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King Abdul-Aziz University Marine science collage Maritime Studies Department Maritime transportation and port management section

Critical analysis to Logistic Services Providers with relation to Ports performance

Case study and risk analysis to Saudi Arabia-Jeddah Port &Logistic Services Providers

Prepared by: Ashraf Kamal (0865027) Super visor : Eng. Hossam H. Othman

2010 - 2011

King Abdul-Aziz University Marine science collage Maritime Studies Department Maritime transportation and port management section

Project name : Critical analysis to Logistic Services Providers with relation to Ports performance:
Case study and risk analysis to Saudi Arabia-Jeddah Port &Logistic Services Providers

Prepared by: Ashraf Kamal (0865027) Super visor: Eng. Hossam H. Othman

Arbitrator (s): . . . . . . . . . . . . .



and appreciation To all of those who participated to create this stud y and it would have not been complete without their help ,

from King AbdulAziz University:

Dr. Akram alentably Eng. Hossam H. Othman

From the Maritime industry:

Mr. H.V. Hegday (intermodal services of SA)

And to everyone who collaborated ,and the companies and establishments who have been cooperative by Submitting their problems and recommendations so the study can reach to a better results ..


Index: y Project Summary------------------------------------------------------------------------------------ 6 y Introduction-------------------------------------------------- -------------------------------7 y Chapter 1 : Logistic as a business------------------------------------------------------8  In-bound logistics--------------------------------------------------------10  Out-bound logistics------------------------------------------------------11 o 1-1 Logistic Services main activities----------------------------------------13  1-1-1 information ----------------------------------------------------13  1-1-2 transportation -------------------------------------------------15  1-1-3 inventory-------------------------------------------------------16  1-1-4 warehousing---------------------------------------------------17  1-1-5 material handling ---------------------------------------------20  1-1-6 packaging------------------------------------------------------21  1-1-7 security--------------------------------------------------------22  1-1-8 Reverse logistics ----------------------------------------------23 y Chapter 2 : Logistic as a services industry (main service providers)-----------26 o 2-1 Third party logistic services providers --------------------------------26 o 2-2 Fourth party logistic services providers------------------------------33 y Chapter 3 : Ports performance and its role in supply chains -------------------36 y Chapter 4 : Risks associated with Logistic Services Providers------------------44 o Company perspective-----------------------------------------------------------44 o Logistic Services Providers perspective-------------------------------------47 y Chapter 5 : the mutual relation between the port and the LSPs & an application to the study on Jeddah`s LSPs and Port------------------------------49 o the mutual relation -----------------------------------------------------------49 o application to the study on Jeddah`s LSPs and Port----------------------50  the importance of a LSP in Jeddah and Saudi arabia-----50  a survey to Logistic services providers in Jeddah----------51  The results of the survey----------------------------------------52 o recommendations and opinions fro m the market -------------------57

Conclusion & recommendation----------------------------------------------------------59


List of tables:

Tables :

1-examples of third-party logistics definitions 2-Benefits and risks of logistics outsourcing

3-The importance of factor to shippers

Page(28) Page(43)

4-The three top important variables in the First axis of the study survey 5-The three top important variables in the second axis of the study survey




List of graphs: Graphs:

The Random sample of survey percentage answers for (efficiency)


The Random sample of survey percentage answers for (Infra-structure & super-structure)

The Random sample percentage answers for (EDI) The Random sample percentage answers (2nd axis)

Page(53) Pages(54,55)

A comparison between the three variables of axis 2 A comparison between the three variables of axis 1



Project Summary :

The problem might be outlined as the time thats over consumed by the port which could affect the logistic service provider negatively causing delay to the consumer or even decrease the value of the goods

The purpose of this study is to investigate the problems that the logistic service provider in Saudi Arabia-Jeddah could face in the ports ,and the critical relation between the logistic services provider and the port performance ..

The study is limited to several references and the application of the study on the Saudi market ''Jeddah city'' as a case study. Another limitation is related to small number of Logistic services providers involvement because it was difficult to get in contact with all of them. In addition, our field of research is ended in the area of logistic services providers and the port and it didnt go any further.


Introduction This study was written as a graduation project for King abdul Azziz universityMaritime studies department Maritime Transportation and port management section . It will discuss the logistic process and analyze it , the logistic providers and the services they provide , and the supply chain and enhancement.

Logistic as the process of the management of the flow of goods and services between the point of origin and the point of consumption in order to meet the requirements of customers- will be the main axis going through with the inbound and outbound logistics and the services that comes under the logistics process such as information , transportation, inventory, warehousing, material handling, packaging, security and Reverse logistics. After that I will discuss the typical supply chain and its management and I will focus on the maritime supply chain. And the importance of ports in the supply chain of most firms. Also, it will discuss the performance and competitiveness of ports and how can it effect the flow of goods in the logistic process, and the impact of the 3PLs and 4PLs on the port competitiveness and performance. A case study from Jeddah- Saudi Arabia will be shown to over explain and this study can be helpful to understand the logistic process and how can it can be effected by port performance which is the major specialization for this study..


Chapter 1 Logistic as a business [1] Logistics as a business concept evolved in the 1950s due to the increasing complexity of supplying businesses with materials and shipping out products in an increasingly globalized supply chain, leading to a call for experts called supply chain logisticians. Business logistics can be defined as "having the right item in the right quantity at the right time at the right place for the right price in the right condition to the right customer", and is the science of process and incorporates all industry sectors. The goal of logistics work is to manage the fruition of project life cycles, supply chains and resultant efficiencies. In business, logistics may have either internal focus (inbound logistics), or external focus (outbound logistics) covering the flow and storage of materials from point of origin to point of consumption. The main functions of a qualified logistician include inventory management, purchasing, transportation, warehousing, consultation and the organizing and planning of these activities. Logisticians combine a professional knowledge of each of these functions to coordinate resources in an organization. There are two fundamentally different forms of logistics: one optimizes a steady flow of material through a network of transport links and storage nodes; the other coordinates a sequence of resources to carry out some project.

Production logistics[1] The term production logistics is used to describe logistic processes within an industry. The purpose of production logistics is to ensure that each machine and workstation is being fed with the right product in the right quantity and quality at the right time. The concern is not the transportation itself, but to streamline and control the flow through value-adding processes and eliminate nonvalue-adding ones. Production logistics can be applied to existing as well as new plants. Manufacturing in an existing plant is a constantly changing process. Machines are exchanged and new ones added, which gives the opportunity to improve the production logistics system accordingly. Production logistics provides the means to achieve customer response and capital efficiency. Production logistics is becoming more important with decreasing batch sizes. In many industries (e.g. mobile phones), a batch size of one is the short-term aim, allowing even a single customer's demand to be fulfilled efficiently. Track and tracing, which is an essential part of production logisticsdue to product safety and product reliability issuesis also gaining importance, especially in the automotive and medical industries.


Logistics management[1]

Logistics management is that part of the supply chain which 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 customer and legal requirements. A professional working in the field of logistics management is called a logistician. Logistics management is known by many names, the most common are as follows:
y y y y y

Materials Management Channel Management Distribution (or Physical Distribution) Business or Logistics Management or Supply Chain Management


Inbound and Outbound Logistics [2] The Inbound process comprises all the steps of an external procurement process that occur when the goods are received; the outbound part covers the necessary activities for preparation and shipping of goods to their destination.

In-bound logistics Goods Receipt Is a follow-on activity to a purchase order. It forms the basis for updating the financials and inventory records and can trigger warehouse management and quality management processes.

With the warehouse management system, you can control the goods receipt and goods issue processes at a physical level. Goods receipts are possible from purchase order, inbound deliveries (advanced shipping notice), stock transport orders, or from production orders. Goods receipt begins the put-away process, which is supported by different advanced strategies.

Determination of External Demands Determines the data describing a demand for a material that is procured externally. This data includes the quantity that is required, the release-to-supplier date of the demand, the goods receipt date for the delivery, and the location to which the material has to be shipped.

Advanced Shipping Notification Comes from the vendor and contains the exact materials, quantities, and the delivery date with reference to a purchase order. This document becomes the Inbound Delivery in the receipt process.

Delivery Monitor Provides an overview of deliveries in working processes. Gives an overview of the workload in different areas, for example shipping, transportation, or invoicing, while also allowing you to collectively process documents that have the same selection criteria. Specialists in different execution areas of the organization can use this tool to gain a quick overview of their workload, drill down to single documents, and trigger follow-up activities.


