Outsourcing Strategy & LSP

Session #6
Outsourcing Strategy & Logistics Service Provider
Dr. Zaroni, CISCP, CFMP
MTI FTI UII

Jogjakarta, 5 November 2019
Activities in a supply chain
07/16/2022 Zaroni - MTI FTI UII Logistics Course 2

Outline of the supply chain for paper

Supply chain around a manufacturer

Continuum of logistics outsourcing showing some of the range
of physical functions and services that might be outsourced

Source: Capgemini Consulting (2012)

The key trade-offs between dedicated and multi-user distribution
emphasizing the different cost and service advantages and disadvantages

THE LOGISTICS PROVIDER BUSINESS
MODEL
OUTSOURCING INCREMENTAL
SERVICE OFFERINGS RELATIONSHIP PRICING
MODELS ATTRIBUTES
Supply Chain  Broad supply chain expertise
Integrator (SCI) or  Knowledge and information-based Collaborative Shared risk
Lead Logistics  Inventory minimization more than and reward
Manager (LLM) or  End to end network optimization Contractual
Synchronized  Advanced integrated technology Partnership
Global Trade
Supply Chains  Adaptive, flexible and collaborative
Orchestrator
tion and
 Total transport planning Fixed and

Lead Logistics Contractual
e
 Operate and buy logistics services variable

Inte g Scop
Provider (LLP)  Project manage network with some

gra
improvements risk
sin
Lead Logistics  Single point of contact: total wallet sharing

rea
 Limited technology integration with

Inc
client
Third-Party Logistics Integration limited to transport with Fixed and
Contractual
Provider (3PL) warehousing Variable
 Limited geographical reach
Value-Added
Freight Forwarders  Multi-modal transport management Contractual Transactional
Transport,  Focused cost reduction Contractual Transactional
Foundation Services Warehousing,  Niche services and/or Spot
Customs
broking
Supply Chain Indonesia (2014)
Source: Adapted from “Third-Party Logistics Results and Findings of the 2004 Ninth Annual Study”. Authors are C. J.
Langley, Georgia Institute of Technology, G. R. Allen, Capgemini, and T. A. Dale, FedEx Supply Chain Services, Inc.
PEMETAAN LOGISTICS SERVICE PROVIDER DI INDONESIA
FOUNDATION/BASIC SERVICES
Transportasi Transportasi Value Added

Transportasi Freight
Laut Udara Warehouse & Express Distributor
Darat (Trucking) Forwarding
(Shipping) (Air Cargo) Distribution
Posindo/Poslog, Meratus, Samudera Garuda, Merpati, Posindo/Poslog, Poslog, Wira, Linc Posindo, Caraka, Indomarco,
Lookman Djaja, Indonesia, Tanto, Lion, Sriwijaya , Pusaka Lintas, Group, Re Pex, Tiki, JNE, Enseval, Dos Ni
Handal, Dunia Tempuran Mas, Pelita-Air Service MIF, Ritra, FIN, Go Trans, BSA, Cardig, Intrasco Roha, Rodamas,
Express, Puninar, SPIL, LJK, CTP, CKB, FIN, Linc, BGR, Kamadjaja, Tigaraksa,
Jawa Indah, JIT, APOL, HIT, BSA, MSA, CKB, LJK, Linc Wicaksana,
DOMESTIK
Sipure, CTL, Satya Sistemindo, Puninar, BGR Anugrah Argon,
Ragam, BSA, Pancaran, Laut, Medica, Atri
Pancaran Darat, PSS, Bimaruna, Distribusindo
Bintang Baru Raya,
Lancar,
Suryakencana,
Alamui, Kumis,
Nova Jaya Maersk, OOCL, NYK, KLM, JAL, SQ, MAS DB Schenker, DGF, Linfox, Ceva, YCH, TNT, FedEx, DHL Zuellig/APL, DKSH
Bimaruna Hapag Lloyd, Air Asia APL Logistics, DHL SC, DB Express, UPS
Mitsui, OSK, HMM, Panalpina, Yusen Schenker, DHL SC,
YML, MSC, APL, Agility, K&N, APL Logistics,
NYK, RCL, ANL, Damco, SDV, Panalpina, Yusen,
CMA CGM, Heung A, Bimaruna, Logwin, Agility, K&N,
Evergreen, PIL, OOCL-Log, Pantos Damco, SDV,
ASING
COSCO Bimaruna, Logwin,
GAC, Pantos,
OOCL-Log, TOLL
Supply Chain Indonesia (2014)
THIRD-PARTY LOGISTICS LEAD LOGISTICS PROVIDER (LLP) SUPPLY CHAIN INTEGRATOR (SCI)
PROVIDER (3PL)
DB Schenker, DHL SC, Yusen (belum ada)
Poslog, DB Schenker, DHL SC, Yusen Agility, K&N, Agility, Damco, SDV, APL
Agility, K&N, Agility, Damco, SDV, APL Logistics, Kamadjaja,
Logistics, Kamadjaja, Wira, Linc, GoTrans.
A breakdown of the broad third-party transport types, showing some of the
different attributes

