic level in order to improve customer service by providing a more responsive network design. Some issues such as product design may affect both strategic and tactical decisions.
The operational level schedules operations to assure in-time delivery of final products to customers,
coordinating the logistics network to be responsive to customer demands.”
(Schmidt and Wilhelm, 2000: p. 1502).
These levels are all explained below and on each level several activities take place. In Chapter 5 is reflected on the decision of this definition. Each activity has one or more
services. I explain these services individually. Important here is to state that TMS is a customer specific service, so all variations on all levels of TMS are possible. TMS must be seen as a toolbox and for every customer TNTL designs a customer specific solution with tools from that toolbox.
2.2.1 Operational level
At the operational level of transport management the first action in figure 2.3 is the management of the received order. The customer of the Logistics Service Provider (LSP) sells a product (or product/service combination) to their customer(s). This order is sent to the LSP. This leads to a demand for transportation. It does not matter what company or what service or product is produced, transport management of physical transport will always start with an order (figure 2.3) and the “transportation demand”. A company has several ‘transportation demands’ in its supply chain.
Order management is not an activity that is independent of other activities. Order management is closely linked with the custom requirements, the picking process in a company ánd the reporting systems for higher management. Then again is the planning of an order again linked with the customer service; complaints or rush orders require more and specific attention than when processes run smoothly. The determination of the route of the transport falls within the scope of order management as well and is an important cost factor. E.g., road transportation is cheaper than plane transportation.
Order management can also be linked with electronic warehouse management systems (WMS). As with Atlas Copco, an automotive company, TNTL offered to built a new warehouse close to Breda and to manage it for Atlas Copco. In this way, inventory planning can optimize the costs level. When the orders are entered in the TMS system, the shipments are planned with several Key Performance Indicators (KPI’s) and with other Service Level Agreements (SLA’s) taken into account. This may sound logical and sound as a service anyone can provide, but in practice, things might seem to go a little differently, see the intermezzo.
Intermezzo: falling short on measuring performance transport management
Adrian Gonzalez of ARC Advisory Group surveyed 121 companies in manufacturing and non-manufacturing about performance-measurement in 2002.
“Falling short on Metrics
5 percent of respondents do not use any supply chain metrics at all
10 percent have established key performance indicators (KPI’s) but do not receive Order
management Shipment planning Execution management Event
Freight bill payment and
Invoicing
18 percent lack good data on the performance of key supply chain partners 20 percent do not tie employees’ performance reviews to their metrics 61 percent lack cross-functional metrics
66 percent lack metrics designed to improve quality from a customer’s point of view 74 percent lack metrics that could determine the sources of variability in their processes and could be used to improve those processes
81 percent lack metrics that could be applied across companies. “((McCrea, 2004)
These numbers from the intermezzo are amazing. It is like holding up an airplane in the air without the necessary instruments. In planning, the shipment consolidation (combining flows) and the optimization of shipment are achieved within the agreed boundaries of the contract. The larger and more diverse the flows, the more consolidation can be achieved. To what extent the transport management is outsourced is decided between both parties on the tactical or on the strategic level. The transport is executed after the formal and registered planning of the shipment. Transport can be multi-modal, meaning over the road, through the air, over the sea or by train. That means that several carriers are used in multi modal transport. However, in single mode transport more than one carrier can be used as well. Because there is a firm competition between shippers and the oversupply of road transporters, it is nowadays practice to use more than one carrier on single mode routes.
The management of ‘events’ monitors the transport. These events are defined with the customer and are ‘events’ as arrival at the dock, departure at a certain time, etc. Important in event management is not what happens when the transport goes right, but how the logistics service providers act when unexpected events occur and how these errors are solved and prevented in the future. As with Thomson, a workflow company, TNTL proposed to offer the event management for them.
Then final, the invoice is sent to the different carriers and to the customer or the invoice sent and paid by self-billing. This is an administrative function that sounds easy, but in the transportation world, there is a variety in formats and ways of calculating the costs. As seen in Chapter 3, one in ten invoices are mistaken in the transportation world (Eye For Transport, 2005).
2.2.2 Tactical level
When the execution and other activities on the operational level are done well, this will set the ‘cogwheels’ in motion on the tactical level for improvements (figure 2.4).
The planning and forecasting service of TMS TNTL provides on the tactical level calculates, considering the seasonal patterns or the sales promotions, the transport capacity and plans the transports. This triggers the designed workflow. Workflow is the automation of the business processes, during which documents, information or tasks are passed from one to another for an action, according to a set of procedural rules (Allen, 2005: p. 2).
The workflow design in TMS is for instance the yard management, the carrier selection and the logging of the transport events. Yard management is the management and control of the trucks, trailers and containers up and around the docks. The workflow in TMS can be adjusted for every customer; TNTL uses the standard tools they have to define their ‘tailored solution’ for their customers.