Yard Management Gives the warehouse an overview of stocks located on trailers, trucks, or railcars in the yard. Sequencing functions decide which stock should be received into the warehouse at which point in time. Yard Management also manages the vehicle from the check-in to check-out, including in-yard activities such as sealing, weighing, and directing the vehicle to a door or parking place within the yard. Registration of the start and finish of loading or unloading activities is also supported. Yard Management is integrated with Mobile Data Entry. Out-bound logistics
Goods Issue

The outbound delivery forms the basis for goods issue posting. The data required for goods issue posting is copied from the outbound delivery into the goods issue document. When you post goods issue for an outbound delivery, the fol lowing functions are carried out on the basis of the goods issue document: 1. Warehouse stock is reduced by the delivery quantity. 2. Value changes are posted to the balance sheet account in inventory accounting. 3. Requirements are reduced by the delivery quantity. 4. The serial number status is updated. 5. The goods issue posting is automatically recorded in the document flow. 6. Stock determination is executed for the vendor's consignment stock. 7. A worklist for the proof of delivery is generated. After goods issue is posted for an outbound delivery, the scope for changing the delivery document becomes very limited. This prevents discrepancies between the goods issue document and the outbound delivery.


Delivery Processing & Distribution

Controls the actual fulfillment of sales orders and purchase orders as well as stock transport orders. The execution of logistics tasks is handled here. With delivery processing, the goods are shipped and relevant documents are printed out. The sales requirements can be distributed to alternative locations. The delivery might be shipped to the customer directly from the fulfilling locations (more than one delivery), or consolidation may occur at one location before one complete shipment is transported to the end customer.

Proof of Delivery

Proof of delivery (POD) is an instrument involved in business processes in which an invoice is issued only after the customer has confirmed the delivery's arrival. In addition to the POD itself, you can also record the POD date, time, actual quantity, and the reason for possible differences in quantities. This is especially important for deliveries where the delivery quantity varies because of the nature of the goods or for which the exact delivery quantity is unknown from the start. You are now in a position to issue an accurate invoice based on the customer's confirmation of goods received. You no longer need to create credit memos. The reasons for deviation that occur most frequently in real-world scenarios, such as stock shrinkage, theft, certain characteristics of goods (volatility, for example), and transportation damage, are recorded and analyzed in the system. This analysis is especially valuable when you are negotiating with forwarding agents, vendors, or customers, since all deviations can be reflected.

Value-Added Services

Value-Add activities in the warehouses need to be managed and monitored. Using the VAS functionality, you are able to manage and control the execution of services in the warehouse. VAS is fully integrated into Warehouse Management, Handling Unit Management, Task and Resource Management, and Mobile Data Entry.

Delivery Monitor

Provides an overview of deliveries in working processes. Gives an overview of the workload in different areas, for example shipping, transportation, or invoicing, while allowing you to collectively process documents that have the same selection criteria. Specialists in different execution areas of the organization can use this tool to gain a quick overview of their workload, drill down to single documents, and trigger follow-up activities.


1-1 Logistic Services 1-1-1 information flow:


The head of the World Economic Forum, Klaus Schwab, summarized the steadfast attitude to e-information: We are moving from a world in which the big eat the small to a world in which the fast eat the slow. Walker et al. (2005) states: Information technology is the glue that makes a distributed supply chain network possible. For decades, the concepts of information and communication technology (ICT), e-commerce, business to customer (B2C), business to business (B2B) and virtual enterprise have been exploited by extensive research and prevailed in practical supply chain management. The most common way to define Value of information (VOI) is the added value emerged from continuous information flow through the supply chain. Recently, 2010 National Federation of Advanced Information Services (NFAIS) redefined VOI as a new revolution which is incompatible with the old thinking. VOI is also confirmed by many academic researches which identify information flows as an important factor of supply chain management (CHEN, Injazz J and Paulraj, Antony, 2004) (CARR, Amelia S and Kaynak, Hale, 2007). As the rise of e-commerce and the development of ICT which lead to more timely and precise information transformation, the attention on VOI increased. This trend invokes companies to highlight the importance of information by showing the benefits of relevant strategies to better implement transformation. Thus, more and more enterprises tend to improve the continuousness and efficiency of information flows in order to streamline the entire supply chain and at the same time significantly reduce costs, time and miscommunication. As it aforementioned, information flow can be divided into horizontal flow and vertical flow. Horizontal information flow runs among different organizations through the supply chain, while vertical information flow goes among different processes happened within the same department.


Lumsden and Mirzabeiki (2008) listed nine different information elements which compose the information flow : (1) Location of the products in supply chain. It is set as one of the most significant information which helps to trace and track on the products. (2) Condition of products in shipment. It relates to temperature, pressure which may indicate the actual quality of transportation. (3) Position and sequencing of products in shipment or inventory. It can help to quickly respond to the customer orders. (4) Inventory level and point-of-sale of retailer (or stores downstream). The bullwhip effect will be decreased by this information. (5) Different suppliers available for each product. It facilitates the efficiency of supplier selection by balancing of demand and supply. (6) History of sales. The statistical information about the historical sales is helpful to improve the accuracy rate of customer demand forecast. (7) Warehouse operation information. (8) Offers of companies on their websites. (9) Sharing quantitative information in the supply chain. All of the data forms the information flow alike different nodes compose the whole network. The nodes are tightly connected by relative information which should be collected, shared, transferred in order to streamline the value chain and create more value of information (VOI).


1-1-2 transportation Transportation could be the most important activity in the logistic process whether it was using one mode of transportation which includes air, rail, road, water, cable, pipeline, and space- or it was an intermodal transportation it would still be to any supply chain the most risk associated activity and therefore it should be will planed and monitored. 1-1-2-1 Freight transport [3] Freight transport, or shipping, is a key in the value chain in manufacturing .With increased specialization and globalization, production is being located further away from consumption, rapidly increasing the demand for transport. While all modes of transport are used for cargo transport, there is high differentiation between the nature of the cargo transport, in which mode is chosen. Logistics refers to the entire process of transferring products from producer to consumer, including storage, transport, transshipment, warehousing, material-handling and packaging, with associated exchange of information.

1-1-2-2 Containerization Containerization, with the standardization of ISO containers on all vehicles and at all ports, has revolutionized international and domestic trade, offering huge reduction in transshipment costs. Traditionally, all cargo had to be manually loaded and unloaded into the haul of any ship or car; containerization allows for automated handling and transfer between modes, and the standardized sizes allow for gains in economy of scale in vehicle operation. This has been one of the key driving factors in international trade and globalization since the 1950s. 1-1-2-3 Bulk transport Bulk transport is common with cargo that can be handled roughly without deterioration; typical examples are ore, coal, cereals and petroleum. Because of the uniformity of the product, mechanical handling can allow enormous quantities to be handled quickly and efficiently. The low value of the cargo combined with high volume also means that economies of scale become essential in transport, and gigantic ships and whole trains are commonly used to transport bulk. Liquid products with sufficient volume may also be transported by pipeline.


1-1-2-4 Air freight Air freight has become more common for products of high value; while less than one percent of world transport by volume is by airline, it amounts to forty percent of the value. Time has become too important in regards to principles such as postponement and justin-time within the value chain, resulting in a high willingness to pay for quick delivery of key components or items of high value-to-weight ratio .In addition to mail, common items send by air include electronics and fashion clothing. 1-1-3 inventory: [4] The following paragraph is to give an over-view to the meaning of inventory, and its similar to the inventory in the industrial sector Inventory is the total amount of goods and/or materials contained in a store or factory at any given time. Store owners need to know the precise number of items on their shelves and storage areas in order to place orders or control losses. Factory managers need to know how many units of their products are available for customer orders. Restaurants need to order more food based on their current supplies and menu needs. All of these business rely on an inventory count to provide answers. The word 'inventory' can refer to both the total amount of goods and the act of counting them. Many companies take an inventory of their supplies on a regular basis in order to avoid running out of popular items. Others take an inventory to insure the number of items ordered matches the actual number of items counted physically. Shortages or overages after an inventory can indicate a problem with theft (called 'shrinkage' in retail circles) or inaccurate accounting practices. Retail businesses restaurant for example- which take frequent inventories may use a 'par' system based on the results. The inventory itself may reveal 10 apples, 12 oranges and 8 bananas on the produce shelf, for example. The preferred number of each item is listed on a 'par sheet', a master list of all the items in the restaurant. If the par sheet calls for 20 apples, 15 oranges and 10 bananas, then the manager knows to place an order for 10 apples, 3 oranges and 2 bananas to reach the par number. This same principle holds true for any other retail business with a number of different product lines. Companies also take an inventory every quarter in order to generate numbers for financial reports and tax records. Ideally, most companies want to have just enough inventory to meet current orders. Having too many products languishing in a warehouse can make a company look less appealing to investors and potential customers. Quite often a company will offer significant discounts if the inventory numbers are high and sales are low. This is commonly seen in new car dealerships as the manufacturers release the next year's models before the current vehicles on the lot have been sold. Furniture companies may also offer 'inventory reduction sales' in order to clear out their showrooms for newer merchandise.