Key Drivers for Outsourcing

Critical factors in deciding which 3PL to use

Key reasons why users do not renew existing 3PL contracts

Key Steps of The Contractor Selection Process

Review the scope for outsourcing
1. Why outsource?
2. Whether outsourcing is the right step to be taking?
3. What are the key requirements?
4. Where are the boundaries?
5. Which outsourcing approach to adopt?

Preparing request for proposal (RFP)
• Point of view the company (users)

1. To provide a specification of business requirements to selected vendors in a standard format.
2. To facilitate the objective comparison of proposals.
3. To maintain an equitable ow of information across all tendering companies.
4. To establish total confidentiality rules.
• Point of view of the contractor
1. To design a logistics system to perform the task and meet the service requirements;
2. To determine all of the many resources that are required to run the operation (personnel,
property, vehicles, plant and equipment);
3. To estimate the costs and hence decide on the structure and level of the rates to be charged;
4. To be clear which distribution components are to be provided by the contractor and which by
the user company;
5. To be clear which information systems need to be provided and specify them in detail.

Data requirements
• Introduction, including confidentiality clause;

• Background to operating company;
• Business description;
• Data provided with the invitation to tender;
• Physical distribution specifications;
• Information systems;
• Distribution service levels and performance monitoring;
• Assets currently employed in distribution operations;
• Risk assessment and transfer;
• Industrial relations;
Data requirements
• Business relationship – contract type and contract management relationship;

• Charging structure;
• Terms and conditions; an example of the complete contract format, which will include
liabilities and insurance issues;
• Environmental issues;
• The selection process including key selection criteria;
• Response format;
• Criteria for award of contract;
• Timescale and method of submitting clarification questions regarding the RFP;
• Deadline for submission of a response to the RFP;
• The proposed start date for the contract after award.

Typical distribution data requirements

Pricing and charging structures
• Unit price or fixed price agreements.

• Hybrid unit price agreements.
• Cost-plus arrangements.
• Open-book contract/management fee.
• Evergreen contracts.

Tender evaluation and comparison
1. Quantitative assessment
• Compare quotations on a standard basis.
• Be clear what has and what has not been included in the prices (eg ‘other’
work, collections, etc.).
• It is likely that the quotation includes some qualifications (perhaps because
of the interpretation of the specification). ese need to be clarified or
eliminated before comparisons are made.
• Beware of imponderables such as ‘likely future rate/rent reviews’.
• Check that service levels can be met within the costs outlined in the
proposal.
• The lowest price may not be the best! – some qualitative issues may override
a low-cost proposal.
Tender evaluation and comparison
2. Qualitative assessment
• the quality of the proposal;
• the extent to which the proposal meets the RFP requirements;
• views on the extent to which it is felt that the proposed physical system can perform the required
tasks;
• views on the extent to which it is felt that the proposed resources are appropriate to the task and the
system;
• whether levels of utilization, productivity and cost are realistic;
• how appropriate the cost is to the recommended design;
• the overall design of the information systems;
• strategies for future enhancement of the operation;
• environmental policy, and health and safety policy;
• the culture of the company – whether it fits with that of the user company;
• the quality of the contract management team;
• staff training.