The financial control on tactical level is the part that TNTL thinks is for shippers one of the most important aspects. TMS provides monitoring of all costs at the lowest level. By this monitoring and just by the visualizing of costs savings are realized. In real business cases, TNTL has proved to save between 10 and 15 percent at start on the transportation and management costs.
Not only are the costs on transport and transport management lowered for the shipper, but also the expenses of TNTL for these functions. This means that profitability for both parties will increase. Performance reporting is done with the events defined on the operational level and with this, the performance is measured.
This will mostly be negative reporting, i.e. the frequency delays, the mistakes and damages. Based on the performance the customized improvement plan will be set up and be implemented. Considering the above, the tactical level offers improvement and monitoring of the transport and transport management performances within the agreement between parties.
2.2.3 Strategic level
On the strategic level TNTL provides four services (figure 2.5). These four services are explained below. The first one is often the beginning of the collaboration and that is called ‘building the business case’. In this context, the partners define their risks,
Planning & Forecasting Performance reporting Workflow design Financial control Improvement plan
scope of the collaboration, the required service levels on the performance, the project organization, the objectives and their overall contract.
The transport network design is the second strategic decision, because (de) investments in warehousing means fixed capital for years. These investment decisions have far-reaching consequences for the financial position of the company. The transport network design is also a definition of how the partners are going to work together: what logistics concept is used and how is the network engineered around these logistics.
Third, by carrier management is meant the selection, the contracting and the evaluation of carriers. Some companies, when sourcing logistics in, prefer two or three carriers. However, when the transport management is sourced out to TNTL, TNTL is able to use any carrier in Europe and TNTL records its individual performance. With that ‘buying power’, TNTL achieves better rates in negotiations and is in the position to demand a higher service level.
Carrier management is the management between the LSP, shipper and the carriers. Information Technology (IT) links the communication between the carrier, shipper and the LSP. This can be any appropriate IT available on the market (from telephone to handwritten fax). In the logistics sector the information exchange happens with too many formats. With TMS, this is standardized.
The LSP can have its own software that stores the content of that information exchange. A carrier is selected on many different factors (Table 2.1). Most of the time, a shipper just selects carriers on the rates. However, that could lead to unexpected costs in cases where things go wrong. Therefore TNTL selects on other aspects as reliability and flexibility too.
Reliability and consistency transit time Loss and damages Service changes Equipment availability Rates Tracing
Transit time total door to door Service frequency Line haul services Pick up and Delivery service Scheduling flexibility Claims
Financial stability Expediting Carrier Salesmanship Operating personnel Rate changes Special equipment
Table 2.1: factors of carrier selection Murphy et al, 1997
When a carrier, selected by TNTL is not performing well on the selected factors, TNTL is in the position not to use that carrier anymore.
Figure 2.5: Strategic level TMS.
Business case building Transport network design Carrier management Information services
Fourth, by information services are meant the frequency of reporting, the visibility or the sharing of data-warehouses. The shipper still owns his data on these activities, a third party only manages it. TNTL is able to help the logistics manager in organizations to convince the rest of his organization. This has been a difficulty in the past. In particular, the financial department of organizations needs to be convinced by the importance of transport management. However, TNTL has proven to reduce the transport management costs between 10-15 percent.
2.2.4 Four enablers
TNTL offers TMS to the market with, as they call it, four ‘enablers’. These enablers are illustrative for the changes that are needed on both sides in the new partnership. The four enablers are: people, the ‘control tower’, technology and ‘organized networks’.
The people that implement and run TMS have “project-organization skills, experience in logistics and are committed” (TNTL, 2005). TNTL emphasize this, because the transport sector, where transport management is connected with closely, is a people’s business. The personal relationships in the logistics sector are seen as very important. The control tower is a container term to indicate a point of view when the logistics service providers looks óver the supply chain of the shipper and manages the transportation and the warehousing of the products. The control tower focuses on long term, structural improvements inside and outside the supply chain. In the proposal for Philips the control tower concept was designed for intra-Europe transport. The invoicing and the financial reporting will be better for Philips because it is more accurate and the transportation is referenced to particular orders received from Philips.
The enabler technology is a combination of market software and an in-house developed Transport Management System called the Matrix™. Under the umbrella of Matrix™, TNTL is capable of bringing all sorts of smart IT-systems together with a user-friendly interface. There are a few IT system-standards beginning to dominate the market, but the IT that is used to manage transport is mainly developed in-house by the Logistics Service Providers (LSP’s). TNTL integrates these within the Matrix™. Matrix can also be connected with the Enterprise Resource Planning (ERP) systems of shippers. Thus, Matrix™ connects the shipper with carriers, suppliers and partners. The Matrix™ connects other vital applications as well: e.g. cross dockmanagement, billing and procurements systems and routeplanning applications (figure 2.6).