1-1-4 warehousing: [5] 1-1-4-1 Definition

A warehouse is a location with adequate facilities where volume shipment are received from a production centre, broken down, reassembled into combinations representing a particular order or orders, and shipped to the cus tomer s location or locations. The concept of distribution warehouse or a distribution centre is vastly different from the earlier concept of a godown for storage. The godown is merely a dumping place. Godowns are maintained merely for storage of surplus goods. The earlier concept, which led to the establishment of warehouses, was based on the need for ensuring a continuous, un-interrupted supply of goods in the market area for the following: (1) Ensuring protection against delays and uncertainties in t ransportation arising from a variety of factors.

(2) Eliminating lack of sophistication in production control and consequent uncertainties in the availability of product at the desired time and place.

(3) Providing for adjustment between the time of production and the time of use because production and use can be seldom synchronized. The modern distribution centre or distribution warehouse is a pivot in the physical distribution system. According to this system, movement is the primary objective of a warehouse. As per this new concept, a warehouse is a location where inputs (incoming factory shipment) are converted into outputs (outward shipments representing orders of customers). this conversion takes place without consuming too much time. The goods may be received over a period of time from different places, combined or broken down into each individual customer s orders, and dispatched to the next point in the distribution channel without their coming to rest within the confines of the distribution centre. Because of the usual and often inevitable lack of coordination between inbound and outbound goods, storage facilities of a temporary nature must be provided for in the scheme.


Characteristics of warehouse activity The warehouse activity work is non -value adding work. It is pointed out for better profits the stores should not exist. Also the material movement should be reduced to zero. These are non-value adding activities. This is because value is what the customer is prepared to pay for. A customer is willing to pay for is the physical conversion/ processing of material into product. The configuration of the product forms only one element of what a customer is wil ling to pay for. Also customer needs other points such as following. The product should be available, At a required location At required time. Warehouse provides these values. These are apart from value added due to conversion. For that reason management must pay the maximum attention to the stocking and handling related activities.


Bonded Warehouses Private and public warehouses can be bonded under the customs and excise act and municipal corporation regulations, facilitati ng deferred payment o f customs. The warehouseman releases only those goods on which the duty is paid on production of roof of such payment and release order issued by the appropriate authority. Field Warehouse Field warehouses are those which are manage d by a public warehousing agency in the premises of a factory or company which needs the facility for borrowing from a bank against the certification of goods in storage or in process by an independent professional warehouseman. Cold Storages: Cold storage facilities are provided for perishables against payment of a storage charge for the space utilized by different parties. In a cold storage, it is essential that the temperature is regulated and temperature variation is controlled to the degree particularly for certain sensitive items.


Agricultural Warehouses: These warehouses are meant storing agricultural produce grown in a certain area and are located in assembling or regulated markets. These warehouses receive agricultural commodities either directly from the farmers or through their commodities agents, or from wholesalers. Distribution Warehouses: These warehouses are located close to the manufacturing concerns or consuming areas. Their location depends on the nature of the product, the tim e taken for transit, operating coast and the need to make the product available in the market in obedience to the demand for it. Buffer Storage Warehouses : These warehouses are built at strategic locations with adequate transport and communication facilities. They store food grains or fertilizers, etc. Export and Import Warehousing : These warehouses are located near the ports from where international trade is undertaken. They provide transit storage facilities for goods awaiting onward movement. Facilities for break-bulk, packaging, inspection, marketing, etc., are available at these warehouses.


1-1-5 material handling: [6]

Material Handling refers to activities, equipment, and procedures related to the moving, storing, protecting and controlling of materials in a system. MH means providing y the right amount of y the right material y at the right place y at the right time y in the right position y in the right sequence y for the right cost

Some of the above points are quite obvious, others require explaining: Right Amount: Which means how much inventory we need to maintain for different parts/components/modules/products, and How much WIP must be running through the system Right Material: It is important for the MH system to deliver the proper material. Typical cause of problems may be; Look-alikes (e.g. Red T-shirts of "XL" size and Red T-Shirts of "XXL" size; or M4 screws with slightly different screw head shape etc.) Methods of identification: Coding, Visual Techniques for coding: Bar codes, Alphanumeric codes stored and recognized by magnetic strips or visual recognition. Visual Techniques: Human vision, Optical camera vision and recognition systems.


Right Sequence: This is an important step in design of manufacturing systems as well as in their operation. Materials delivered in the wrong sequence will directly result in increased WIP (Why ?) Answer : Product design, and Process Planning should be done, if possible, BEFORE the layout of the factory and the MH system is planned. For mixed product systems, where multiple products need to run through the same processing line, the line should be designed to minimize the total amount of loop-back movement of materials. Similarly, in assembly lines, the sequence in which the parts arrive at the assembly station should match the sequence in which they are assembled. One example where this becomes very important is palletizing stations where pallets are bing loaded with a particular part/product mix. Right Orientation: Especially important for automated MH systems, or assembly systems. Typical assembly heads can only handle parts presented to them in a given orientation. Often, special devices and tracks are sued to maintain the parts/WIP in a given orientation as it travels along the MH system.

1-1-6 packaging and labeling: [9] Packaging is defined in the regulations as "all products made of any materials of any nature to be used for the containment, protection, handling, delivery and preservation of goods from the producer to the user or consumer." This applies where the product is one of the following:
y y y

'Primary' or 'Sales' packaging is packaging which forms a sales unit for the user or final consumer, for example, a box containing soap powder 'Secondary' or 'Grouped' packaging is that which contains a number of sales units, for example, a cardboard outer containing a number of boxes of soap powder. 'Tertiary' or 'Transport' packaging is packaging that is used to group secondary packaging together to aid handling and transportation and prev ent damage to the products, for example, the pallet and shrink wrap used to transport a number of cardboard outers containing boxes of soap powder. For the purposes of the Regulations, this does not include road, ship, rail or air containers.


The main packaging materials included are:

y y y y y

paper/fibreboard plastic glass steel aluminium

Wood packaging and packaging made from other materials (for example hessian, jute, cork, ceramics and so on) are also included.
Labeling: it may be required to include certain information on the label of your product when it is distributed in specific ways. For example, labels of food products sold in retail outlets must contain information about their ingredients and nutritional value. [10]

1-1-7 security: Cargo security means making sure that the cargo is fully secure from any potential risk and the cargo security as a service can be provided by the logistic services provider , and the following is a (cargo security) definitions provided by Samskip (a European logistic services provider) : Cargo security representative: Employees of certified secure cargo handlers (e.g., exporters, cargo transporters and freight forwarders) that have been approved by the Directorate of Customs to act in a further specified capacity in respect to cargo security. Certified cargo transporter: Transport company that has been approved by the Directorate of Customs to transport cargo domestically, and to export cargo. Cargo security declaration: Document filled out by the shipper in accordance with Directorate of Customs regulations. The document or a copy of it shall accompany the cargo to shipside. Port cargo security representative: approved Port employees to see to security affairs in harbor areas.


Cargo security declaration Loaded closed containers


A cargo security declaration shall accompany each exported container of goods. The Office of the Directorate of Customs gets the original, cargo security declaration at the place of loadi ng, and the shipper(s) a copy that accompanies cargo to shipside.

When an approved cargo security representative of the exporter has delivered to the port security representative, or the cargo transporter's cargo security representative, a loaded cargo container, along with a cargo security declaration, responsibility for the shipment is deemed to pass to the cargo security representative or cargo transporter, depending on circumstances.
Loaded unsealed containers

An unsealed, loaded cargo container may not be moved from its loading site into a restricted area of a cargo transporter or port. If a loaded cargo container arrives unsealed at an export destination, a port security representative or the shipper shall see to it that the contents are properly inspected, and the relevant directorate of customs shall be notified, before the container is sealed with a security seal. A container that has been sealed with a cargo security seal shall be moved immediately to a restricted area of the relevant port.

1-1-8 Reverse logistics [12] At a company that does not operate reverse logistics any item that has been returned from a customer may be received into the warehouse and stored until it is examined by the quality department or scrapped, this could be hours days o r months. Not only does this scenario use precious warehouse space, but it fails to address the potential benefits of repairing items for customers or refurbishing returns for potential resale. Both of these options can turn the loss due to the cost of disposal into a profit for your company as well as improving customer satisfaction. The value added processes that are performed on customer returns, as well as the whole returns process, have been described by the term Reverse Logistics. This process covers the method by which items are returned from the customer and the processing of the returns by servicing and returning to the customer, putting the material back into stock or refurbishing the items for resale. The returns process has now become an important part of the processing that takes place in the warehouse.


1-1-8-1 Helping The Customer

When a customer receives an item from your company that are unhappy with and then has to return the item, their satisfaction with your company would have decreased. If your company then has a poor returns process whereby there are hurdles in returning the item such as paying for shipping, or restrictive freight carriers, delays in issuing a refund, etc., your could lose the customers business in the future. The first step of a best practice implementing a reverse logistics solution, would be to supply the customer with a return label, when the item is shipped, that includes the customers order number in barcode form so that you can inform the customer as to when the item is received in the warehouse. The receipt could also trigger a replacement or credit memo to be processed. Communication is crucial in keeping the customer happy.
1-1-8-2 Warehouse Operations

Customer returns can arrive at the warehouse without prior knowledge or authorization. This can cause capacity issues with warehouse resources as warehouse managers try to plan their resources based on the inbound and outbound deliveries in the system. When returns arrive they can take a long time to process as information has to be found about the item and this wastes resources. By having a package with a bar-coded label, the warehouse does not have to spend any time investigating the details on the return. The item can then be placed in a location specifically for returns processing.