Structured assessment
1. Operational factors
2. Financial factors
3. Service factors
4. Contractor-related factors

The final stages of contractor selection

Initial contract
• takeover of warehouse sites:
• – which are acceptable/unacceptable,
• – procedures for takeover;
• takeover of vehicles and capital equipment:
• – which vehicles and equipment are included,
• – how they are valued, etc.;
• takeover of personnel:
• – which, if any, are transferred,
• – the financial basis,
• – terms of employment,
• – pension rights,
• – etc.;
• redundancy agreement – that agreement will be negotiated as necessary by the client, the
basis of this agreement, etc.

Cost-related/tariff structure
• Capital/investment costs (vehicles, warehouse equipment, hardware, etc.),

Depreciation timescale and return on investment;
• Operational costs (rent, building services, staff, transport running costs,
administration, insurance, etc.) And cover for operational costs;
• Management costs and expenses (proportion of contractor head office cost –
diminishing short to medium term, and including project work and time
related to contract);
• Cover risk/make pro t – should be taken into account by return on investment
and operational cost cover and length of formal contract.

Service-related
1. Service requirements:
• Definition of service to be provided,
• Indication of main areas, including delivery zones and service levels (e.g. once a week),
delivery/collection times, cut-o points for receipt of information at depots, special
orders and how to deal with them, emergency orders and how to deal with them, etc.;
2. Service-related aspects:
• Preferred vehicle specification,
• Vehicle livery,
• Driver uniforms;
3. Service/performance measurement:
• Key performance indicators (KPI’s), report format and timings, etc.,
• Damages, late delivery, refusals, etc.

Why 3PL relationships fail

Potential pitfalls that might adversely impact the successful implementation of an outsourcing operation

An overall approach to outsourcing management

Global Logistics & Incoterms
Dr. Zaroni, CISCP, CFMP
MTI FTI UII

Jogjakarta, 28 – 29 October 2017

Incoterms
• Incoterms atau International Commercial Terms adalah kumpulan istilah yang

dibuat untuk menyamakan pengertian antara penjual dan pembeli dalam
perdagangan internasional.
• Incoterms menjelaskan hak dan kewajiban pembeli dan penjual yang
berhubungan dengan pengiriman barang.
• Hal-hal yang dijelaskan meliputi proses pengiriman barang, penanggung jawab
proses ekspor-impor, penanggung biaya yang timbul dan penanggung risiko
bila terjadi perubahan kondisi barang yang terjadi akibat proses pengiriman.

Incoterms
• Incoterms dikeluarkan oleh Kamar Dagang Internasional atau International Chamber of
Commerce (ICC), versi terakhir yang dikeluarkan pada tanggal 1 Januari 2011 disebut sebagai
Incoterms 2010. Incoterms 2010 dikeluarkan dalam bahasa Inggris sebagai bahasa resmi dan 31
bahasa lain sebagai terjemahan resmi.
• Dalam Incoterms 2010 hanya ada 11 istilah yang disederhanakan dari 13 istilah Incoterms 2000,
yaitu dengan menambahkan 2 istilah baru dan menggantikan 4 istilah lama.
• Istilah baru dalam Incoterms 2010 yaitu Delivered at Terminal (DAT) dan Delivered at Place
(DAP).
• Istilah lama yang digantikan yaitu: Delivered at Frontier (DAF); Delivered Ex Ship (DES);
Delivered Ex Quay (DEQ); Delivered Duty Unpaid (DDU).
• Pada Incoterms 2010, istilah dibagi dalam 2 kategori berdasar metode pengiriman, yaitu 7
istilah yang berlaku secara umum, dan 4 istilah yang berlaku khusus untuk pengiriman melalui
transportasi laut.

