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by Rajen Kumar

No Escaping Social Media

Running a magazine concentrating on issues of small and medium enterprises and managing with limited resources is a like living life on the edge. In this rush of meeting deadlines,...

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Apr 2012

EMRC, Brussels Associates with SME WORLD as its New Media Partner

EMRC has promoted business partnerships with the developing world and has organised dozens of business forums in key decision-making cities, such as Amsterdam, Rome,...

SME Worldwide

Virtual Global Organisations - The Next Generation LSPs

Sumeet Nadkar
Sep 2009

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The Global Economic Scenario

Logistics is an industry intricately linked to world GDP. 9% is the projected decrease in Global Trade in 2009. Growth in output has been directly impacted by reduction in demand, buying capacity, output, trade & revenue.

The chart below reveals that the essential growth drivers have taken the economies on a downturn.

Myriad Challenges Faced by Logistics Service Providers

Logistics industry in developing nations is often highly fragmented with complex tariff & non-tariff barriers. The sorry state of infrastructure adds to the fuel & security costs. Further more, inadequate communication infrastructure combined with unskilled resources delays the overall logistics cycle. Shippers today are looking at increasing Logistics outsourcing and they want one-stop-shops. Service level expectations are mounting thanks to the invasion of multi-nationals. Consolidation between Intermediaries is threatening the survival of local companies. The industry is faced with a harsh reality, 'Are the Local LSPs geared up for Survival if not Excellence???'

It's high time that the Davids Face Goliaths!

Multinational vs. Independents

The need of the hour for smaller LSPs is to go Global. When compared with MNCs, the local independent LSPs lose out on account of three factors- reach, ability to provide end-to-end supply chain visibility and ability to win and deliver large contracts. However, they also have price competitiveness, knowledge of local conditions/ practices & high flexibility to meet customer requirements.

Virtual Global Organization Presenting the Opportunities

"A virtual global organization is a network of independent companies -suppliers, customers, and even rivals - linked by information technology to share skills, costs, and access to one another's markets.

This corporate model is fluid and flexible - a group of collaborators that unite to exploit a specific opportunity.

Technology plays a central role in the development of the virtual global corporation."

The transformation of LSP from local to virtual global business

Let us understand how local LSPs can transform into global businesses with international standards. Going global is not about expanding your physical infrastructure, with new acquisitions and multiple office set ups. Virtualisation is one of the few sure-fire techniques to cut floor space and power costs.

Virtual Global Organization's can be created through strategic alliances and partnerships between an Origin LSP of one location/country and Destiny LSP of another location/country.

The key steps to build a virtual network for an Origin LSP are:

The coverage of virtualization as a concept spans across the various functions in an LSP organisation. In a VGO model, sales/presales collaborate by communicating new business opportunities to partners using the virtual platform. Technology facilitates sharing access to partner profile & history; facilitating online agreements & contracts with partners & other agencies; send/receive quotations online (rate enquiries & negotiation); increase in members business resulting in higher revenue/profit realisation.

Similarly, LSPs can use virtual platform for operational collaboration to send routing order to agent as business confirmation; send/receive pre-alerts & manifests online; proactive intimation for changes in rates/terms/schedules of carriers; timely alerts & updates on milestones providing enhanced tracking of cargo, documents & shipment information; send/receive post shipment alerts online; e-dockets and e-freight compliance.

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