1-1-8-3 Refund, Restock, Refurbish

When the returned item is inspected, the quality department can determine whether the item is suitable for a customer refund. By inspecting the item the quality inspector can identify whether the item is covered by the returns policy, if not then a refund should not be processed. Many companies automatically refund the customer despite a different item being returned. If the quality department inspect the item and find it to be sub-standard, then a replacement or refund can be issued to the customer. However, if the quality department finds that the item can be repaired and resold this can create revenue for the company. Items should not be scrapped just because they are returned. Many items are returned because the packaging is damaged and these items can be repackaged and placed back into stock. Cosmetic imperfection on an item may not be able to be corrected, but the item still could be sold as a second and generate revenue.


1-1-8-4 Recycling

A facet of the reverse logistics process is that companies should offer end of life recycling for items they sell. When a customer purchases an appliance such as a washing machine and it reaches the end of its service life, the customer will often not know how to deal with that item. Your company should review how it deals with this type of situation. Many items that are sold contain toxic components, such as heavy metals and as consumers become more environmentally knowledgeable. They are more concerned about the effects of dumping items on landfills and companies are beginning to offer a recycling program where consumers can send items back when their service life has ended. A benefit of this for your company is that the recycling of items can lead to a small revenue stream, especially in recycling certain metals. Although this may not be a major source of revenue it may offset the cost of disposing of toxic items, and the cu stomer goodwill would be significant.


Chapter 2 Logistic as a services industry

This chapter of the book will discuss the logistic services providers as parties of the service industry . It will focus on "Third-Party logistic services providers" and "FourthParty logistic services providers".

2-1 Third party logistic services providers [13] 2-1-1 INTRODUCTION DEFINITION OF THIRD-PARTY LOGISTICS In a globalised world there is a clear need to reduce costs, in order to assure survival or further development. A component of the total cost of a product is related to logistics activities, which can be either performed by the company or outsourced to a third party. Outsourcing is widely regarded as a useful approach to lowering costs and gaining competitive advantage (Razzaque and Sheng, 1998). It has been highlighted by the Outsourcing Institute that companies gain a 9% costs saving and a 15% increase in capacity and quality, on average, through outsourcing (Elmuti et al, 1998). Logistics and transportation are the most popular areas of outsourcing. In fact, there is a growing trend of outsourcing logistics activities in a wide variety of industrial sectors (Transport Intelligence, 2004). This outsourcing logic goes with a new concept according to which businesses are considered as a collection of processes, rather than as a collection of functions. This is a key distinction, since processes, which can be defined as methods of doing something with all the steps involved, tend to cut across functional boundaries. In a process, functional activities, rather than the functions themselves, tend to be emphasized. For example, an order cycle integrates several activities, including order transmittal (marketing function), order processing (information systems function), order picking (warehousing function) and order delivery (transportation function) (Murphy and Poist, 1996). Terms such as logistics outsourcing, logistics alliances, third-party logistics (3PL), contract logistics and contract distribution have been widely used to describe the organizational practice of contracting-out part of or all logistics activities that were previously performed in-house (Aertsen, 1993; Bowersox, 1990; Lieb, 1992; Sink et al, 1996). A variety of definitions exists in the literature; different definitions tend to emphasize different aspects of logistics outsourcing arrangements such as the service offering, nature and duration of relationships, performance outcomes, extent of third-party responsibility over the logistics process, and position/ role in the supply chain. Table 1 presents some definitions of 3PL, which depend on

orientation (service offering, nature/duration of 3PL relations, performance outcomes, extent of 3PL responsibility and position in the supply chain). 3PL is usually associated with the offering of multiple, bundled services, rather than just isolated transport or warehousing functions (Leahy et al, 1995). Contemporary 3PL arrangements are based on formal, contractual relations as opposed to spot purchases of logistics services (Murphy and Poist, 1998). 3PL providers are, generally speaking, perceived as supporting intermediaries between suppliers and buyers within the supply chain (Fawcett and Mangan, 2002; Hertz and Alfredsson, 2003; McGinnis et al, 1995). It is also noteworthy that some authors provide broad definitions of the 3PL industry, including freight forwarders and shipping lines (see Rao and Young, 1994). Overall, it appears that 3PL terminology is overlapping and fails to take into account shippers industry-specific characteristics.
table 1: examples of third-party logistics definitions


2-1-2 BENEFITS AND RISKS FROM LOGISTIC OUTSOURCING A variety of advantages and disadvantages in relation to 3PL use have been reported in the literature. Benefits and risks of logistics outsourcing are classified as strategy-, finance- and operations-related. Outsourcing non-strategic activities enables organizations to focus on core competence and exploit external logistical expertise (Sink and Langley, 1997). 3PL providers can also help their clients improve customer satisfaction and gain access to international distribution networks (Bask, 2001). The most often-cited risks are associated with loss of control over the logistics function and loss of in-house capability and customer contact (Ellram and Cooper, 1990). However, it is usually the case that shippers employ a mixed strategy regarding logistics and retain important logistics activities (e.g. order management) in-house (Wildingand Juriado, 2004). While it is reported that users of 3PL enhance their flexibility with regard to market (investments) and demand (volume flexibility) changes, lack of responsiveness to customer needs is also cited as a problem of outsourcing (van Damme and Ploos van Amstel, 1996). Table 2 summarizes the benefits and risks of logistics outsourcing. Table 2:Benefits and risks of logistics outsourcing


2-1-3 SELECTION CRITERIA FOR 3PL PROVIDERS Several criteria for 3PL choice have been discussed in the literature, such as _ capability/technical competence, _ capacity/flexibility, _ client references/provider reputation, _ communications, _ compatible IS/IT, _ creative management, _ expertise/specialist knowledge, _ financial stability/strength, _ service quality, _ price/cost, _ knowledgeable sales-force, _ harmonized planning horizons, _ geographical coverage/networks, _ network customization, _ experience in handling specific product types, _ sub-contracting practices, _ supply of critical information, _ responsiveness/ability to meet promises, _ reliability/on-time shipment and delivery, _ personnel quality/human resource management, _ performance measurement, _ top management availability, _ experience in specific industry familiar with industry regulations. Factors such as cost, service quality and reliability, flexibility, responsiveness to requests and financial stability are often-cited criteria for the selection of Logistic Services Providers. Some criteria are developed with specific client needs in mind, while others are common for all circumstances (Bagchi and Virum, 1996). Contrasting evidence exists with regard to the relative importance of the price factor; some authors (e.g. van

Laarhoven and Sharman, 1994) rank it as top criterion, while others argue that service performance and quality requirements precede discussions about rates (Menon et al, 1998). Qualitative factors such as supplier reputation, references from clients and response to information requests are used for the initial screening of candidate service providers (Sink and Langley, 1997). Moreover, it appears that prior experience in the clients industry, experience with specific product types and familiarity with industryspecific regulations are perceived as important factors by buyers during the selection process (Aghazadeh, 2003; Sink et al, 1996; van Damme and Ploos van Amstel,1996). Overall, the criteria seem to be generic and apply to all 3PL purchasing circumstances, irrespective of service requirements. 2-1-4 Service-related issues Buyers of logistics services stress that, despite outsourcing, there is a need to retain control of the logistics function. All but one respondent reported that they outsource logistics activities that are regarded as non-core, that is, transport and warehousing-related services. Activities such as inventory management, order management and forecasting are kept in-house in order to retain control of logistics. On the other hand, logistics suppliers argued that they can successfully manage, and take responsibility for, core logistics activities such as order management. By bundling activities (e.g. warehousing and order processing) they can achieve operational and cost efficiencies for their clients. Buyers also highlighted the importance of the end-customer interface when outsourcing. According to the majority of the respondents, logistics is very closely tied with customer service and as such, it is crucial for business success. Logistics suppliers indeed recognized the importance of customer service and argued that end-customer requirements should be integrated in the service offering to the buyer company. They also offered several examples of managing successfully the end-customer interface (e.g. through call-centers). However, buyers indicated that outsourcing may limit the extent of flexibility regarding customer service as in many instances we offer bespoke services to our customers and such customized services are not compatible with 3PL operations. Interviewees within the service provider companies emphasized the move towards developing Pan-European logistics networks and services. They argued that logistics providers nowadays can offer Pan-European, one-stop shop solutions for manufacturers and retailers. The majority of buyers, on the other hand, regard such integrated outsourcing strategies as difficult to implement because of lack of provider capabilities and service requirement variations across different countries.