Figure 2.6: IT system the Matrix™ overview
The last enabler is the organized network. The organized network is related to the organization between all the parties that are involved in the management of transport. That will be discussed in detail in Chapter 4. Now it is enough to stress that the organized network consists of two important aspects:
First, the used carriers by TNTL, which in itself form a network where potential customer can be fit in by the ‘plug & play’ concept. There between 200 and 250 carriers TNTL uses for the Benelux at the moment. For every shipper TNTL is able to find and select the carriers that meet the SLA agreed on.
Second, it is the ability of TNTL to organize the transportation modes of a shipper on any level. To meet the quality standards the shipper requires adjusted to the situation is the responsibility of TNTL.
2.3 Critical success factors according to TNT Logistics Benelux
This paragraph describes the critical success factors of TMS from the perspective of TNTL. TNTL writes proposals for shippers. But what does that mean? Confidential proposals are for shippers that ask for a Request For Quotation (RFQ). Alternatively, in other situations shippers who have given out tenders for their transportation processes ask LSP’s to quote their transportation management. That means that they ask, for how much can you do it and how would you do it?
2.3.1 RFQ process
In this thesis there will be referred to the RFQ process of TNTL. The business
development department manages that process. The RFQ process is described below (Table 1. 2) for a better understanding of how TNTL views the process of acquiring customers.
Enquiry Phase Project Phase Contract Phase Post Project Phase
1a customer analysis 2 Kick-off 8 Presentation 10 Project Review 1b opportunity
assessment 3 Customer analysis II 9 Negotiation & Contract
4 Data analysis
5 Solution design
6 Costing
7 Proposal
Table 2.2: the RFQ process in business development of TNTL (BD Manual TNTL, 2005) The numbers represent the order of the steps in the RFQ process. During the project, phase and the contract phase it is important that it is clear what the CSFs are.
TNTL sells itself in these proposals and uses sales pitches to convince the customer. From these proposals, a pattern could be derived on why shippers should use TNTL, according to TNTL. First is discussed what the order winning aspect of TMS are, then what the order qualifying and the order losing aspects are.
2.3.2 Order winning
The order winning aspects are those customer requirements that enable a firm to win business. The first aspect from a TNTL perspective is the in-house developed IT. In every proposal, TNTL gives a lot of attention to the Matrix™. This tool can be applied to every customer, but the Matrix™ has several standard elements. Almost all of the leading logistics service providers have developed their IT architecture and software by themselves, since there is not an equivalent (yet) available on the market.
TNTL states: “Matrix™ is our flagship suite of supply chain technologies, incorporating best-of-breed proprietary and off-the-shelf applications into an ideal logistics solution and involving many processes via just a single, integrated system. Our cutting-edge Matrix™ system is at the forefront of logistics technology. Matrix™ manages inbound just-in-time logistics and outbound logistics, including transportation, inventory management, order fulfillment, financial settlement and e-commerce processes. Matrix™ combines proprietary and off-the-shelf applications to create a tailored solution for each customer.” (www.tntlogistics.com)
Second, Logistics is a peoples business. That means that in contact between both parties the personal contact is crucial. TNTL has recognized this and incorporated in their vision. Therefore, staff and employees are an order winning aspects. TNTL states, “more focus on relationship and understanding” (BD Manual, achieving Excellence in our RFQ process, 2005: 13).
Third, the solution TNTL thinks a solution must be of high quality and complete. This starts with the proposal: the content of the proposal and the look and feel of it. TNTL provides services with the client and thinks beyond the problems of the shipper. TNTL
does not want to be a ‘run away consultant’. TNTL aims for a long-term logistics partnership. The solution TNTL proposes, TNTL is able to deliver (BD manual 2005: 18) and positions itself in the ‘high end’ of the market.
Fourth, TNTL also states that the experience they have is order winning. TNTL has proven many times that they can solve the business case that is described in the requests for proposals of shippers. In training business development managers TNTL states that this is an important message that has to come across to the prospect (BD Manual, 2005). However, TNTL does not have a client that TNTL manages all of the transportation for. It manages only parts of the transportation in the supply chain. By bundling the transport volumes, optimizing the network and reducing the hidden costs TNTL is able to deliver added value (Proposal Philips LTL/FTL Transport intra-Europe, 2005).