Istilah-istilah dalam Incoterms
• EXW (nama tempat): Ex Works, pihak penjual menentukan tempat pengambilan barang.
• FCA (nama tempat): Free Carrier, pihak penjual hanya bertanggung jawab untuk mengurus izin
ekspor dan meyerahkan barang ke pihak pengangkut di tempat yang telah ditentukan.
• FAS (nama pelabuhan keberangkatan): Free Alongside Ship, pihak penjual bertanggung jawab
sampai barang berada di pelabuhan keberangkatan dan siap disamping kapal untuk dimuat. Hanya
berlaku untuk transportasi air.
• FOB (nama pelabuhan keberangkatan): Free On Board, pihak penjual bertanggung jawab dari
mengurus izin ekspor sampai memuat barang di kapal yang siap berangkat. Hanya berlaku untuk
transportasi air.
• CFR (nama pelabuhan tujuan): Cost and Freight, pihak penjual menanggung biaya sampai kapal
yang memuat barang merapat di pelabuhan tujuan, namun tanggung jawab hanya sampai saat
kapal berangkat dari pelabuhan keberangkatan. Hanya berlaku untuk transportasi air.
• CIF (nama pelabuhan tujuan): Cost, Insurance and Freight, sama seperti CFR ditambah pihak
penjual wajib membayar asuransi untuk barang yang dikirim. Hanya berlaku untuk transportasi air.

• CPT (nama tempat tujuan): Carriage Paid To, pihak penjual menanggung biaya
sampai barang tiba di tempat tujuan, namun tanggung jawab hanya sampai
saat barang diserahkan ke pihak pengangkut.
• CIP (nama tempat tujuan): Carriage and Insurance Paid to, sama seperti CPT
ditambah pihak penjual wajib membayar asuransi untuk barang yang dikirim.
• DAF (nama tempat): Delivered At Frontier, pihak penjual mengurus izin ekspor
dan bertanggung jawab sampai barang tiba di perbatasan negara tujuan. Bea
cukai dan izin impor menjadi tanggung jawab pihak pembeli.
• DES (nama pelabuhan tujuan): Delivered Ex Ship, pihak penjual bertanggung
jawab sampai kapal yang membawa barang merapat di pelabuhan tujuan dan
siap untuk dibongkar. izin impor menjadi tanggung jawab pihak pembeli.
Hanya berlaku untuk transportasi air.
• DEQ (nama pelabuhan tujuan): Delivered Ex Quay, pihak penjual bertanggung jawab sampai
kapal yang membawa barang merapat di pelabuhan tujuan dan barang telah dibongkar dan
disimpan di dermaga. Izin impor menjadi tanggung jawab pihak pembeli. Hanya berlaku untuk
transportasi air.
• DDU (nama tempat tujuan): Delivered Duty Unpaid, pihak penjual bertanggung jawab
mengantar barang sampai di tempat tujuan, namun tidak termasuk biaya asuransi dan biaya
lain yang mungkin muncul sebagai biaya impor, cukai dan pajak dari negara pihak pembeli. Izin
impor menjadi tanggung jawab pihak pembeli.
• DDP (nama tempat tujuan): Delivered Duty Paid, pihak penjual bertanggung jawab mengantar
barang sampai di tempat tujuan, termasuk biaya asuransi dan semua biaya lain yang mungkin
muncul sebagai biaya impor, cukai dan pajak dari negara pihak pembeli. Izin impor juga
menjadi tanggung jawab pihak penjual.

Cost and Performance
Monitoring
Dr. Zaroni

The planning and control cycle

Influence of logistics on ROA

Balanced scorecard: typical measurements

Integrating the chain through SLAs

Viewing supply chain metrics across the chain

SCOR: typical performance metric development

SCOR metrics category
• assets (such as capacity utilization, equipment availability);

• cost (inventory holding, invoicing);
• data (forecast accuracy, visibility);
• flexibility (order, returns);
• inventory (availability, obsolescence);
• orders (fulfilment accuracy, invoice errors);
• productivity (direct versus indirect labor, vehicle subcontracting);
• time (order cycle time, on-time delivery).