2-1-5 Cost-related issues The majority of buyer companies indicated that 3PL providers unjustifiably increase their prices, either during the contract term or at the renewal period. As one interviewee put it, the supplier will find excuses to increase his prices during the contract term and we need to make sure that we monitor and control such demands. On the other hand, service providers stressed that most of the time such cost increases are justified on the basis of reviewing unrealistic operational assumptions made during the process of service design. Such wrong assumptions become obvious once the operations go live and so there is a need to review and renegotiate costs, often upwards. In terms of charging mechanisms, the majority of buyers expressed their preference for fixed-cost, closed-book contracts. On the other hand, service providers aim towards open-book charging mechanisms, because this involves less risk in terms of financial remuneration of the supplier. Respondents indicated that open-book arrangements are especially desirable in cases of newly established client relationships, where there is little knowledge and high uncertainty regarding the customers supply chain requirements. The establishment of an appropriate charging mechanism also depends on the nature of the service offering.

2-1-6 Risk-related issues All but two buyer companies stressed that the loss of control over the logistics function is a major risk when considering the outsourcing option. There is a perceived risk of losing internal logistics competence and knowledge regarding logistics costs and customer requirements. Respondents also indicated that, once outsourced, logistics activities are very difficult to bring back in-house due to the significant investments required in relevant facilities,assets and equipment. There is also a perceived lack of flexibility with regard to changes in market requirements and systems. In particular, hi-tech buyers expressed their concerns in relation to 3PLs ability to keep in pace with the rapid pace of change within their sector. In contrast to the above, logistics providers argued that outsourcing contributes to increased flexibility in terms of buying transport/warehousing capacity and transforming fixed cost to variable.


With the exception of one, all buyers indicated that developing detailed service specifications, writing detailed contracts and monitoring provider performance are main ways to manage outsourcing risks. On the other hand, service providers said that too often buyers are unclear about their exact requirements and are unaware of their true logistics costs. Three of the buyers also complained about the time and effort required to manage the 3PL relationship.

2-1-7 Contracting-related issues Results indicate that contracting practices vary according to the services that are being outsourced. Typically buyers sign longer -term agreements for warehousing and short-term contracts for transportation. Respondents within the logistics companies expressed their preference for long-term contractual relationships (5 years and above), with a dedicated service being offered to the client. On the other hand, the majority of the interviewed buyers said that they typically signed 1 to 3-year agreements and that they were also looking for shared-user solutions in order to achieve synergies and drive supply chain costs down. Some respondents also said that they preferred short-term, rolling contracts due to flexibility and cost savings considerations. Three of the respondents also reported that they did not sign contracts at all because when the service provider performance is poor, it is easier for us to terminate the relationship. However, once relationships become successful, some buyers appear more reluctant to switch suppliers.


2-2 Fourth party logistic service provider [14] [15]

Fourth-Party Logistics (4PL): Differs from third party logistics in the following ways; 1) 4PL organization is often a separate entity established as a joint venture or long term contract between a primary client and one or more partners; 2) 4PL organization acts as a single interface between the client and multiple logistics service providers; 3) All aspects (ideally) of the client's supply chain are managed by the 4PL organization; and, 4) It is possible for a major third -party logistics provider to form a 4PL organization within its existing structure.

2-2-1 Definition
The definition of Fourth-Party Logistics (4PL) is an integrator that assembles the resources, capabilities and technology of its own organisation and other organisations to design, build and run comprehensive supply chain solutions.

Fourth-Party Logistics (4PL) means that one company is able to outsource the entire management of its supply chain to another company. This would include all the assets, planning and management of the process. The 4PL management service provider would gather together all the constituent parts required such as systems, transport providers, order management, and inventory management with a view to providing the client with a fully integrated supply chain. In return the client will pay an appropriate fee and concentrate on its core business. Fourth-Party Logistics (4 PL) presents a solution that incorporates the advantages of both outsourcing and insourcing to provide maximum overall benefit. A separate management company is established as a JV or long-term contract between the primary client and at least one other partner, which contribute the start-up capital for the venture, as well as assets and expertise for ongoing operations. The 4PL organization is a supply chain integrator and acts as a single interface between clients and the full scope of supply chain services. It is staffed with the best skills from the founding partners and should regularly be assessed against global benchmarks.


2-2-2 Industry Solution Model To co-ordinate and manage the distribution operations of its primary clients initially, and then those of other related companies within the industry. 2-2-3 Supply Chain Partner Model To manage an integrated industry supply chain consisting of manufacturers, material suppliers, 3PL providers and management consultants.

2-2-4 Benefits of the 4PL organisation include:

y Improves accountability y Retains corporate supply chain knowledge y Realizes revenue opportunities by selling the supply chain services to external clients y Addresses operational failures of 3PL services because the new entity allows the creation of a totally new culture y Addresses strategic failures of 3PL services with a single point of contact to manage all aspects of the client supply chain y Addresses financial failures of 3PL services by releasing capital through selling logistics assets to the 4PL organisation or on the free market

The 4PL concept addresses the shortfalls of traditional 3PL arrangements and offers the opportunity to achieve substantial incremental benefits. In addition, the concept can be extended to an existing 3PL, converting it into a 4PL.



3PL vs 4PL [16]

When it comes to outsourcing, there are three questions and underlying issues. One, do you outsource a function versus outsource a process? 3PLs target the function. They want to handle containers/shipments/freight, not the transport management process, for example. The true need is the process, which is what the 4PL targets. Is there really a process in place or a series of standalone transactions? What is the present process? How does it work? Where does it fail? Where are there gaps? Where are there redundancies? The supply chain process crosses organizational lines. It runs horizontal in a vertical organization. Two, do you outsource work/tasks or do you outsource managing? Much outsourcing is work related. Handle warehousing. Handle shipments. Not manage them. This matter is part of the next evolution of outsourcing and where the 3PL will have to migrateand where the 4PL is already positioned. Three, the outsource service provider, to truly meet the needs of his customer, should be neutral. 4PLs should be neutral if they are to manage the process. 3PLs, especially those which are asset-based struggle to be neutral. 3PLs which seek to push shipments through their transport contracts or through their warehouses are not neutral.


Chapter 3 Ports performance and its role in supply chains [17] [18]

Ports , in order to become an effective and successful gate-way and a value added to any supply chain that s the port is a part of , it should have some determinates and characteristics and it should contribute to the performance of gate ways. These determinates are strategic location ,efficiency , adequate infra-structure and superstructure , connectivity and Technology for Data Sharing ,a value added services , relation-ships with shipping lines , relation-ship with Logistic Services Providers , and transport mode integration which is explained briefly in the following part [17] [18]: 4-1 strategic location You might have heard people say that location is the most important thing for a business. Then, the next most important is ... location, and so on. For many businesses, getting the right location can make the difference between success and failure. Can think of a shop or restaurant near where you live that has closed down, maybe because it was in the wrong place? There are lots of different reasons why location is important to a business and location matters to some businesses much more than it does to others. Here are some reasons why location matters. 4-1-1 Labor Workers must be available locally, or must be willing to travel to work at the business. These workers must have the right skills. If there is high unemployment locally, you might find it easier to recruit workers, and maybe you won't have to pay them as much as you would elsewhere. But if there is high unemployment, local people may not have as much to spend with your business. Often a location becomes a centre for related industries - Staffordshire for potteries, Sheffield for steel, and the local people have particular skills. 4-1-2 Land/buildings The right amount and type of land and buildings must b e available. For some businesses, you need a lot of space - perhaps your business is noisy or creates fumes and needs to be well away from where people live. Some businesses need to be near their customers, or to their suppliers.


4-1-3 Transport and communications links Your workers need to be able to travel to work. You might need to be able to transport materials and products in and out of your business. Telephone, postal and Internet services might be better in cities than in the countryside. 4-1-4 Customers Every business needs to be able to reach its customers. For a retail shop, you might want potential customers to be walking past all the time. An Internet business might be able to locate almost anywhere! 4-1-5 Language As businesses become more global, you need people who can speak the same language as your customers. This is one reason why, for example, India has been successful in attracting call centers and software development from the UK and North America. 4-1-6 Image Some businesses need to be in a location that suits their image. Remember, though, high class locations tend to have high rents! 4-1-7 Competitors In some cases, you might want to be the only business of your type nearby . Other businesses cluster together.