Fifth, Trust is an order winning according to TNTL. Trust is an important aspect in a partnership. After all, SCM is built on an increasing foundation of trust and commitment (Chen and Paulraj, 2004; Skjoet Larsen, 1999; Hoyt and Huq, 2000) Trust is one’s belief that one’s supply chain partner will act in a consistent manner and do what he promises. If the shipper has no trust in the capabilities of the partner and the partnership, there is no business case for TNTL. In the process before the partnership, building trust has a central role.
2.3.3 Order qualifying
Order qualifying are those criteria that a firm must meet to have a customer consider it to be a possible supplier. The project organization of TNTL for the implementation and the execution of the designed solution is order qualifying. At the end, this has to be good up to a certain level, but it does not win business in itself.
TNTL as a brand and as a company is also order qualifying in their perception. The company brand is almost anytime enough to put TNTL on the long list of shippers. In the proposals of Philips and Atlas Copco TNTL writes, that TNTL is a stable and reliable company.
The way TNTL presents itself and the way the proposals are written and how they look, is order qualifying. Under the time pressure of the RFQ process TNTL is able to deliver the documents in a proper way.
The visibility TNTL gives a shipper in their transport of the supply chain is order qualifying, since this service is offered by every LSP. The problem with this benefit is that the visibility is often included in the carrier price. Competitors give away this benefit for free to be competitive. However, the advantage to know at all time where and when your goods are at any time is great. It can be offered and presented in many ways. TNTL offers that visibility in clear reports that can be printed at any time.
2.3.4 Order losing
Order losing are those customer requirements that are not met in order to have a customer consider it to be a possible supplier. Order losing according to TNTL is that they think that they are perceived as too expensive, as managers at TNTL state. DHL, a German company, one of the main competitors of TNTL, has a different strategy, where they accept lower margins on business, to generate new customers. This is called ‘buying of businesses. At first DHL accepts lower margins and then when the partnership is up and running they state that the costs have gone up and that it the transport management costs are have gone up. This is a treat to the concept of cooperation in the supply chain, since it damages mutual trust and it stimulates this and other opportunistic behavior.
TNTL has decided not to accept much lower margins to win business than 15 percent. In 2000 TNTL was a bad performing business unit and financially not healthy. Therefore, the management board has decided to focus on the financials with an explicit focus on the margins of the provided services.
An order-losing requirement according to TNTL is that the solution TNTL provides is ahead of the position of the customer. TMS is a concept that requires a high level of rationalization in the organization and the full senior management support.
When the shipper has not been fully open towards TNTL, it might during the process not be possible to implement TMS. It happens that the implementation of TMS does not have the full management support, because the senior management of a client does not want to loose the control. In the interviews with the competitor of TNTL and the business development manager of TNTL this was brought up frequently (appendix 1) another order losing aspect is that the solution TNTL has for the problem is too difficult to implement on a reasonable term. Shippers are just not ready yet for TMS due to political reasons.
It has happened that shippers only want to know if their current logistics service provider is expensive or operating with market prices. These shippers are only using the RFQ process to benchmark their transport management costs. This has happened with Sony. Another order losing aspect is that the politics at the shipper make that TNTL does not win the business. TNTL calls this “the wrong delegation”. That means that TNTL is not talking and negotiating with the right people. This is hard to prove, but I heard this frequently. The politics at the shipper causes many problems in acquiring new business and managing the implementation of projects (Wijnen et.al. 2001: 58)
2.4 Overview of TNT Logistics’ view
discussed how TMS is supplied and organized. The CSFs are determined and these CSFs are summarized in the model below (figure 5.1). Important here to state is that not always the content of TMS leads to an order winning aspect, but sometimes more the way TMS is offered. Logistics is a sector where orders are given onto others. “Service firms have the opportunity to build long-term relationships, because customers conduct their transactions directly with the service provider, most often in person (Fitzsimmons and Fitzsimmons, 1998)”. Not all decision making is fully rationalized. The aspects are presented in no particular order.
According to TNTL costs savings are realized by organizing the supporting supply chain processes better than the shipper does. The enabler to support this is the Matrix™. This is the first order winning aspect. TNTL brings their expertise into the supply chain of the shipper. This expertise is in the heads of the people. The skills of those people are the resource for success. The complete supply chain management solution design is an order winning aspect as well. The service level and quality TNTL is able to
guarantee and the proven business cases form other two order winning aspects. The final order winning aspect is trust. A high level of trust between leads to winning the business. The first two order qualifying aspects are the brand TNTL and the
• The high price / tariffs
• Client not ready • Politics at shipper • Too difficult to
implement
Figure 2.7: critical success factors TMS according to TNTL
Order winning Order qualifying Order losing
• The name and brand TNT
• The proposal look and feel
• Project organization • Visibility
Critical success factors
• IT / the Matrix ™ • The people • A complete SCM
solution
• Improving quality and service level • The proven
business case experience • Trust