Integrated supply chain metrics framework

Integrated supply chain metrics

KPIs can be categorized in a number of different
ways
• input (time, labor, cost);
• output (throughput, production, profit);
• ratio (efficiency, productivity).

In practice, an effective measurement system will cover all of the major
operational areas within a business. A typical categorization might be:
• Financial KPI’s: return on investment (ROI), return on capital

employed (ROCE), stock turn;
• Customer KPI’s: new customers, lost customers, on time in full
(OTIF);
• Sales KPI’s: total volume, total value, sales per customer;
• Process KPI’s: productivity, efficiency;
• People KPI’s: labor turnover, training, average length of service;
• Supplier KPI’s: OTIF, cost per piece.

Hierarchical structure of a measurement system:
A grocery multiple retailer
1. Director/head office (strategic planning and control):
• ROCE,
• cost per case (divisional),
• cost per vehicle (divisional),
• cost per value of goods delivered,
• cost as a percentage of company sales;

2. Site managers (management control):
• cost per mile or kilometer,
• cost per vehicle,
• cost per roll pallet,
• average earnings per driver,
• maximum earnings per driver,
• maintenance costs per vehicle;

3. Transport manager (operational control):
• cost per case,
• cost per journey,
• roll pallets per journey,
• journeys per vehicle,
• damage repairs per vehicle,
• miles (kilometers) per gallon (liter) per vehicle, – damages in transit and cases delivered,
• percentage cases out of temperature,
• percentage journeys out of schedule;

3. Transport manager (operational control):
• cost per case,
• cost per journey,
• roll pallets per journey,
• journeys per vehicle,
• damage repairs per vehicle,
• miles (kilometers) per gallon (liter) per vehicle, – damages in transit and cases delivered,
• percentage cases out of temperature,
• percentage journeys out of schedule;

Example of actual measurements for the dashboard

Process calculations for the dashboard

Reverse Logistics

These circumstances are generally referred to as reverse logistics
and usually relate to:
• Product recall for quality or safety reasons;

• The return of unwanted goods;
• Used packaging or products for recycling or disposal.

A measurement dashboard

Outsourcing Strategy &amp; LSP

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Session #6

Outsourcing Strategy & Logistics Service Provider

Dr. Zaroni, CISCP, CFMP

MTI FTI UII

07/16/2022 Zaroni - MTI FTI UII Logistics Course 2

07/16/2022 Zaroni - MTI FTI UII Logistics Course 3

07/16/2022 Zaroni - MTI FTI UII Logistics Course 4

07/16/2022 Zaroni - MTI FTI UII Logistics Course 6

07/16/2022 Zaroni - MTI FTI UII Logistics Course 7

07/16/2022 Zaroni - MTI FTI UII Logistics Course 8

 Total transport planning Fixed and

 Operate and buy logistics services variable

Provider (LLP)  Project manage network with some

Lead Logistics  Single point of contact: total wallet sharing

 Limited technology integration with

Supply Chain Indonesia (2014)

Transportasi Transportasi Value Added

Supply Chain Indonesia (2014)

07/16/2022 Zaroni - MTI FTI UII Logistics Course 11

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• Point of view the company (users)

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• Introduction, including confidentiality clause;

• Business relationship – contract type and contract management relationship;

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• Unit price or fixed price agreements.

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• Capital/investment costs (vehicles, warehouse equipment, hardware, etc.),

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Dr. Zaroni, CISCP, CFMP

MTI FTI UII

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• Incoterms atau International Commercial Terms adalah kumpulan istilah yang

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• assets (such as capacity utilization, equipment availability);

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• Financial KPI’s: return on investment (ROI), return on capital

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Outsourcing Strategy & LSP

Outsourcing Strategy & LSP