Picture 1:Top 20 ports in the world (2005)[20]


4-2 efficiency [21]

As the clearinghouses for a major portion of the worlds rapidly increasing international trade flows, ocean ports and the efficiency with which they process cargo have become an ever more important topic. Poorly-performing ports may reduce trade volumes, particularly for small, less-developed countries (Clark et al., 2004, and Wilson et al., 2003). Thus, port efficiency is an important issue in addressing trade facilitation practices, which has been a recent focus of the World Trade Organization and regional trade institutions, such as the Asia-Pacific Economic Cooperation organization. Disruptions to U.S. ports, such as the recent congestion issues at the ports of Los Angeles and Long Beach, quickly become national news because they can substantially impact supply chains throughout the country (MacHalaba, 2004). Despite the obvious significance of port efficiency, consistent and comparable measurement of such efficiencies is a daunting task. A myriad of factors contribute to port efficiency. Some of the more obvious factors include dock facilities, connections to rail and trucking lines, harbor characteristics (including channel depth and ocean/tidal movements), time to clear customs, and labor relations. However, consistent data and methods to construct measures allow comparisons across ports are not currently available even in developed countries. As stated in a recent report to Congress by the U.S. Department of Transportation, Maritime Administration (MARAD), MARAD concluded that it was unable to provide the requested comparison of the most congested ports in terms of operational efficiency due to a lack of consistent national port efficiency data comparing port efficiency would require the creation of new methodologies and the collection of data that were not available for this report (U.S. Department of Transportation, Maritime Administration, 2005, p. 8).2

4-3 adequate infra-structure and super-structure [23] Infrastructure all fixed structures on water and those below the ground surface level (navigational aids, breakwaters, quay walls, port land, transport access) Superstructure all structures above ground including ground surfacing, buildings, equipment, vehicles, harbo ur vessels.


4-4 connectivity and Technology for Data Sharing [22] [17]

and receive orders, invoices and shipping notifications with much shorter lead times, which give the potential to speed up the entire shipping transaction (Stefansson, 2002). The sharing of information among supply chain partners is viewed as a building block that characterizes a solid supply chain relationship (Lalonde 1998). Authors have suggested that the key to the seamless supply chain is making available undistorted and up -dated information at every node within the supply chain (Towill 1997) and by taking the data available and sharing it with other parties within the supply chain, information can be used as a source of competitive advantage (Novack, Langley and Rinehart 1995). Information sharing to be effective requires accuracy, timeliness, adequacy and credibility (Monczka et al 1998). This means that integrated information technology should be central in facilitating the exchange of information between supply chain partner s and between ports

EDI and other similar technologies save a company money by providing an alternative to, or replacing information flows that require a great deal of human interaction and materials such as paper documents, meetings, faxes, etc. Even when paper documents are maintained in parallel with EDI exchange, e.g. printed shipping manifests, electronic exchange and the use of data from that exchange reduces the handling costs of sorting, distributing, organizing, and searching paper documents. EDI and similar technologies allow a company to take advantage of the benefits of storing and manipulating data electronically without the cost of manual entry. Another advantage of EDI is reduced errors, such as shipping and billing errors, because EDI eliminates the need to rekey documents on the destination side. One very important advantage of EDI over paper documents is the speed in which the trading partner receives and incorporates the information into their system thus greatly reducing cycle times. F or this reason, EDI can be an important component of just-in-time production systems.


4-5 value added services [17]

This variable entails the ability of the port to add value to the services that it provides in the context of facilitating further the objectives of the supply chain system. For instance, Robinson (2002) suggests that ports form part of a value-driven chain and as such they can add value to the goods passing through them. Carbone and De Martino (2003) indicate that procurement and pre-assembly stages are becoming of considerable significance and may well shape the future development of ports. Paixao and Marlow (2003) put forward a framework than can be adopted for adding value in a port environment. This involves adding value in the cont ext of the different operations, services and capabilities that take place in a port environment including capacity to provide hinterland and foreland for road/rail access, to launch new tailored services, to handle different types of cargo, speed at which the port can take decisions on altering schedules, amend orders and changing design processes to meet customers demands, variety of services in intermodal operations, capacity to convey cargo through the most diversified routes/modes at the least possible time to end-users premises, and capacity to deliver tailored services to different market segments and to act as collaborative intermodal hub networks.
4-6 relation-ships with shipping lines [17]

In discussing the importance of integration in supply chains it has been stated that a supply chain based on relationships has the greatest potential to result in unique solutions that are simultaneously effective, efficient and relevant (Bowersox, Closs and Stank 2000). The importance of creating long-term relationships in supply chains has also been made explicit by Kalwani and Narayandas (1995) who state that supplier firms in long-term relationships with select customers are able to retain or even improve their profitability levels more than firms which employ a transactional approach. To achieve intermodal operational synchronization it is essential to have an appropriate governance structure in the relationship between ports and shipping lines (Panayides 2002). Ports that build long term co-operative relationships will be deemed to have higher levels of integration in the supply chain.


Suppl i l ti ips ent il cust er as well as supplier relati nships. In the same way that ports formulate and engage in relationships with shipping lines, they should also initiate, develop and foster relationships with inland transport providers and operators. As indicated by Notteboom and Rodrigue (2005), regional port authorities and market participants can engage in co-ordination that can substantially improve inland freight distribution like for instance streamlining container flows and reducing empty hauls. Various methods of networking strategies may be used from informal programs of coordination to advanced forms of strategic partnerships. Central to all forms of coordination is communication and the characteristics of the relationship between theparticipants .


icture 2

e ports and its re ation-s ips inc uding the shipping lines and the 3 (represented by the Freight forwarder) [23]


l tion-ship ith Lo isti

i s

o id s [17]


4-8 transport mode integration [25] [17]

Ports are bi-directional logistics systems in that they receive goods from ships to be distributed to land (road/rail) and inland waterway modes that perform the remaining legs of the transport systems, whereas at the same time ports receive cargoes arriving by road/rail and inland waterway and deliver them to ships for the sea-leg. This bidirectional logistics system requires a high level of co-ordination and inter-connectivity capabilities within the port system. Robinson (2002) suggested that ports are part of a value -driven chain system competing with other value-driven chain systems. Cargo flows will seek for routes that offer the lowest cost, and ports offering efficient hinterland accessibility due to productivity, efficiency and reliability in inter-modal transport connectivity and interoperability add value to shippers and consignees in the supply chain.
A Multimodal transport (also known as combined tr ansport) is the transportation of goods under a single contract, but performed with at least two different means of transport; the carrier is liable (in a legal sense) for the entire carriage, even though it is performed by several different modes of trans port (by rail, sea and road, for example). The carrier does not have to possess all the means of transport, and in practice usually does not; the carriage is often performed by sub -carriers (referred to in legal language as "actual carriers"). The carrier responsible for the entire carriage is referred to as a multimodal transport operator, or MTO. In practice, freight forwarders have become important MTOs; they have moved away from their traditional role as agents for the sender, accepting a greater liability as carriers. Large sea carriers have also evolved into MTOs; they provide customers with so-called door-to-door service. The sea carrier offers transport from the sender's premises (usually located inland) to the receiver's premises (also usually situated inland), rather than offering traditional tackle -to-tackle or pier-to-pier service. MTOs not in the possession of a sea vessel (even though the transport includes a sea leg) are referred to as Non-Vessel Operating Carriers (NVOC) in common law co untries .


The importance of these previous factor to shippers [18]

Table (3): global ranking range of the most important factors

And all of these factors could affect the 3 PLs positively or the opposite, and there for it could affect the entire economy regarding to the delay that can come from a poor port performance ..


Chapter 4 Risks associated with Logistic Services Providers [26]

What are the most common supply chain and logistics risks that businesses and logistics providers have to deal with? The following part of the study provides the most complete answer to that question quoting from the study made by Hans-Christian Pfohl, Philipp Gallus and Holger Khler which is a meticulous study from Germany that speaks for itself in describing which risks that have which probability and which impact among businesses and among logistics providers. And the risks that could face logistic services providers in Saudi Arabia Jeddah
5-1 Logistics and supply chain risks company perspective

The model framework follows the traditional division of risk sources in supply risks related to the supplier, demand risks related to the customer, process and control risks, and external risks. In addition, there are two logistics risks related to the logistics provider (LDL), one related to sourcing and one related to distribution. These risks are then evaluated, first from the company supply chain perspective, and from the logistics provider perspective
Supply chain risks probability and impact

The risk matrix shows the overall picture of supply chain risks in the survey, with the probability increasing from left to right, and the impact increasing from bottom to top.
y y y y y y

Supply risks Sourcing-related logistics risks Process and Control risks Distribution-related logistics risks Demand risks External risks

Supply risks 1. Capacity fluctuations/bottlenecks in the supply market 2. Dependence on a certain supplier 3. Production delays or disruptions 4. Inflexibility of supplier when faced with last minute order changes 5. Varying quality 6. Low quality 7. Crucial information is not passed on to purchaser 8. Supplier insolvency 9. Rigid contracts 10. Outage of IT-systems


Process and control risk 1. Production close to capacity limit 2. Long-term production outage 3. Outage of IT-system 4. Varying quality of products made 5. Short-term production outage or delays in production 6. Lack of personnel 7. Low inventory of raw materials 8. Inventory outage (facilities unusable) 9. Personnel lacks qualifications 10. Personnel lacks motivation 11. Accidents 12. Malicious acts/sabotage/theft Demand risks 1. Price slump 2. Unexpected demand fluctuations or total failure 3. Last-minute changes in order specifications 4. Market segment changes 5. Necessary information is not passed on by customer 6. Customer insolvency 7. Rigid contracts 8. Production outage at customer 9. Loss of intellectual property 10. Production disruption/delay at customer 11. Outage of IT-systems at customer Sourcing logistics risks 1. 2. 3. 4. 5. 6. Breakage during transport Low quality transport Lack of personnel, equipment, vehicle and storage space Theft Rigid contracts Insolvency of logistics provider

Distribution logistics risks 1. 2. 3. 4. 5. 6. Breakage during transport Low quality transport Lack of personnel, equipment, vehicle and storage space Insolvency of logistics provider Rigid contracts Theft


External risks 1. Terrorist attack 2. Strikes and other labor conflicts 3. Natural disasters 4. Export or import restrictions 5. Delays or other formality ( red tape ) issues with customs clearance 6. Negative PR, loss of brand reputation 7. Political instability 8. Outage of ICT-systems external to company 9. Organized crime 10. War


5-2 Logistics and supply chain risks

provider perspective

The framework for the risk sources for the logistics provider follows the same principle as the framework for the supply chain risks, but now the logistics provider is center stage, having process and control risks, with a supply side and a demand side . The supply side consists of Personal and operational means , or transportation means. The customer makes up the demand side, and the demand risks are separated further into initiation , contract design and cooperation .
Logistics risks
y y y y

Supply risks Process and control risks Demand risks External risks

Supply risk 1. 2. 3. 4. 5. 6. 7. Sub-performing sub-contractor Lack of sufficient transport capacity General lack of personnel More and more HES regulations, requirements and restrictions Lack of (intermediate) storage space Lack of personnel during peak operati ons Lack of sufficient transfer capacity (mode or means change)

Process and control risks 1. Handling of sensitive goods 2. Breakage during transport 3. Personnel lacks qualification 4. Outage of IT-systems 5. Interface issues between different IT-systems 6. Theft 7. Inventory outage (facilities unusable) 8. Malicious acts or sabotage 9. Personnel lacks motivation 10. Lack of procedural documentation 11. Outage of transport means (vehicles) 12. HR-issues during/after company takeover/merger 13. Overworked personnel 14. Lack of competence using new/lates t technology 15. Theft at warehouse or storage facility 16. Theft at transfer facility 17. High turnover of personnel 18. Accidents


Demand risks 1. Deficiencies in customer data/information 2. Deficiencies in tender documents 3. Delinquent customer payments 4. Decreasing profit margins during contract period 5. Loss of intellectual property during tender phase 6. No/little return on investment 7. Short contract period 8. Rigid contracts 9. Clustered location of customers 10. Customer insolvency 11. Termination of outsourced services 12. Increasing legal arguments External risks 1. Terrorist attack 2. Natural disasters 3. Organized crime 4. Negative PR, loss of brand reputation 5. Delays or other formality ( red tape ) issues with customs clearance 6. Strikes and other labor conflicts 7. War 8. Outage of ICT-systems external to company 9. Political instability 10. Export or import restrictions Risks and obstacles that could face logistic services providers in KSA Jeddah : 1. 2. 3. 4. 5. 6. Bureaucracy Man made mistakes and low skilled labor in ports Gate congestion Delays caused by traffic in the internal roads Complex procedures which can cause a delay Slow customs clearance


Chapter 5 the mutual relation between the port and the LS & an application to the study on Jeddah`s LS s and Port

7-1 Th mutual relati

As we said in chapter 4 there should be a relation-ship between the port and every party that could be classified as a client or any party that s related to it..

Picture 2 The ports and its relation-ships [23] The logistic services providers that works with a certain port means a Permanent client to the port and a several powerful logistic services provider means the perpetual prosperity and the continuous revenue to the port . Several private ports around the world contacts with firms for a long term contracts in order stay in business and having a logistic services provider that work with the port can accomplish the same purpose. In the other hand, the logistic services providers cannot work without the port . nowadays the competition between ports that can cover a certain region is getting tougher with a new technology and other factors that can make the port clients switch to another port in order to reduce its final costs, and therefore it supposed to be a win win relationship not a rigid one where the port performs an incapacitating and complex procedures.


7-2 appli ati

to the study on Jeddah`s L

s and Port

7-2-1 the importance of a LSP in Jeddah and Saudi arabia Jeddah is the name of city that s located in the western region of Saudi Arabia which is considered as one of the most important markets in the GCC region and the middle east , if not the most important.

Picture 3 Jeddah on the map As any strong economy the Saudi economy consists of a several companies and establishments that s powerful and promising and that has a good management. Any good management that manages firms and establishments should have a good supply chain and logistic process management. Many firms and establishments in Saudi Arabia uses logistics services outsourcing as many establishments around the world , which usually reduces costs as we explained in a previous chapter- . And an establishment that uses logistic outsourcing needs a good powerful logistic services provider, and that is where the need for a uni ue and capable onea logistic services provider that s up to the level .


7-2-2 a survey to Logistic services provider s in Jeddah This survey was made and designed with a several variables from the previous chapters to clarify if the market participants agrees or not , the survey was made by a questionnaire from two axis the first axis is related to the needs that should be provided by the port to the logistic services providers and the second axis is to clarify what is the obstacles and risks that might get in the way of an efficient logistic services providing.
The questionnaire that was given to Logistic services providers to do the survey is attached at the last pages

The variables of the questionnaire: First axis Location (Away from traffic congestion) Efficiency Infra-structure & super-structure of the port Technological data interchange Specialized services to facilitate the operations of the logistic services providers ( *) Several modes of transportation from and to the port (*)capacity to provide hinterland and foreland for road/rail access, to launch new tailored services, to handle different types of cargo, speed at which the port can take decisions on altering schedules, amend orders and changing design processes to meet customers demands, variety of services

Second axis Port charges is high

Port usage of technology is low or limited Customs declaration is slow and it needs improvement Port performance is slow and causing delay Port Round time of trucks is long Port round time of ships is long


And the result of a random sample came as the following:

Rank of importance y Table 4:The three top important variables in the First axis: Rank Variable Name Mean weighted Standard deviation 14.73 0.4577 Efficiency 24.45 1.060 Technological data interchange (EDI) 34.2 1.146 Infra-structure & super-structure of the port


5-strongly agree


1-dont agree I don t agree at all

The Random sample answers percentage for (efficiency)

The Random sample answers percentage for (Infra -structure & superstructure)


The Random sample answers percentage for (EDI)


y Table 5:The three top important variables in the second axis: Rank Variable Name Mean weighted Standard deviation 11.19 Customs declaration 4.13 is slow and it needs improvement 23.8 1.01 Port performance is slow and causing delay 33.6 1.01 Port Round time of trucks is long From 5-strongly agree to 1-dont agree I don t agree at all

The Random sample answers percentage

The Random sample answers percentage


The Random sample answers percentage


4.7 4.6


4.3 4.2
Tec n l gical ata exc ange ((E I
Infra-structure & super structure f t e p rt
#  # "  ! 

4 3.9
t e first axis

A comparison between the three variables of axis 1


4.1 4
# & %


3.7 3.

3.5 3.4

t e sec n axis

A comparison between the three variables of axis 2



P rt

un time f trucks is l ng

P rt perf rmance is sl w an causing elay



Cust m s e clarati n is sl w an it nee s impr v ement

# # & #

7-3 recommendations and opinions The following is a recommendations and opinions from the logistic services providers in Jeddah: Establishment name : Intermodal Services of SA Recommendation:  Jeddah has a strategic location as a hub port ,and with a little enhancement to the infrastructure and the simplifying of procedures it can really attract a large volume of transshipment which can generate an additional revenue to the port.  Usage of Saudi EDI to all port customers in order to monitor customs clearance ,and it should be available in both Arabic and English Recommendation for efficient handling and a speed import and export process:  To increase the number of scanners in all terminal to inspect containers  To increase the number of customs staff and officers  To increase coast guards staff and officers to keep additional gates opening  To increase number of gates openings and to maintain 18 hours openings to facilitate movement and reduce congestion  To improve the laboratory facilities and increase its staff  To maintain a close relation /co-ordination between port authority ,cost guards, customs and terminal operators to achieve efficient handling Recommendation for safety , security and law of the land  To receive and move all import containers directly through scanner and store the normal containers in the yard and the containers that requires inspection to be stored separately with due remarks and comments Establishment name : LSC Recommendations:

To increase the capacity of containers in yards more. To fix and maintain the internal roads inside the port. To put signs that indicates the location of berths. To apply and improve the system of issuing Permits.


Establishment name : faisal hajji group Recommendations:


To increase the numbers of scanners To increase the number of the discharging staff To increase the number of customs staff Gates should work 24 hours or at least find a way to prevent the delay to the next day 5- The scanning process should be from the ship to the yard immediately

Establishment :customs clearance company Recommendations: 1-to facilitate the movement of trucks to enter the port and not to transfer them to another road 2- to re-consider applying new charges -charges are high- and specially the charges to discharge a container and the penalty for ballets 3-any Resolution should be clear to everyone and should get distributed to every related party to avoid conflict between customs and other parties Establishment name : al Tayyar group (cargo) Recommendations:
1- To re-consider allowing non saudies to clear their cargo in the customs 2- Its better if ports worked on Thursday 3- Port stevedoring communication is poor


Conclusion & recommendation To conclude we can say that there is several main problems in the port of Jeddah which can cause a delay to the port users which can get the port out of competition with rivals in the region ,specially with ports in the region that is more efficient. We used logistic services providers in this study to clarify the picture , with them being the most party using the port and its facilities. And from the study we found that there is three main needs that s most be provided to the users if it not exist or it should be enhanced if it already e xists. This study contained several solutions to the problems , and these most of these solutions was provided by the logistic services providers in Jeddah where we did the study. The following is the writer`s own recommendations based on the previous study and the recommendations from the logistic services providers : A-recommendations concerning the needs of the port users: y Efficiency of the port staff which came as the top need of the port users based o n the survey that we did

 Recommendation1:  to find more efficient human resources or get the already existing staff more trained.
y the need of a more developed ,up to date and up to the level EDI system came as the second top need of port users

 Recommendation2:  to get one, as the EDI system can g et the port much faster and reduce the time of many processing procedures.
y at the third place of the rank came the need of a better infra -structure and superstructure which is considered as a problem that many users comp lain about

 Recommendation3:  the internal roads to get better paved to reduce the possibility of damages to trucks , and the rest of the infra-structure to get more "up to date and up to the level"


B- A-recommendations concerning the obstacles and risks that faces port users: y the first and top obstacles is the customs declaration which is considered "slow and in a need for improvement" and the o Recommendation1: o to get the containers scanned immediately after its discharged from the ship and before it goes to the yard and to get the containers that requires inspection to be stored separately with due remarks and comments. Another recommendation is to increase the number of staff and the number of scanners to get the whole process faster. y the second top obstacle is that the ov erall performance of the port is slo w and in a need to be faster o Recommendation2: o to get the port more involved with technology as the ports that used the automotive operations succeeded and got more faster and efficient. y round time of trucks being to o long came as the third top obstacles and from the survey we have found that the round time of the truck in the port of Jeddah can take three to five hours -while it takes fifteen minutes at the port of Liverpool in UK to compare -, o Recommendation3: o to get the trucks procedures to be done before it gets in the port through a computer application that every port user can get in to and finish his procedures to get a code or a serial number that he can submit to the port staff when he arrives to t he port and by that he the time of the procedures can be reduced Significantly .


REFERENCES: [1](2011)an assembled article in the website that had the following references: Joint Logistics Analysis Tool John T. Phelan, Jr. P.E. "Guest Column: Knowing When a WMS or WCS Is Right for Your Company". Supply & Demand Chain Executive. Enom, Inc. Retrieved 15 September 2009. Baziotopoulos (2008). An Investigation of Logistics Outsourcing Practices In the Greek Manufacturing Sector. PhD thesis- "". [2] (2011) SAP ERP official website [3](2011) an assembled article in the website that had the following references: Bardi, Edward; John Coyle and Robert Novack (2006). Management of Transportation. Thomson South-Western. ISBN 0-324-31443. Chopra, Sunil and Peter Meindl (2007). Supply Chain Management. Pearson. ISBN 013-208608-5. Cooper, Chris; John Fletcher; David Gilbert; Stephen Wanhill and Rebecca Shepherd (1998). Tourism Principles and Practice (2nd ed.). Harlow: Longman. ISBN 0-58231275-6. Lay, Maxwell G (1992). Ways of the World: A History of the World's Roads and of the Vehicles that Used Them. Rutgers University Press. ISBN 0813526914. Stopford, Martin (1997). Maritime Economics. London: Routledge. ISBN 0-41515310-7. [4] What is Inventory? Written by Michael Pollick Edited by Lindsay D. Last Modified: 22 May 2011
Copyright Protected: 2003-2011

[5]warehousing (article) written by : Vikram Chawla a Student of BMS at LALA LAJPATRAI INSTITUTE OF MANAGEMENT on
August 20th, 2009

[6] (2011)an assembled article in the website that had the following references:
o Facilities Planning, Tompkins, White, Bozer, Frazelle, Tanchoco, Trevino, pub. John Wiley, 2nd Edition. o Assembly Automation and Product Design, Boothroyd, pub. Marcel Dekker o Factory Physics, Hopp and Spearman, pub. Irwin press o Modeling and Analysis of Mfg Sys, Askin and Standridge, pub. John Wiley.

[7] the research Optimization of Goods Incoming Process by : Alona Golovatova, Jinshan Zhou] University of Bors 2010 [8] (2011) an assembled article in the website (references are attached to the text on the chapter) [9](2011) definitions on the web site of The Department of the Environment UK [10](2011) an article on [12] article : Reverse logistics By Martin Murray , Guide (2011) [13] Benefits, Risks, Selection Criteria and Success Factors for Third-Party Logistics Services
Maritime Economics & Logistics, 2008, KONSTANTINOS SELVI A R I D I S 1, MARTIN SPRING1 , VASSI LIOS PROFILLID I S2 & GEORGE BOTZORIS2 1 S c h o o l o f Management, La n c a s t e r Unive r s i t y, La n c a s t e r LA1 4YX, UK; 2 S e c t i o n of Tra n s p o r t a t i o n , D e m o c r i t u s Unive r s i t y o f Thra c e, X a n t h i 6710 0 , Gre e c e.

[14] (2011)an article concerned about 4th party logistics written by :Steve Murray Senior Research Analyst ,Supply Chain Visions At -selection/scm-select/4pl-1543542 [15] from "concargo" logistic services company official website (2011) [16] "3rd VS. 4th party logistics services providers "an article written by Tom Craig - LTD Management (2010) [17] GLOBAL SUPPLY CHAIN AND PORT/TERMINAL: INTEGRATION AND COMPETITIVENESS (2007) Dr Dong-Wook Song Logistics Research Centre Heriot-Watt University Dr Photis M. Panayides Cyprus International Institute of Management [18]the research : The Role of Port Performance in Gateway Logistics By: Dr.Jose Lelis Tongzon & Dr.Tae Hoon Oum , taken from a website in the year (2011) [20] The Political Economy of Port Competition (2007) By W Jacobs [21] Port Efficiency and Trade Flows (2006) Bruce A. Blonigen# And Wesley W. Wilson*

[22] (2011)an assembled article in the website that had the following references:
1. Kantor, Michael; James H. Burrows (1996-04-29). "Electronic Data Interchange (EDI)". National Institute of Standards and Technology. Retrieved 2008-05-13. 2. Wal-Mart EDI Requirement

[23]a UK-Liverpool JMU port operation course (2010) [24] (2011)from the standards of the Marine Department of the Hong Kong Special Administrative Region (SAR). [25] (2011)an assembled article in the website Interchange that had the following references: o United Nations Convention on International Multimodal Transport of Goods (Geneva, 24 May

[26] Pfohl, H.-C., Gallus, P., & Khler, H. (2008). Risikomanagement in der Supply Chain Status Quo und Herausforderungen aus Industrie-, Handels- und Dienstleisterperspektive. In H.-C. Pfohl (Ed.), Sicherheit und Risikomanagement in der Supply Chain. Gestaltungsanstze und praktische Umsetzung (pp. 95-147). Hamburg: DVV Media Group. Author links
y y y Hans-Christian Pfohl Philipp Gallus Holger Khler


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The questionnaire that was given to Logistic services providers to do the survey

Name: Job title:

Establishment Name:

Axis 1 : the needs that must be satisfied for providers of logistics services (Rank from 1 to 5) Degree of importance 2 (low 3 (Medium 4 importance) importance) (important)

1(not important) Location (Away from traffic congestion) Efficiency

5 (very important)

Infrastructure & superstructure of the port Technological data interchange Specialized services to facilitate the operations of the logistic services providers( *) Several modes of transportation from and to the port (*)capacity to provide hinterland and foreland for road/rail access, to launch new tailored

services, to handle different types of cargo, speed at which the port can take decisions on altering schedules, amend orders and changing design processes to meet customers demands, variety of services


Axis 2 : obstacles and risks

(Rank from 1 to 5) Degree of agreement 3 (Slightly 4 (agree) agree)

1(I don t agree at all) Port charges is high Port usage of technology is low or limited Customs declaration is slow and it needs improvement Port performance is slow and causing delay Port Round time of trucks is long Port round time of ships is long

2 (I don t agree)

5 (Strongly agree)

Do you have any Suggestions or recommendations?